Monday, July 28, 2014

CIT couldn’t revise order of AO because AO lost his jurisdiction due to a circular issued by CBDT subsequently

Income tax Officer had valid jurisdiction at time of issuance of notice under section 143(2), subsequent disqualification would not deprive him of jurisdiction of making assessment.


a)The Assessing Officer (‘AO’) issued notice under section 143(2) after analyzing various claims made by the assessee. The ITO passed assessment order, which was partly allowed by the CIT(A).

b)However, later on the Commissioner initiated proceeding under section 263. But on basis of detailed submission of assessee, said revisional proceeding was dropped by him

c)Thereafter, the subsequent CIT initiated revisional proceeding on ground that there was an internal circular according to which with effect from 1-4-2001 for any return of income of any assessment year, being over Rs. 5 lakh, ITO would have no jurisdiction, as jurisdiction in such case would lie with Dy. CIT /ACIT.

d)On appeal, the Tribunal quashed the order of CIT. The aggrieved-revenue filed the instant appeal. The High Court held in favour of assessee as under:

1)The AO had the jurisdiction when the notice under section 143(2) was issued. Once the ITO had valid jurisdiction at the time of issuance of notice, the Assessing Officer ought to have informed the assessee if there was some internal circular.

2)The opinion of CIT that the ITO had no jurisdiction could not be said to be proper, as the assessee appeared on valid notice and after considering all the submissions or representation, the ITO passed the order.

3)It was not the case where the ITO had passed order in a cryptic or summary manner accepting the returned income. The order could not be termed to be erroneous only because the CIT was not satisfied with the conclusion.

4)If the CIT was of the view that the AO had passed the order without jurisdiction then he ought to have initiated departmental enquiry against such officer. No such information had been brought forward from the appellant-revenue or perused from the order of Commissioner under section 263.

5)Thus, the order of CIT under section 263 would be deemed as a change of opinion and would tantamount to abuse of powers granted to him. The practice adopted by the CIT amounted to unnecessary harassment to the assessee for no fault of his. Thus, there was no infirmity or perversity in the order of the Tribunal so as to call for any interference.- CIT V. KAILASH CHAND METHI [2014] 47 59 (Rajasthan)