Commissioner of Income Tax vs M.I. Builders Pvt. Ltd.

Heard Sri D.D. Chopra, learned counsel for the appellant and Sri Jaideep Narain Mathur, assisted by Sri Mudit Agarwal, learned counsel for the respondent. Income Tax Appeal No. 58 of 2008 arises out of the judgment and order dated September 7, 2007, passed by the income tax Appellate Tribunal, Lucknow Bench, Lucknow, in Appeal No. I.T.A. No. 111/Luc./2006 for the assessment year 1997-98, whereby the appeal preferred by the respondent-M/s. M.I. Builders Pvt. Ltd., Lucknow, was allowed, inter alia, on the ground that notice issued u/s 148(1) of the income tax Act, 1961, by ACIT, Range IV, Lucknow, was without jurisdiction and invalid.

Income Tax Appeal No. 172 of 2008 arises out of the judgment and order dated May 30, 2008, passed by the income tax Appellate Tribunal, Lucknow Bench, Lucknow, in Appeal No. I.T.A. No. 278/Luc./2008 for the assessment year 1997-98, whereby the appeal preferred by the Department against the order cancelling the penalty imposed u/s 271(1)(c) of the income tax Act, 1961 (hereinafter referred to as "the Act"), for the assessment year 1997-98 was dismissed, inter alia, on the grounds that since the Tribunal, vide order dated September 7, 2007, passed in I.T.A. No. 111/Luc./2006, cancelled the reassessment order relating to the assessment year 1997-98, as stated hereinabove, on the basis of which the Assessing Officer has levied penalty, as such, the penalty cannot stand by itself and the same is liable to be cancelled.

Since the question of law and facts involved in the above captioned income tax appeals are similar in nature, as such, they are being decided by a common order.

The respondent-assessee, M/s. M.I. Builders Pvt. Ltd., Lucknow (hereinafter referred to as "the company"), is a private limited company and is engaged in the civil construction activity and is being assessed to tax since 1989-90 and onwards. The registered office of the company was located at the second floor, Karamat Market Complex, Nishatganj, Lucknow, till the assessment year 2001-02. On the basis of the location of its registered office, the jurisdiction over the assessee was with ACIT, Company Circle, Lucknow. The assessee had filed the return of income from the assessment year 1989-90 to 2000-01 with ACIT, Company Circle, Lucknow. Later on, there was change in the nomenclature of the Assessing Officers due to reorganization and restructuring in the income tax Department and jurisdiction over the corporate assessees having their registered office in Nishatganj area vested with ACIT, Range-4, Lucknow. The return for the assessment year 2001-02 was filed with ACIT, Range-4, Lucknow. Subsequently, the assessee had shifted its registered office to sixth floor, New Janpath Complex, 9A Ashok Marg, Lucknow, with effect from November 22, 2001.

The CCIT, Lucknow, while exercising power vested u/s 120 of the Act revised the territorial jurisdiction of the Assessing Officer, with effect from August 1, 2001, and as per the fresh order so passed, the jurisdiction over the corporate assessees vested with the Assessing Officer exercising the jurisdiction as per location of their respective registered offices and as the registered office of the respondent-assessee has shifted at Ashok Marg/Hazratganj, Lucknow, the jurisdiction is vested with the Additional CIT, Range-I, Lucknow, and as such, the assessee filed its returns of income for the assessment years 2002-03, 2003-04 and 2004-05 with the Additional CIT, Range-I, Lucknow, which was duly accepted and processed by the Additional CIT, Range-I, Lucknow.

On April 6, 2004, a notice u/s 148 of the Act for the assessment year 1997-98 was issued to the assessee from ACIT, Range-4, Lucknow, requiring the assessee to file return of income for the assessment year 1997-98. On receipt of notice, the assessee has filed an objection regarding the jurisdiction of the Assessing Officer, Range-4, Lucknow, vide letter dated April 19, 2004. However, the ACIT, Range-4 transferred the record of the assessee to the income tax Officer-1(I), Lucknow. Thereafter, fresh notice u/s 142(1) dated January 27, 2005, was issued to the assessee by the income tax Officer 1(I), Lucknow, in continuation of the proceedings initiated by the Assessing Officer, Range-4, Lucknow.

The assessee has raised the objection with regard to continuation of the proceedings by income tax Officer 1(I), Lucknow, on the ground that the said proceedings are illegal as the notice u/s 148 of the Act issued on April 6, 2004 itself was devoid of proper jurisdiction and ab initio void but the income tax Officer-1(I), Lucknow, without considering the objection, continued to proceed in the matter and passed the Assessment Order, assessing Rs. 22 lakhs as income of the assessee and directed to initiate the penalty proceedings u/s 271(1)(c) of the Act.

Feeling aggrieved by the inaction of the Assessing Officer, the assessee preferred an appeal before the Commissioner income tax (Appeals)-I, Lucknow, who, vide order dated November 23, 2005, dismissed the appeal, against which, the assessee preferred a second appeal, bearing No. 111/LUC/2006, before the income tax Appellate Tribunal, Lucknow.

During the pendency of the above second appeal, penalty order dated March 8, 2006, was passed by the Assessing Officer against the assessee, against which, the assessee has preferred an appeal before the Commissioner income tax (Appeals)-I, Lucknow, who, vide order dated January 31, 2008, allowed the appeal and cancelled the penalty order dated March 8, 2006. Feeling aggrieved, the Revenue preferred a second appeal, bearing No. I.T.A. No. 278/Luc/2008, before the Tribunal.

The Tribunal, after considering the whole aspect of the matter involved in I.T.A. No. 111/Luc/2006, allowed the appeal of the assessee, vide order dated September 7, 2007, on the ground that notice issued u/s 148(1) of the Act by the ACIT, Range-4, Lucknow, was without jurisdiction and, therefore, the subsequent proceedings are invalid.

Feeling aggrieved by the order dated September 7, 2007, the Revenue has preferred Income Tax Appeal No. 58 of 2008.

While entertaining Income Tax Appeal No. 58 of 2008, this court, vide order dated January 23, 2008, admitted the appeal on the following substantial questions of law:

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was right in law in holding that the notice issued u/s 148 of the income tax Act, 1961, was without jurisdiction when the Assessing Officer issuing the said notice had valid jurisdiction while passing the assessment order in the case of the assessee for the assessment year 2001-02 just six days before the issue of notice u/s 148.

Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was justified in entertaining the fact that the jurisdiction was challenged u/s 124 of the Act especially when this was not done before the same Assessing Officer during the assessment proceeding for the assessment year 2001-02.

During the pendency of the above Income Tax Appeal No. 58 of 2008, the Tribunal, vide order dated May 30, 2008, dismissed the appeal, bearing No. I.T.A. No. 278/Luc/2008, inter alia, on the grounds that since the Tribunal, vide order dated September 7, 2007, passed in I.T.A. No. 111/Luc./2006, cancelled the reassessment order relating to the assessment year 1997-98, as stated hereinabove, on the basis of which the Assessing Officer has levied penalty, as such, the penalty cannot stand by itself and the same is liable to be cancelled.

Sri D.D. Chopra, learned counsel for the appellant, submits that the assessee had not informed to the income tax Department about shifting of its office at sixth floor, New Janpath Complex, 9A Ashok Marg, Lucknow, and as such, computer systems had shown the address of the company of the assessee as second floor, Karamat Market Complex, Nishatganj, Lucknow. Accordingly, the ACIT, Range-4, Lucknow, issued notice u/s 148 of the Act to the address available on the record of the income tax Department. However, on the objection raised by the assessee that his office has been shifted to Ashok Marg, therefore, ACIT, Range-4, Lucknow, has no jurisdiction, the ACIT, Range-4, Lucknow, transferred the matter to the ACIT, Range-1, Lucknow, who, without issuing fresh notice u/s 148 of the Act issued a notice u/s 142(1) of the Act, treating to be the proceedings in continuation of the earlier notice. Therefore, notice issued u/s 148 of the Act cannot be held as lacking jurisdiction but the Tribunal erred in not considering the contention of the appellant in the right perspective and allowed the appeal of the assessee.

Refuting the contention of the learned counsel for the appellant, Sri Jaideep Narain Mathur, learned counsel for the respondent-assessee submits that for the purpose of shifting the registered office, the assessee followed the due process of law as provided under the Companies Act, viz., it passed a resolution in the meeting of the board of directors, gave due intimation to the Registrar of Companies and also put advertisement in the newspaper regarding change of address. He further submits that an intimation with regard to change of address by the company has also been given to the income tax authorities. Thus, the order passed by the Tribunal has no illegality and infirmity.

Having heard learned counsel for the parties and perusing the records, we are of the view that on March 29, 2004, when the notice u/s 148(1) of the Act was issued, ACIT, Range-IV, Lucknow, have no jurisdiction over the assessee on the date of issuance of such notice as the jurisdiction over the assessee was transferred to the Additional CIT, Range-I, Lucknow, vide order dated August 1, 2001, passed u/s 120 of the Act by the CCIT, Lucknow. Therefore, it cannot be situation where two Assessing Officer would have simultaneous jurisdiction over the assessee, one being Additional CIT, Range-I, Lucknow, and other being ACIT, Range-IV, Lucknow. In these backgrounds, the Tribunal has rightly held that the issuance of notice u/s 148(1) of the Act by the ACIT, Range-IV, Lucknow, was without jurisdiction.

In view of the above, substantial question so framed at the time of the admission of Income Tax Appeal No. 58 of 2008 is answered in the negative.

With regard to Income Tax Appeal No. 172 of 2008, on a perusal of the records, it reflects that it has not been admitted as yet.

Considering the peculiar facts and circumstances of the case, we do not find that any substantial question of law arises for consideration involved in Income Tax Appeal No. 172 of 2008. Both the income tax appeals are dismissed.