Challenge order u/s 271(1)(c) on validity of ao


(Guest)

From the year calendar 2004 onwards I have been living in Gurgaon, Haryana. Consequently, I have been filing my tax returns with a Gurgaon address since AY 2005-06. I filed a return for AY 2007-08 in July 2007 with a Gurgaon address, ITO, Gurgaon as the jurisdictional AO and showing only salary income. The return was picked up for scrutiny by ITO, New Delhi in June 2009. The following events then occurred.
 

  1. ITO, New Delhi issued a show-cause notice u/s 148 in June 2009.
  2. ITO, New Delhi issued a notice u/s 143(2) initiating assessment proceedings against me in August 2009.
  3. I met ITO, New Delhi in August who told me that I had not paid taxes for three inward transactions into my savings bank account (let us assume amounts of 10,000, 20,000 and 30,000 respectively) that amounted to short-term capital gains. I informed the ITO that one of the transactions (30,000) resulted in short-term capital loss and accepted that the other two (10,000 and 20,000) resulted in short-term capital gains. However, I asked the ITO how he could initiate assessment proceedings against me given that he was not my jurisdictional AO. He did not provide any reply to my question. I received no further notices from the said ITO.
  4. In August 2009 I paid tax plus interest on the two transactions (10,000 and 20,000) that resulted in short-term capital gains for me.
  5. ITO, Gurgaon issued a notice u/s 142(1) in November 2009.
  6. I met the ITO, Gurgaon and submitted all documents, including challans for the tax deposited in August 2009.
  7. ITO, Gurgaon issued an order u/s 143(3) in December 2009, adding all three transactions (10,000, 20,000 and 30,000) as short-term capital gains.
  8. ITO, Gurgaon issued an order u/s 156 in December 2009 demanding additional tax arising out of the third transaction (30,000) classified as short-term capital gain.
  9. ITO, Gurgaon also recommended imposition of penalty u/s 271(1)(c) or furnishing inaccurate 
  10. ACIT, Gurgaon issued an order u/s 271(1)(c) imposing penalty amounting to 100% of the tax calculated on all the three transactions classified as short-term capital gains by the AO.
  11. I appealed to CIT(A) who has accepted my submissions and agreed to delete the transaction that resulted in short-term capital loss (30,000), thereby setting aside the demand for additional tax u/s 156.
  12. CIT(A) has asked me to submit a separate submission to explain why penalty should not be imposed for the taxes and interest that were paid (in August 2009) after the notice u/s 148 was issued.

I would like to submit to CIT(A) that no penalty should be imposed on me because I had already paid all the taxes and interest due before the jurisdictional AO raised his first notice in November 2009. I had already objected to the ITO, New Delhi issuing notices u/s 148 and 143(2) against me as he had no jurisdiction for raising those notices for the given assessment year. As far as I am concerned, the first legal notice was issued against me u/s 142(1) in November 2009 and I had already paid all taxes due by then.

I would like to know whether I can mention in my submission that the notices u/s 148 and 143(2) were legally invalid. If yes, references to past cases supporting this would be useful. Appreciate guidance in this regard.

It must be noted that I have never filed taxes in Delhi and the ITO, New Delhi has never had jurisdiction over my returns. I am also unaware if ITO, New Delhi transferred the assessment legally to ITO, Gurgaon u/s 127.