IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR INCOME TAX APPEAL NO.127 OF 2006 Commissioner of Income Tax-I, Aaykar Bhavan, Civil Lines, Nagpur. ..... APPELLANT // VERSUS // Lalitkumar Bardia, Prop. Aditya Jewellers, 2nd Flor, Golden Palace, Dharampeth, Nagpur. ....... RESPONDENT Mr.Anand Parchure, Sr. Cl. with Mr.A.J.Bhoot, Adv. for Appellant. Mr.C.J.Thakar and Mr.S.C.Thakar, Advocate for Respondent. CORAM : M.S.SANKLECHA & MANISH PITALE, JJ. DATE : 11.7.2017. ORAL JUDGMENT (Per M.S.Sanklecha, J) : 1. This appeal challenges Order dt.17.2.2006 passed by Income Tax Appellate Tribunal (the Tribunal). ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: impugned order relates to Block Assessment Years 1989-90 to 1999-2000. 2. This appeal was admitted on 6.10.2009 on following substantial questions of law : Whether in facts and circumstances of case and in law filing of return in response to notice under Section 158BC by respondent/assessee with Nagpur I.T.O., is sufficient to apply bar under Section 124(3) of Income Tax Act in matter ? 3. In year 1999, there was search and seizure operation on Motwani group of Nagpur. As consequence, search was also carried out on respondent/assessee during period from 2.2.1999 to 6.2.1999. At that time, respondent/assessee was being assessed at Rajnandgaon (M.P.). 4. On 6.7.1999, Commissioner of Income Tax, Raipur, in exercise of powers under Section 127 of Act, transferred Appellant's assessment proceedings (case) from I.T.O., Rajnandgaon to Deputy Commissioner of Income Tax, Nagpur. respondent/assessee challenged order dated ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 3 itl127.06.odt 6.7.1999 passed under Section 127 of Act by Commissioner of Income Tax, Raipur before Hon'ble Madhya Pradesh High Court. On 17.9.1999, Hon'ble Madhya Pradesh High Court quashed and set aside order dt.6.7.1999 passed u/s.127 by Commissioner of Income Tax, Raipur. However, Court by its Order, dated 17.9.1999 directed Commissioner to hear respondent/assessee and pass reasoned order in support of transfer of case. 5. On 22.9.1999, Deputy Commissioner of Income Tax, Nagpur issued show cause notice under Section 158BC of Act calling upon appellant to file its return of income. In response to above notice, appellant on 5.5.2000 did file its return of income declaring undisclosed income at 'Nil'. 6. In meantime i.e. after order of High Court dt.17.9.1999 quashing earlier order dt.6.7.1999 by Commissioner of Income Tax, Raipur, CIT passed fresh order dt.18.1.2000 under Section 127 of Act. By order dt.18.1.2000, Commissioner of Income Tax, Raipur maintained earlier order dt.6.7.1999. In fact, operative part of order reads as under : ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 4 itl127.06.odt case of petitioner was connected case of Motwani Group of Nagpur, where search and seizure operation u/s.132 of I.T. Act were conducted. Accordingly, case of petitioner was transferred from ITO, Ward Rajnandgaon to Dy. CIT, Central Circle-1(1) Nagpur for co-ordinated investigation. Thus, order passed u/s.127 dated 6.7.99 is in order and no further action is necessary. 7. Thereafter, Deputy Commissioner of Income Tax, Nagpur on 12.8.2000 issued notices u/ss. 142(1) and 143(2) of Act. respondent/assessee participated in proceedings and consequent thereto, order dated 28.2.2001 of assessment came to be passed u/s.143(3) r/w. Section 158BC of Act by Deputy Commissioner of Income Tax, Nagpur. above order dated 28.2.2001 of assessment determined undisclosed income at Rs.27.56 Crores. 8. Being aggrieved by Order dated 28.2.2001 of Deputy Commissioner of Income Tax, Nagpur, respondent/assessee filed appeal to Commissioner of Income Tax (Appeals) [CIT(A)]. By Order dated 14.3.2002, CIT (A) partly allowed respondent/assessee's appeal in ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 5 itl127.06.odt effect reducing undisclosed income by directing Deputy Commissioner of Income Tax to rework undisclosed income, thus, reducing tax payable thereon. 9. Being aggrieved by order dt.14.3.2002 of CIT(A), both appellant/revenue as well as respondent/assessee filed appeals to Tribunal. Before Tribunal, respondent/assessee raised additional ground viz. that Assessment Order dt.28.2.2001 passed u/s.143(3) r/w. 158BC of Act by Deputy Commissioner of Income Tax, Nagpur, is without jurisdiction. This is so as, on date when notice under Section 158 BC of Act was issued i.e. 22.9.1999, Deputy Commissioner of Income Tax, Nagpur was not his Assessing Officer. basis of his assuming jurisdiction was Order dt.6.7.1999 by Commissioner of Income Tax, Raipur, which had been quashed by Order dated 17.9.1999 of Hon'ble Madhya Pradesh High Court. Tribunal allowed raising of additional ground as it concerned issue of jurisdiction, being pure question of law. Thereafter, impugned order upheld objection of respondent/assessee negating stand of Appellant/Revenue that issue of jurisdiction cannot be urged by Respondent/Assessee in view of Section 124 (3) of Act. This by holding that same would not apply as ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 6 itl127.06.odt respondent/assessee has not filed his return of income u/s.139(1) or in response to notice u/s.142(1) or 142(3) of Act, but in response to notice u/s.158BC of Act. Besides holding that on 22.9.1999 when notice under Section 158BC of Act was issued, Deputy Commissioner of Income Tax, Nagpur was not having jurisdiction, Tribunal allowed respondent/assessee's appeal. Being aggrieved, Revenue is in appeal before us. 11. Before considering rival submissions, it would be useful to reproduce provisions of Act which would have bearing in answering question formulated for our consideration : Section 2(7A) of Income Tax Act, 1961 : Assessing Officer means Assistant Commissioner (or Deputy Commissioner) (or Assistant Director) (or Deputy Director) or Income-tax Officer who is vested with 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 (Additional Commissioner or) (Additional Director or) (Joint Commissioner or Joint Director) who is directed under clause (b) of sub-section (4) of that ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 7 itl127.06.odt section to exercise or perform all or any of powers and functions conferred on, or assigned to, Assessing Officer under this Act;). Section 124 of Income Tax Act, 1961 : Jurisdiction of Assessing Officers. 124(1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, Assessing Officer has been vested with jurisdiction over any area, within limits of such area, he shall have jurisdiction - (a) in respect of any person carrying on business or profession, if place at which he carries on his business or profession is situate within area, or where his business or profession is carried on in more places than one, if principal place of his business or profession is situate within area, and (b) in respect of any other person residing within area. 2. ......... 3 No person shall be entitled to call in question jurisdiction of Assessing Officer - (a) where he has made return (under sub- section (1) of section 115 WD or) under sub- section (1) of section 139, after expiry of ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 8 itl127.06.odt one month from date on which he was served with notice under sub-section (1) of section 142 or (sub-section (2) of section 115WE or) sub-section (2) of section 143 or after completion of assessment, whichever is earlier; (b) where he has made no such return, after expiry of time allowed by notice under (sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115 WH or under section 148 for making of return or by notice under first proviso to section 115WF or under first proviso to section 144) to show cause why assessment should not be completed to best of judgment of Assessing Officer, whichever is earlier. It is pertinent to note that w.e.f. 1.6.2016 Finance Act, 2016 is inserted following sub-clause (c) : (c) where action has been taken under section 132 or section 132A, after expiry of one month from date on which he was served with notice under sub-section (1) of section 153A or sub- section (2) of section 153C or after completion of assessment, whichever is earlier. Section 127 of Income Tax Act, 1961 : ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 9 itl127.06.odt Power to transfer cases. (1) (Principal Director General or) Director General or (Principal Chief Commissioner or) Chief Commissioner or (Principal Commissioner or) Commissioner may, after giving assessee reasonable opportunity of being heard in matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) ...... (3) ...... (4) ...... Explanation In section 120 and this section, word case, in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after date of such order or direction in respect of any year.) ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 10 itl127.06.odt Section 158 BC of Income Tax Act, 1961 : Procedure for block assessment. 158BC. Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A. In case of any person, then, - (a) Assessing Officer shall - (I) in respect of search initiated or books of account or other documents or any assets requisitioned after 30th day of June, 1995, but before 1st day of January, 1997, serve notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after 1st day of January, 1997, serve notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in notice return in prescribed form and verified in same manner as return under clause (ii) of sub-section (1) of section 142, setting forth his total income including undisclosed income for block period : ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 11 itl127.06.odt Provided that no notice under section 148 is required to be issued for purpose of proceeding under this Chapter : Provided further that person who has furnished return under this clause shall not be entitled to file revised return;) (b) .... (c) .... (d) .... (emphasis supplied) 12. Mr.Anand Parchure, learned Senior Counsel for appellant/assessee in support of appeal submits as follows : (a) In view of Section 124(3) of Act, respondent/assessee is statutorily barred from objecting to jurisdiction of Assessing Officer. This is so as same was raised only before Tribunal. Thus, admittedly, beyond time provided therein; (b) As respondent/assessee has participated in proceedings consequent to notice issued under Section 158BC of Act and allowed Deputy Commissioner of Income Tax, Nagpur to complete assessment without raising this objection, it amounts to waiver. respondent/assessee cannot ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 12 itl127.06.odt now challenge jurisdiction of Deputy Commissioner of Income Tax, Nagpur; and (c ) In any view, Deputy Commissioner of Income Tax, Nagpur was vested with jurisdiction to complete assessment of undisclosed income under Section 158BC of Act by subsequent Order dated 18.1.2000 of Commissioner of Income Tax, Raipur which has retrospectively revived his earlier Order dated 6.7.1999. Consequently, Deputy Commissioner of Income Tax, Nagpur is Assessing officer in terms of Act at time when notice was issued to respondent/assessee and no fault can be found with same. 13. On other hand, Mr.Thakar, learned Counsel appearing for respondent/assessee while supporting impugned order, submits as under : (a ) Section 124 (3) of Act would have no application as, at relevant time and even now, as it does not deal with notices issued u/s.158 BC of Act. Even amendment carried out by Finance Act, 2016 only seeks to bring within its ambit any notices issued u/s.153A and 153C of Act and not notices issued under Section 158BC of Act. Thus, no fault can be found with order of Tribunal and question as ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 13 itl127.06.odt framed has to be answered in favour of respondent/assessee. (b) There can be no question of waiver by mere participation in Assessment proceedings where there is inherent lack of jurisdiction in Assessing Officer. In support, he placed reliance upon Apex Court decision in Kanwar Singh Saini vs. High Court of Delhi, 2012 (4) SCC 307; and (c) At time when notice u/s.158BC was issued on 22.9.1999, Deputy Commissioner of Income Tax had ceased to be Assessing Officer. This is for reason that Order dated 6.7.1999 passed u/s.127 bestowing jurisdiction on him had already been quashed and set aside on 17.9.1999. Thus, Deputy Commissioner of Income Tax, Nagpur could not have assumed jurisdiction to issue notice u/s.158 BC of Act. 14. It is undisputed position that respondent/assessee was being assessed at Rajnandgaon (M.P.). It was as consequence of search upon Motwani group at Nagpur that search was carried on upon Respondent/Asseessee. In view of above, Commissioner of Income Tax, Raipur for facilitating detailed and coordinated investigation, passed order on 6.7.1999, under Section 127 of Act transferring respondent/assessee's case from Rajnangaon to Nagpur. ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 14 itl127.06.odt However, Order dated 6.7.1999 of Commissioner of Income Tax, Nagpur was quashed and set aside on 17.9.1999 by Hon'ble M.P. High Court. notice u/s.158BC of Act was issued on 22.9.1999 i.e. after order of transfer dated 6.7.1999, u/s.127 of Act was quashed and set aside. Thus, it ceased to exist. Consequently, on 22.9.1999, when Deputy Commissioner of Income Tax, Nagpur ceased to have jurisdiction to assess Respondent/Assessee as there was no order of transfer of respondent/assessee's case to Nagpur. In terms of Section 2(7A) of Act, Assessing Officer means 'an Officer of Income Tax vested with jurisdiction either by virtue of Section 120 or any other provision of Act'. Admittedly, Deputy Commissioner of Income Tax, Nagpur does not have jurisdiction over respondent/assessee by virtue of Section 120 of Act. However, claim of jurisdiction as Assessing Officer over respondent/assessee is Order dated 6.7.1999 which has been passed u/s.127 of Act, while issuing notice on 22.9.1999, under Section 158 BC of Act. But, as Order dt.6.7.1999 under Section 127 of Act by Commissioner of Income Tax, Raipur was set aside before issuing of notice, Deputy Commissioner of Income Tax, Nagpur ceased to be Respondent/Assessee's Assessing Officer. In result, notice dated 22.9.1999 issued u/s.158BC of Act was issued by Deputy Commissioner of Income Tax, who was not Assessing ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 15 itl127.06.odt Officer of respondent/assessee. It is Assessing Officer alone who has to serve notice upon assessee calling upon him to furnish return in terms of Section 158BC of Act. This notice Deputy Commissioner of Income Tax could not issue as, on 22.9.1999, he was not Assessing Officer. As consequence, notice being without jurisdiction, all proceedings subsequent thereto are without authority of law. 15. In fact, as Apex Court held in A.C.I.T. vs. Hotel Blue Moon, (2010) 321 I.T.R. 362 (SC) that issue of notice under Section 158 BC of Act, consequent to search is mandatory, as it is very foundation for jurisdiction. Therefore, notice u/s.158 BC of Act has necessarily to be issued by person who is Assessing Officer and not by any Officer of Income Tax Department. In view of above, on 22.9.1999, when notice under Section 158 BC of Act was issued by Deputy Commissioner of Income Tax, Nagpur, he was not Assessing Officer of Respondent/Assessee. Therefore, no fault can be found on above count with Order of Tribunal. 16. Notwithstanding above, it is submitted on behalf of Revenue that respondent/assessee is statutorily barred by virtue of Section 124(3) of Act, from now urging this issue before Tribunal or before this Court. However, on ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 16 itl127.06.odt examination of Section 124(3) of Act, it is noted that person is not entitled to question jurisdiction of Assessing Officer in context of present facts after time prescribed therein, only when return is filed under Section 139(1) of Act and within one month of service of notice under Section 142(1)/143(2) of Act. In this case, admittedly, return has been filed in response to notice under Section 158BC of Act, though it may be verified in same manner as return under Section 142(1)(i) of Act as provided in Section 158BC(b) of Act. However, it is still return filed in response to notice under Section 158BC of Act and not return in response to notice under Section 142(1)(i) of Act. assessment consequent to notice issued under Section 158 BC of Act (Chapter XIV-B of Act) is carried out in manner prescribed/laid down in Section 158 BC of Act. Further Section 158 BC of Act provides that provisions of Section 142 and 143 (2) and (3) of Act shall so far as may be, apply. Therefore, these sections do not apply in its entirety, but only to extent applicable. Further requirement in Section 124(3)(a) of Act of raising objection within one month of completion of Assessment is to be read in context of earlier part i.e. objection within one month of notice under Sections 142 and 143 of Act, as later part is qualified by words whichever is earlier'. ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 17 itl127.06.odt 17. In this case, it is undisputed position that return of income was filed declaring undisclosed income at 'Nil' on 5.5.2000 in response to notice dated 22.9.1999 issued under Section 158 BC of Act and not consequent to notice u/ss.142(1)(i) of Act which was issued as late as 12.8.2000. In above view, it is clear that bar of Section 124(3) of Act would not prohibit respondent/assessee from calling in question jurisdiction of Deputy Commissioner of Income Tax, Nagpur in passing Assessment Order beyond period provided therein. It needs to be pointed out that amendment by Finance Act, 2016 which is w.e.f. 1.6.2016 brings within ambit of Section 124(3) of Act cases when notice is issued consequent to search u/s.153(A) or 153(C) of Act preventing/prohibition assessee from raising issue of jurisdiction. It does not include notices issued u/s.158 BC of Act. This further supports view that time bar u/s.124(3) of Act to question jurisdiction of Income Tax Officer would not apply to cases where return has been filed consequent to notice u/s.158 BC of Act. 18. It was next submitted that even absent statutory provision, respondent/assessee is barred from raising issue of jurisdiction after having participated in proceedings before Deputy Commissioner of Income Tax, Nagpur on ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 18 itl127.06.odt principle of waiver of its right to question his jurisdiction. waiver would mean case where party decides not to exercise its right to particular privilege, available under law. In this case, Respondent/assessee has right not to be assessed to tax by Income Tax Officer, who is not Assessing Officer. However, waiver can only be of one's right/privilege but non- exercise of same will not bestow jurisdiction on person who inherently lacks jurisdiction. Therefore, principle of waiver cannot be invoked so as to confer jurisdiction on Officer who is acting under Act when he does not have jurisdiction. Act itself prohibits Officer of Income Tax from exercising jurisdiction u/s.158 BC of Act, unless he is Assessing Officer. This limit in power of Income Tax Officer in exercise of jurisdiction is independent of conduct of any party. Waiver can only be of irregular exercise of jurisdiction and not of lack of jurisdiction. decision of Delhi High Court in Venad Properties v. CIT, 340 ITR 463 relied upon by Appellant/Revenue is case of non-service of notice before passing of order by Officer having inherent jurisdiction. Therefore, it is case of irregular exercise of jurisdiction and not absence of jurisdiction to issue notice. Therefore, it will have no application. 19. It is settled position in law that mere participation in ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 19 itl127.06.odt proceedings or acquiescence will not confer jurisdiction. Apex Court in Kanwar Singh Saini (supra) made observations, which are apposite to issue at hand and which read as under : 22.There can be no dispute regarding settled legal proposition that conferment of jurisdiction is legislative function and it can neither be conferred with consent of parties nor by superior court, and if court passes order/decree having no jurisdiction over matter, it would amount to nullity as matter goes to roots of cause. Such issue can be raised at any belated stage of proceedings including in appeal or execution. finding of court or tribunal becomes irrelevant and unenforceable/inexecutable once forum is found to have no jurisdiction. Acquiescence of party equally should not be permitted to defeat legislative animation. court cannot derive jurisdiction apart from statute. (Vide United Commercial Bank Ltd v. Workmen, Nai Bahu v. Lala Ramnarayan, Natraj Studios (P) Ltd. v. Navrang Studios, Sardar Hasan Siddiqui v. STAT, A.R. Antulay v. R.S. Nayak, Union of India v. Deoki Nandan Aggarwal, Karnal Improvement Trust v. Parkash Wanti, U.P. Rajkiya Nirman Nigam Ltd. v. Indure (P) Ltd., State of Gujarat v. Rajesh Kumar Chimanlal Barot, Kesar Singh v. Sadhu, Kondiba Dagadu Kadam v. Savitribai Sopan Gujar and CCE v. Flock (India) (P) Ltd.) ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 20 itl127.06.odt 20. It was lastly submitted that, by virtue of subsequent Order dated 18.1.2000 passed by Commissioner of Income Tax, Raipur, earlier order dt.6.7.1999 passed u/s.127 of Act by him stands revived. Consequently, all proceedings taken between 6.7.1999 till Order dated 18.1.2000 by Deputy Commissioner of Income Tax, Nagpur become regular and he will retrospectively enjoy status of Assessing Officer even on 22.9.1999, when he issued notice u/s.158 BC of Act. 21. Transfer of proceedings u/s.127 of Act cannot be retrospective so as to confer jurisdiction on person who does not have it. Section 127 of Act does not empower Authorities under Act to confer jurisdiction on person who does not have jurisdiction with retrospective effect. In fact, explanation under Section 127 of Act clearly provides that all proceedings under Act which are pending on date of such order of transfer and all proceedings which may be commenced after date of such order of transfer would stand transferred to Assessing Officer to whom case is transferred by Section 127(1) of Act. This provision makes it clear that though transfer would come into effect from date order of Commissioner passed under Section 127(1) of Act, proceedings already commenced would not abate and continue with new Assessing Officer, who assumes charge consequent to transfer subject ofcourse to pending notices ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: 21 itl127.06.odt being within jurisdiction of Officer issuing notices. It is not provision which validates without jurisdiction notice issued by Income Tax Officer. If submission of Revenue on above account is to be accepted, then order which is without jurisdiction could be bestowed with jurisdiction by passing order of transfer with retrospective effect. Section 127 of Act does not validate notices/orders issued without jurisdiction, even if they are transferred to new Officer by Order under Section 127 of Act. 22. For aforesaid reasons, above substantial question of law is answered in negative i.e. in favour of respondent/assessee and against appellant/revenue. 23. Therefore, appeal is dismissed. No order as to costs. JUDGE JUDGE jaiswal ::: Uploaded on - 17/07/2017 ::: Downloaded on - 19/07/2017 09:08:31 ::: Commissioner of Income-tax-I, Nagpur v. Lalitkumar Bardia