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Pankajbhai Jaysukhlal Shah vs. ACIT (Gujarat High Court)

COURT:
CORAM: ,
SECTION(S): , ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: April 9, 2019 (Date of pronouncement)
DATE: September 7, 2019 (Date of publication)
AY: 2011-12
FILE: Click here to download the file in pdf format
CITATION:
S. 147/148/292B: The officer recording the reasons u/s 148(2) for reopening the assessment & the officer issuing notice u/s 148(1) has to be the same person. If the reasons are recorded by the DCIT but the notice is issued by the ITO, the reassessment proceedings are invalid. The s. 148 notice is a jurisdictional notice. Any inherent defect therein cannot be cured u/s 292B. The fact that the assessee participated in the proceedings is irrelevant

C/SCA/230/2019 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 230 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
==========================================================
1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
==========================================================
PANKAJBHAI JAYSUKHLAL SHAH C/O. MEENA AGENCY LTD.
Versus
ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2 & 1 other(s)
==========================================================
Appearance:
MR DARSHAN B GANDHI(9771) for the Petitioner(s) No. 1
MR SP MAJMUDAR(3456) for the Petitioner(s) No. 1
MRS MAUNA M BHATT(174) for the Respondent(s) No. 1,2
==========================================================
CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 09/04/2019
ORAL JUDGMENT
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(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. Rule. Mrs. Mauna Bhatt, learned senior standing counsel
waives service of notice of rule on behalf of the
respondents.
2. Having regard to the controversy involved in the present
case, which lies in a narrow compass and with the consent
of the learned advocates for the respective parties, the
matter was taken up for final hearing today.
3. By this petition under article 226 of the Constitution of
India, the petitioner has challenged the notice dated
29.3.2018 issued by the Incometax
officer, Ward 2(2),
Jamnagar under section 148 of the Income Tax Act, 1961
(hereinafter referred to as the “Act”) seeking to reopen the
assessment of the petitioner for assessment year 20112012.
It appears that before this petition came to be filed,
the Assessing Officer has proceeded further pursuant to
the impugned notice and has passed the assessment order.
However, since the issue raised in the present petition is a
jurisdictional issue, this court had issued notice in the
matter.
4. The facts stated briefly are that, the petitioner herein filed
return of income for the assessment year 20112012
on
1.9.2012 declaring total income of Rs.44,05,746/.
The
return was processed under section 143(1) of the Act.
Thereafter, by the impugned notice dated 29.3.2018, the
Incometax
officer Ward 2(2), Jamnagar, sought to reopen
the assessment of the petitioner for the assessment year
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20112012.
In response to the notice, the petitioner
submitted that the return filed by him on 31.8.2012 be
treated as the return filed in response to notice under
section 148 of the Act and requested the Assessing Officer
to supply a copy of the reasons recorded for reopening the
assessment.
4.1) It appears that after issuance of notice under section
148 of the Act, the charge over the petitioner’s case was
transferred to the Assistant Commissioner of Income Tax
(ACIT) who is the current Assessing Officer of the
petitioner.
4.2) Upon receipt of the reasons recorded, the petitioner
found that the same had been recorded by the Deputy
Commissioner of Income Tax (DCIT), Circle2,
Jamnagar. It
appears that in the meanwhile, the petitioner participated
in the assessment proceedings. Thereafter, by a letter
dated 20.12.2018, the petitioner raised objections against
the initiation of proceedings under section 148 of the Act.
Before such objections could be decided by the respondent,
the petitioner has filed the present petition seeking reliefs
noted hereinabove.
5. Mr. Darshan Gandhi, learned advocate for the petitioner
invited the attention of the court to the impugned notice to
point out that the same has been issued by one Mr. Neeraj
Kumar, Incometax
officer, Ward 2(2), Jamnagar. Referring
to the reasons recorded, it was pointed out that the same
has been recorded by one Mr. Chintamani V. Dingankar,
Deputy Commissioner of Incometax,
Circle2,
Jamnagar.
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Reference was made to section 148 of the Act, which
provides for issue of notice where income has escaped
assessment and, more particularly, to subsection
(2)
thereof, which provides that the Assessing Officer shall,
before issuing any notice under this section, record his
reasons for doing so. It was submitted that the notice
under section 148 of the Act is required to be issued by the
Assessing Officer who recorded the reasons; whereas in the
facts of the present case, the reasons have been recorded
by the Deputy Commissioner of Incometax
whereas the
impugned notice has been issued by the Incometax
Officer
and hence, the notice under section 148 of the Act is
without jurisdiction. In support of his submission, learned
advocate for the petitioner has placed reliance upon the
decision of this court in case of Hynoup Food & Oil
Industries Ltd. v. Assistant Commissioner of Incometax,
307 ITR 115 (Gujarat), wherein the court after
referring to the provisions of sections 147 and 148 of the
Act, held that when section 147 is read in conjunction with
section 148(2) of the Act which mandates that the
Assessing Officer shall, before issuing any notice under
section 148(1) of the Act, record his reasons for issuing the
notice, it is clear that the officer recording the reasons
under section 148(2) and the officer issuing notice under
section 148(1) has to be the same person. The court further
observed that the form of the notice itself indicates that the
authority has to record ‘whereas I have reason to believe
that income liable to tax for the assessment year has
escaped assessment within the meaning of section 147 of
the Incometax
Act, 1961′. Accordingly, the court held that
the notice which was issued by an officer other than the
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officer who had recorded the reasons was invalid. Mr.
Gandhi submitted that the above decision would be
squarely applicable to the facts of the present case and
hence, the impugned notice which is a jurisdictional notice
is invalid and without authority of law. It was, accordingly,
urged that the petition deserves to be allowed by setting
aside the impugned notice.
6. Opposing the petition, Mrs. Mauna Bhatt, learned senior
standing counsel for the respondents, submitted that in
this case the petitioner has responded to the notice issued
under section 148 of the Act and has participated in the
proceedings pursuant thereto, which have culminated into
the impugned assessment order. It was submitted that the
petitioner is, therefore, required to be relegated to the
remedy of appeal under the relevant statutory provisions. It
was further submitted that the petitioner has initially
participated in the proceedings under section 147 of the
Act and has belatedly raised the objections and before such
objections could be dealt with, has approached this court,
and hence, this court may not entertain this petition at
this stage.
6.1) As regards the contention raised by the petitioner that
the notice under section 148 of the Act having been issued
by an officer other than the officer who recorded the
reasons for reopening the assessment, the attention of the
court was invited to the averments made in the affidavitinreply
filed by the first respondent. It was submitted that
the Assessing Officer namely, DCIT/ACIT, Circle2,
Jamnagar who was holding the jurisdiction over the case
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recorded reasons on 27.3.2018. Thereafter, as per the
requirement of the Incometax
Act, 1961, the approval of
the Principal CIT, Jamnagar was sought to issue notice
under section 148 of the Act on 27.3.2018. After such
approval was given on 28.3.2018, the notice under section
148 of the Act was issued on 29.3.2018. For the purpose of
explaining as to why the notice was issued by the Income
Tax Officer and not the Deputy Commissioner of Incometax
who recorded the reasons, reference was made to the
averments made in paragraph 4 of the above affidavitinreply
reference to which shall be made hereinafter. It was
submitted that issuance of the notice by the Income Tax
Officer is a procedural lapse which has happened on
account of the mandate of eassessment
scheme and non
migration of Permanent Account Number in time. It was
submitted that this being a procedural lapse, such defect
would be covered under the provisions of section 292B of
the Act and therefore, the impugned notice cannot be said
to be invalid. It was submitted that the petitioner having
participated in the reassessment proceedings, pursuant to
which the reassessment order came to be passed on
28.12.2018, it is not permissible for the petitioner to now
challenge the impugned notice on the ground of invalidity,
in view of provisions of section 292B of the Act. It was,
accordingly, urged that the petition being devoid of merits,
deserves to be dismissed.
7. Having regard to the conduct of the petitioner of
participating in the proceedings before the Assessing
Officer and thereafter, at the later stage, filing objections
and approaching this court before such objections could be
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disposed of, ordinarily this court would be reluctant to
interfere in such a case, more so, when the assessment
order has already been passed, but having regard to the
peculiar facts of the case, where the very jurisdiction of the
Assessing Officer who issued the notice under section 148
of the Act is under challenge, this court has entertained
the petition.
8. In the present case, what is the subject matter of challenge
is the notice issued under section 148 of the Act on the
ground that the assumption of jurisdiction on part of the
Assessing Officer by issuance of such notice is invalid. The
sole contention on the basis of which such notice is
challenged before this court is that the notice has been
issued by the Income Tax Officer, Ward No.2(2) Jamnagar,
whereas the reasons have been recorded by the Deputy
Commissioner of Incometax,
Circle2,
Jamnagar. In this
regard, reference may be made to section 147 of the Act
which provides that if the Assessing Officer has reason to
believe that any income chargeable to tax has escaped
assessment for any assessment year, he may, subject to
the provisions of section 148 to 153, assess or reassess
such income and also any other income chargeable to tax
which has escaped assessment and which comes to his
notice subsequently during the course of the proceedings
under that section. Section 148 of the Act provides for
issue of notice where income has escaped assessment and
provides that before making the assessment, reassessment
or recomputation under section 147 of the Act, the
Assessing Officer shall serve on the assessee a notice
requiring him to furnish return of income as specified
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thereunder. Subsection
(2) thereof postulates that the
Assessing Officer shall, before issuing any notice under
that section, record his reasons for doing so.
9. This court in Hynoup Food & Oil Industries Ltd. (supra),
has on a conjoint reading of sections 147 and 148(2) of the
Act, held that the officer recording the reasons under
section 148(2) of the Act and the officer issuing notice
under section 148(1) of the Act has to be the same person.
In this case, admittedly the officer who recorded the
reasons for reopening the assessment has not issued the
notice under section 148(1) of the Act. In this regard, in
response to the averments made in the petition regarding
lack of jurisdiction on part of the Assessing Officer on the
ground of the impugned notice having been issued by an
officer other than the officer who recorded the reasons, the
first respondent has filed an affidavitinreply,
wherein it
has been averred thus :
“3. Xxxxxxx. So the Assessing Officer viz. the DCIT/ACIT,
Cir2,
Jamnagar who was holding the jurisdiction over the
case recorded reasons on 27/03/2018. Thereafter, as per
the requirement of the Incometax
Act, 1961, the approval of
the Pr.CIT, Jamnagar was sought to issue notice u/s 148 on
27/03/2018. The Pr. CIT, Jamnagar gave the approval to
issue notice u/s 148 on 28/03/2018. Subsequently, the
notice u/s 148 was issued on 29/03/2018.xxxxx
4. Xxxxxxx I submit that the reasons are recorded by Mr.
Chintamani V. Dingankar, Deputy Commissioner of Income
Tax, Circle2,
Jamnagar having jurisdiction over the
petitioner. I submit that at the relevant point of time, the PAN
of the petitioner was lying with the Income Tax Officer, Ward
2(2), Jamnagar as he was holding territorial jurisdiction over
the case and therefore, the impugned notice came to be
issued by the ITO, Ward 2(2) as the PAN could not be
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migrated at the last moment to the DCIT, Circle2.
But as the
income of the assessee was more than Rs. 15 lakh, the
DCIT/ACIT, Cir2,
Jamnagar held the jurisdiction over the
case as per CBDT Instruction. The notice u/s 148 was
required to be issued by 31/03/2018 and the migration of
the PAN was not possible in that short period. It is pertinent
to mention that as per the prevailing scheme of eassessment,
the assessment was required to be made as eAssessment
and all the correspondences/notices needed to
be done online through the ITBA application as the such
correspondences/notices then goes to the efiling
account of
the assessee which enable the assessee to respond through
his/her efiling
account. As the PAN was lying in the
jurisdiction of the Incometax
Officer, Ward2(
2) Jamnagar,
the notice was issued from petitioner’s Assessing Officer
code. However, the assessment was completed by
DCIT/ACIT, Circle2,
Jamnagar who was holding the
jurisdiction over the case and who recorded the reasons for
reopening and formed his belief for reopening u/s 147. Since
the assessment was completed by the same Assessing
Officer who recorded the reasons for reopening and who
holding the jurisdiction over the case, the validity of issued
of notice is correct and it is not a case of borrowed opinion.It
was a procedural lapse which was (sic. had) happened on
account of mandate of eassessment
scheme and nonmigration
of PAN in time.”
10.From the averments made in the affidavitinreply
filed on
behalf of the respondent, it is evident that it was the
Deputy Commissioner of Incometax,
Circle2,
Jamnagar,
who had jurisdiction over the petitioner. Previously the
Incometax
officer, Ward 2(2), Jamnagar was having
jurisdiction over the petitioner, however, as per the CBDT
instructions, in view of the fact that the income of the
assessee was more than Rs.15 lakhs, DCIT/ACIT
Jamnagar held the jurisdiction over the petitioner. It
appears that it was not possible for the jurisdictional
Assessing Officer viz. the Deputy Commissioner of IncomePage
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tax to issue the notice under section 148 of the Act on or
before 31.3.2018 as migration of the Permanent Account
Number was not possible within that short period.
Therefore, the Incometax
officer has issued notice under
section 148 of the Act instead of the jurisdictional
Assessing Officer. Thus there is an admission on part of
the first respondent that the Deputy Commissioner of
Incometax,
Circle2,
Jamnagar who had jurisdiction over
the petitioner had not issued notice under section 148 of
the Act but it is the Incometax
officer, Ward 2(2),
Jamnagar, who did not have any jurisdiction over the
petitioner, in respect of the present case, who had issued
such notice. As held by this Court in case of Hynoup Food
& Oil Industries Ltd. (supra), it is the officer who records
the reasons who has to issue the notice under section
148(1) of the Act whereas in the present case the reasons
have been recorded by the jurisdictional Assessing Officer,
whereas the notice under section 148(1) of the Act has
been issued by an officer who did not have jurisdiction over
the petitioner. Since the notice under section 148 of the
Act is a jurisdictional notice, any inherent defect therein
cannot be cured under section 292B of the Act. A notice
under section 148(1) of the Act would be a valid notice if
the jurisdictional Assessing Officer records the reasons for
reopening the assessment as contemplated under subsection
(2) of section 148 and thereafter the same officer
namely the jurisdictional Assessing Officer issues the
notice under section 148(1) of the Act. In the facts of the
present case, while the reasons for reopening the
assessment have been recorded by the jurisdictional
Assessing Officer viz. the Deputy Commissioner of IncomePage
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tax, Circle2,
Jamnagar, the impugned notice under
section 148(1) of the Act has been issued by the Income
Tax Officer, Ward 2(2), Jamnagar who had no jurisdiction
over the petitioner, and hence, such notice was bad on the
count of having been issued by an officer who had not
authority in law to issue such notice. As a necessary
corollary it follows that no proceedings could have been
taken under section 147 of the Act in pursuance of such
invalid notice. In the aforesaid premises, the impugned
notice under section 148(1) of the Act as well as all the
proceedings taken pursuant thereto cannot be sustained.
11. It may be noted that before the Assessing Officer, during
the course of assessment proceedings also, the petitioner
had raised such objections with regard to the jurisdiction
of the Assessing Officer. However, the Assessing Officer has
proceeded further and instead of recording the objections
raised by the petitioner, namely that the notice has been
issued by the Income Tax Officer though the reasons have
been recorded by DCIT, has recorded that the notice was
issued by the DCIT, Circle2
and subsequently, ACIT was
holding charge of Circle2
and, therefore, there was no
harm in passing the assessment order. It, therefore,
appears that the Assessing Officer has not even understood
the contention raised by the petitioner during the course of
assessment proceedings.
12. In light of the above discussion, the petition succeeds and
is accordingly allowed. The impugned notice dated
29.3.2018 issued under section 148 of the Income Tax Act,
1961, and all the proceedings pursuant thereto including
the assessment order dated 28.12.2018 are hereby
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quashed and set aside.
13. Rule is made absolute accordingly with no order as to
costs.
(HARSHA DEVANI, J)
(BHARGAV D. KARIA, J)
RAGHUNATH R NAIR
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