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The assessee has impugned the First Appellate Order on the following
grounds of appeal:
1
New Delhi has also grossly erred both in law and on facts in
upholding the action of the learned Assessing Officer to treat the long
term capital gain on shares of Rs. 6,10,92,870/- as business income of
the appellant company and, disallowance of claim of exemption of Rs.
6,10,92,870/- u/s 10(38) of the Act.
3.1
3.2
3.4
further failed to appreciate that such long term capital gain could not
held to be business income on the mere assumption that the shares
were not held by the appellant in its own de-mat account which demat account/bank were admittedly on behalf of the assessee by the
broker of the appellant.
3.5
erred both in law and on facts is concluding that the assessee has
failed to establish that, securities transaction tax which was leviable
on the transfer of such shares was not paid. The finding is factually
incorrect and, contrary to material on record.
3.6
3.8
grossly erred both in law and on facts in holding that, short term
capital gain of Rs. 2,98,49,797/- and, Rs. 1,20,513/- did not represent
short term capital gain but represents business income of the
appellant company.
4.1
failed to appreciate that mere fact that securities were held by the
broker of the appellant could not be a basis much less a valid basis to
allege and, hold that, short-term capital gain arising on purchase
and, sale of shares was not taxable @ 10% u/s 111A of the Act but
@30% as business income of the appellant company.
4.2
erred both in law and on facts in confirming the levy of interest u/s
234B of Rs. 98,80,958/- which is not leviable at all on the facts of the
instant case.
3.
The relevant facts leading to filing of the present appeal are that for
and thereafter, set aside two issues raised in the additional ground to the file
of learned CIT(A) for adjudication on merits. It was held as under:
7.
jurisdiction over the assessee was transferred under sec. 127 of the
Act or not. Faced with this situation, we have confronted the learned
representatives and put as to why a finding may not be called for from
the Learned First Appellate Authority on this issue who will be looked
into relevant record available with the department. Both the
representatives had expressed no objection over the suggestion.
Considering all these aspects, we deem it appropriate to set aside
these two issues to the file of the Learned CIT(Appeals) for
adjudicating them on merit. Learned CIT(Appeals) shall pass a
speaking order referring to all relevant material.
8.
3.2
The learned CIT(A) thereafter, called for the comments from the
Assessing Officer and dismissed the appeal of the assessee and as such, this
appeal has been preferred by the assessee.
4.
10
6, New Delhi. As regards former contention, the learned CIT(A) negated the
said submission by concluding as under:
11
So far as the latter contention is concerned, the same too, was negated
12
4.2
Apart from the above, another additional basis adopted by the learned
CIT(A) to reject the claim of the appellant is that the assessee has not
challenged the jurisdiction or authority of the Assessing Officer to make the
assessment itself at the stage of assessment and once the assessee had
subscribed to the jurisdiction and participated in the assessment proceedings,
the said contention is not tenable. He has held in this regard as under:
14. In my considered opinion, the contentions raised by the
appellant are liable to be rejected as the appellant has never
challenged the jurisdiction or authority of the AO to make assessment
before the AO, itself. Even if it is assumed that AO had no authority or
was not the proper Assessing Officer, as per section 120 of the Act or
was not competent to pass an order as per Board Circular, yet the
assessee subscribed to his jurisdiction and participated in the
assessment proceedings unchallenged. This behavior of the assessee
goes against raising any contention at later stage. After silently
participating in the proceedings before the AO, the appellant has
accepted the jurisdiction of the AO. Had the appellant raised the issue
at the level of AO, the AO could have written to the Higher Authorities
for defining the jurisdiction. By not doing so the appellant
surrendered the right to object the jurisdiction of the AO which
cannot be revived at the later stage just to prolong the issue for
adjudication. Similar is the case with regard to the validity of notice
u/s 143(2) of the Act and assessee has nowhere challenged during the
13
Before us, the learned counsel for the assessee Shri Salil Aggarwal,
14
4.4
b)
c)
4.5
contended that the contention raised by the assessee are not maintainable
more particularly when the issue of jurisdiction was never raised during the
15
5.
perused the order of the learned CIT(A), comments of the Assessing Officer
and material placed on record. The controversy raised in this appeal relates
to the validity of order of assessment dated 29.12.2008 passed by Additional
CIT, Range 6, New Delhi. According to the appellant/assessee, it is
incumbent under the scheme of statute to vest the Additional CIT u/s
120(4)(b) of the Act to exercise or perform all or any of the powers and
functions of Assessing Officer under the Act.
5.1
or Assistant Director
or Deputy
16
parts. The first part provides that Assessing Officer means the Assistant
Commissioner or Deputy Commissioner or Assistant Director or
Deputy Director or Income Tax Officer who is vested with the relevant
jurisdiction by virtue of directions or orders issued under section 120(1) or
120(2) or any other provision of this Act. The second part provides that
Assessing Officer means the Additional Commissioner or Additional
Director or Joint Commissioner or Joint Director who is directed under
section 120(4)(b) of the Act to exercise or perform all or any of the powers
and functions conferred on or assigned to an Assessing Officer under this
Act. In other words, it is manifest that Assessing Officer inter-alia means
Additional Commissioner who is directed under section 120(4)(b) of the Act
to exercise or perform all or any of the powers and functions conferred on or
assigned to an Assessing Officer under the Act.
In other words, an
17
5.3
It will be seen that the said provision provides that Board may by
18
5.4
of Income Tax ipso facto cannot exercise the powers or perform the
functions of an Assessing Officer under the Act. He can perform the
functions and, exercise the powers of an Assessing Officer only if he is
specifically directed under section 120(4)(b) of the Act. In fact, the above
conclusion is also supported by the decision of the Tribunal in the case of
Prachi Leathers Pvt. Ltd. (supra) wherein it has been held in para 16.2 of the
decision as under:
16.2 From the contents of the aforesaid provisions, it is quite clear
that so far as Addl. Commissioner is concerned, firstly he has been
19
upon the
20
him.
This
view
of
ours
functions/ powers
decision of the Hon'ble Delhi High Court in the case of Dr. Nalini
Mahajan vs. DIT, 257 ITR 123, wherein the Hon'ble High Court,
while discussing the powers of Additional Director Investigation,
held as under:
"It is now well-settled that when a power is given to do a certain thing
in a certain manner, the same must be done in that manner or not at
all. A delegation of power is essentially a legislative function. Such a
power of delegation must be provided by the statute. The director
himself for certain matters is the delegating authority. He, unless the
statute expressly states, cannot sub-delegate his power to any other
authority. In any event, if an authority, which had no jurisdiction to
issue such an authorization, did so, the same would be liable to be
quashed as ultra vires. Thus, unless and until an amendment is
carried out, by reason of the redesignation itself, read with the
provisions of the General Clauses Act, the Addl. Director does not get
any statutory power to issue authorization to issue warrant.
Therefore, the Addl. Director (Investigation) cannot be said to have
any power to issue any authorization or warrant to Joint Director.
Consequently, notification dt. 6th Sep. 1989 is not valid in law to the
said extent. "
18.2 So far as the present case is concerned, though we are
concerned with the powers of Additional CIT but the proposition of
law laid down by the Hon'ble High Court which was, though in
relation to powers of Additional Director (Investigation), is fully
applicable to the present case.
18.3 In view of the aforesaid facts, circumstances and the discussion
and following the law laid down by the Hon'ble Delhi High Court in
the case of Dr.Nalini Mahajan (supra), first of all we are of the
opinion that the Addl.CIT, Range-6, Kanpur having not been
empowered to exercise or perform the powers or functions of an
Assessing Officer, the assessment framed by him was illegal and void
ab initio.
21
5.5
Similar view has also been expressed in the case of City Garden vs.
5.6
Applying the above statutory position to the facts of the case of the
5.7
In view of the above factual and judicial position, we are of the view
22
6.
23
6.1
mentioned order, the jurisdiction of the Additional CIT, Range 6, New Delhi
is stated clearly as in the case of companies registered under the Companies
Act, 1956 with the name beginning with the any of the expressions M dot,
MA to MN alphabets. The perusal of the above order dated 1.8.2007 would
show that it refers to notification No. 267/2001 dated 17.9.2001 which reads
as under:
Section 120 of the Income-tax Act, 1961 Jurisdiction of Income-tax
authorities
Notification No. 267/2001 [F.No. 187/5/2001-ITAT-I] dated 17-92001
In exercise of the powers conferred by clause (b) of sub-section (4) of
section 120 of the Income-tax Act, 1961 (43 of 1961), the Central
Board of Direct Taxes, hereby directs that the Joint Commissioners of
Income-tax or the Joint Directors of Income-tax, shall exercise the
powers and functions of the Assessing Officer, in respect of territorial
area or persons or classes of persons or incomes or classes of income
or cases, or classes of cases, in respect of which such Joint
Commissioner of Income-tax are authorised by the Commissioner of
Income-tax, vide Government of India, Central Board of Direct Taxes
notification number S.O. 732 (E) dated 31.07.2001, S.O. 880(E) dated
14.09.2001, S.O.881(E) dated 14.09.2001, S.O.882(E) dated
14.09.2001 and S.O.883(E) dated 14.09.2001 published in the Gazette
of India, Part II, Section 3, sub-section (ii), Extraordinary.
6.2
Furthermore we notice the learned CIT(A) has also held that section
120(2) empowers the Board to direct any other Income Tax Authority to
issue orders to exercise the powers of any other Income Tax Authority and
24
6.3
25
6.4
Section 120(1) provides that income tax authorities shall exercise all
or any of the powers and perform all or any of the functions conferred on, or,
as the case may be, assigned to such authorities by or under this Act in
accordance with such directions as the Board may issue for the exercise of
the powers and performance of the functions by all or any of those
authorities. Thus section 120(1) stipulates that powers and functions of an
income tax authority shall be confined and restricted to the powers and
functions conferred or assigned by Board under the Act. Further section
120(2) enables the Board u/s 120(1) to even authorize an income tax
authority to issue an order in writing for exercise of powers and function by
subordinate income tax authorities. In other words, section 120(2) does not
in any manner provide that CIT can authorize an Additional Commissioner
of Income Tax to perform the functions and, exercise the powers of an
Assessing Officer.
26
7.
is not in accordance with law. During the course of arguments the ld.
counsel for the assessee has contended that the order dated 1.8.2007 by CIT,
Delhi-II, New Delhi is not an order u/s 120(4)(b) of the Act and is an order
u/s 120(2) of the Act Moreover there are no direction in the said order so as
to confer and assign the Additional Commissioner with the powers of an
Assessing Officer and exercise the functions of an Assessing Officer.
7.1
order apparently is neither an order under section 120(4)(b) of the Act and
nor it otherwise directs the Additional Commissioner to exercise or perform
all or any of the powers and functions conferred on or assigned to an
Assessing Officer under the Act. As regards the notification no. 267/2001
dated 17.9.2001 we notice that such notification by CBDT u/s 120(4)(b) of
the Act directs that Joint Commissioner of Income Tax or Joint Director
shall exercise the power and function of an Assessing Officer in respect of
specified cases in respect of which such Joint Commissioner or authorized
by Commissioner of Income Tax vide CBDT notification dated 14.9.2001
27
7.2
order u/s 120(4)(b) of the Act the Addl. CIT Range-6, New Delhi lacks
jurisdiction to exercise the functions of the AO and therefore consequently
the order of assessment framed is without jurisdiction.
8.
The learned CIT(A) has relied on the judgment in the case of CIT vs.
British India Corporation Ltd. 337 ITR 64 (All) to hold that question of
jurisdiction of the assessing authority cannot be disputed after the
completion of the assessment proceedings. The facts in the case were that
assessee filed its return of income for the assessment year 1974-75 which
was processed by the Assessing Officer, namely, Income Tax Officer,
Central Circle-I, Kanpur who completed the assessment under section
143(3)/144B of the Act on September 7, 1977 after making certain additions
and disallowances to the returned income. On appeal assessee contended
28
that the assessing authority had no jurisdiction to pass the assessment order
in as much as the assessment file stood transferred from Income Tax Officer,
Central Circle-I, Kanpur to the Inspecting Assistant Commissioner Range-D,
Kanpur by the order dated July 1, 1977 and thus the assessment order by the
Income Tax Officer was void-ab-initio. The Tribunal allowed the appeal on
the ground that the Income Tax Officer, Central Circle-I had no jurisdiction
in view of the transfer order dated July 1, 1977 transferring the case to the
Inspecting Assistant Commissioner. The Honble High Court in light of the
above facts held as under:
18. It is reasonable to deduce that the question of jurisdiction of the
assessing authority cannot be disputed after the completion of the
assessment proceedings. Alternatively, if such a question arises, the
said question can be addressed by the Commissioner or the Board, as
the case may be, in view of sub-section (4) of section 124 and this by
necessary corollary excludes the jurisdiction of the first appellate
authority or the court.
8.1
the case as here is a case where the issue is about the lack of jurisdiction of
Additional Commissioner of Income Tax to exercise the powers and perform
the functions of an Assessing Officer under the Act. Once authority lacks
jurisdiction then it is well settled it cannot be conferred participation or even
elapse of time. Moreover even factually in the said case it was found that
29
assessee had not provided the date of communication of the order u/s 127 of
the Act and as such the Honble Court held as under:
23. It has not come on record, not disclosed by the assessee at
least, even before the first appellate authority in the additional memo
of appeal as to when he got the knowledge of the transfer order dated
July 1, 1977. The observation of the Tribunal that it is admitted that
the order of transfer order is effective from July 1, 1977 is therefore,
uncalled for. It has misdirected itself. The Tribunal has proceeded on
a wrong footing that in the absence of date of communication of the
order to the assessee, the assessee could raise the plea of jurisdiction
in appeal as it is the first opportunity. The burden was upon the
assessee to state specifically when the order of the transfer was
received by it, which it failed to discharge. The order of the Tribunal
is, therefore, also bad as it proceeds on assumptions and
presumptions. The date of actual communication of the transfer order
was within the special knowledge of the assessee and it was its duty to
disclose the same.
8.2
8.3
30
8.4
The learned CIT(A) has also referred to the judgment in the case of
Mukti Properties (P) Ltd. vs. CIT 344 ITR 177 (Cal). In the said judgment
their Lordships have held once an issue has not been raised before the first
Appellate Authority then the appellant is stopped from raising the said issue
at the later stage. The said judgment is also not applicable as this issue from
raised by the appellant before the Tribunal and the Tribunal had then
directed the CIT(A) to adjudicate the said issue on merits. The said order of
Tribunal has became final and therefore having regard to the above the said
judgment does not support the case of the revenue.
8.5
31
9.
u/s 127 of the Act from transferring the case from the DCIT to the Addl.
CIT, Range 6, New Delhi. The learned CIT(A) has held that in the cases of
transfer of cases to another AO after issue of notice u/s 143(2) of the Act by
another AO, the issue involves the interpretation of concurrent jurisdiction
which is beyond the scope of this appeal within the restricted directions of
the Honble ITAT. He has held that, in my considered opinion, since both
Addl. CIT Range-6 and DCIT Circle-6(1) works as subordinate officer to the
same CIT and the CIT having entire territorial jurisdiction, the passing of
assessment order by the Addl. CIT after issue of notice u/s 143(2) by the
DCIT Circle 6(1) does not affect the taxability of the appellant or appellant
is not adversely affected by the order. The Honble Delhi High Court in the
above context in the case of Valvoline Cummins Ltd. (supra) has held as
under:
28. On the issue of concurrent jurisdiction between the Additional
Commissioner and the Deputy Commissioner, learned counsel for the
assessee relied upon a decision of the Calcutta High Court in Berger
Paints India Ltd. v. Asstt. CIT [2000] 246 ITR 1331. The Calcutta
High Court had explained the meaning of the expression concurrent
to mean two authorities having equal powers to deal with a situation but the same work cannot be divided between them. This is what the
Calcutta High Court had to say :
32
concurrently
exercise
power.
One
example
that
33
30. In the facts of the present case, since the Additional Commissioner
had exercised the power of an Assessing Officer, he was required to
continue to exercise that power till his jurisdiction in the matter was
over. His jurisdiction in the matter was not over merely on the passing
of the assessment order but it continued in terms of section 220(6) of
the Act in dealing with the petition for stay. What has happened in the
present case is that after having passed the assessment order, the
Additional Commis- sioner seems to have washed his hands of the
matter and left it to the Deputy Commissioner to decide the stay
petition filed under section 220(6) of the Act. We are of the opinion
that this was not permissible in law.
9.1
34
10.
For the reasons aforesaid we hold that the order of assessment dated
35
11.
12
Dated: 22 /09/2015
Mohan Lal
Copy forwarded to:
1)
Appellant
2)
Respondent
3)
CIT
4)
CIT(Appeals)
5)
DR:ITAT
ASSISTANT REGISTRAR
36
Date
22.09.2015
22.09.2015
22.09.2015
24.09.2015
22.09.2015
28.09.2015