Charu K. Bagadiawife Of Ketan C. Bagadiano v. Assistant Commissioner Of Income Tax-23(2), Mumbai

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE R. MAHADEVANANDTHE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD Writ Appeal No. 2493 of 2021andC.M.P. No. 16191 of 2021 Charu K. BagadiaWife of Ketan C. BagadiaNo.28, Ritherdon RoadVepery, Chennai - 600 007 ..Appellant/Petitioner Versus 1. Assistant Commissioner of Income Tax-23(2), Mumbai 104, 1st Floor, Matru Mandir Tardeo Road, Mumbai - 07 2. Assistant Commissioner of Income Tax Corporate Circle - 4 (2), Chennai Room No.433, 4th Floor Aaykar Bhavan, Main Building 121, Nungambakkam High Road Chennai - 600 034..Respondents/Respondents Appeal filed under Clause 15 of The Letters Patent againstthe order dated 16.04.2021 passed in W.P.No.34136 of 2018 on thefile of this Court. Prayer in W.P.No.34136 of 2018: Writ Petition filed underArticle 226 of the Constitution of India, call for the recordson the file of the Respondents in PAN in issuingthe impugned notice Under Section 148 of the Income Tax Act1961 dated 28-3-2018 by the 1st respondent as well theconsequentila notice U/S 143(2) RWS 129 of the Income Tax Act1961 dated 14-12-2018 issued by the 2nd Respondent and quash thesame. For Appellant : Ms.Vandana Vyas for Mr.R.SivaramanFor Respondents : Mrs. Hema MuralikrishnanSenior Panel Counsel R. MAHADEVAN, J. At the outset, be it noted, it is settled law that “ajurisdiction can neither be waived nor created even by consentand even by submitting to jurisdiction, an Assessee cannotconfer upon any jurisdictional authority, something which helacked inherently”. The said ratio squarely applies to the caseon hand. 2.The appellant is an assessee on the file of the secondrespondent. For the assessment year 2011-2012, she filed herreturn of income on 19.04.2012 admitting an income ofRs.11,60,000/-, which was processed by the Assessing Officerunder Section 143 (1) of the Income Tax Act, 1961 (in short,“the Act”). While so, after a period of five years, she receiveda notice dated 28.03.2018 issued by the first respondent underSection 148 of the Act purportedly to re-assess the income ofreturn submitted by her for the assessment year 2011-2012. Inresponse, she submitted a reply dated 26.04.2018 stating thatthe first respondent has no jurisdiction to issue such a noticeunder Section 148 of the Act and therefore, she requested todrop the reassessment proceedings. Subsequently, the firstrespondent transferred the files pertaining to the appellant tothe second respondent. Thereafter, the second respondentcontinued the reassessment proceedings by issuing a notice dated14.12.2018 under section 143(2) r/w 129 of the Act, directingthe appellant to appear and file return of income to the noticeunder section 148 of the Act along with supportive documents.Aggrieved over the same, the appellant preferred WP.No.34136 of2018 to quash both the notices dated 28.03.2018 and 14.12.2018issued by the respective respondents 1 and 2. 3. It was contended by the respondents before the writcourt that the appellant had received a sum of Rs.53,50,000/-towards her share in respect of the property at Mumbai, from adeveloper within the jurisdiction of the first respondent andtherefore, notice dated 28.03.2018 under section 148 of the Actwas issued by the first respondent. When the appellant raised anissue of jurisdiction, the entire materials collected by thefirst respondent were sent to the second respondent forcontinuing the reassessment proceedings. Accordingly, the secondrespondent seized of the reassessment proceedings within whosejurisdiction the appellant resides. According to therespondents, in the original assessment proceedings for theassessment year 2011-2012, it was not known as to whether theappellant had disclosed the said sum of Rs.53,50,000/- receivedby her towards transfer of FSI rights in respect of the propertysituated at Mumbai and therefore, she was directed to appearbefore the second respondent and explain the same. In any event, there is tangible material evidence available to initiatereassessment proceedings against the appellant. 4.Upon hearing both sides, the learned Judge, havingobserved that the notice initially issued by the firstrespondent against the appellant though improper, need not beset aside, in view of the fact that the said proceedings weresubsequently transferred to the Income Tax Authorities atChennai; the commencement of the proceedings by issuing noticedated 14.12.2018 is in no way prejudiced the appellant; and sheis at liberty to file her objections and avail an opportunity ofhearing to be provided under the IT Act, dismissed the said writpetition, by the order impugned herein. Therefore, the appellant/ writ petitioner is before this court with this appeal. 5.1. The learned counsel for the appellant would contendthat the first respondent lacks jurisdiction to initiate thereassessment proceedings by issuing the notice dated 28.03.2018knowing fully well that the appellant is not residing within thejurisdiction of the first respondent. Further, after a period offive years from the completion of the original assessment forthe assessment year 2011-2012, the reassessment proceedings wereinitiated, alleging that some of the income was not disclosed bythe appellant truly and fully. However, the fact remains thatthere was no income omitted to be included by the appellant forassessment during the assessment year in question. Therefore,the reassessment proceedings ought not to have been initiated bythe first respondent against the appellant. 5.2. Adding further, the learned counsel for the appellantcontended that when the reassessment proceedings initiated bythe first respondent itself is invalid, the second respondentwithout issuing notice afresh under section 148 of the Act,cannot be permitted to continue the further proceedings byissuing notice dated 14.12.2018 invoking Section 129 of the Act.According to the learned counsel, even assuming that thereassessment proceedings are valid, as per Section 149 (b) ofthe Act, the second respondent cannot issue a notice underSection 148 of the Act beyond the period of six years from theend of the relevant assessment year. It is also submitted thatthe limitation period for initiation of reassessment proceedingsfor the assessment year 2011-12 came to an end on 31.03.2018;the second respondent, who is the jurisdictional assessingofficer, did not issue any notice under Section 148 of the Act,before 31.03.2018 to reopen the return of income declared by theappellant; and therefore, the second respondent cannot ride uponthe borrowed satisfaction of the first respondent to continuewith the reassessment proceedings without issuance of noticeunder section 148 of the Act within the prescribed time frame,which vitiate the entire reassessment proceedings. However, the learned Judge erred in observing that there is no irregularityor infirmity in initiating the reassessment proceedings by thefirst respondent by issuing notice dated 28.03.2018 andtransmitting the files to the second respondent, who in turn,issued notice dated 14.12.2018 for continuation of thereassessment proceedings; and dismissing the writ petition, bythe order impugned herein. 5.3.The learned counsel placed reliance on the decisions ofvarious High Court and the Hon'ble Supreme Court and ultimately,submitted that when once the initiation of the reassessmentproceedings is without jurisdiction and held to be invalid, theother consequential proceedings must also necessarily held to beinvalid; and therefore, the writ appeal will have to be allowed,by setting aside the order impugned herein and the noticesimpugned in the writ petition. 6. Opposing this appeal, the learned Senior Panel Counselappearing for the respondents would contend that thereassessment proceedings were initiated by issuing notice undersection 148 of the Act by the first respondent inasmuch as theparticulars relating to the PAN number of the appellant were notavailable and the details about the developer, who had madepayment to the appellant, were not furnished. However, when theissue of jurisdiction was raised by the appellant, the firstrespondent transferred the entire files relating to thereassessment proceedings of the appellant to the secondrespondent. The appellant, without filing her return of incometo the notice under section 148 of the Act for the relevantassessment year to the second respondent, approached this Courtinvoking Article 226 of the Constitution of India. Even in thewrit proceedings, the appellant did not state anything about theamount received by her. Therefore, the learned Judge justifiedthe notices issued by the respondents and rightly dismissed thewrit petition, granting liberty to the appellant to submit herobjections to the notice dated 14.12.2018 issued by the secondrespondent and also avail an opportunity of personal hearing tobe provided. Thus, according to the learned counsel, the orderof the learned Judge does not require any interference at thehands of this court. 7.Heard both sides and perused the materials available onrecord. 8.The subject matter of challenge before the writ court wasthe notice dated 28.03.2018 issued by the first respondent undersection 148 of the Act and the consequential notice dated14.12.2018 issued by the second respondent under section 143(2)r/w 129 of the Act, for the assessment year 2011-12. The learnedJudge decided the same against the appellant / writ petitioner. 9.In this writ appeal, the learned counsel for theappellant made elaborate contentions both on legal and factualaspects. Firstly, in law, it is submitted that the firstrespondent lacks jurisdiction to issue reassessment notice undersection 148 of the Act; when the same was pointed out by theappellant, the first respondent transferred the entire files tothe jurisdictional assessing officer / second respondent, whointurn, continued the reassessment proceedings by issuing noticeunder section 143(2) r/w 129 of the Act, without issuing anyfresh notice under section 148 of the Act; and hence, thenotices so issued by the respective respondents are invalid andthe same vitiate the reassessment proceedings. Secondly, onfacts, it is contended that the appellant disclosed fully andtruly all the material facts necessary for her assessment forthe relevant assessment year and there was no income omitted tobe included by way of reassessment proceedings. However, thelearned Judge failed to appreciate the same in a properperspective and erred in dismissing the writ petition filed bythe appellant herein. 10.On the other hand, the learned senior panel counselappearing for the respondents reiterating the averments made inthe counter affidavit, justified the reassessment proceedingsinitiated by the respondents against the appellant, as affirmedby the learned Judge in the writ petition. 11.Before proceeding further, it is but relevant to referto the provisions of law, based on which the notices impugned inthe writ petition were issued by the respondent authorities,viz., section 148 and 129 of the Act, as follows: “Issue of notice where income has escaped assessment 148.(1)Beforemakingtheassessment,reassessment or recomputation under section 147, theAssessing Officer shall serve on the assessee anotice requiring him to furnish within such period asmay be specified in the notice, a return of hisincome or the income of any other person in respectof which he is assessable under this Act during theprevious year corresponding to the relevantassessment year, in the prescribed form and verifiedin the prescribed manner and setting forth such otherparticulars as may be prescribed; and the provisionsof this Act shall, so far as may be, applyaccordingly as if such return were a return requiredto be furnished under section 139: Provided that in a case - (a)Where a return has been furnished during theperiod commencing on the 1[st] day of October, 1991 and ending on the 30[th] day of September, 2005 in responseto a notice served under this section, and (b)Subsequently a notice has been served undersub-section (2) of section 143 after the expiry oftwelve months specified in the proviso to sub-section(2) of section 143, as it stood immediately beforethe amendment of said sub-section by the Finance Act,2002 (20 of 2002) but before the expiry of the timelimit for making the assessment, re-assessment orrecomputation as specified in sub-section (2) ofsection 153, every such notice referred to in thisclause shall be deemed to be a valid notice: Provided further that in a case - (a)Where a return has been furnished during theperiod commencing on the 1[st] day of October, 1991 andending on the 30[th] day of September, 2005, in responseto a notice served under this section, and (b)subsequently a notice has been served underclause (ii) of sub section (2) of section 143 afterthe expiry of twelve months specified in the provisoto clause (ii) of sub-section (2) of section 143, butbefore the expiry of the time limit for making theassessment, reassessment or recomputation asspecified in sub-section (2) of section 153, everysuch notice referred to in this clause shall bedeemed to be a valid notice.] [Explanation.- For the removal of doubts, it ishereby declared that nothing contained in the firstproviso or the second proviso shall apply to anyreturn which has been furnished on or after the 1[st]day of October, 2005 in response to a notice servedunder this section.] (2)The Assessing Officer shall, before issuing anynotice under this section, record his reasons fordoing so.” “Change of incumbent of an office: 129.Whenever in respect of any proceeding under thisAct an income-tax authority ceases to exercisejurisdiction and is succeeded by another who has andexercises jurisdiction, the income-tax authority sosucceeding may continue the proceeding from thestage at which the proceeding was left by hispredecessor: Provided that the assessee concerned my demand thatbefore the proceeding is so continued the previous (2)The Assessing Officer shall, before issuing anynotice under this section, record his reasons fordoing so.” “Change of incumbent of an office: 129.Whenever in respect of any proceeding under thisAct an income-tax authority ceases to exercisejurisdiction and is succeeded by another who has andexercises jurisdiction, the income-tax authority sosucceeding may continue the proceeding from thestage at which the proceeding was left by hispredecessor: Provided that the assessee concerned my demand thatbefore the proceeding is so continued the previous proceeding or any part thereof be reopened or thatbefore any order of assessment is passed againsthim, he be reheard.” On a plain reading of the aforesaid provisions, it is apparentthat section 148 provides for issuance of notice where incomehas escaped assessment and the assessing officer intends to makeassessment, reassessment or recomputation under section 147.Under sub-section (1) to section 148, the assessing officershall issue notice to the assessee requiring him/her to furnisha return of income in respect of which he/she is assessable forthe relevant assessment year; and under sub-section (2) tosection 148, the assessing officer shall before issuing anynotice under this section, record his reasons for doing so. Itis also crystal clear from the provisions of section 129 of theAct that the same is applicable, when there is a change ofincumbent without any change of jurisdiction and one AssessingOfficer is succeeded by another in the same office. 12.In the instant case, it could be seen that theassessment of the appellant was reopened upon receipt ofcredible information from the Directorate of Income Tax (I &CI), Mumbai, to the effect that she received a sum ofRs.53,50,000/- for transfer of her FSI right in the property atMumbai. Pursuant to the same, the first respondent issued noticedated 28.03.2018 under section 148 of the Act stating that hehas reasons to believe that the income of the appellantchargeable to tax for the assessment year 2011-12 has escapedassessment within the meaning of section 147 of the Act; andtherefore, he proposed to assess/re-assess the income for thesaid assessment year and he directed the appellant to file herreturn of income in the prescribed form within 30 days from theservice of notice. Upon receipt of the said notice, theappellant in her reply dated 26.04.2018, pointed out that she isa permanent resident of Chennai and her PAN is and anassessee on the file of the second respondent; and shetherefore, requested the first respondent to drop the proposal.Consequently, the files pertaining to the reassessment of theappellant were transmitted to the second respondent. Thereafter,without issuing any fresh notice under section 148 of the Act,the second respondent / jurisdictional assessing officercontinued the reassessment proceedings initiated by the firstrespondent, who lacks jurisdiction to issue notice under section148 of the Act, and sent a notice dated 14.12.2018 under section143(2) r/w section 129 of the Act to the appellant, calling uponher to appear either in person or through an authorisedrepresentative and produce the documents in support of thereturn of income filed by her. Thus, both the notices issued bythe respondents 1 and 2 respectively were challenged by theappellant. 13. Reference was made by the learned counsel for theappellant to the following decisions: (i)Shibani Dutta v. Commissioner of Income-tax [(2012) 26taxmann.com 105 (Delhi), in which, it was held as under: 13. Reference was made by the learned counsel for theappellant to the following decisions: (i)Shibani Dutta v. Commissioner of Income-tax [(2012) 26taxmann.com 105 (Delhi), in which, it was held as under: “10....The period of limitation gets extendedunder clause (iii) of Explanation I only by the timetaken to reopen the whole or any part of theproceeding or giving an opportunity to the assessee(to be reheard) under the proviso to Section 129. Ifwe turn to section 129 of the Act we find that itprovides for the procedure to be followed when thereis a “change of incumbent of an office”. ... 11.We do not see how this provision helps theRevenue. It is applicable when in the samejurisdiction, there is a change of incumbent and oneAssessing Officer is succeeded by another. In such acase, the main Section provides that the successor –officer is entitled to continue the proceeding fromthe stage at which it was left by his predecessorsubject to the caveat, expressed in the proviso, thatif the assessee demands that before the proceeding iscontinued the previous proceedings or any partthereof shall be reopened or that before anyassessment order is passed against him, he shall bereheard, such a demand has to be accepted. If as aresult of accepting the assessee's demand under theproviso to section 129 some time is taken and theassessment proceedings cannot be completed within thenormal period of limitation, then the period oflimitation gets extended by such time taken forgiving the assessee an opportunity to reopen theearlier proceedings or for rehearing. Section 129 isapplicable to normal assessments made under section143(3) of the Act as well as the block assessmentsmade under section 158BC of the Act....” (ii)Commissioner of Income-tax v. M.I.Builders (P) Ltd [(2014)44 taxmann.com 360 (Allahabad)], wherein, it was observed asfollows: “17.Having heard learned counsel for the partiesand perusing the records, we are of the view that on29.3.2004, when the notice under section 148(1) ofthe Act was issued, ACIT, Range-IV, Lucknow have nojurisdiction over the Assessee on the date ofissuance of such notice as the jurisdiction over theAssessee was transferred to the Additional CIT,Range-I, Lucknow vide order dated 1.8.2001 passedunder section 120 of the Act by the CCIT, Lucknow.Therefore, it cannot be situation where two AssessingOfficer would have simultaneous jurisdiction over the assessee, one being Additional CIT, Range-I,Lucknow and other being ACIT, Range-IV, Lucknow. Inthese backgrounds, the Tribunal has rightly held thatthe issuance of notice under section 148(1) of theAct by the ACIT, Range-IV, Lucknow was withoutjurisdiction.” (iii)Pr.Commisioner of Income Tax-II Lucknow v. Mohd. RizwanProp. M/s.M.R.Garments Moulviganj [ITA No.100 of 2015 dated30.03.2017], in which, it was held as under: “34.Section 148 clearly talks of issue ofnotice by A.O. Meaning thereby, A.O. havingjurisdiction over Assessee. In fact, it is hissatisfaction which is to be recorded for justifyingreopening of assessment / reassessment proceedings ascontemplated under section 147 and recording ofreasons for the same purpose is mandatory. Thesatisfaction of A.O. could not have been hired or bedelegated to any other authority.” “43.The reason for issuance of notice byCompetent A.O. is quite obvious inasmuch as suchnotice could have been issued only when concernedA.O. has reason to believe that some income hasescaped assessment and recomputation / reassessmentis needed. Now such satisfaction can be of that A.O.only who has jurisdiction in the matter and not ofany third party. “43.The reason for issuance of notice byCompetent A.O. is quite obvious inasmuch as suchnotice could have been issued only when concernedA.O. has reason to believe that some income hasescaped assessment and recomputation / reassessmentis needed. Now such satisfaction can be of that A.O.only who has jurisdiction in the matter and not ofany third party. 44.We, therefore, hold that in the present case,no valid notice under section 148 was issued byJurisdictional A.O before making assessment /reassessment and, therefore, proceedings ofreassessment pursuant to notice issued under section148 by an incompetent officer are void and abinitio.” (iv)Pankajbhai Jaysukhlal Shah v. Assistant Commissioner ofIncome-tax Circle 2 [(2019)110 taxmann.com.51 (Gujarat), whichwas affirmed by the Hon'ble Supreme Court in AssistantCommissioner of Income-tax Circle-2 v. Pankajbhai JaysukhlalShah [(2020) 120 taxmann.com 318 (SC)] and the ratio laid downtherein is as follows: “10.....while the reasons for reopening theassessment have been recorded by the jurisdictionalAssessing Officer viz., the Deputy Commissioner ofIncome Tax, Circle-2, Jamnagar, the impugned noticeunder section 148(1) of the Act has been issued bythe Income Tax Officer, Ward 2(2), Jamnagar who hadno jurisdiction over the petitioner and hence, such notice was bad on the count of having been issued byan officer who had not authority in law to issue suchnotice. As a necessary corollary it follows that noproceedings could have been taken under section 147of the Act in pursuance of such invalid notice. Inthe aforesaid premises, the impugned notice undersection 148(1) of the Act as well as all theproceedings taken pursuant thereto cannot besustained.” The legal proposition laid down in the aforesaid decisions isthat “notice under section 148 is mandatory to reopen/ reassessthe income of the assessee and such a notice should have beenissued by the competent assessing officer, who hasjurisdiction”; “The jurisdictional Assessing Officer, whorecords the reasons for reopening the assessment as contemplatedunder sub section (2) of section 148, has to issue notice undersection 148(1), then only, such a notice issued under section148(1) would be a valid notice”; “The officer recording thereasons under section 148(2) of the Act and the officer issuingnotice under section 148(1) has to be the same person”;“Section 129 is applicable when in the same jurisdiction, thereis a change of incumbent and one assessing officer is succeededby another”; and “when once the initiation of reassessmentproceedings is held to be invalid, whatever follows thereaftermust also, necessarily be invalid”. 14. Applying the provisions of law as well as the legalproposition laid down in the aforesaid decisions to the facts ofthe present case, wherein, admittedly, the appellant is anassessee on the file of the second respondent and hence, thefirst respondent has no jurisdiction over the appellant to issuenotice under section 148 for reopening the assessment for therelevant assessment year, after recording the reasons to believethat some of the income of the appellant has escaped assessment,this court is of the opinion that the notice dated 28.03.2018issued by the first respondent under section 148 of the Act,without jurisdiction, lacks legal sanctity and hence, the sameis held to be invalid. As a sequitur, the continuation of thereassessment proceedings by the second respondent, who is thejurisdictional assessing officer, without issuing any freshnotice as contemplated under section 148, but issuing noticedated 14.12.2018 under section 143(2) r/w 129 of the Act, whichapplies only for change in incumbent within the samejurisdiction, is also held to be invalid. 15.Pertinently, it is to be pointed out at this stage that“if an order is passed by a judicial or quasi-judicial authorityhaving no jurisdiction, it is an obligation of Appellate Courtto rectify the error and set aside the order passed by the authority or forum having no jurisdiction” [Refer: State ofGujarat v. Rajesh Kumar Chimanlal Barot and another, AIR 1996 SC2664]. Therefore, the notice issued by the first respondentunder section 148 as well as the consequential notice issued bythe second respondent under section 143(2) r/w 129, cannot beallowed to be sustained. However, the learned Judge erred indirecting the second respondent to continue the reassessmentproceedings and granting liberty to the appellant to fileobjections and avail the opportunity of personal hearing to beprovided, by the order impugned herein, which is liable to beset aside, in the considered view of this court. 16.As already held by this court, the first respondent, whorecorded the reasons for reopening the assessment under section148(2), has no jurisdiction over the appellant, to issue noticedated 28.03.2018 under section 148(1). Though the filespertaining to the reassessment proceedings of the appellant weretransferred, the second respondent has no authority to continuethe reassessment proceedings under section 129 and hence, thenotice dated 14.12.2018 issued by him is also held to beinvalid. The invalid notices so issued by the respondentsvitiate the entire reassessment proceedings initiated againstthe appellant. Admittedly, no notice under section 148 wasissued by the second respondent, who is the jurisdictionalassessing officer, for reassessment of the return of income ofthe appellant, within the time frame stipulated under the Act.In this case, the limitation period of six years for reopeningthe assessment for the year 2011-12 under section 147 of theAct, came to an end on 31.03.2018. In such circumstances, thereis no requirement for this court to go into the other issuebased on the factual matrix projected by the appellant i.e.,whether the appellant has disclosed fully and truly all thematerial particulars that are necessary for assessment for therelevant assessment year. 17.In the ultimate analysis, the writ appeal stands allowedby setting aside the notices impugned in the writ petition andthe order impugned herein. No costs. Consequently connectedmiscellaneous petition is closed. Sd/- Assistant Registrar(CS-VIII) //True Copy// Sub Assistant Registrar To 1. Assistant Commissioner of Income Tax-23(2), Mumbai 104, 1st Floor, Matru Mandir Tardeo Road, Mumbai - 07 104, 1st Floor, Matru Mandir Tardeo Road, Mumbai - 07 2. Assistant Commissioner of Income Tax Corporate Circle - 4 (2), Chennai Room No.433, 4th Floor Aaykar Bhavan, Main Building 121, Nungambakkam High Road Chennai - 600 034 Corporate Circle - 4 (2), Chennai Room No.433, 4th Floor Aaykar Bhavan, Main Building 121, Nungambakkam High Road Chennai - 600 034 +1cc to M/s.Hema Muralikrishnan, Advocate, S.R.No.40068 EV(CO)RGA(19/07/2022) WA No. 2493 of 2021