The Commissioner Of Income Tax-I vs Lalitkumar Bardia
2017 Latest Caselaw 4288 Bom

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     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
            NAGPUR BENCH : NAGPUR


             INCOME TAX APPEAL NO.127 OF 2006




The Commissioner of Income Tax-I,
Aaykar Bhavan, Civil Lines,
Nagpur.                     .....                APPELLANT



      // VERSUS //



Lalitkumar Bardia,
Prop. Aditya Jewellers,
2nd Flor, Golden Palace,
Dharampeth, Nagpur.                .......       RESPONDENT


-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
     Mr.Anand Parchure, Sr. Cl. with Mr.A.J.Bhoot, Adv.
                       for Appellant.
        Mr.C.J.Thakar and Mr.S.C.Thakar, Advocate
                   for the Respondent.
-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-



                               CORAM : M.S.SANKLECHA &
                                       MANISH PITALE, JJ.

DATE : 11.7.2017.

ORAL JUDGMENT (Per M.S.Sanklecha, J) :

1. This appeal challenges the Order dt.17.2.2006

passed by the Income Tax Appellate Tribunal (the Tribunal).

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The impugned order relates to Block Assessment Years

1989-90 to 1999-2000.

2. This appeal was admitted on 6.10.2009 on the

following substantial questions of law :

"Whether in the facts and circumstances of the case and in law the filing of return in response to notice under Section 158BC by respondent/assessee with Nagpur I.T.O., is sufficient to apply bar under Section 124(3) of the Income Tax Act in the matter ?

3. In the year 1999, there was a search and seizure

operation on Motwani group of Nagpur. As a consequence, a

search was also carried out on respondent/assessee during the

period from 2.2.1999 to 6.2.1999. At that time, the

respondent/assessee was being assessed at Rajnandgaon (M.P.).

4. On 6.7.1999, the Commissioner of Income Tax,

Raipur, in exercise of powers under Section 127 of the Act,

transferred the Appellant's assessment proceedings (case) from

I.T.O., Rajnandgaon to the Deputy Commissioner of Income Tax,

Nagpur. The respondent/assessee challenged the order dated

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6.7.1999 passed under Section 127 of the Act by the

Commissioner of Income Tax, Raipur before the Hon'ble Madhya

Pradesh High Court. On 17.9.1999, the Hon'ble Madhya Pradesh

High Court quashed and set aside the order dt.6.7.1999 passed

u/s.127 by the Commissioner of Income Tax, Raipur. However,

the Court by its Order, dated 17.9.1999 directed the

Commissioner to hear the respondent/assessee and pass a

reasoned order in support of the transfer of the case.

5. On 22.9.1999, the Deputy Commissioner of Income

Tax, Nagpur issued a show cause notice under Section 158BC of

the Act calling upon the appellant to file its return of income. In

response to the above notice, the appellant on 5.5.2000 did file

its return of income declaring undisclosed income at 'Nil'.

6. In the meantime i.e. after the order of High Court

dt.17.9.1999 quashing the earlier order dt.6.7.1999 by the

Commissioner of Income Tax, Raipur, the CIT passed a fresh

order dt.18.1.2000 under Section 127 of the Act. By order

dt.18.1.2000, the Commissioner of Income Tax, Raipur

maintained the earlier order dt.6.7.1999. In fact, the operative

part of the order reads as under :

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"The case of the petitioner was connected case of Motwani Group of Nagpur, where search and seizure operation u/s.132 of the I.T. Act were conducted. Accordingly, the case of the petitioner was transferred from ITO, Ward Rajnandgaon to the Dy. CIT, Central Circle-1(1) Nagpur for co-ordinated investigation. Thus, the order passed u/s.127 dated 6.7.99 is in order and no further action is necessary."

7. Thereafter, the Deputy Commissioner of Income Tax,

Nagpur on 12.8.2000 issued notices u/ss. 142(1) and 143(2) of

the Act. The respondent/assessee participated in the

proceedings and consequent thereto, an order dated 28.2.2001

of assessment came to be passed u/s.143(3) r/w. Section 158BC

of the Act by the Deputy Commissioner of Income Tax, Nagpur.

The above order dated 28.2.2001 of assessment determined

the undisclosed income at Rs.27.56 Crores.

8. Being aggrieved by the Order dated 28.2.2001 of the

Deputy Commissioner of Income Tax, Nagpur, the

respondent/assessee filed an appeal to the Commissioner of

Income Tax (Appeals) [CIT(A)]. By an Order dated 14.3.2002,

the CIT (A) partly allowed the respondent/assessee's appeal in

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effect reducing the undisclosed income by directing the Deputy

Commissioner of Income Tax to rework the undisclosed income,

thus, reducing the tax payable thereon.

9. Being aggrieved by order dt.14.3.2002 of the CIT(A),

both the appellant/revenue as well as the respondent/assessee

filed the appeals to the Tribunal. Before the Tribunal, the

respondent/assessee raised an additional ground viz. that the

Assessment Order dt.28.2.2001 passed u/s.143(3) r/w. 158BC

of the Act by the Deputy Commissioner of Income Tax, Nagpur,

is without jurisdiction. This is so as, on the date when notice

under Section 158 BC of the Act was issued i.e. 22.9.1999, the

Deputy Commissioner of Income Tax, Nagpur was not his

Assessing Officer. The basis of his assuming jurisdiction was the

Order dt.6.7.1999 by the Commissioner of Income Tax, Raipur,

which had been quashed by the Order dated 17.9.1999 of

Hon'ble Madhya Pradesh High Court. The Tribunal allowed

raising of additional ground as it concerned the issue of

jurisdiction, being a pure question of law. Thereafter, the

impugned order upheld the objection of the

respondent/assessee negating the stand of the

Appellant/Revenue that the issue of jurisdiction cannot be

urged by the Respondent/Assessee in view of Section 124 (3) of

the Act. This by holding that the same would not apply as the

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respondent/assessee has not filed his return of income

u/s.139(1) or in response to notice u/s.142(1) or 142(3) of the

Act, but in response to notice u/s.158BC of the Act. Besides

holding that on 22.9.1999 when the notice under Section

158BC of the Act was issued, the Deputy Commissioner of

Income Tax, Nagpur was not having jurisdiction, the Tribunal

allowed the respondent/assessee's appeal. Being aggrieved,

the Revenue is in appeal before us.

11. Before considering the rival submissions, it would be

useful to reproduce the provisions of the Act which would have

a bearing in answering the question formulated for our

consideration :

Section 2(7A) of the Income Tax Act, 1961 :

"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

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section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;).

Section 124 of the Income Tax Act, 1961 :

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. ............

3 No person shall be entitled to call in question the jurisdiction of an Assessing Officer -

(a) where he has made a return (under sub-

section (1) of section 115 WD or) under sub- section (1) of section 139, after the expiry of

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one month from the date on which he was served with a notice under sub-section (1) of section 142 or (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 (sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115 WH 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.

It is pertinent to note that w.e.f. 1.6.2016 the Finance Act, 2016 is inserted the following sub-clause (c) :

(c) where an action has been taken under section 132 or section 132A, after expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub- section (2) of section 153C or after the completion of the assessment, whichever is earlier.

Section 127 of the Income Tax Act, 1961 :

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Power to transfer cases.


(1)            The (Principal Director General or) Director

General or (Principal Chief Commissioner or) Chief Commissioner or (Principal 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)            .........


(3)            .........


(4)            .........

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.)

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Section 158 BC of the Income Tax Act, 1961 :

Procedure for block assessment.

158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A. In the case of any person, then, -

(a) the Assessing Officer shall -

(I)            in respect of search initiated or books of
account        or      other   documents   or    any       assets

requisitioned after the 30th day of June, 1995, but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days;

(ii)           in respect of search initiated or books of
account        or      other   documents   or    any       assets

requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (ii) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period :

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Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter :

Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;)

(b) .......

      (c)            .......
      (d)            .......
                                                 (emphasis supplied)

12. Mr.Anand Parchure, learned Senior Counsel for the

appellant/assessee in support of the appeal submits as follows :

(a) In view of Section 124(3) of the Act, the

respondent/assessee is statutorily barred from objecting to the

jurisdiction of the Assessing Officer. This is so as the same was

raised only before the Tribunal. Thus, admittedly, beyond the

time provided therein;

(b) As the respondent/assessee has participated in the

proceedings consequent to notice issued under Section 158BC of

the Act and allowed the Deputy Commissioner of Income Tax,

Nagpur to complete the assessment without raising this

objection, it amounts to waiver. The respondent/assessee cannot

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now challenge the jurisdiction of the Deputy Commissioner of

Income Tax, Nagpur; and

(c ) In any view, the Deputy Commissioner of Income Tax,

Nagpur was vested with jurisdiction to complete the assessment

of undisclosed income under Section 158BC of the Act by the

subsequent Order dated 18.1.2000 of Commissioner of Income

Tax, Raipur which has retrospectively revived his earlier Order

dated 6.7.1999. Consequently, the Deputy Commissioner of

Income Tax, Nagpur is the Assessing officer in terms of the Act at

the time when the notice was issued to the respondent/assessee

and no fault can be found with the same.

13. On the other hand, Mr.Thakar, learned Counsel

appearing for the respondent/assessee while supporting the

impugned order, submits as under :

(a ) Section 124 (3) of the Act would have no application

as, at the relevant time and even now, as it does not deal with

the notices issued u/s.158 BC of the Act. Even the amendment

carried out by Finance Act, 2016 only seeks to bring within its

ambit any notices issued u/s.153A and 153C of the Act and not

notices issued under Section 158BC of the Act. Thus, no fault can

be found with the order of the Tribunal and the question as

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framed has to be answered in favour of the respondent/assessee.

(b) There can be no question of waiver by mere

participation in the Assessment proceedings where there is

inherent lack of jurisdiction in the Assessing Officer. In support,

he placed reliance upon the Apex Court decision in Kanwar

Singh Saini vs. High Court of Delhi, 2012 (4) SCC 307; and

(c) At the time when the notice u/s.158BC was issued on

22.9.1999, the Deputy Commissioner of Income Tax had ceased

to be the Assessing Officer. This is for the reason that the Order

dated 6.7.1999 passed u/s.127 bestowing jurisdiction on him had

already been quashed and set aside on 17.9.1999. Thus, the

Deputy Commissioner of Income Tax, Nagpur could not have

assumed jurisdiction to issue notice u/s.158 BC of the Act.

14. It is undisputed position that the respondent/assessee

was being assessed at Rajnandgaon (M.P.). It was as a

consequence of search upon the Motwani group at Nagpur that a

search was carried on upon the Respondent/Asseessee. In view of

the above, the Commissioner of Income Tax, Raipur for

facilitating detailed and coordinated investigation, passed an

order on 6.7.1999, under Section 127 of the Act transferring the

respondent/assessee's case from Rajnangaon to Nagpur.

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However, the Order dated 6.7.1999 of the Commissioner of

Income Tax, Nagpur was quashed and set aside on 17.9.1999 by

the Hon'ble M.P. High Court. The notice u/s.158BC of the Act was

issued on 22.9.1999 i.e. after the order of transfer dated

6.7.1999, u/s.127 of the Act was quashed and set aside. Thus, it

ceased to exist. Consequently, on 22.9.1999, when the Deputy

Commissioner of Income Tax, Nagpur ceased to have jurisdiction

to assess the Respondent/Assessee as there was no order of

transfer of the respondent/assessee's case to Nagpur. In terms of

Section 2(7A) of the Act, the Assessing Officer means 'an Officer

of the Income Tax vested with jurisdiction either by virtue of

Section 120 or any other provision of the Act'. Admittedly, the

Deputy Commissioner of Income Tax, Nagpur does not have

jurisdiction over the respondent/assessee by virtue of Section

120 of the Act. However, the claim of jurisdiction as a Assessing

Officer over respondent/assessee is the Order dated 6.7.1999

which has been passed u/s.127 of the Act, while issuing notice on

22.9.1999, under Section 158 BC of the Act. But, as the Order

dt.6.7.1999 under Section 127 of the Act by the Commissioner of

Income Tax, Raipur was set aside before issuing of notice, the

Deputy Commissioner of Income Tax, Nagpur ceased to be the

Respondent/Assessee's Assessing Officer. In the result, the notice

dated 22.9.1999 issued u/s.158BC of the Act was issued by the

Deputy Commissioner of Income Tax, who was not the Assessing

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Officer of the respondent/assessee. It is the Assessing Officer

alone who has to serve notice upon the assessee calling upon

him to furnish a return in terms of Section 158BC of the Act. This

notice the Deputy Commissioner of Income Tax could not issue

as, on 22.9.1999, he was not the Assessing Officer. As a

consequence, the notice being without jurisdiction, all the

proceedings subsequent thereto are without authority of law.

15. In fact, as the Apex Court held in A.C.I.T. vs. Hotel

Blue Moon, (2010) 321 I.T.R. 362 (SC) that the issue of notice

under Section 158 BC of the Act, consequent to search is

mandatory, as it is the very foundation for jurisdiction. Therefore,

the notice u/s.158 BC of the Act has necessarily to be issued by a

person who is the Assessing Officer and not by any Officer of the

Income Tax Department. In view of the above, on 22.9.1999,

when the notice under Section 158 BC of the Act was issued by

Deputy Commissioner of Income Tax, Nagpur, he was not the

Assessing Officer of the Respondent/Assessee. Therefore, no fault

can be found on the above count with the Order of the Tribunal.

16. Notwithstanding the above, it is submitted on behalf of

the Revenue that the respondent/assessee is statutorily barred

by virtue of Section 124(3) of the Act, from now urging this issue

before the Tribunal or before this Court. However, on

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examination of Section 124(3) of the Act, it is noted that a person

is not entitled to question the jurisdiction of a Assessing Officer in

the context of the present facts after the time prescribed therein,

only when a return is filed under Section 139(1) of the Act and

within one month of service of notice under Section

142(1)/143(2) of the Act. In this case, admittedly, the return has

been filed in response to a notice under Section 158BC of the Act,

though it may be verified in the same manner as a return under

Section 142(1)(i) of the Act as provided in Section 158BC(b) of

the Act. However, it is still a return filed in response to notice

under Section 158BC of the Act and not a return in response to

notice under Section 142(1)(i) of the Act. The assessment

consequent to notice issued under Section 158 BC of the Act

(Chapter XIV-B of the Act) is carried out in the manner

prescribed/laid down in Section 158 BC of the Act. Further Section

158 BC of the Act provides that provisions of Section 142 and 143

(2) and (3) of the Act shall so far as may be, apply. Therefore,

these sections do not apply in its entirety, but only to the extent

applicable. Further the requirement in Section 124(3)(a) of the

Act of raising objection within one month of completion of

Assessment is to be read in the context of the earlier part i.e.

objection within one month of the notice under Sections 142 and

143 of the Act, as the later part is qualified by the words

"whichever is earlier'.

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17. In this case, it is undisputed position that the return of

income was filed declaring undisclosed income at 'Nil' on

5.5.2000 in response to the notice dated 22.9.1999 issued under

Section 158 BC of the Act and not consequent to notice

u/ss.142(1)(i) of the Act which was issued as late as 12.8.2000.

In the above view, it is clear that the bar of Section 124(3) of the

Act would not prohibit the respondent/assessee from calling in

question the jurisdiction of the Deputy Commissioner of Income

Tax, Nagpur in passing the Assessment Order beyond the period

provided therein. It needs to be pointed out that amendment by

Finance Act, 2016 which is w.e.f. 1.6.2016 brings within ambit of

Section 124(3) of the Act cases when notice is issued consequent

to search u/s.153(A) or 153(C) of the Act preventing/prohibition

an assessee from raising the issue of jurisdiction. It does not

include notices issued u/s.158 BC of the Act. This further

supports the view that time bar u/s.124(3) of the Act to question

the jurisdiction of the Income Tax Officer would not apply to the

cases where return has been filed consequent to notice u/s.158

BC of the Act.

18. It was next submitted that even absent statutory

provision, the respondent/assessee is barred from raising the

issue of jurisdiction after having participated in the proceedings

before the Deputy Commissioner of Income Tax, Nagpur on

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principle of waiver of its right to question his jurisdiction. A waiver

would mean a case where a party decides not to exercise its

right to a particular privilege, available under the law. In this

case, the Respondent/assessee has a right not to be assessed to

tax by an Income Tax Officer, who is not the Assessing Officer.

However, the waiver can only be of one's right/privilege but non-

exercise of the same will not bestow jurisdiction on a person who

inherently lacks jurisdiction. Therefore, the principle of waiver

cannot be invoked so as to confer jurisdiction on an Officer who

is acting under the Act when he does not have jurisdiction. The

Act itself prohibits an Officer of Income Tax from exercising

jurisdiction u/s.158 BC of the Act, unless he is an Assessing

Officer. This limit in power of the Income Tax Officer in exercise

of jurisdiction is independent of conduct of any party. Waiver can

only be of irregular exercise of jurisdiction and not of lack of

jurisdiction. The decision of the Delhi High Court in Venad

Properties v. CIT, 340 ITR 463 relied upon by the

Appellant/Revenue is a case of non-service of notice before

passing of an order by an Officer having inherent jurisdiction.

Therefore, it is a case of irregular exercise of jurisdiction and not

absence of jurisdiction to issue notice. Therefore, it will have no

application.

19. It is a settled position in law that mere participation in

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proceedings or acquiescence will not confer jurisdiction. The Apex

Court in Kanwar Singh Saini (supra) made observations, which

are apposite to the issue at hand and which read as under :

"22.There can be no dispute regarding the settled legal proposition that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the parties nor by a superior court, and if the court passes order/decree having no jurisdiction over the matter, it would amount to a nullity as the matter goes to the roots of the cause. Such an issue can be raised at any belated stage of the proceedings including in appeal or execution. The finding of a court or tribunal becomes irrelevant and unenforceable/inexecutable once the forum is found to have no jurisdiction. Acquiescence of a party equally should not be permitted to defeat the legislative animation. The court cannot derive jurisdiction apart from the statute. (Vide United Commercial Bank Ltd v. Workmen, Nai Bahu v. Lala Ramnarayan, Natraj Studios (P) Ltd. v. Navrang Studios, Sardar Hasan Siddiqui v. STAT, A.R. Antulay v. R.S. Nayak, Union of India v. Deoki Nandan Aggarwal, Karnal Improvement Trust v. Parkash Wanti, U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., State of Gujarat v. Rajesh Kumar Chimanlal Barot, Kesar Singh v. Sadhu, Kondiba Dagadu Kadam v. Savitribai Sopan Gujar and CCE v. Flock (India) (P) Ltd.)

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20. It was lastly submitted that, by virtue of the subsequent Order dated 18.1.2000 passed by the Commissioner of Income Tax, Raipur, the earlier order dt.6.7.1999 passed u/s.127 of the Act by him stands revived. Consequently, all the proceedings taken between 6.7.1999 till the Order dated 18.1.2000 by the Deputy Commissioner of Income Tax, Nagpur become regular and he will retrospectively enjoy the status of the Assessing Officer even on 22.9.1999, when he issued the notice u/s.158 BC of the Act.

21. Transfer of proceedings u/s.127 of the Act cannot be

retrospective so as to confer jurisdiction on a person who does

not have it. Section 127 of the Act does not empower the

Authorities under the Act to confer jurisdiction on a person who

does not have jurisdiction with retrospective effect. In fact, the

explanation under Section 127 of the Act clearly provides that all

the proceedings under the Act which are pending on the date of

such order of transfer and all the proceedings which may be

commenced after date of such order of transfer would stand

transferred to the Assessing Officer to whom the case is

transferred by Section 127(1) of the Act. This provision makes it

clear that though transfer would come into effect from the date

the order of Commissioner passed under Section 127(1) of the

Act, the proceedings already commenced would not abate and

continue with new Assessing Officer, who assumes charge

consequent to transfer subject ofcourse to the pending notices

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being within jurisdiction of the Officer issuing the notices. It is not

a provision which validates without jurisdiction notice issued by

an Income Tax Officer. If the submission of the Revenue on the

above account is to be accepted, then an order which is without

jurisdiction could be bestowed with jurisdiction by passing an

order of transfer with retrospective effect. Section 127 of the Act

does not validate notices/orders issued without jurisdiction, even

if they are transferred to a new Officer by an Order under Section

127 of the Act.

22. For the aforesaid reasons, the above substantial

question of law is answered in the negative i.e. in favour of the

respondent/assessee and against the appellant/revenue.

23. Therefore, the appeal is dismissed. No order as to

costs.

                                 JUDGE             JUDGE




jaiswal