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Satyanarayana Peeti Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1984)7ITD496(Hyd.)
AppellantSatyanarayana Peeti
Respondentincome-tax Officer
Excerpt:
.....these materials in the assessment cannot, therefore, be lightly brushed aside. it may be that the assessee's return is complete and that there is no omission with reference to the seized records as very earnestly urged on the assessee's behalf. but that does not mean that the ito was justified in accepting the return under section 143(1) without making any enquiry whatsoever. the learned departmental representative pointed out that the very ito had forwarded all the prior records to the ito, special investigation circle-i, even prior to that date. we are, therefore, of the view that there was a case for prima facie enquiry and the apprehension of the commissioner that the order was prejudicial to the revenue is fully justified in the facts and circumstances of the case once we accept.....
Judgment:
1. This is an appeal filed by Shri Satyanarayana Peeti of Hyderabad against the order of the Commissioner under Section 263 of the Income-tax Act, 1961 ('the Act') for the assessment year 1960-81.

2. The assessee had filed a return of income before the ITO on 10-8-1981 for the assessment year 1980-81, while the assessee's case which was before the ITO had meanwhile been assigned to the ITO, vide the Commissioner's Notification No. S-P2/IAC/R.1/1981-82, dated 13-7-1981. Apparently, the mistake on the part of the assessee arose because this notification had not reached the assessee by the time the return was filed by him. It is stated by the learned representative for the assessee that this order has not been served on his client till date. If so. it is regrettable. It appears that the assessee also received a direct notice under Section 148 of the Act from the ITO and the assessee had replied to him that he had already filed the return before his regular officer. The ITO accepted the return which he ought to have forwarded to the ITO, Special Investigation Circle-I, under Section 143(1) of the Act on 31-8-1982. When this matter was brought to the notice of the Commissioner, he issued notice to the assessee as to why he should not cancel the assessment. The assessee made his written submissions wherein he pointed out that the ITO, who made the assessment, had territorial jurisdiction over his case. He also claimed that there was no prejudice caused to the revenue by acceptance of his return and that there was no material to suggest any escapement of income. The Commissioner would not accept these reasons. He pointed out that there was no jurisdiction with this officer to make the assessment. Even otherwise, he was of the view that in a case where there had been materials, considered as incriminating and, therefore, seized at the time of the raid in the assessee's premises on 2-4-1980, had not been vetted by the ITO with reference to the return and that such non-enquiry was prejudicial to the revenue. Since he could set aside the assessment for either of the reasons, he cancelled the same.

3. The learned representative for the assessee repeated the grounds stated before the Commissioner. It is claimed that the assessee is not aware of the notification transferring the case. Even assuming that there was such a notification, he claimed that there was concurrent jurisdiction which justified the action of the ITO. He pointed out that mere non-enquiry may not justify action under Section 263 unless there was prima facie material to necessitate an enquiry. According to him, there was none in this case as the assessee was in a position to explain the seized material. His return, it was claimed, was complete.

The learned departmental representative, however, relied upon the orders of the authorities below. He claimed that the assessment was lacking in jurisdiction. He disputed the proposition that there was a concurrent jurisdiction. He claimed that once a case is assigned to a particular officer, that officer alone was competent to deal with the same. He further claimed that the ITO was bound to make enquiries in the facts of this case in view of the raid and the seized documents, even as pointed out by the Commissioner. He claimed that there are a number of decisions which have uniformly laid down that non-enquiry would constitute prejudice, last one being that of the Rajas-than High Court in the case of Kanhaiyalal v. CIT [1982] 136 ITR 243. He particularly laid stress on the fact that the assessment in this case was made under Section 143(1) without any enquiry. The learned counsel in reply pointed out that Section 143(3)(b) is a provision to be appliedion such circumstances and that the ITO should have resorted to this expedient only. Action under Section 263, according to him, stood discredited even on this ground. He also claimed that the assessee has got a right to question the jurisdiction of the ITO within the time allowed for filing the return. Since the time had already expired, he claimed that it was not open to the Commissioner to dispute the jurisdiction.

4. We have carefully considered the records as well as the arguments.

The Commissioner has got the right to transfer a case from one ITO to another under Section 127 of the Act. It has also been further provided that this transfer could be made at any stage of the proceedings and that there is no need to reissue any notice already issued. Explanation thereto further provides that transfer of a case means transfer of all the pending proceedings. Once a case stands transferred, the previous ITO, who held jurisdiction over the case whether on territorial basis or by any previous assignment, loses his jurisdiction. As for the right of the assessee to call the jurisdiction of the ITO to question under Sub-section (6) to Section 124 of the Act, such a question arises only when there is a dispute as to which the ITO has jurisdiction to assess the assessee. There is no such dispute in this case as after the Commissioner's order the territorial ITO ceases to have jurisdiction and the ITO, Special Investigation Circle-I, assumes jurisdiction for all pending matters. We are satisfied that there was a transfer of jurisdiction under a valid order on 13-7-1981 for the purpose of facilitating investigation in respect of material seized during a search in the assessee's premises on 2-4-1980. This order does not become any the less valid merely because it had not found its way to the assessee, as claimed by him. Hence, the assessment was rightly set aside by the Commissioner as it was lacking in jurisdiction. In fact, the assessment has no legal effect and whether it had been cancelled or not, the effect probably is the same. The Commissioner by his order has put the matter beyond possible technical controversy by invoking the power under Section 263. His order could be upheld for this reason alone.

5. Even otherwise, we do not find any justification for accepting the assessee's ground that it is not a fit case for invoking action under Section 263 even if the ITO had valid jurisdiction. It is because there were seized materials available with the ITO on a search of the assessee's premises on 2-4-1980. The seizure was subsequent to the end of the accounting year. The relevance of these materials in the assessment cannot, therefore, be lightly brushed aside. It may be that the assessee's return is complete and that there is no omission with reference to the seized records as very earnestly urged on the assessee's behalf. But that does not mean that the ITO was justified in accepting the return under Section 143(1) without making any enquiry whatsoever. The learned departmental representative pointed out that the very ITO had forwarded all the prior records to the ITO, Special Investigation Circle-I, even prior to that date. We are, therefore, of the view that there was a case for prima facie enquiry and the apprehension of the Commissioner that the order was prejudicial to the revenue is fully justified in the facts and circumstances of the case once we accept that non-enquiry in a case where enquiry is warranted, would constitute prejudice. This proposition has been accepted by the different High Courts, as pointed out by the learned departmental representative, the last one being that of the Rajasthan High Court in the case of Kanhaiyalal (supra). The order of the Commissioner under Section 263 would have had to be upheld even for this reason.


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