Commissioner Of Income Tax vs Kapil Jain
2010 Latest Caselaw 3609 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


+                              ITA No.613 of 2009



%                                   Decision Delivered On: August 05, 2010


      COMMISSIONER OF INCOME TAX                               . . . Appellant

                         through :           Mr. N.P. Sahini, Advocate



                               VERSUS


      KAPIL JAIN                                              . . .Respondent

                         through:            Mr. Santanu Kanngo, Advocate



CORAM :-
    HON'BLE MR. JUSTICE A.K. SIKRI
    HON'BLE MS. JUSTICE REVA KHETRAPAL

      1.    Whether Reporters of Local newspapers may be allowed
            to see the Judgment?
      2.    To be referred to the Reporter or not?
      3.    Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. This appeal was admitted on 2nd September, 2009 on the following

substantial question of law: -

"Whether the ITAT, while deleting the additions, was correct in law and on facts in holding that the order of the AO was without jurisdiction though it has been passed after due compliance of the procedure envisaged u/s 158 BD?"

2. On 20th September, 2009, a search was conducted in the premises

of Sh. Sumer Chand Jain, who is the father of the assessee herein.

On the basis of certain documents seized in the said search, a

notice dated 19th April, 2004 under Section 158 BD read with

Section 158 BC of the Income Tax Act, 1961 (hereinafter referred

to as „the Act‟) was served upon the assessee. The assessee

thereafter moved an application dated 5th May, 2004 seeking

extension of time to file the return for the block period comprising

of the assessment year 1997-98 to 2003-04. Eventually, the

return was filed on 24th May, 2004 declaring his income as „Nil‟.

The Assessing Officer, however, made the assessment for the

aforesaid block period by assessing the income at Rs.25,61,147/-.

The assessee filed an appeal before the CIT (A), who allowed the

same partly by deleting some of the additions made and

confirmed some other additions made by the Assessing Officer. It

is worthwhile to point out that before the CIT (A), the assessee

had also raised the question of jurisdiction of the Assessing

Officer. This objection was turned down by the CIT (A). The

Income Tax Appellate Tribunal (hereinafter referred to as „the

Tribunal‟), however, has accepted the objection qua jurisdiction of

the Assessing Officer and on that ground alone, the assessment

made by the Assessing Officer is set aside vide impugned decision

dated 29th August, 2008, without going into the merits of the case.

Challenging that order, this appeal is preferred and the aforesaid

facts would disclose that we are concerned with the issue as to

whether the order passed by the concerned AO was without

jurisdiction. In so far as this issue is concerned the following facts

may be spelled out: -

The search was conducted at the premises of father of the

assessee. The concerned Assessing Officer in the case of the

father of the assessee was ACIT Circle 36 (1), New Delhi whereas

the Assessing Officer having jurisdiction over the assessee was

the ITO, Ward 29 (1), at the time of the issue of notice under

Section 158 BD. In the case of the assessee, however, the notice

under Section 158 BC was issued by the ACIT, Circle 36 (1), New

Delhi who had no jurisdiction over the assessee.

3. Subsequently, the case of the assessee was transferred to Circle

36 (1) and as such transfer order was passed by the CIT on 21 st

April, 2004. However, the fact remains that as on the date of the

issue of the notice under Section 158 BD read with Section 158 BC

of the Act on 19th April, 2004, the jurisdiction vested with ITO,

Ward 29(1) in so far as the assessee is concerned. It is thus clear

that ACIT, Circle 36 (1), New Delhi, on the date of issuance of

notice, had no jurisdiction to issue such a notice.

4. Mr. Sahini accepts the aforesaid position. However, his

submission is that no objection to the jurisdiction of the ACIT,

Circle 36 (1) was taken by the assessee within one month from

the date on which he was served with the notice under Section

158 BD of the Act and for this reason alone it was not competent

on the part of the Tribunal to set aside the proceedings for want of

jurisdiction. In support of this plea, Mr. Sahini, places reliance on

the provisions of Section 124 of the Income Tax Act, 1961. Sub-

section (3) of this Section provides that under certain

circumstances the jurisdiction of the Assessing Officer would not

be questioned. This is so stated in the following manner: -

"S.124 JURISDICTION OF ASSESSING OFFICERS

(1) XXX XXX XXX

(2) XXX XXX XXX

(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 139, after the expiry of 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 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 (1) of section 142 or under section 148 for the making of the return or by the notice 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."

5. Though there is no specific mention of Section 158BD or Section

158 BC in clause (a) of the sub-section, Mr. Sahini submits that in

Section 158 BC itself, provisions of Section 142 (1) are

incorporated and because of this, proceedings under Section

158BC shall also be covered.

6. We are in quite agreement with the aforesaid submissions made

by the learned counsel for the Revenue. Sub-Section (3) of

Section 124 of the Act puts a specific embargo on the assessee

from raising objection about the jurisdiction of an Assessing

Officer after the expiry of one month from the date on which he

was served with notice under sub-Section (1) of Section 142 of the

Act or after completion of assessment whichever is earlier. It is

not in doubt that the plea of the jurisdiction was not raised by the

assessee at all within one month from the date on which he was

served with the notice under Section 158BD of the Act. Chapter

XIV-B of the Act provides „special procedure for assessment of

such cases‟. Thus, where the search has taken place and as a

result thereof, the assessment for the „block period‟ is required,

specific procedure is provided under this Chapter for completing

the assessment. If the A.O. is satisfied that the documents on

material seized in the search reveals undisclosed income of any

other person if premises are not even searched, notice can be

issued to that person under Section 158BD for „block period‟.

7. It cannot be disputed that after service of the notice for „block

assessment‟ under these provisions, the assessment is to be

carried out in the manner provided under Section 143 of the Act.

Notice was duly served under Section 143 of the Act along with

detailed questionnaire by the Deputy Commissioner of Income

Tax, Circle 36(1), which was served upon the assessee on

21.04.2006 by when the jurisdiction stood transferred to him.

Section 124(3) of the Act specifically provides for limitation of one

month, inter alia, from the date of service of notice under Section

143(2).

8. In the present case, admittedly objection was not taken within one

month. Therefore, for this reason, we are of opinion that the order

of the Tribunal holding that the assessment proceeding for the

block period was without jurisdiction is not correct. We, thus,

decide the question in favour of the Revenue and against the

assessee. As a result thereof, the impugned order passed by the

Tribunal is set aside and the matter is remanded back to the

Tribunal to decide the appeal on merits.

9. This appeal is disposed of in the aforesaid terms.

(A.K. SIKRI) JUDGE

(REVA KHETRAPAL) JUDGE AUGUST 05, 2010.

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