IN THE ITAT JODHPUR BENCH
Vaishali Builders & Colonizers
versus
Additional Commissioner of Income-tax,
IT APPEAL NO. 391 (JODH.) OF 2011
[ASSESSMENT YEAR 2008-09]
JULY 25, 2012
ORDER
Bhavnesh Saini, Judicial Member
This appeal by the assessee is directed against the order of the ld. CIT(A), Jodhpur dated 13.10.2011 for the assessment year 2008-09 on the following grounds :
“1. The impugned order passed by the Ld. CIT(A) and the impugned assessment order is contrary to the provisions of law, contrary to facts, material and evidence existing on records, contrary to all cannons of natural justice.
2. The Ld. CIT(A) has erred in not accepting the assessee’s contention that the impugned assessment order passed by the Ld. Assessing Authority is patently without jurisdiction and is void ab initio.
3. The Ld. CIT(A) has erred in confirming the disallowance of Rs. 1,12,00,000/- made by the Ld. AO by wrongly invoking the provisions of section 40A(3).
4. That on the facts and circumstances of the present case, the provisions of section 40A(3) are not applicable in respect of the agricultural land purchased by the assessee. The Ld. CIT(A) ought to have deleted the aforesaid addition of Rs. 1,12,00,000/- made in the declared income,
5. The Ld. CIT(A) ought to have accepted the assessee’s contention that the payment so made by the assessee for purchase of agricultural land is covered by the exceptional circumstances mentioned in Rule 6DD. The entire disallowance made by the Ld. AO amounting to Rs. 1,12,00,000/- ought to have been deleted by the Ld. CIT(A).
6. The Ld. CIT(A) have ought to have cancelled the interest charged u/s 234A, 234B and 234C.”
2. We have heard the ld. Representatives of both the parties, perused the findings of the authorities below and considered the material available on record.
3. On ground No.1 & 2, noted above, the assessee challenged the jurisdiction of the Assessing Officer (Addl. CIT, Range-I, Jodhpur) in passing the assessment order in question. The assessee submitted before the ld. CIT(A) that the return was filed with the ACIT, Circle-1 and notice u/s. 143(2)/142(1) were issued by the ACIT. However, subsequently, the case was transferred and commenced by the ACIT, Circle-1, Jodhpur and the order is also passed by the Additional CIT u/s. 143(3) on December, 2010. It was further stated that the ACIT, Range-1, Jodhpur had already started the assessment proceedings and the notice u/s. 143(1) was issued by him and the final order being made by some other officer not having jurisdiction over the matter. The ld. CIT(A) called for the report from the Assessing Officer, in which he has stated that the assessee has challenged the assessment order passed by the Additional CIT, Range-1, Jodhpur at the appellate stage. As per section 120, the Additional CIT is also an Assessing Officer. From the assessment record, it is clear that the Addl. CIT, Range-I, Jodhpur has issued the notice u/s. 142(1) on 09.09.2010 and after that the assessee filed the details before him and participated in the assessment proceedings in compliance to his query letters dated 05.10.2010, 14.10.2010, 09.11.2010, 23.11.2010, 30.11.2010 and 02.12.2010. Therefore, it was not justifiable to challenge the notice issued by the Addl. CIT and his jurisdiction at the appellate stage. The AO relied upon section 124(3) of the IT Act, which provides that no person shall be entitled to call in question the jurisdiction of an Assessing Officer where he has filed return of income u/s. 139(1), after expiry of one month from the date on which he was served with the notice u/s. 142(1) or 143(2) or after the completion of assessment, whichever is earlier. The ld. CIT(A) considering the explanation of the assessee in the light of the report submitted by the AO and order sheets, dismissed the objection of the assessee regarding jurisdiction of the AO (Addl. CIT, Range-1, Jodhpur). The findings of the ld. CIT(A) in the appellate order in para 3.3 are reproduced as under :
“3.3 I have considered the submission of the appellant and report of the Assessing Officer and I find that no such issue was raised by the appellant before the Assessing Officer while finalizing the assessment order. The appellant complied with reference to notices/letters issued by the Addl. CIT, Range – 1, Jodhpur. The appellant has furnished all the details before the Addl. CIT as required by him on various occasions. On all these occasions, the assessee has neither raised this point before the Addl. CIT, Range – 1, Jodhpur. The Addl. CIT, Range – 1, Jodhpur is having concurrent jurisdiction over the cases pertain to Range – 1, of Jodhpur. The Addl. CIT in exercise of power conferred in sec. 120 has rightly issued the notices. Further, as per sec. 124(3) no person shall be entitled to call in question the jurisdiction of an Assessing Officer. So, the point raised during the appellate proceeding cannot be accepted. The appellant cannot be validly raised as any challenge to order of transfer shall be raised by the assessee in independent proceeding; if no such challenge was made at the initial stage, the issue cannot be raised in an appeal against assessment order, as has been clarified by Hon’ble Punjab & Haryana in the case of Jaswindeer Kaur Kooner (291 ITR 80 P&H). In view of this, the ground of appeal is dismissed.”
4. The ld. counsel for the assessee reiterated the submissions made before the ld. CIT(A) and submitted that first notice u/s. 143(2) was issued by the ACIT, Circle-1, Jodhpur. Therefore, Addl. CIT, Range-1 Jodhpur cannot pass the assessment order without further issue of notice u/s. 143(2). He has, however, admitted that the assessee participated in the proceedings before the Addl. CIT in response to the statutory notices and no objection regarding jurisdiction was raised before the AO. He has referred to section 120(5) of the IT Act and submitted that since ACIT and Addl. CIT Range-1, Jodhpur were having concurrent jurisdiction, therefore, ACIT should have passed the assessment order. He has submitted that there was no jurisdiction order in favour of the Addl. CIT. On the other hand, the ld. DR relied upon the order of the AO and submitted that there is no need that further notice u/s. 143(2) should be issued by the Addl. CIT. As per scheme of the Act, Addl. CIT is also Assessing Officer. The assessee appeared before the Addl. CIT as Assessing Officer and participated in the assessment proceedings before him and no objection regarding jurisdiction was raised before him. Therefore, the objection of the assessee has been rightly turned down by the ld. CIT(A). The ld. DR filed copy of jurisdiction order u/s. 127(1) dated 25.08.2010 in favour of Addl. CIT, Range-1, Jodhpur in the case of the assesse for the assessment year under appeal as issued by the CIT-I, Jodhpur. He has, therefore, submitted that Addl. CIT was having jurisdiction over the case of the assessee.
5. We have considered the rival submissions and the material on record and do not find any justification to interfere with the order of the ld. CIT(A). Section 124 of the IT Act provides as under :
“Jurisdiction of Assessing Officers.
124. (1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction-
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and
(b) in respect of any other person residing within the area.
(2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner or the Commissioner; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify.
(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer-
(a) where he has made a return 21[under sub-section (1) of section 115WD or] under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or 21[sub-section (2) of section 115WE or] sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under 22[sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier.
(4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made.
(5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120.”
5.1 On reading the provisions of section 124 (2) of the IT Act above, the issue of jurisdiction to assess the person shall be determined by the Director General, Chief Commissioner or the Commissioner or in other cases, by the Board and sub-sec.(4) of section 124 provides that where the assessee questioned the jurisdiction of the AO as per section 124(3), then the AO shall, if not satisfied with the correctness of the claim of the assessee, refer the matter for determination under sub-section (2) before the assessment is made, i.e., the question to be referred to the Director General, CCIT, CIT or the Board, as the case may be. Hon’ble Allahabad High Court in the case of Hindustan Transport Co. v. IAC [1991] 189 ITR 326, considering the objections to the jurisdiction of the Assessing Officer held that objection cannot be raised after the assessment is completed. In this case, the assessment order under consideration of the assessment year 1985-86 and Hon’ble Allahabad High Court considering the provisions of section 124 of the IT Act considered the following points :
(i) What is the nature of the power of transfer conferred by the Act ? and
(ii) How the Act itself views a defect of the nature involved in the present case ?
We may mention that the provisions of section 124 as were applicable in assessment year 1985-86 are almost similar to the provisions contained in section 124 of the IT Act after amendment, which are applicable to the present case. Hon’ble Allahabad High Court further held -(page 331)
“Being an enactment aimed at collecting revenue, the Legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit up to which the plea of jurisdiction may be raised. As provided in section 124(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture.
From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substance. It treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action.”
5.2 The ITAT, Delhi Bench in the case of Triveni Engg. & Industries Ltd. v. Dy. CIT [2006] 280 ITR (AT) 210/[2005] 93 ITD 561, following the above decision of Hon’ble Allahabad High Court, decided the issue against the assessee.
5.3 It is admitted fact that the assessee did not raise any objection before the AO (Addl. CIT) within one month from the date of service of notice u/s. 142(1) till the completion of the assessment. The assessee participated in the assessment proceedings before the AO. The assessee, therefore, cannot raise issue of jurisdiction before the ld. CIT (A) at the appellate stage. Since no objection regarding jurisdiction was raised as required u/s. 124(3) within the period of specified under law, as above, therefore, the objection of the assessee is not tenable. The Addl. CIT is also the Assessing Officer as per scheme of the Act having concurrent jurisdiction over the case of the assessee. Further, section 127 of the IT Act provides the powers to transfer the cases and reads as under :
“Power to transfer cases.
127. (1) The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,-
(a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;
(b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.
(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.
(4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.
Explanation.-In section 120 and this section, the word “case”, in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.
5.4 The ld. DR produced the copy of the order u/s. 127 of the IT Act dated 25.08.2010 passed by CIT-I, Jodhpur transferring the jurisdiction of the case of the assessee with Addl. CIT, Range-1, Jodhpur. Thus, the concurrent jurisdiction with Addl. CIT, Range-1, Jodhpur was conferred with the “jurisdiction” to pass the assessment order in the case of the assessee. According to sub-sec. (3) of section 127, there was no need to give any opportunity to the assessee for transfer of case of the assessee from earlier AO, ACIT to Addl. CIT, Range-1, Jodhpur because both were situated in the same city, locality or place. Further, sub-sec. (4) of section 127 provides that the transfer of the case can be made any stage of proceedings and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred. Therefore, there is no need to issue notice u/s. 143(2) of the IT Act again and there is no further requirement under the law to issue another notice u/s. 143(2) of the Act because once such a notice is issued within the period of limitation, there is no requirement by law to issue such notice u/s. 143(2) again and again at different stages. The Explanation to section 127 also clarifies regarding concurrent jurisdiction of the officer of the same range which would clearly negate the objection of the ld. counsel for the assessee. Therefore, the Addl. CIT, Range-1, Jodhpur was having proper jurisdiction over the case of the assessee to pass the assessment order in the matter. There is compliance of section 127 of the IT Act in the matter and the assessee has not raised any objection of jurisdiction within the period of limitation as provided u/s. 124(3) of the Act. Therefore, the objection of the assessee has been rightly rejected by the ld. CIT(A). Considering the above discussion, we do not find any merit in ground No. 1 & 2 of appeal of the assessee. The same are, accordingly, dismissed.
6. On ground Nos. 3 to 5, the assessee challenged the disallowance of Rs. 1,12,00,000/- u/s. 40A(3) of the IT Act. According to the AO, during the assessment proceeding, the assessee submitted that there have been purchases of Rs. 5,37,57,500/- and the assessee has made sales amounting to Rs. 5,84,30,300/-. Vide note sheet entry dated 5-10-2010, the assessee was asked to furnish mode of payment to parties to whom payments for purchase have been made. The assessee furnished the details of purchases vide letter dated 23-11-2010 wherein the mode of payment was mentioned. In these details the following two details were noticed:-
