It often happens in the income tax department. Many scrutiny cases are assigned to the range head who are of the rank of Joint Commissioner or Additional Commissioner of Income Tax . So , may the return was filed with the assessing officer of rank of Income Tax Officer or DCIT or ACIT rank, but you find that a notice from office of rang ehead asking questions for scrutiny of the case. In all those cases, the JCIT or Addl.CIT becomes the assessing officer . The power to assess comes from combined reading of section 120 and the definition of word assessing officer u/s 2(7A) which includes JCIT or ADDL.CIT as assessing officer . Section 2(7A) is given below :
| 7A) | “Assessing Officer” means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ; |
What is the Illegality about Assessment Order?
Now that the Income Tax Act has included a JCIT or Addl.CIT as assessing officer , it has not given them power to assume the role of assessing officer. However, CBDT has powers u/s 120(1) to authorize any other officer to act as assessing officer. It issues a Notification No. 267/2001 [F.No. 187/5/2001-ITAT-I] dated 17-9-2001 by which the Joint commissioner of Income Tax was authorized to act as assessing officer. But , no notifcation was issued by CBDT to confer jurisidction of assessment to an Addl.CIT . That power is left with Commissioner of Income Tax to issue order u/s 120(4) whereever it is felt that the Addl.CIT should be acting as assessing officer .
Further , even the concurrent jurisidction mention in section 120(5) has been judicially held never to mean two assessing officer simultaneously for one assessee.
In other words , if a scrutiny case is supposed to be handled by the Addl.CIT , then the appropriate authority i.e Commissioner must use the power vested in him /her under section120(4) and section 127 to first authroize the JT.CIT /Addl.CIT to act as assessing officer and then transfer the case from A.O below the rank of Joint CIT or Addl.CIT to the Range head . If those steps are taken by the CIT concerned,the assessment order passed by the Joint Commissioner or Addl.CIT is without jurisdiction and therefore patently illegal.
This was the view of Courts and Tribunals which are presented below :
Mega Corporation Ltd vs Addl.CIT Range 6, New Delhi [2015] 62 taxmann.com 351 (Delhi – Trib.) in which the facts in grief was that the the return filed by assessee company was selected for scrutiny. It received a notice u/s 143(2) of the Act dated 15.10.2007 from Dy. CIT, Circle 6, New Delhi for framing assessment under section 143(3) of the Act. Thereafter, on 25.8.2008, notice was issued by Additional CIT, Range 6, New Delhi under section 142(1) of the Act and pursuant thereto, assessment has been framed under section 143(3) of the Act on 29.12.2008 by the Additional CIT, Range 6, New Delhi.
The assessee contended before CIT(A) and ITAT that the assessment framed by the Additional CIT Range-6, New Delhi was without jurisdiction as firstly, he was not an Assessing Officer under section 120(4)(b) of the Act and furthermore, there was no order under section 127(1) of the Act for transfer of jurisdiction from Dy. CIT, Circle 6(1), New Delhi to Additional CIT, Range 6, New Delhi.
ITAT, Delhi held that if the CIT did not pass the order u/s 120(4) conferring the jurisdiction to addl.CIT , the assessment order is passed without jurisdiction.
7.2 We thus find merit in the claim of the appellant that in absence of an 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.
On the lack of order of transfer of jusrisdiction u/s 127 , ITAT held , by relying on the judgment of Delhi High Court that considered the definition of word Concurrent jurisdiction by Kolkata High Court in case of Bereger Paints India Ltd Vs ACIT , 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 133. 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 :–
“. . . Concurrent jurisdiction means a subordinate authority can deal with the matter equally with any superior authority in its entirety so that either one of such jurisdictions can be invoked. It cannot be construed as concurrent jurisdiction when one part of the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate officer. . . .” (p. 141)
29. It appears to us quite clearly that there is a distinction between concurrent exercise of power and joint exercise of power. When power has been conferred upon two authorities concurrently, either one of them can exercise that power and once a decision is taken to exercise the power by any one of those authorities, that exercise must be terminated by that authority only. It is not that one authority can start exercising a power and the other authority having concurrent jurisdiction can conclude the exercise of that power. This perhaps may be permissible in a situation where both the authorities jointly exercise power but it certainly is not permissible where both the authorities concurrently exercise power. One example that immediately comes to the mind is that of grant of anticipatory bail. Both the Sessions Judge and the High Court have concurrent power. It is not as if a part of that power can be exercised by the High Court and the balance power can be exercised by the Sessions Judge. If the High Court is seized of an application for anticipatory bail it must deal with it and similarly if the Sessions Judge is seized of an anticipatory bail, he must deal with it. There can be no joint exercise of power both by the High Court as well as by the Sessions Judge in respect of the same application for anticipatory bail.
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 Commissioner 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 We therefore hold that applying the above judicial position that assessment has to be completed by the authority who has initiated the proceedings for making assessment and any other authority can take over the proceedings only after a proper order of transfer u/s 127(1) or 127(2) of the proceedings. The revenue has not brought any order for transfer of the proceedings from Dy. CIT, Circle-6(1), New Delhi to the Additional CIT, Range-6, New Delhi and therefore it is quite evident that the Additional CIT, Range-6 took over the assessment proceedings without there being an order u/s 127(1).
The order of ITAT , Lucknow in Prachi Leathers (P.) Ltd. v. Addl. CIT [IT Appeal No. 744 (Luck.) of 2004, dated 29-3-2010] (para 4.3) was also relied on in which it was held that if the order u/s 127 . The relevant portion of the order ITAT, lucknow is given as under :
“19. We are further of the opinion that the notice under section 143(2) of the Act having been issued by the Income-tax Officer, Range 6(2), Kanpur on 16.8.2002, it was Income-tax Officer alone who could frame the assessment subject however to the fact that that the assessment could be framed by any other officer also provided there was an order of transfer of jurisdiction over assessee’s case from Income-tax Officer, Range-6(2), Kanpur to that officer under section 127(4) of the Act, but so far as present case is concerned, the Revenue has not brought to our notice any order under section 127 passed after 6.8.2002 transferring jurisdiction over the assessee’s case from the Income-tax Officer, Range 6(2), Kanpur to the Addl. CIT, Range-6,Kanpur and therefore, the assessment framed by the Addl.CIT, Range-6,Kanpur irrespective of the fact as to whether he was authorized to perform the functions of an AO or not, is illegal and void ab initio for want of jurisdiction. Consequently, we are of the opinion that the assessment order in the present case dated 31.3.2003 passed by the Addl.CIT, Range (6), Kanpur was illegal and void ab initio for want of jurisdiction. Consequently, the assessment order is quashed.”
Conclusion on Assessment Order by Addl.CIT
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- If no order u/s 120(4) was passed by the concerned commissioner authrizing him to act as assessing officer, the order passed by the Addl.CIT is illegal.
- Even if the order u/s u/s 120(4) was passed , there must still be an order u/s 127 trasfeering case from an A.O to Addl.CIT.
- If only 127 order passed, still it can be challenged that the case was transferred from an authorized assessing officer to an addl.CIT who is not not authorized by an order.
Readers are advised to read How Scrutiny Case Transfer by ITO to DC/AC Circle Suo Moto May Make Assessment Order Illegal !