Commissioner Of Income Tax Delhi-Xvi v. S.s. Ahluwalia

* IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA Nos. 255/2002, 256/2002, 257/2002, 1577/2006, 314/2002315/2002, 316/2002, 1578/2006, 1580/2006 % Reserved on: 27[th] November, 2013 Date of Decision: 14[th] March, 2014 COMMISSIONER OF INCOME TAX DELHI-XVI....Appellant Through Mr. AmolSinha, Sr. Standing Counsel & Mr. Anshum Jain, Rahul Kochar, Advs. Versus S.S. AHLUWALIA ..... Respondent Through Mr. S. Krishnan, Advocate. WTA Nos. 13/2006, 14/2006, 15/2006, 16/2006, 18/2006 COMMISSIONER OF WEALTH TAX ..... Appellant Through Mr. AmolSinha, Sr. Standing Counsel & Mr. Anshum Jain, Rahul Kochar, Advs. ..... Appellant versus S.S. AHLUWALIA ..... Respondent Through Mr. S. Krishnan, Advocate. CORAM: HON’BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA SANJIV KHANNA, J. ITA Nos. 255/2002, 256/2002, 257/2002, 1577/2006, 315/2002,1578/2006, 316/2002, 1580/2006, 314/2002 The respondent assessee is an IAS Officer of Nagaland cadre, who was compulsorily retired in January, 1993. During the period 1971-72 to 1978-79, the respondent had filed income tax returns at ITA 255/2002 + connected Page 1 of 61 Dimapur, Nagaland as he was posted and working there. In July 1978, he was posted to Delhi on deputation in the Ministry of Home Affairs, a position which he continued to hold till 1984. Income tax returns for the assessment years 1980-81 to 1983-84 were filed at Delhi with the Income Tax Officer, Salary Circle. 2. As per the respondent assessee, return for the assessment year 1984-85 was filed by the respondent at Dimapur, Nagaland on or about 8[th] August, 1985. The return was not taken up for scrutiny assessment but was processed on 31[st] March, 1987 under Section 143(1) of the Act. 3. The respondent assessee was subjected to search by the Central Bureau of Investigation on 27[th] March, 1987. It is the case of the Revenue that the assessee had acquired 18 commercial properties in Delhi, 370 acres agricultural land in and around Delhi and had substantial unaccounted/undisclosed deposits in form of Fixed Deposit Receipts. These assets/properties were in names of the respondent and his family members. 4. The Assessing Officer at Delhi i.e. Assistant Commissioner of Income Tax (Investigation), Circle 8(1) (hereinafter referred to as the AO, Delhi) issued notice under Section 148 of the Act dated 26[th] June, 1987 in respect of assessment years 1984-85, 1985-86, 1986-87 and 1987-88. Commissioner of Income Tax, Delhi by order dated 10[th]November, 1987 transferred the case of the respondent assessee from Income Tax Officer, Salary Circle to AO, Delhi i.e. Assistant Commissioner of Income Tax (Investigation). Proceedings in respect of assessment year 1988-89 were taken up for scrutiny assessment by issue of notice under Section 143(2) of the Act. It appears that ITA 255/2002 + connected Page 2 of 61 proceedings for the assessment year 1984-85 under Section 148 of the Act were dropped. We are not concerned with the said proceedings in the present appeals. We are also not concerned with the proceedings in respect of 1988-89 in the present income tax appeals as these appeals relate to assessment years 1985-86, 1986-87 and 1987-88. Appeals, ITA No. 89/2003 and ITA No. 1579/2006 relating to assessment year 1988-89 were disposed of vide orders dated 7[th] April, 2011 and 24[th] July, 2011, due to low tax effect. ITA 255/2002 + connected Page 2 of 61 proceedings for the assessment year 1984-85 under Section 148 of the Act were dropped. We are not concerned with the said proceedings in the present appeals. We are also not concerned with the proceedings in respect of 1988-89 in the present income tax appeals as these appeals relate to assessment years 1985-86, 1986-87 and 1987-88. Appeals, ITA No. 89/2003 and ITA No. 1579/2006 relating to assessment year 1988-89 were disposed of vide orders dated 7[th] April, 2011 and 24[th] July, 2011, due to low tax effect. 5. The respondent assessee did not file returns pursuant to the above notices for the assessment years 1985-86, 1986-87 and 1987-88 under Section 148 of the Act. Subsequently, the assessing officer issued notice under Section 142(1) on 22[nd] March, 1988 and thereafter vide letter dated 25[th] March, 1988, the respondent assessee raised objection to the jurisdiction of the AO, Delhi. It was, inter alia, stated that the respondent was employed with the Government of Nagaland and was regularly assessed by the ITO, A Ward, Dimapur for the last many years. 6. In respect of assessment year 1985-86, the AO, Delhi passed the assessment order dated 27[th] March, 1990 and for assessment years 1986-87 and 1987-88, assessment orders were passed on 28[th] March, 1990. A few days before the assessment orders were passed, ITO, Dimapur had written letter dated 15[th] March, 1990 enclosing therewith income tax assessment records in two parts as directed by the AO, Delhi. Copy of the said letter was marked to Commissioner of Income Tax (Investigation) as well as Commissioner of Income Tax, North Eastern Region, Shillong and other authorities. This was followed by another letter dated 20[th] September, 1990 written by the ITO, Dimapur ITA 255/2002 + connected Page 3 of 61 to the AO, Delhi enclosing therewith return for the assessment year 1990-91. 7. These two letters dated 15[th] March, 1990 and 20[th] September, 1990 written by the ITO, Dimapur were made subject matter of challenge before the Gauhati High Court in a writ petition filed in February, 1991. On an interim application, the income tax proceedings for assessment years 1975-76, 1976-77 and 1988-89 in respect of which notice dated 27[th] September, 1990 was issued by the AO, Delhi were stayed till further orders. The prayers made in the writ petition read as under: ―In the premises aforesaid, it is prayed that your Lordships may graciously be pleased to issue Rule, call for the records directing the Respondents to show cause as to why an appropriate Writ shall not be issued declaring the impugned Orders dated 15.03.1990 and –dated 20.09.1990 (Annexure A and B) and any orders passed by the Respondent No. 5 under given assessment jurisdiction and as illegal, unconstitutional and void ab initio and/or why a Writ in the nature of Mandamus/Certiorari/Prohibition and/or any other appropriate Writ shall not be issued quashing the aforesaid impugned Orders dated 15.03.1990 and 20.09.1990 and any orders passed by the Respondent No. 5 under given assessment jurisdiction and prohibiting the Respondent No. 5 from proceeding further in the matter or exercising any jurisdiction in the matter of Income Tax not vested in him in respect of the Petitioner and on cause or causes being shown and upon hearing the parties, be pleased to make the Rule absolute and/or pass any other Order or further orders as your Lordships may deem fit and proper. Pending disposal of the Rule be further pleased to pass an Order staying the income Tax proceedings before the Respondent No.5 and also restraining the Respondent No. 5 in exercising any jurisdiction in the aforesaid matter in respect of the Petitioner. And for this act of your Kindness the humble Petitioner as in duty bound shall ever pray.‖ Pending disposal of the Rule be further pleased to pass an Order staying the income Tax proceedings before the Respondent No.5 and also restraining the Respondent No. 5 in exercising any jurisdiction in the aforesaid matter in respect of the Petitioner. And for this act of your Kindness the humble Petitioner as in duty bound shall ever pray.‖ ITA 255/2002 + connected Page 4 of 61 8. By order dated 17[th] July, 1993, this writ petition was substantially but partly allowed holding that the two letters issued by the ITO, Dimapur were without following due process as postulated under Section 127 of the Act. The dictum of the Gauhati High Court was as under:- ―14. After hearing learned counsel for the parties and on careful examination of the relevant documents placed before me and relied upon by the parties, I am of the view that orders/letters dated 15-3-90 and 20-9-90 cannot be sustained in as much as there is no order of transfer of jurisdiction from Dimapur to Delhi by a competent authority. I also hold that Respondent 5 has no authority to give direction to Respondent 4 regarding transfer of jurisdiction and in calling for the records of the petitioner.‖careful examination of the relevant documents placed before me and relied upon by the parties, I am of the view that orders/letters dated 15-3-90 and 20-9-90 cannot be sustained in as much as there is no order of transfer of jurisdiction from Dimapur to Delhi by a competent authority. I also hold that Respondent 5 has no authority to give direction to Respondent 4 regarding transfer of jurisdiction and in calling for the records of the petitioner.‖ 9. The aforesaid judgment also takes on record earlier correspondence exchanged between the respondent assessee and the ITO, Dimapur on transfer of records in terms of letter dated 5[th]February, 1982 written by ITO, Dimapur and reply dated 27[th]November, 1982 by the respondent to the said officer that he was not permanently transferred to Delhi and on completion of deputation period he was likely to come back to the parent cadre in Nagaland for posting. Response to this letter was purportedly written by the ITO, Dimapur on 27[th] February, 1985 and the respondent was informed that the assessment records had not been sent to Delhi. 10. On 23[rd] December, 1988, Commissioner of Income Tax, North-eastern Region, Shillong, had issued statutory notice under Section 127 of the Act for transfer of respondent’s case from ITO, Dimapur to the AO, Delhi to which response/objection was filed vide letter dated 5[th] January, 1989. The respondent assessee had objected to transfer of the ITA 255/2002 + connected Page 5 of 61 case to Delhi. There is nothing on record and it is not known whether any order was passed thereupon by the Commissioner of Income Tax, Dimapur. 11. In respect of assessment year 1985-86, the respondent had filed return of income with ITO, Dimapur on 8[th] August, 1985. The return was, however, defective as no TDS certificate was enclosed and defect memo dated 31[st] March, 1987 was issued. As per Section 139(9) of the Act, defects were required to be removed by 30[th] April, 1987. The same were not removed and as per respondent, he had written a letter on 18[th] April, 1988. The ITO, Dimapur thereupon issued notice dated 26[th] June, 1987 under Section 148 of the Act for the assessment year 1985-86. case to Delhi. There is nothing on record and it is not known whether any order was passed thereupon by the Commissioner of Income Tax, Dimapur. 11. In respect of assessment year 1985-86, the respondent had filed return of income with ITO, Dimapur on 8[th] August, 1985. The return was, however, defective as no TDS certificate was enclosed and defect memo dated 31[st] March, 1987 was issued. As per Section 139(9) of the Act, defects were required to be removed by 30[th] April, 1987. The same were not removed and as per respondent, he had written a letter on 18[th] April, 1988. The ITO, Dimapur thereupon issued notice dated 26[th] June, 1987 under Section 148 of the Act for the assessment year 1985-86. 12. In respect of assessment year 1986-87, there is a dispute. As per the Revenue, no return was filed by the respondent before the ITO, Dimapur and notice under Section 148 of the Act dated 26[th] June, 1987 was issued by ITO, Dimapur. The respondent, however, claims that he had filed return for the assessment year 1986-87 on 30[th] July, 1986 with ITO, Dimapur. We notice that in the assessment order dated 28[th]March, 1990, passed by the AO, Delhi, it is recorded that the respondent assessee had not filed any proof of filing of return at Dimapur for the assessment year 1986-87. Notice under Section 148 ITA 255/2002 + connected Page 6 of 61 issued by the ITO, Dimapur on 26[th] June, 1987 was on record (see assessment order dated 28[th] March, 1990 relating to assessment year 1986-87 in ITA No. 257/2002). 13. In respect of assessment year 1987-88, the respondent assessee had filed return of income on 27[th] April, 1988 but defect memo dated 6[th] July, 1988 was issued on the ground that annexures, statements in columns in the return under the heads of income, computation of gross total income and total income had not been fully filled up; statement of computation of income on statement of facts had not been furnished; dividend warrants have not been attached; TDS and self assessment advance tax challans had not been attached etc. The respondent has not stated or averred that he had filed the requisite papers as mentioned in the said notice dated 6[th] July, 1988. However, there is no order of the income tax authority at Dimapur declaring the return to be void or invalid. 14. The assessment orders passed by the AO, Delhi dated 27[th]March, 1990 and 28[th] March, 1990, were made subject matter of appeals before Commissioner of Income Tax (Appeals), New Delhi [CIT (Appeals), for short] and were decided by a common order dated 26[th] February, 1993. The said order is fairly detailed and has become the substratum of subsequent orders passed by the tribunal ITA 255/2002 + connected Page 7 of 61 in the second, third and fourth round. CIT(Appeals) in order dated 26[th]February, 1993 has given the following findings:- (i) Return for the assessment year 1985-86 filed with ITO, Dimapur was rightly declared to be invalid and the assessee had belatedly tried to rectify the defects after a period of 13 months from the date of issue of defect notice dated 30[th] April, 1987 vide letter dated 13[th] April, 1988. ITO Dimapur was therefore right and fully justified in initiating proceedings under Section 148 of the Act for the assessment year 1985-86. (ii) Notice issued by ITO, Dimapur under Section 148 of the Act was legal and valid for the assessment years 1985-86 as well as 1986-87. (iii) The respondent assessee was assessed at Delhi only for the period of five years during his tenure in Delhi and was regularly assessed with ITO, Dimapur and on his reversion to the parent cadre; the jurisdiction was with ITO, Dimapur only. (iv) Commissioner of Income Tax, Shillong had rightly initiated the proceedings under Section 127 of the Act for transfer of the jurisdiction from ITO,Dimapur to AO, Delhi, but ITO Dimapur was (ii) Notice issued by ITO, Dimapur under Section 148 of the Act was legal and valid for the assessment years 1985-86 as well as 1986-87. (iii) The respondent assessee was assessed at Delhi only for the period of five years during his tenure in Delhi and was regularly assessed with ITO, Dimapur and on his reversion to the parent cadre; the jurisdiction was with ITO, Dimapur only. (iv) Commissioner of Income Tax, Shillong had rightly initiated the proceedings under Section 127 of the Act for transfer of the jurisdiction from ITO,Dimapur to AO, Delhi, but ITO Dimapur was ITA 255/2002 + connected Page 8 of 61 wrong and had erred in transferring records to the AO, Delhi without an order under Section 127 of the Act. (v) Instruction No. 1739 of the CBDT dated 19[th] December, 1986 stipulated, the procedure for transfer of assessment records of an assessee on change of his residence for the convenience of the assessee but the instruction by itself cannot and did not result or cause transfer of jurisdiction. (vi) The respondent was reverted to Nagaland in 1984 and instruction No. 1739 of the CBDT was issued on 19[th] December, 1986. The search was conducted only on 19[th] March, 1987 at which date the respondent was residing within the jurisdiction of ITO, Dimapur. Thus, AO, Delhi should have transferred the records to ITO, Dimapur in terms of instruction No. 1731 dated 19[th] December, 1986 and not vice versa. (vii) Upon receipt of notice under Section 142(1), the respondent had objected to the jurisdiction of the AO, Delhi. The respondent assessee denied receipt of notice under Section 148 of the Act issued by AO, Delhi for the three assessment years. The respondent had correctly objected to the assumption of jurisdiction by the AO, Delhi within the statutory time limit fixed/stipulated under Section 124 of the Act. The AO, Delhi should have approached the Board to decide the question of ITA 255/2002 + connected Page 9 of 61 jurisdiction under Section 124(4) of the Act or an order under Section 127 of the Act was required for transfer of jurisdiction from the Commissioner of Income Tax, North Eastern Region (NER), Shillong to New Delhi. (viii) The initiation of proceedings by ITO, Dimapur for assessment years 1985-86, 1986-87 and 1987-88 were legal and valid and there was infirmity in the proceedings assumed/conducted by the AO, New Delhi. All proceedings before the AO, New Delhi were illegal and set aside. (ix) However, AO, Delhi could acquire proper jurisdiction from the Chief Commissioner, NER, Shillong under Section 127 of the Act or Section 120 from CBDT and frame fresh assessment as per law for the three assessment years. (x) As the assessments were set aside on the point of jurisdiction, there was no need to discuss merits as this could be examined during fresh assessment proceedings before the Assessing Officer. It was finally observed as under:- ―4. Since the assessment have been set aside on the point of jurisdiction, I do not want to discuss the addition made on merits. The objections of the ld Counsel in this regard will be considered by the A.O. During fresh assessment proceedings and a decision will be taken as per law after giving adequate opportunity to the appellant in respect of the investments made in flats, land and bank ITA 255/2002 + connected Page 10 of 61 deposits etc. In the name of family members and close relatives. Assessment for A.Y. 85-86, 86-87 and 87-88 are hereby set aside for statistical purposes, the appeals for these 3 years will be partly allowed.‖ ―4. Since the assessment have been set aside on the point of jurisdiction, I do not want to discuss the addition made on merits. The objections of the ld Counsel in this regard will be considered by the A.O. During fresh assessment proceedings and a decision will be taken as per law after giving adequate opportunity to the appellant in respect of the investments made in flats, land and bank ITA 255/2002 + connected Page 10 of 61 deposits etc. In the name of family members and close relatives. Assessment for A.Y. 85-86, 86-87 and 87-88 are hereby set aside for statistical purposes, the appeals for these 3 years will be partly allowed.‖ 15. Both Revenue and the respondent preferred cross-appeals before the tribunal which were disposed of 9 years later vide order dated 19[th]March, 2002. This order dated 19[th] March, 2002 has become subject matters of ITA 256/2002, 257/2002 and 255/2002, filed by the Revenue relating to the assessment years 1985-86, 1986-87 and 1987-88. In the order dated 19[th] March, 2002 passed by the tribunal, it has held as under:- (i) It has not been disputed by the Revenue that jurisdiction was with ITO Dimapur with whom the assessee was filing returns after repatriation from deputation. with ITO Dimapur with whom the assessee was filing returns after repatriation from deputation. (ii) The assessee had objected to assumption of jurisdiction by the AO, Delhi upon issue of notice under Section 142(1) of the Act. AO, Delhi upon issue of notice under Section 142(1) of the Act. (iii) The respondent had successfully challenged transfer of assessment records to Delhi before the Gauhati High Court and succeeded vide judgment dated 15[th] July, 1993. assessment records to Delhi before the Gauhati High Court and succeeded vide judgment dated 15[th] July, 1993. (iv) There was no specific order of transfer of jurisdiction by the competent authority under Section 127 of the Act. competent authority under Section 127 of the Act. It was further held: ―7. Ld. Counsel for the assessee has further invited our attention to the order dated 14.8.1995 passed by the CIT, N.E.R., Shillong u/s 127(2)(a) of the IT Act transferring the jurisdiction over the assessee from ITO Ward Dimapur to ITO Ward 20(3), New Delhi. Admittedly, till 14.8.95 no order for transferring the jurisdiction over the assessee was ever passed by any competent authority u/s 127(2)(a) of the IT Act. ITA 255/2002 + connected Page 11 of 61 8. On careful perusal of these documents, we find that till 14[th] August, 1995, the jurisdiction over the assessee as per Section 124(1) lies with the ITO, Ward Dimapur with whom the return of income were regularly filed by the assessee. But the impugned assessment orders for the AY 85-86 to AY 87-88 were passed by the ACIT Inv. Circle 8(1), New Delhi on 27.3.90 and 28.3.90. The appeals against these assessment orders were filed before the CIT(A) who had decided these appeals by a single consolidated order on 22[nd] February, 1993. It means till the disposal of the appeal by the CIT(A), the AO did not assume jurisdiction over the assessee. Hence, the order passed by the AO is defective. Now, the question arises before us whether this defect is curable or it goes to the root of the case and makes the order null and void. In support of his contention that order was passed by an authority having no jurisdiction is a void ab initio and liable to be quashed, ld. counsel for the assessee has relied upon the following judgments:- State of Gujarat v. Rajesh Kumar ChianLal AIR 1996 P.2664 Raza Textiles Ltd. v. ITO 87 ITR 539 (S.C.). ChoubeyJagdish Prasad v. Gaya Pal Chaturvedi AIR 1959 492 P. Das Muni Reddy v. AppaRao AIR 1974 208 Sant Baba Mphan Singh v. CIT 90 ITR 197 77 Taxman 265 – SitaramRathore vs. CIT State of Gujarat v. Rajesh Kumar ChianLal AIR 1996 P.2664 Raza Textiles Ltd. v. ITO 87 ITR 539 (S.C.). ChoubeyJagdish Prasad v. Gaya Pal Chaturvedi AIR 1959 492 P. Das Muni Reddy v. AppaRao AIR 1974 208 Sant Baba Mphan Singh v. CIT 90 ITR 197 77 Taxman 265 – SitaramRathore vs. CIT 9. We have carefully perused the aforesaid judgments and we find that whenever an order is passed by an officer having no jurisdiction to pass such order, that order is void ab initio and it deserves to be annulled. The defect in this order is not curable and it cannot be rectified even by sending the matter back to the concerned officer. In these circumstances, we are of the considered opinion that since the assessment orders were passed by the ACIT Circle 8(1), New Delhi without assuming proper jurisdiction over the assessee, his orders are void ab-initio and CIT(A) should have annulled the same instead of setting it aside. We, therefore, set aside the order of CIT(A) and annul all the assessment orders for the AY 85-86, 86-87 and 87-88 passed by the ACIT, Cir.8(1), New Delhi. ITA 255/2002 + connected Page 12 of 61 10. In the result, the appeals of the assessee are allowed and that of the Revenue are dismissed.‖ 16. During this period of 9 years from 27[th] March, 1990 to 19[th]March, 2002, there were three more rounds of assessment. 17. ITO Dimapur passed three assessment orders all dated 1[st] March, 1995 for the assessment years 1985-86, 1986-87 and 1987-88, assessing total income of the respondent assessee at Rs.44,93,340/-, Rs.86,97,230/- and Rs.67,79,930/- respectively. 18. Meanwhile, on 14[th] August, 1995, an order under Section 127(2)(a) of the Act was passed by Commissioner NER, Shillong transferring ―the case‖ from ITO Ward Dimapur to ITO Ward 20(3), New Delhi. Reason given for transfer was administrative convenience and it was stated that the transfer order would take effect from 21[st]August, 1995. This order was accepted by the respondent assessee and has not been challenged. 19. In view of the order under Section 127(2)(a) of the Act, the respondent assessee preferred appeals against three assessment orders dated 1[st] March, 1995 passed by ITO, Dimapur before the CIT (Appeals), New Delhi. These appeals were allowed by the CIT (Appeals) vide order dated 27[th] March, 1997 recording as under: ―2. I have considered the facts and circumstances of the case. The records of the assessee do not indicate that the assessee was given adequate opportunity to explain these investments. Further, it was also enjoined upon the assessing officer to make independent enquiries about these investments from the assessee’s relatives. I, therefore, hold that the assessee has not been granted proper opportunity of being heard. The assessment is, therefore, set aside and the assessing officer is, therefore, directed to frame the assessment denovo in accordance with law after giving a fair and reasonable opportunity to the assessee.‖ ITA 255/2002 + connected Page 13 of 61 20. It is noticeable that the aforesaid order does not refer to the merits or jurisdiction of the assessing officer but an order of remand was passed for fresh adjudication after fair opportunity of hearing being given to the respondent assessee. 21. Pursuant to the order of remand, ACIT, Circle 15 (2), New Delhi passed three assessment orders dated 30[th] March, 1999 assessing total income of the assessee at Rs. 41,19,344/-, Rs. 86,97,227 and Rs.67,79,930/- for the assessment years 1985-86, 1986-87 and 1986-87 respectively. The assessee preferred appeals which were allowed vide order dated 29[th] February, 2000 of the CIT (Appeals) recording as under:- ITA 255/2002 + connected Page 13 of 61 20. It is noticeable that the aforesaid order does not refer to the merits or jurisdiction of the assessing officer but an order of remand was passed for fresh adjudication after fair opportunity of hearing being given to the respondent assessee. 21. Pursuant to the order of remand, ACIT, Circle 15 (2), New Delhi passed three assessment orders dated 30[th] March, 1999 assessing total income of the assessee at Rs. 41,19,344/-, Rs. 86,97,227 and Rs.67,79,930/- for the assessment years 1985-86, 1986-87 and 1986-87 respectively. The assessee preferred appeals which were allowed vide order dated 29[th] February, 2000 of the CIT (Appeals) recording as under:- ―From the perusal of assessment order and after discussion of the case with the A.O., I find that the infirmities and irregularities pointed by my learned predecessor still persists and there is nothing before me to defer with the decision of my learned predecessor CIT (A) – V. I am of the view that these assessments should be set aside again for allowing another opportunity to the A.O. Accordingly, I set aside all the three assessment orders from the stage the A.O. New Delhi assumed jurisdiction for issuing notice u/s 148 and completing the assessment. In my above decision to set aside the order, I am supported by the decision of Hon’ble Supreme Court in the case of Gudhudhar Brothers Vs. ITO 40 ITR 289. Further the Hon’ble Supreme court has also held in the case of Kapoor Chand Srimat v. CIT AP 131 ITR page 551, 560 that ―it is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden by the Statute.‖ (emphasis supplied) ITA 255/2002 + connected Page 14 of 61 22. Before that the CIT(Appeals) had quoted from the order of the CIT (Appeals) dated 26[th] February, 1993, the gist of which we have reproduced above. 23. This order of the CIT (Appeals) dated 29[th] February, 2000 was not challenged, either the Revenue or the respondent assessee and thus has attained finality. 24. Pursuant to the order of remit passed by the CIT(Appeals) dated 29[th] February, 2000, in the fourth round, DCIT, Circle-2 passed assessment orders dated 23[rd] March, 2001 assessing the income at Rs.41,19,344/- Rs.86,97,227/- and Rs.67,79,390/- for the assessments years 1985-86, 1986-87 and 1987-88 respectively. The respondent assessee there upon preferred appeals and succeeded before the CIT (Appeals) vide order dated 28[th] February, 2003. The CIT (Appeals) relied upon order of the tribunal in the first round dated 19[th] March, 2002 and held that the first assessments had been annulled. There could not have been a further or fresh assessment. He did not notice or refer to the position that the ITO, Dimapur had passed the assessments order in the second round or the order of the CIT (Appeals), Delhi dated 29[th] February, 2000. 25. Against the order of CIT (Appeals) dated 27[th] March, 1990, relating to second round, assessee preferred appeals which stand allowed by the order dated 13[th] May, 2002. Tribunal in this order relied upon their earlier order dated 19[th] March, 2002 in the first round. Order dated 13[th] May, 2002 of the tribunal has been made subject matter of appeals of Revenue being ITA Nos.314/02, 315/02 and 316/02. ITA 255/2002 + connected Page 15 of 61 25. Against the order of CIT (Appeals) dated 27[th] March, 1990, relating to second round, assessee preferred appeals which stand allowed by the order dated 13[th] May, 2002. Tribunal in this order relied upon their earlier order dated 19[th] March, 2002 in the first round. Order dated 13[th] May, 2002 of the tribunal has been made subject matter of appeals of Revenue being ITA Nos.314/02, 315/02 and 316/02. ITA 255/2002 + connected Page 15 of 61 26. Similarly appeals relating to the fourth round against the order of CIT (Appeals) dated 28[th] February, 2002 have been dismissed by the tribunal vide order dated 21[st] February, 2006. The said order also relies upon the order of the tribunal dated 19[th] March, 2002, annulling the assessments in the first round. This order of the tribunal has been made subject matter of ITA Nos. 1578/06, 1577/06 and 1580/06. Substantial Questions of Law 27. ITA Nos. 256/02, 257/02 and 255/02 were admitted for hearing vide order dated 10[th] November, 2005 on the following substantial question of law: ―Whether the ITAT was correct in law in holding that the order of assessment passed by the ACIT, Investigation Circle 8(1), New Delhi were without jurisdiction and therefore void ab initio?‖ 28. ITA Nos. 314/02, 315/02 and 316/02 were admitted for hearing vide order dated 10[th] November, 2005 on the following substantial question of law: ―Whether the Income Tax Tribunal was correct in law in holding that the assessment made by the assessing officer was unsustainable in law?‖ 29. ITA Nos. 1578/06, 1577/06 and 1580/06 were admitted for hearing vide order dated 20[th] February, 2007 on the following substantial question of law: ―Whether the Income Tax Appellate Tribunal was correct in law in holding that the assessment made by the Assessing Officer was not sustainable in law?‖ ITA 255/2002 + connected Page 16 of 61 However, in the said ITAs vide order dated 26[th] November, 2011 the following question of law on similar lines was framed:- ―Whether the Income Tax Appellate Tribunal was right in dismissing the appeal of the Revenue following their earlier orders dated 19[th] March, 2002 and 13[th]May, 2002?‖ The substantial question of law dated 20[th] February, 2007 is being answered. 30. In order to decide the question, it would be appropriate to first reproduce and understand the ambit and scope of Sections 120, 124 and 127 of the Act both pre-amendment and post-amendment i.e. w.e.f 1.4.1988. 31. Pre-Amendment Section 120 reads: “120. Jurisdiction of Directors of Inspection.--Directors of Inspection shall perform such functions of any other Income-tax authority as may be assigned to them by the Board.” Post-Amendment Section 120 reads: ―120. (1) Income-tax authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities. —[Explanation.For the removal of doubts, it is hereby declared that any income-tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-section (1).] (2) The directions of the Board under sub-section (1) may authorise any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income-tax authorities who are subordinate to it. —[Explanation.For the removal of doubts, it is hereby declared that any income-tax authority, being an authority higher in rank, may, if so directed by the Board, exercise the powers and perform the functions of the income-tax authority lower in rank and any such direction issued by the Board shall be deemed to be a direction issued under sub-section (1).] (2) The directions of the Board under sub-section (1) may authorise any other income-tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income-tax authorities who are subordinate to it. (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the —following criteria, namely : (a) territorial area; (b) persons or classes of persons; (c) incomes or classes of income; and (d) cases or classes of cases. (4) Without prejudice to the provisions of sub-sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may —be specified therein, (a) authorise any Director General or Director to perform such functions of any other income-tax authority as may be assigned to him by the Board; functions of any other income-tax authority as may be assigned to him by the Board; (b) empower the Director General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of income or cases or classes of cases, shall be exercised or performed by a[25][Joint] Commissioner [26][or a[25][Joint] Director], and, where any order is made under this clause, references in any other provision of this Act, or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such [25][Joint] Commissioner[26][or [25][Joint] Director] by whom the powers and functions are to be exercised or performed under such order, and any provision of this Act requiring approval or sanction of the[25][Joint] Commissioner shall not apply. (5) The directions and orders referred to in sub-sections (1) and (2) may, wherever considered necessary or appropriate ITA 255/2002 + connected Page 18 of 61 for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply. (6) Notwithstanding anything contained in any direction or order issued under this section, or insection 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income-tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.]‖ (6) Notwithstanding anything contained in any direction or order issued under this section, or insection 124, the Board may, by notification in the Official Gazette, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income-tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.]‖ 32. Sub-Section (1) to Section 120 post- amendment stipulates that Income Tax authorities shall exercise any of the powers and perform all or any functions conferred on, or assigned to any authority by or under the Act as per directions of the Board. The explanation elucidates that the power can be exercised by an authority higher in rank. Sub-section (2) states that the Board may issue orders in writing under sub-section (1) for exercise of powers and performance of functions by income-tax authorities. Sub-section (3) postulates that the Board while issuing directions or issuing orders can have regard to the four-fold criteria, namely, territorial area; persons or classes of person; incomes or classes of income; and cases or classes of cases. The aforesaid criteria is very broad and by the orders referred to sub-sections (1) and (2), the Board can authorize any income-tax authority ITA 255/2002 + connected Page 19 of 61 to perform function based upon territorial area, type/class of person(s), income or case(s). Sub-section (4) confers power on the Board to pass general or special order as may be desired without prejudice to sub-section (1) and (2). Sub-section (5) is relevant and stipulates that orders/directions under sub-sections (1) and (2) wherever considered necessary and appropriate may require two or more Assessing Officers to perform concurrent power and functions in respect of area, person(s), income(s) or case(s) and when so stipulated, the higher authority may direct the authority lower in rank. This enables distribution of work between two or more Assessing Officers having concurrent jurisdiction under a single higher authority. Under sub-section (6), the Board retains power by way notification to direct furnishing of return or any act or thing under the Act or rules, shall be made before such authority as may be specified, in relation to class of persons. Thus, it is apparent that Act does not by itself confer jurisdiction by way of territory, class of persons, income or cases. It is left to the discretion and wisdom of the Board who have been given wide powers and latitude. The said exercise, is administrative and broad choice/option given to the Board. Though Section 120 refers to jurisdiction of the Assessing Officer or authorities but the said term has been used rather loosely and does not refer to subject matter jurisdiction as such. Concurrent jurisdictions are not an anathema, but clearly postulated and accepted. This becomes clear when we refer to Section 124 of the Act both prior and past 1.4.1988. 33. Pre-Amendment Section 124 reads: "124. (1) Income Tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income as the Commissioner may direct. ITA 255/2002 + connected Page 20 of 61 (2) Where any directions issued under sub-section (1) have assigned to two or more Income Tax Officers, the same area or the same persons or classes of persons or the same incomes or classes of income, they shall perform their functions in accordance with any orders which the Commissioner may make for the distribution and allocation of the work to be performed. (3) Within the limits of the area assigned to him, the Income Tax Officer shall have jurisdiction - 33. Pre-Amendment Section 124 reads: "124. (1) Income Tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income as the Commissioner may direct. ITA 255/2002 + connected Page 20 of 61 (2) Where any directions issued under sub-section (1) have assigned to two or more Income Tax Officers, the same area or the same persons or classes of persons or the same incomes or classes of income, they shall perform their functions in accordance with any orders which the Commissioner may make for the distribution and allocation of the work to be performed. (3) Within the limits of the area assigned to him, the Income Tax Officer 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. (4) Where a question arises under this section as to whether an Income Tax Officer has jurisdiction to assess any person, the question shall be determined by the Commissioner; or where the question is one relating to areas within the jurisdiction of different Commissioners, by the Commissioners concerned or if they are not in agreement, by the Board. (5) No person shall be entitled to call in question the jurisdiction of an Income Tax Officer - (a) after the expiry of one month from the date on which he has made a return under sub-section (1) of section 139 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 139 or under section 148 for the making of the return. (6) Subject to the provisions of sub-section (5), where an assessee calls in question the jurisdiction of an Income Tax Officer, then, the Income Tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (4) before assessment is made. (7) Notwithstanding anything contained in this section, or in section 130A, every Income Tax Officer shall have all the powers conferred by or under this Act on an Income Tax ITA 255/2002 + connected Page 21 of 61 Officer in respect of any income accruing or arising or received within the area for which he is appointed." Post-Amendment Section 124 reads: 124. Jurisdiction of Assessing Officers.- (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) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or