Usurping Jurisdiction Not a Mere Technical Defect Curable u/s 292B of Income Tax Act: ITAT Quashes Re-Assessment [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT)has quashed the re assessment holding that usurping jurisdiction could not be a mere technical defect curable under Section 292B of the Income Tax Act 1961.

The assessee-company Viswanathan Securities Pvt. Ltd. is engaged in the business of dealing in shares and securities in its own name and also acting as sub-brokers. The assessee company filed its return of income on 30.09.2010 declaring income for Assessment Year 2010-11 in question. 

information was received by the AO that assessee has under-reported its taxable income to the extent for Assessment Year 2010-11 by misusing the ‘client code modification’ (CCM) facility available for correction of punching mistakes. Consequently, the case was reopened. The Assessing Officer subsequently issued a corrigendum on 14th December, 2017 to rectify certain mistakes that occurred in the reasons originally recorded. An addition was made alleging profit shifting by the assessee in a clandestine manner by conniving in client code modification.

Section 292B of the Act takes care of certain situations and enables the income tax authorities to cure defects in orders, notices, etc.

R.K. Mehra, appeared on behalf of the assessee and N.K. Bansal appeared on behalf of the revenue.

The Division Bench of Challa Nagendra Prasad (Judicial Member) and Pradip Kumar Kedia (Accountant Member) set aside the impugned order observing that,

The jurisdiction to reopen flows from reason recorded in writing under Section 148(2) on the strength of ‘reason to believe’ towards escapement of charitable income. Thus, such reasons confer an assumption of jurisdiction of substantive nature. Fundamental defect in the basis for holding ‘reason to believe’ could not be seen as a mere irregularity and thus could not be cured with the aid of Section 292B of the Act. 

“The Assessing Officer, in the instant case, has drawn belief based on the transactions carried out through brokers namely ‘S.S. Corporate Securities Ltd.’ which was later found to be totally non-existent. Such defect in the reasons cannot be ascribed as a mere technical irregularity and consequently defect cannot be cured by applying Section 292B of the Act. The instant case is the case of the jurisdictional defect which cannot be rectified by invoking the provisions of Section 292B of the Act.” the Bench further observed.

To Read the full text of the Order CLICK HERE

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