Mega Corporation Ltd... v. Additional Cit, Rang...

ORDER

I.C. Sudhir, Judicial Member - This appeal preferred by the assessee is directed against the order of learned CIT(A)-IX, New Delhi dated 29.11.2013 and relates to assessment year 2006-07.

2. The assessee has impugned the First Appellate Order on the following grounds of appeal:

'1 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the order of assessment under section 143(3) of the Act dated, 29.12.2008 which was without jurisdiction since the learned Additional Commissioner of Income-tax, who framed the impugned assessment was not empowered or authorized or directed under the provisions of sec. 120(4)(b) read with section 2(7A) of the Act to exercise the powers or perform the functions of Assessing Officer and as such, the same was without jurisdiction, invalid and deserve to be quashed as such.

1.1 That the learned Commissioner of Income Tax (Appeals) having admitted that there is no order under section 120(4)(b) of the Act as required under section 2(7A) of the Act was wholly incorrect in law and on fact to uphold the assessment on the basis of an order under section 120(2) passed by the CIT-II, Delhi based on Notification No. 267 of the Board and principle of substance over procedure.

1.2 That the finding of the learned Commissioner of Income Tax (Appeals) that since the appellant had participated in the proceeding before the Assessing Officer, therefore, the appellant has accepted the jurisdiction of the Assessing Officer, is contrary to the well settled position of law that the participation cannot be foundation for an assessment without jurisdiction and in any case, the said finding is in breach of the directions of the Hon'ble Tribunal in order dated 16.01.2013, which has acquired finality and has not been challenged by the revenue.

2. That the learned Commissioner of Income Tax (Appeals) has otherwise too failed to appreciate that the order of assessment was without jurisdiction in absence of an order transferring jurisdiction u/s 127 of the Act from the learned Dy. CIT, Circle 6(1), New Delhi to learned Additional Commissioner of Income-tax, Range-6, New Delhi.

3. That the learned Commissioner of Income Tax (Appeals) - IX New Delhi has also grossly erred both in law and on facts in upholding the action of the learned Assessing Officer to treat the long term capital gain on shares of Rs. 6,10,92,870/- as business income of the appellant company and, disallowance of claim of exemption of Rs. 6,10,92,870/- u/s 10(38) of the Act.

3.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the sum of Rs. 6,10,92,870/- represented long term capital gain accrued on disinvestment of shares and as such, the finding that, such gain represents business income of the appellant company is misconceived, misplaced and, wholly untenable.

3.2 That the learned Commissioner of Income Tax (Appeals) has overlooked the fact that, once it is an undisputed and admitted fact that, shares sold by the appellant in the instant assessment year were held and, accepted as "investments" in the preceding assessment year, there remained no basis much less any valid basis to regard the gain accruing on sale of such investment as business income and, not long-term capital gain on sale of shares and therefore, the conclusion is erroneous and, contrary to facts on record.

3.3 That the learned Commissioner of Income Tax (Appeals) has otherwise failed to appreciate that, once assessee was admittedly the owner of equity shares which had been held by it for a period exceeding 12 months and the same were sold resulting into a long term capital gain of Rs. 6,10,92,870/- and as such since the gain had accrued to the assessee on transfer of long term 'capital asset', the same was not includible in the total income of the assessee and in any case the tax levied @ 30% instead of prescribed rate of tax @ 20% was beyond jurisdiction and, had erroneously been levied.

3.4 That the learned Commissioner of Income Tax (Appeals), has further failed to appreciate that such long term capital gain could not held to be business income on the mere assumption that the shares were not held by the appellant in its own demat account which demat account/bank were admittedly on behalf of the assessee by the broker of the appellant.

3.5 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts is concluding that the assessee has failed to establish that, securities transaction tax which was leviable on the transfer of such shares was not paid. The finding is factually incorrect and, contrary to material on record.

3.6 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, mere alleged violation of the provisions of SEBI could not be sufficient to disentitle the assessee, in treating the asset held as equity shares as long term capital asset, particularly when transactions of identical nature were accepted in the immediately preceding assessment year and as such, finding recorded are based on subjective, whimsical and, arbitrary considerations and, therefore not sustainable.

3.7 That the finding of the learned Commissioner of Income Tax (Appeals) in order dated 6.12.2010 that, no payment for purchase of shares was made in the immediately preceding assessment year is factually incorrect and, contrary to material on record. In fact, he has overlooked the fact that, investment was made in the shares out of the sale and was shown and accepted as short term capital gain on purchase and, sale of shares in the immediately preceding assessment year, which has been offered and, assessed to tax.

3.8 That the learned Commissioner of Income Tax (Appeals) has further erred in recording contradictory and vague findings in order dated 6.12.2010. The findings recorded in the impugned order are totally contrary to the material placed on record and is nothing but is based on figment of an imagination including the finding that no STT was paid on such transactions and is not established from the contract notes issued by the broker, particularly when there is no material on dispute the genuineness of the contract notes/bills issued by the broker.

4 That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in holding that, short term capital gain of Rs. 2,98,49,797/- and, Rs. 1,20,513/- did not represent short term capital gain but represents business income of the appellant company.

4.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that mere fact that securities were held by the broker of the appellant could not be a basis much less a valid basis to allege and, hold that, short-term capital gain arising on purchase and, sale of shares was not taxable @ 10% u/s 111A of the Act but @30% as business income of the appellant company.

4.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the finding of the learned AO that, the "assessee has failed to produce evidence that these belong to transactions of shares held by it" was based on misconceived facts and factually incorrect, legally misconceived and, was contrary to documentary evidence placed on record.

5 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the levy of interest u/s 234B of Rs. 98,80,958/- which is not leviable at all on the facts of the instant case.'

3. The relevant facts leading to filing of the present appeal are that for the assessment year, the assessee furnished return of income on 30.11.2006 declaring an income of Rs. 4,27,86,793/- which came to be assessed at an income of Rs. 9,10,63,184/- in an order dated 29.12.2008 under section 143(3) of the Act. The appeal filed by appellant-assessee was dismissed vide order dated 6.12.2010 by learned CIT(A). On further appeal before Tribunal, the assessee raised following additional grounds of Appeal:

"1. That order of assessment u/s. 143(3) of the Act 29.12.2008 is without jurisdiction since the learned Additional Commissioner of Income-tax, who framed the impugned assessment was not empowered or authorized or directed under the provisions of sec. 120(4)(b) read with section 2(7A) of the Act to exercise the powers or perform the functions of Assessing Officer and as such, order of assessment is illegal, invalid and, be quashed as such.

2. Without prejudice to the above, even if it is assumed (not admitted) for the same of an argument that the learned Additional Commissioner of Income-tax was empowered under section 124)4)(b) read with section 2(7A) of the Act, then too, order of assessment is without jurisdiction in absence of an order transferring jurisdiction u/s. 127 of the Act from the learned Dy.CIT, Circle 6(1), New Delhi to learned Additional Commissioner of Income-tax, Range-6, New Delhi".

3.1 The ITAT in an order dated 16.1.2013 admitted the additional grounds and thereafter, set aside two issues raised in the additional ground to the file of learned CIT(A) for adjudication on merits. It was held as under:

"7. We have duly considered the rival contentions and gone through the record carefully. As far as the admission of additional grounds of appeal are concerned, we are of the view that both these grounds are directly challenging the validity of the assessment which would ultimately effect the taxability of the assessee. If the assessment order has been passed by an authority who has no jurisdiction over the assessee in that case, the assessment order would not be sustainable. Hon'ble Supreme Court in the case of NTPC has observed that if a particular legal issue which effects the taxability of the assessee then even at belated stage the assessee can be permitted to raise legal issue. Therefore, we admit the additional grounds of appeal raised by the assessee. As far as the merits of the grounds are concerned, admittedly first notice under sec. 143(2) was issued by the Dy. CIT, Circle-6, New Delhi. Learned Additional Commissioner took charge of the assessment proceedings from 25.8.2008. The material placed on record in the shape of correspondence by the learned DR is not sufficient to clinch the issue. These are general information and it is not discernible whether learned Dy. CIT and Additional CIT were having concurrent jurisdiction on the companies whose names start with alphabet "M". Similarly, it is not discernible whether the jurisdiction over the assessee was transferred under sec. 127 of the Act or not. Faced with this situation, we have confronted the learned representatives and put as to why a finding may not be called for from the Learned First Appellate Authority on this issue who will be looked into relevant record available with the department. Both the representatives had expressed no objection over the suggestion. Considering all these aspects, we deem it appropriate to set aside these two issues to the file of the Learned CIT(Appeals) for adjudicating them on merit. Learned CIT(Appeals) shall pass a speaking order referring to all relevant material.

8. In case, the grounds are accepted and assessment order is quashed then no proceeding would remain, however, in case Learned CIT(Appeals) does not find any error in passing the assessment order by the learned Additional CIT, then the assessee will be at liberty to challenge the issues, whether long term capital gain and short term capital gain earned by it, is to be assessed as a business income or not? In other words, we are not adjudicating this controversy. The assessee will take all the grounds of appeal taken before us in the second round of litigation. Learned CIT(Appeals) need not to comment on any other issue. It is needless to say that the observations made by us will not impair or injure the case of the Assessing Officer and will not cause any prejudice to the defence/explanation of the assessee. Learned First Appellate Authority shall adjudicate the alleged grounds of appeal."

3.2 The learned CIT(A) thereafter, called for the comments from the Assessing Officer and dismissed the appeal of the assessee and as such, this appeal has been preferred by the assessee.

4. Ground Nos. 1 and 2 raised by the assessee challenge the assumption of jurisdiction by the Additional CIT to frame the impugned order of assessment dated 29.12.2008 under section 143(3) of the Act. The relevant facts are that appellant company furnished a return of income on 30.11.2006 which was accepted in an intimation dated 23.3.2008 under section 143(1) of the Act. It is further not disputed that notice u/s 143(2) of the Act dated 15.10.2007 was issued by Dy. CIT, Circle 6, New Delhi for framing assessment under section 143(3) of the Act. Thereafter, on 25.8.2008, notice was issued by Additional CIT, Range 6, New Delhi under section 142(1) of the Act and pursuant thereto, assessment has been framed under section 143(3) of the Act on 29.12.2008 by the Additional CIT, Range 6, New Delhi. The contention of the assessee is that the aforesaid assessment framed by the Additional CIT Range-6, New Delhi is without jurisdiction as firstly, he was not an Assessing Officer under section 120(4)(b) of the Act and furthermore, there was no order under section 127(1) of the Act for transfer of jurisdiction from Dy. CIT, Circle 6(1), New Delhi to Additional CIT, Range 6, New Delhi. As regards former contention, the learned CIT(A) negated the said submission by concluding as under:

"15.5 The appellant's main contention is that in the absence of order u/s 120(4)(b),, as required by section 2(7A), the impugned assessment order of Addl. CIT is without jurisdiction. It is a fact that there is no order u/s 120(4)(b). But there is an order u/s 120(2) passed by the CIT-II, Delhi, as pointed out by the Ld. AR of assessee, the issue remains whether order u/s 120(2) can fulfil the requirement of order u/s 120(4)(b). On the basis of principle laid down in the decision of City Garden v. ITO (supra) that such decision has to keep in mind that defect of procedure should not invalidate the end action and allocation of functions is matter of procedure and not substance, the ambiguities in the order of CIT-II, Delhi u/s 120(2) can be ignored. In the judicial citation given by the Ld. AR, there was no order u/s 120(2) and hence are distinguishable in this case. Applying the principle of substance over procedure, the issue needs re-examination. There is an alternative remedy available u/s 124 of the Act. Against this, the Ld. AR argued that since based on the decision in the case of NTPC Ltd. v. CIT (supra), the Hon'ble ITAT accepted the additional ground of jurisdiction, the issue of Section 124(2) & (3) is not applicable. However, in view of the decision of the Hon'ble High Courts in CIT v. British India Corporation Ltd. (supra) and Mukti Properties P. Ltd. v. Commissioner Of Income-Tax (supra), which are directly on the issue of jurisdiction raised by the appellant at a later stage and not at the stage of assessment, the admission of such grounds of appeal by the Hon'ble ITAT may be re-examined. In view of this, the contention of the appellant that the impugned order passed by the Addl. CIT is without any jurisdiction is not accepted. As far as, specific directions of the Hon'ble ITAT is concerned there is no procedural lapse adversely affecting the appellant in the impugned order. Hence, I find no error in passing the assessment order by the Ld. Addl. CIT. Hence, this ground of appeal is dismissed."

4.1 So far as the latter contention is concerned, the same too, was negated by the Learned CIT(Appeals) by concluding as under:

"15.3 The appellant objected that even if concurrent jurisdiction is given to the Addl. CIT, an order u/s 127 of the Act is required to be passed to give Addl. CIT the power to complete a particular assessment as it is done in the cases of transfer of cases to another AO after issue of notice u/s 143(2) of the Act by another AO. On this account, the issue raised is whether after notice u/s 143(2) is issued by the Dy. CIT, Circle-6(1), assessment order can be passed by the Addl. CIT of Range-6 having concurrent jurisdiction. This issue involves the interpretation of concurrent jurisdiction which is beyond the scope of this appeal within the restricted direction of the hon'ble ITAT. In my considered opinion, since both Addl. CIT Range-6 and Dy. CIT Circle-6(1) works as subordinate officer to the same CIT, and the CIT having entire territorial jurisdiction, the passing of assessment order by the Addl. CIT after issue of notice u/s 143(2) by the Dy. CIT Circle-6(1) does not affect the taxability of the appellant is not adversely affected by the order."

4.2 Apart from the above, another additional basis adopted by the learned CIT(A) to reject the claim of the appellant is that the assessee has not challenged the jurisdiction or authority of the Assessing Officer to make the assessment itself at the stage of assessment and once the assessee had subscribed to the jurisdiction and participated in the assessment proceedings, the said contention is not tenable. He has held in this regard as under:

"14. In my considered opinion, the contentions raised by the appellant are liable to be rejected as the appellant has never challenged the jurisdiction or authority of the AO to make assessment before the AO, itself. Even if it is assumed that AO had no authority or was not the proper Assessing Officer, as per section 120 of the Act or was not competent to pass an order as per Board Circular, yet the assessee subscribed to his jurisdiction and participated in the assessment proceedings unchallenged. This behaviour of the assessee goes against raising any contention at later stage. After silently participating in the proceedings before the AO, the appellant has accepted the jurisdiction of the AO. Had the appellant raised the issue at the level of AO, the AO could have written to the Higher Authorities for defining the jurisdiction. By not doing so the appellant surrendered the right to object the jurisdiction of the AO which cannot be revived at the later stage just to prolong the issue for adjudication. Similar is the case with regard to the validity of notice u/s 143(2) of the Act and assessee has nowhere challenged during the assessment proceedings that notice is bad or beyond statutory period as prescribed u/s 143(2) of the Act."

4.3 Before us, the learned counsel for the assessee Shri Salil Aggarwal, submitted that it is an admitted position that there is no order under section 120(4)(b) of the Act so as to confer jurisdiction on the Additional CIT, Range 6, New Delhi to frame the impugned assessment. It was submitted that in absence of such an order under section 120(4)(b) read with section 2(7A) of the Act so as to vest the Additional CIT the power to exercise and perform the functions of the Assessing Officer, the assessment framed is legally unsustainable. He referred to the provisions contained in sections 120, 121 and also section 124 along with 2(7A) of the Act to support his contention. It was contended that order dated 1.8.2007 in an order u/s 120(2) and not u/s 120(4)(b) of the Act. It was submitted that in any case, even assuming that the said order is a valid order conferring jurisdiction on Additional Commissioner of Income Tax then too impugned assessment is invalid since notice u/s 143(2) was issued on 15.10.2007 by Dy. CIT, who then did not have jurisdiction to validly initiate proceedings for assessment u/s 143(3) of the Act. Thus in his submission, on either of the basis, the assessment framed is an invalid assessment. It was also submitted that there is no order under section 127 of the Act for transfer of jurisdiction from Dy. CIT to Additional CIT. It has been contended that when a power is conferred upon two authorities concurrently one of them can exercise that power and once a decision is taken to exercise the power either by the two authorities, that exercise must be terminated by the either authority. In support of above, the learned counsel also relied upon the following decisions:

4.4 The learned counsel further contended that mere acquiescence or participation in assessment proceedings cannot confer jurisdiction to an Assessing Officer who lacked jurisdiction. He relied on the cases in Sewlal Daga v. CIT [1965] 55 ITR 406 (Cal.) , Tansukhrai Bodulal v. ITO [1962] 46 ITR 325 (Gau.) , P.V Doshi v. Commissioner Of Income-Tax, Gujarat [1978] 113 ITR 22 (Guj.) , Valvoline Cummins Ltd. v. Dy. CIT [2008] 307 ITR 103/171 Taxman 241 (Delhi) , Smt. Swaran Yash v. CIT [1982] 138 ITR 734/8 Taxman 191 (Delhi) and Investors Industrial Corporation Ltd. v. CIT [1992] 194 ITR 548 (Bom.) .

4.5 The learned DR relied on the findings of the learned CIT(A) and contended that the contention raised by the assessee are not maintainable more particularly when the issue of jurisdiction was never raised during the assessment proceedings and therefore, order of assessment was within the jurisdiction framed by the Additional CIT, Range 6, New Delhi.

5. We have considered the arguments advanced by the parties and perused the order of the learned CIT(A), comments of the Assessing Officer and material placed on record. The controversy raised in this appeal relates to the validity of order of assessment dated 29.12.2008 passed by Additional CIT, Range 6, New Delhi. According to the appellant/assessee, it is incumbent under the scheme of statute to vest the Additional CIT u/s 120(4)(b) of the Act to exercise or perform all or any of the powers and functions of Assessing Officer under the Act.

5.1 To examine the above contention, we consider it appropriate to firstly extract section 2(7A) of the Act which reads as under:

'2(7A) Assessing Officers

(7A) "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] 5 Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;'

5.2 A plain reading of the aforesaid provision would show that it is in two parts. The first part provides that Assessing Officer means the "Assistant Commissioner" or "Deputy Commissioner" or "Assistant Director" or "Deputy Director" or "Income Tax Officer" who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1) or 120(2) or any other provision of this Act. The second part provides that Assessing Officer means the "Additional Commissioner" or "Additional Director" or "Joint Commissioner" or "Joint Director" who is directed under section 120(4)(b) of the Act to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under this Act. In other words, it is manifest that Assessing Officer inter alia means Additional Commissioner who is directed under section 120(4)(b) of the Act to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. In other words, an Additional Commissioner can only be directed u/s 120(4)(b) of the Act to "Assistant Commissioner" or "Deputy Commissioner" or "Assistant Director" or "Deputy Director" or Income Tax Officer" under the Act. This interpretation also derives strength from the provisions contained in section 120(4)(b) of the Act which reads as under:

"120. Jurisdiction of income-tax authorities

(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,-

(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 [an Additional Commissioner or] [an Additional Director or] a Joint Commissioner [[ or a 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 [Additional Commissioner or] [Additional Director or] Joint Commissioner [[ or a 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 Joint Commissioner shall not apply."

5.3 It will be seen that the said provision provides that Board may by general or special order and subject to such conditions, restrictions or limitations as may be specified therein 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, 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 an Additional Commissioner or an Additional Director or a Joint Commissioner or a Joint Director and where any order is made under this clause, reference 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 Additional Commissioner or Additional Director or Joint Commissioner or a 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 Joint Commissioner shall not apply.

5.4 The position which emerges thus is that an Additional Commissioner of Income Tax ipso facto cannot exercise the powers or perform the functions of an Assessing Officer under the Act. He can perform the functions and, exercise the powers of an Assessing Officer only if he is specifically directed under section 120(4)(b) of the Act. In fact, the above conclusion is also supported by the decision of the Tribunal in the case of Prachi Leathers P. Ltd. (supra) wherein it has been held in para 16.2 of the decision as under:

'16.2 From the contents of the aforesaid provisions, it is quite clear that so far as Addl. Commissioner is concerned, firstly he has been included in the definition of "Assessing Officer" given under section 2(7A) of the Act with effect from 1.6.1994 as a result of retrospective amendment made by the Finance Act, 2007 but at the same time, it is also clear that the Addl. Commissioner will be Assessing Officer as envisaged in section 2(7A) so amended only if he is directed under clause (b) of sub-section (4) of section 120 to exercise or perform all or any of the powers and functions concerned on or assigned to an Assessing Officer; meaning thereby that the Addl. CIT can function or can exercise the powers and perform the functions of an Assessing Officer if he is empowered by the CBDT as required under clause (b) of sub-section (4) of section 120.

18.1 So far as the issue before us in the present appeal is concerned, it is now clear from the provisions as discussed hereinbefore that the Additional CIT could act and exercise the powers of an AO only in consequence upon delegation of such authority by the Board, Chief Commissioner of Income-tax or Commissioner of Income-tax as envisaged in the provisions of section 120(4)(b) of the Act. However, the power given to the Chief Commissioner of Income-tax or Commissioner of Income-tax being in consequence upon the delegation of power duly authorized by the Legislature, the Chief Commissioner of Income-tax or Commissioner of Income-tax were duty-bound, if at all they were to exercise such delegated power to act according to the provisions of law; meaning thereby that it was incumbent upon the Chief Commissioner of Income-tax or the Commissioner of Income-tax, as the case may be, if at all they wanted to authorize the Additional CIT to act and perform the functions of an AO, to pass a proper order delegating such functions/ powers upon him. This view of ours is fully supported by the decision of the Hon'ble Delhi High Court in the case of Dr. Nalini Mahajan v. DIT, 257 ITR 123 , wherein the Hon'ble High Court, while discussing the powers of Additional Director Investigation, held as under:

"It is now well settled that when a power is given to do a certain thing in a certain manner, the same must be done in that manner or not at all. A delegation of power is essentially a legislative function. Such a power of delegation must be provided by the statute. The director himself for certain matters is the delegating authority. He, unless the statute expressly states, cannot sub-delegate his power to any other authority. In any event, if an authority, which had no jurisdiction to issue such an authorization, did so, the same would be liable to be quashed as ultra vires. Thus, unless and until an amendment is carried out, by reason of the redesignation itself, read with the provisions of the General Clauses Act, the Addl. Director does not get any statutory power to issue authorization to issue warrant. Therefore, the Addl. Director (Investigation) cannot be said to have any power to issue any authorization or warrant to Joint Director. Consequently, notification dt. 6th Sep. 1989 is not valid in law to the said extent. "

18.2 So far as the present case is concerned, though we are concerned with the powers of Additional CIT but the proposition of law laid down by the Hon'ble High Court which was, though in relation to powers of Additional Director (Investigation), is fully applicable to the present case.

18.3 In view of the aforesaid facts, circumstances and the discussion and following the law laid down by the Hon'ble Delhi High Court in the case of Dr.Nalini Mahajan (supra), first of all we are of the opinion that the Addl.CIT, Range-6, Kanpur having not been empowered to exercise or perform the powers or functions of an Assessing Officer, the assessment framed by him was illegal and void ab initio.

5.5 Similar view has also been expressed in the case of City Garden (supra) whereby it was held as under:

"The Revenue's which has also placed its written submissions on record, stand that the Jt. CIT, Sri Ganganagar, had jurisdiction to assess the assessee u/s 120 of the Act, thus, cannot be accepted i.e., in the absence of a specific order issued in pursuance to section 120(4)(b) specifically authorizing him to exercise the powers and perform the functions as conferred on or assigned to an AO by or under the Act, or a notification u/s 120(6) of the Act."

5.6 Applying the above statutory position to the facts of the case of the appellant, it is an undisputed position and not challenged by the revenue in the present appeal either by placing on record any order or any notification supporting the position that an order was made under section 120(4)(b) of the Act so as to confer jurisdiction of the Additional CIT to exercise the powers or perform the functions of an Assessing Officer under section 2(7A) of the Act read with section 120(4)(b) of the Act.

5.7 In view of the above factual and judicial position, we are of the view that the order of assessment so framed is without jurisdiction inasmuch as the Additional CIT did not have the requisite mandate power under the law to frame the impugned assessment under section 143(3) of the Act.

6. The learned CIT(A) has however supported the validity of an order of assessment on the basis of an order dated 1.8.2007 under section 120(2) of the Act passed by the learned CIT-2, New Delhi. The said order as extracted by the learned CIT(A) reads as under:

"In appreciation of Order No. CIT-II/2001-02/509 dated 01.08.2001 and CIT-II/u/s 122(2)/2001-02/992 and in exercise of the powers conferred by sub-section (2) of Sec. 120 of the Income Tax Act, 1961 and in supersession of all earlier notification (s)/orders, except as respects thing done or omitted to be done before such supersession. I, the Commissioner of Income-tax, Delhi-II, New Delhi, in pursuance of the notification issued by the Central Board of Direct Taxes vide Notification No. 732(E) dated 31.07.2001 and Notification No. 267 of 2001 dated 17.09.2001 issued by Central Board of Direct Taxes, New Delhi having been so authorized, hereby direct that the Additional Joint Commissioner of Income-tax specified in column (3) of Schedule-1, hereto annexed, shall exercise the powers and perform the functions in respect of such cases or classes of cases specified in the corresponding entries in column (6) of the such Schedule-I, in respect of such persons or classes of persons specified in the corresponding entries in column (5) of the such Schedule-I in such territorial areas specified in the corresponding entries in column (4) of the said Schedule-I.

This order shall take effect from 01.08.2007."

6.1 It has been noted by learned CIT(A) that in Schedule I of the above-mentioned order, the jurisdiction of the Additional CIT, Range 6, New Delhi is stated clearly as "in the case of companies registered under the Companies Act, 1956 with the name beginning with the any of the expressions M dot, MA to MN alphabets." The perusal of the above order dated 1.8.2007 would show that it refers to Notification No. 267/2001 dated 17.9.2001 which reads as under:

"Section 120 of the Income-tax Act, 1961 – Jurisdiction of Income-tax authorities

Notification No. 267/2001 [F.No. 187/5/2001-ITAT-I] dated 17-9-2001

In exercise of the powers conferred by clause (b) of sub-section (4) of section 120 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby directs that the Joint Commissioners of Income-tax or the Joint Directors of Income-tax, shall exercise the powers and functions of the Assessing Officer, in respect of territorial area or persons or classes of persons or incomes or classes of income or cases, or classes of cases, in respect of which such Joint Commissioner of Income-tax are authorised by the Commissioner of Income-tax, vide Government of India, Central Board of Direct Taxes Notification Number S.O. 732 (E) dated 31.07.2001, S.O. 880(E) dated 14.09.2001, S.O.881(E) dated 14.09.2001, S.O.882(E) dated 14.09.2001 and S.O.883(E) dated 14.09.2001 published in the Gazette of India, Part II, Section 3, sub-section (ii), Extraordinary."

6.2 Furthermore we notice the learned CIT(A) has also held that section 120(2) empowers the Board to direct any other Income Tax Authority to issue orders to exercise the powers of any other Income Tax Authority and order u/s 120(2) is required to be issued by learned CCIT/CIT under the directions of the Board to give jurisdiction of Assessing Officer to Addl. CIT and Joint Commissioner of Income Tax for a specified area of persons. It has thus been concluded that section 120(2) is a larger and broader section making any Income Tax Authority as AO and therefore, when a particular Income Tax Authority is empowered as AO u/s 120(2) there may not be any necessity to pass another order u/s 120(4)(b) of the Act. In other words he has held that section 120(2) is a coterminous to section 120(4)(b) of the Act.

6.3 To appreciate the above, we seek to note the provisions contained in section 120(1) to 120(3) which reads as under:

"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.

(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 :—

6.4 Section 120(1) provides that 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. Thus section 120(1) stipulates that powers and functions of an income tax authority shall be confined and restricted to the powers and functions conferred or assigned by Board under the Act. Further section 120(2) enables the Board u/s 120(1) to even authorize an income tax authority to issue an order in writing for exercise of powers and function by subordinate income tax authorities. In other words, section 120(2) does not in any manner provide that CIT can authorize an Additional Commissioner of Income Tax to perform the functions and, exercise the powers of an Assessing Officer. On the contrary, we have already held above that section 2(7A) is explicit inasmuch as that section 120(1)/120(2) apply to Deputy Commissioner of Income, Assistant Commissioner of Income Tax, Additional Commissioner of Income Tax or Deputy Director of Income Tax.

7. Having regard to statutory position the finding of the learned CIT(A) is not in accordance with law. During the course of arguments the ld. counsel for the assessee has contended that the order dated 1.8.2007 by CIT, Delhi-II, New Delhi is not an order u/s 120(4)(b) of the Act and is an order u/s 120(2) of the Act Moreover there are no direction in the said order so as to confer and assign the Additional Commissioner with the powers of an Assessing Officer and exercise the functions of an Assessing Officer.

7.1 On careful consideration we find merit in the said submission. This order apparently is neither an order under section 120(4)(b) of the Act and nor it otherwise directs the Additional Commissioner to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. As regards the notification no. 267/2001 dated 17.9.2001 we notice that such notification by CBDT u/s 120(4)(b) of the Act directs that Joint Commissioner of Income Tax or Joint Director shall exercise the power and function of an Assessing Officer in respect of specified cases in respect of which such Joint Commissioner or authorized by Commissioner of Income Tax vide CBDT notification dated 14.9.2001 and 31.7.2001. It is thus apparent that the said notification is applicable in respect of Joint Commissioner authorized by Commissioner of Income Tax under notification as specified therein and no more. In the instant case it is admitted position that none of the notifications as specified therein confer powers of an Assessing Officer to the Additional Commissioner of Income Tax, Range 6, New Delhi.

7.2 We thus find merit in the claim of the appellant that in absence of an order u/s 120(4)(b) of the Act the Addl. CIT Range-6, New Delhi lacks jurisdiction to exercise the functions of the AO and therefore consequently the order of assessment framed is without jurisdiction.

8. The learned CIT(A) has relied on the judgment in the case of CIT v. British India Corpn. Ltd. [2011] 337 ITR 64/[2012] 20 taxmann.com 446 (All.) to hold that question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. The facts in the case were that assessee filed its return of income for the assessment year 1974-75 which was processed by the Assessing Officer, namely, Income Tax Officer, Central Circle-I, Kanpur who completed the assessment under section 143(3)/144B of the Act on September 7, 1977 after making certain additions and disallowances to the returned income. On appeal assessee contended that the assessing authority had no jurisdiction to pass the assessment order inasmuch as the assessment file stood transferred from Income Tax Officer, Central Circle-I, Kanpur to the Inspecting Assistant Commissioner Range-D, Kanpur by the order dated July 1, 1977 and thus the assessment order by the Income Tax Officer was void-ab-initio. The Tribunal allowed the appeal on the ground that the Income Tax Officer, Central Circle-I had no jurisdiction in view of the transfer order dated July 1, 1977 transferring the case to the Inspecting Assistant Commissioner. The hon'ble High Court in light of the above facts held as under:

"18. It is reasonable to deduce that the question of jurisdiction of the assessing authority cannot be disputed after the completion of the assessment proceedings. Alternatively, if such a question arises, the said question can be addressed by the Commissioner or the Board, as the case may be, in view of sub-section (4) of section 124 and this by necessary corollary excludes the jurisdiction of the first appellate authority or the court."

8.1 It is apparent that the said judgment has no application to the facts of the case as here is a case where the issue is about the lack of jurisdiction of Additional Commissioner of Income Tax to exercise the powers and perform the functions of an Assessing Officer under the Act. Once authority lacks jurisdiction then it is well settled it cannot be conferred participation or even elapse of time. Moreover even factually in the said case it was found that assessee had not provided the date of communication of the order u/s 127 of the Act and as such the hon'ble Court held as under:

"23. It has not come on record, not disclosed by the assessee at least, even before the first appellate authority in the additional memo of appeal as to when he got the knowledge of the transfer order dated July 1, 1977. The observation of the Tribunal that it is admitted that the order of transfer order is effective from July 1, 1977 is therefore, uncalled for. It has misdirected itself. The Tribunal has proceeded on a wrong footing that in the absence of date of communication of the order to the assessee, the assessee could raise the plea of jurisdiction in appeal as it is the first opportunity. The burden was upon the assessee to state specifically when the order of the transfer was received by it, which it failed to discharge. The order of the Tribunal is, therefore, also bad as it proceeds on assumptions and presumptions. The date of actual communication of the transfer order was within the special knowledge of the assessee and it was its duty to disclose the same."

8.2 In fact the Court finally concluded in the said judgment is as under:

"27. The case on hand stands still on a weak footing inasmuch as the Income-tax Officer, CC-I had the jurisdiction when the assessment proceedings commenced and a draft assessment order was submitted to the Inspecting Assistant Commissioner. Subsequent change in the jurisdiction if any unless brought to the notice of the authority concerned, will not in any manner vitiate the assessment order in the absence of any objection with regard to lack of jurisdiction by the assessee. It is a case where both the Assessing Officer and the assessee proceeded as if there is no transfer order transferring jurisdiction."

8.3 The above proposition if applied specifically support the plea of assessee i.e. in absence of jurisdiction order made by Additional Commissioner of Income Tax is a nullity.

8.4 The learned CIT(A) has also referred to the judgment in the case of Mukti Properties P. Ltd. v. Commissioner Of Income-Tax [2012] 344 ITR 177/[2011] 12 taxmann.com 215/201 Taxman 23 (Cal.) (Mag.) . In the said judgment their Lordships have held once an issue has not been raised before the first Appellate Authority then the appellant is stopped from raising the said issue at the later stage. The said judgment is also not applicable as this issue from raised by the appellant before the Tribunal and the Tribunal had then directed the CIT(A) to adjudicate the said issue on merits. The said order of Tribunal has became final and therefore having regard to the above the said judgment does not support the case of the revenue.

8.5 Further more reliance on provisions contained in section 124 of the Act is of no help to the revenue inasmuch as here is a case where the Additional Commissioner of Income Tax lacks jurisdiction and is not a case of either irregular exercise of jurisdiction or territorial jurisdiction. The hon'ble Delhi High Court in the case of Valvoline Cummins Ltd. (supra) has held as under:

"This is well settled, that mere acquiescence in the exercise of power by a person who does not have jurisdiction to exercise of power by a person who does not have jurisdiction to exercise that power, cannot work as an estoppels against him."

9. Another contention specifically raised is that there is no transfer order u/s 127 of the Act from transferring the case from the Dy. CIT to the Addl. CIT, Range 6, New Delhi. The learned CIT(A) has held that in the cases of transfer of cases to another AO after issue of notice u/s 143(2) of the Act by another AO, the issue involves the interpretation of concurrent jurisdiction which is beyond the scope of this appeal within the restricted directions of the Hon'ble ITAT. He has held that, "in my considered opinion, since both Addl. CIT Range-6 and Dy. CIT Circle-6(1) works as subordinate officer to the same CIT and the CIT having entire territorial jurisdiction, the passing of assessment order by the Addl. CIT after issue of notice u/s 143(2) by the Dy. CIT Circle 6(1) does not affect the taxability of the appellant or appellant is not adversely affected by the order." The hon'ble Delhi High Court in the above context in the case of Valvoline Cummins Ltd. (supra) has held as under:

'28. On the issue of 'concurrent' jurisdiction between the Additional Commissioner and the Deputy Commissioner, learned counsel for the assessee relied upon a decision of the Calcutta High Court in Berger Paints India Ltd. v. Asstt. CIT [2000] 246 ITR 133 . The Calcutta High Court had explained the meaning of the expression 'concurrent' to mean two authorities having equal powers to deal with a situation -but the same work cannot be divided between them. This is what the Calcutta High Court had to say :–

". . . Concurrent jurisdiction means a subordinate authority can deal with the matter equally with any superior authority in its entirety so that either one of such jurisdictions can be invoked. It cannot be construed as concurrent jurisdiction when one part of the assessment will be dealt with by one superior officer and the other part will be dealt with by one subordinate officer. . . ." (p. 141)

29. It appears to us quite clearly that there is a distinction between concurrent exercise of power and joint exercise of power. When power has been conferred upon two authorities concurrently, either one of them can exercise that power and once a decision is taken to exercise the power by any one of those authorities, that exercise must be terminated by that authority only. It is not that one authority can start exercising a power and the other authority having concurrent jurisdiction can conclude the exercise of that power. This perhaps may be permissible in a situation where both the authorities jointly exercise power but it certainly is not permissible where both the authorities concurrently exercise power. One example that immediately comes to the mind is that of grant of anticipatory bail. Both the Sessions Judge and the High Court have concurrent power. It is not as if a part of that power can be exercised by the High Court and the balance power can be exercised by the Sessions Judge. If the High Court is seized of an application for anticipatory bail it must deal with it and similarly if the Sessions Judge is seized of an anticipatory bail, he must deal with it. There can be no joint exercise of power both by the High Court as well as by the Sessions Judge in respect of the same application for anticipatory bail.

30. In the facts of the present case, since the Additional Commissioner had exercised the power of an Assessing Officer, he was required to continue to exercise that power till his jurisdiction in the matter was over. His jurisdiction in the matter was not over merely on the passing of the assessment order but it continued in terms of section 220(6) of the Act in dealing with the petition for stay. What has happened in the present case is that after having passed the assessment order, the Additional Commissioner seems to have washed his hands of the matter and left it to the Deputy Commissioner to decide the stay petition filed under section 220(6) of the Act. We are of the opinion that this was not permissible in law.'

9.1 We therefore hold that applying the above judicial position that assessment has to be completed by the authority who has initiated the proceedings for making assessment and any other authority can take over the proceedings only after a proper order of transfer u/s 127(1) or 127(2) of the proceedings. The revenue has not brought any order for transfer of the proceedings from Dy. CIT, Circle-6(1), New Delhi to the Additional CIT, Range-6, New Delhi and therefore it is quite evident that the Additional CIT, Range-6 took over the assessment proceedings without there being an order u/s 127(1). In the case of Prachi Leathers (P.) Ltd. (supra), it has been held as under:

"19. We are further of the opinion that the notice under section 143(2) of the Act having been issued by the Income-tax Officer, Range 6(2), Kanpur on 16.8.2002, it was Income-tax Officer alone who could frame the assessment subject however to the fact that that the assessment could be framed by any other officer also provided there was an order of transfer of jurisdiction over assessee's case from Income-tax Officer, Range-6(2), Kanpur to that officer under section 127(4) of the Act, but so far as present case is concerned, the Revenue has not brought to our notice any order under section 127 passed after 6.8.2002 transferring jurisdiction over the assessee's case from the Income-tax Officer, Range 6(2), Kanpur to the Addl. CIT, Range-6,Kanpur and therefore, the assessment framed by the Addl.CIT, Range-6,Kanpur irrespective of the fact as to whether he was authorized to perform the functions of an AO or not, is illegal and void ab initio for want of jurisdiction. Consequently, we are of the opinion that the assessment order in the present case dated 31.3.2003 passed by the Addl.CIT, Range (6), Kanpur was illegal and void ab initio for want of jurisdiction. Consequently, the assessment order is quashed."

9.2 Consequently on this count also, the assessment made on 29.12.2008 by the Additional Commissioner is illegal and bad in law for want of jurisdiction.

10. For the reasons aforesaid we hold that the order of assessment dated 29.12.2008 was without jurisdiction and therefore is quashed as such. In result, ground Nos. 1 and 2 are allowed.

11. Ground No(s) 3 and 4 of Grounds of Appeal are regarding treatment of long-term capital gain and, short-term capital gain declared by the appellant company as business income of the appellant company. However since we have quashed the assessment order itself, the issues raised by the assessee by way of other grounds of appeal do not survive, and, therefore, do not require any adjudication. Ground No. 5 of Ground of Appeal is regarding levy of interest which is consequential in nature.

12. In the result appeal is allowed.

JYOTI