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Shelley Products Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1984)10ITD136(Delhi)
AppellantShelley Products
Respondentincome-tax Officer
Excerpt:
.....it speaks of his jurisdiction in terms of pluralities, viz., areas, persons, classes of persons, income, classes of incomes, etc. perusal of this section makes it patently clear that unlike section 127, it does not provide for the transfer of an individual pending proceeding or case from one iac to another iac. considering the foregoing discussion it is held that iac (assessment), indore, was fully competent to dispose of the reference under section 144b. the challenge to the validity of assessment, therefore, fails. no relief is due to the appellate on this account.7. before us the case of the assessee is that the learned first appellate authority in his reasoning contained in paragraph 1.6 of the impugned order has brushed aside the legal objections in a summary manner since what he.....
Judgment:
1 to 4. [These paras are not reproduced here as they involve minor issues.] 5. As regards ground Nos. 2 and 3, the narration in the assessment order dated 23-8-1980 made by the ITO, Indore, in his file GIR. No.S-18-010-FX-0307, reads as under : Earlier the case was under the jurisdiction of the ITO, B-Ward, Bhopal, who had examined the case. As the variation between the returned income and the assessed income was more than Rs. 1 lakh, he forwarded the draft order dated 25-2-1980 to the assessee on 26-2-1980, in view of the provisions of Section 144B of the Income-tax Act. The assessee filed objection to the said proposed additions and, therefore, the ITO, B-Ward, Bhopal, referred the case to the IAC, Bhopal Range, Bhopal. Subsequently, the jurisdiction over the case was transferred by the Commissioner, MP-I, Bhopal, to the ITO (Sic.) I, Indore vide its notification No. 55/IT/MP-I/80 dated 9-7-1980. Consequently, the IAC, Bhopal Range, Bhopal, also forwarded the draft order along with the objection to the IAC (Assessment), Indore, for issuing necessary directions under Section 144B of the Income-tax Act. The IAC (Assessment), Indore, has issued the directions dated 21-8-1980. This order is being passed keeping in view the directions issued by the IAC (Assessment), Indore.

6. On the above facts the grievance of the assessee stood brushed aside by the learned Commissioner (Appeals) and the narration in the impugned order (vis-a-vis ground Nos. 2 and 3 taken by the assessee before us), reads as under : The objection of the appellant is that though the assessment proceedings have been validly transferred under Section 127 from ITO, B-Ward, Bhopal, to the ITO (sic) I, Indore, there is no valid transfer of the pending reference under Section 144B(1) from IAC, Range-X, Bhopal, to the IAC (Assessment), Indore. The learned counsel argued that the IAC (Assessment), Indore, does not assume jurisdiction over the reference as a consequence of the order passed under Section 127. Unless the Commissioner passes a specific order under Section 123(1) transferring the aforesaid reference from IAC, Bhopal, to the IAC (Assessment), Indore, the former continues to have jurisdiction over the reference. In other words, the disposal of the reference by IAC (Assessment), Indore, was without jurisdiction. This being so, the benefit of extended limitation was not available to the department. In support of this view, the learned counsel cited the judgement of the Calcutta High Court in the case of ITO v. Ashoke Glass Works [1980] 125 ITR 491.

I am afraid, I do not find any substance in this contention. The scheme of the Act is quite simple and logical. In this case, the Commissioner has fixed the jurisdiction of the two IACs under Section 123 in respect of areas, persons, classes of persons, etc., assessed by certain specified ITOs. He has also fixed the jurisdiction of the ITOs under Section 124. Consequently, where a case is transferred from one ITO under one IAC to another ITO under another IAC, the change in the jurisdiction of the IAC is automatic by reason of the existing orders under Section 123. No separate order under Section 123(1) is necessary in respect of the transfer of a reference under Section 144B from one IAC to another IAC. The learned counsel has merely relied on an obiter dicta made by the learned judges of the Calcutta High Court in the aforesaid case. The learned judges were not required to and in fact did not decide this issue at all. On the contrary, they have made a reference to another case of the same High Court which supports the case of the department, viz., Madhusudan Nandy v. Union of India in CR No. 2489(W) of 1969 (unreported case). Though this case has been quoted with disapproval, the law as laid down in that case remains unaltered for the reason that the issues involved in the case before the learned judges were altogether different.

In the second place, perusal of the provisions of Section 123 would reveal that in such a case, the transfer of a pending reference under Section 144B is not only necessary but also impermissible.

Section 123 does not speak of the jurisdiction of an IAC in terms of an individual case. On the contrary, it speaks of his jurisdiction in terms of pluralities, viz., areas, persons, classes of persons, income, classes of incomes, etc. Perusal of this section makes it patently clear that unlike Section 127, it does not provide for the transfer of an individual pending proceeding or case from one IAC to another IAC. Considering the foregoing discussion it is held that IAC (Assessment), Indore, was fully competent to dispose of the reference under Section 144B. The challenge to the validity of assessment, therefore, fails. No relief is due to the appellate on this account.

7. Before us the case of the assessee is that the learned first appellate authority in his reasoning contained in paragraph 1.6 of the impugned order has brushed aside the legal objections in a summary manner since what he has observed is wholly misconceived and is against facts and law. The learned authorised representative of the assessee strongly relied on the provisions of law as contained in Sections 123, 127 and 144B of the Income-tax Act, 1961 ('the Act') and contended that there was inherent lack of jurisdiction on the part of the IAC, Indore, since he was not competent in law to have assumed jurisdiction under Section 144B and, accordingly, he could not have issued the directions on the basis of which the assessment has been framed. The assessee in a nut shell contends that since the assessment order is based on the directions of the IAC, Indore and since the IAC, Indore, had not on facts and in law, jurisdiction to give such directions, there being total and inherent lack of jurisdiction, the assessment is a nullity.

Ratio of the decisions in Narinder Singh Dhingra v. CIT [1973] 90 ITR 110 (Delhi), P.V. Doshi v. CIT [1978] 113 ITR 22 (Guj.) and that of the Tribunal, Special Bench, Hyderabad in East Coast Marine Products (P.) Ltd. v. ITO [1983] 4 ITD 73 have been pressed in service along with Mulla's Code of Civil Procedure, Vol. 1, page 157 and concludingly strong reliance has been placed on the decision of the Hon'ble Calcutta High Court in ITO v. Ashoke Glass Works [1980] 125 ITR 491, 499. The revenue's stand is that the learned departmental representative supports the orders of the lower authorities and contended that jurisdictions of the ITO and the IAC are interlinked and are general in nature and not specific. Hence, once there was a change of jurisdiction from one ITO to another ITO, automatically the IAC assume jurisdiction under Section 144B. The learned departmental representative also contended that no separate order is required since this is not plausible and secondly, that if at all there is any infirmity attached to the diiections of the IAC, Indore, given under Section 144B, it amounts to an irregularity and not a nullity. Section 127 reads as under : Power to transfer cases.-(1) The Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so and after recording his reasons for doing so, transfer any case from one or more of the following officers subordinate to him, namely :- (b) any Income-tax Officer or Income-tax' Officers having concurrent jurisdiction with the Inspecting Assistant Commissioner.

to any other Income-tax Officer or Income-tax Officers (whether with or without concurrent, jurisdiction with the Inspecting Assistant Commissioner) also subordinate to him and the Board may similarly transfer any case from- (ii) any Income-tax Officer or Income-tax Officers having concurrent jurisdiction with the Inspecting Assistant Commissioner.

to any other Income-tax Officer or Income-tax Officers (whether with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) : Provided that nothing in this Sub-section shall be deemed to require any such opportunity to be given where the transfer is from any Income-tax Officer or Income-tax Officers (whether with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) to any other Income-tax Officer or Income-tax Officers (whether with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) and the offices of all such officers are situated in the same city, locality or place : (a) where any case has been transferred from any Income-tax Officer or Income-tax Officers to two or more Income-tax Officers, the Income-tax Officers to whom the case is so transferred shall have concurrent jurisdiction over such case and shall perform their functions in accordance with such general or special orders in writing as the Board or the Commissioner or the Inspecting Assistant Commissioner authorised by the Commissioner in this behalf, may make for the purpose of facilitating the performance of such functions ; (b) where any case has been transferred from any Income-tax Officer or Income-tax Officers (whether with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) to two or more Income-tax Officers with concurrent jurisdiction with the Inspecting Assistant Commissioner, the officers (including the Inspecting Assistant Commissioner) to whom the case is so transferred shall have concurrent jurisdiction over such case and shall perform their functions in accordance with such general or special orders in writing as the Board or the Commissioner may make for the purpose of facilitating the performance of such functions and the Income-tax Officers shall perform their functions also in accordance with such orders or directions as the Inspecting Assistant Commissioner may make under Sub-section (2) of Section 124 or, as the case may be, under Sub-section (2) of Section 125A. (2) The transfer of a case under Sub-section (1) may be made at any stage of the proceedings and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer or Income-tax Officers from whom the case is transferred.

Explanation : In this section and in Sections 121, 123, 124 and 125, the 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 the 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 the date of such order or direction in respect of any year.

8. A reading of the above section makes it clear that the Commissioner can, after giving a reasonable opportunity of being heard to the assessee and after recording his reasons for doing so, transfer any case from one or more of the ITOs subordinate to him to any other ITO or ITOs whether having concurrent jurisdiction with the IAC (Assessment) or not. The section postulate the transfer of a case and 'the case' has been denned in Explanation attached to Sub-section (2) of Section 127.

9. Section 124 of the Act deals with the jurisdiction of the ITOs and it reads as under : Jurisdiction of Income-tax Officer.-(1) Income-tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct.

(2) Where any directions issued under Sub-section (1) have assigned to two or more Income-tax Officers, the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases, they shall have concurrent jurisdiction and shall perform their functions in relation to the said area, or persons or classes of persons, or incomes or classes of income, or cases or classes of cases, in accordance with such general or special orders in writing as the Commissioner or the Inspecting Assistant Commissioner authorised by the Commissioner in this behalf, may make for the purpose of facilitating the performance of such functions.

(3) Within the limits of the area assigned to him, the Income-tax Officer shall have jurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (4) Where a question arises under this section as to whether an Income-tax Officer has jurisdiction to assess any person, the question shall be determined by the Commissioner ; or where the question is one relating to areas within the jurisdiction of different Commissioners, by the Commissioners concerned or, if they are not in agreement, by the Board.

(5) No person shall be entitled to call in question the jurisdiction of an Income-tax Officer- (a) after the expiry of one month from the date on which he has made a return under Sub-section (1) of Section 139 or after the completion of the assessment, whichever is earlier ; (b) where he has made no such return, after the expiry of the time allowed by the notice under Sub-section (2) of Section 139 or under Section 148 for the making of the return.

(6) Subject to the provisions of Sub-section (5), where an assessee calls in question the jurisdiction of an Income-tax Officer then the Income-lax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under Sub-section (4) before assessment is made.

(7) Notwithstanding anything contained in this section or in Section 130A, every Income-tax Officer shall have all the powers conferred by or under this Act on an Income-tax Officer in respect of any income accruing or arising or received within the area for which he is appointed.

10. The above section speaks of the jurisdiction of the ITOs in performing their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct.

11. Section 123 deals with jurisdiction of the IACs and the said provisions read as under : Jurisdiction of Inspecting Assistant Commissioners-(1) Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct.

(2) Where any directions issued under Sub-section (1) have assigned to two or more Inspecting Assistant Commissioners, the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases, they shall have concurrent jurisdiction and shall perform such functions in relation to the said area or persons or classes of persons or incomes or classes of income or cases or classes of cases as the Commissioner may, by general or special order in writing, specify, for the distribution and allocation of the work to be performed.

12. A bare reading of the above makes it clear that an IAC has to perform his functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct.

13. A comparison of Sections 123 and 124 makes it clear that jurisdiction of an ITO and an IAC is what is vested in them by the Commissioner and that both the officials have to perform their functions as the Commissioner may direct, but these are not automatic or interlinked.

14. Now on the facts of the assessee's case, the assessment order itself speaks of the fact that earlier the jurisdiction over the assessee was held by the ITO, Bhopal, who forwarded the draft order dated 25-2-1980 which was received by the assessee on 26-2-1980. The IAC, Bhopal, was also seized of proceedings under Section 144B.Subsequently, jurisdiction was transferred to the ITO, Indore and the IAC, Bhopal, transferred proceedings pending before him to IAC, Indore, despite the fact that there was no change in his jurisdiction.

15. The Commissioner, Bhopal, vide his letter dated 15-7-1980 in his case file No. J-25/1/79-80, proposed to the assessee the transfer of the assessee's income-tax case from the ITO, Bhopal, to the ITO, Indore and it was notified to the assessee that this was a notice within the meaning of Section, 127(1). A copy of this letter is placed on our file as page 3 of the assessee's paper book. Since there is an order of transfer under Section 127(1) the jurisdiction over the assessee stood validly transferred from the ITO, Bhopal, to ITO, Indore, but that does not suo moto gives the jurisdiction to the IAC, Indore.

This is what the learned authors Chaturvedi and Pithisaria have to say in their commentary on Income-tax Law, Third edition, volume 3 on the issue involved in these grounds of the assessee : Transfer order under Section 127(1), ordinarily, affects ITO's jurisdiction.- Strictly speaking, Section 127(1) affects the jurisdiction of the Inocme-tax officer and an order thereunder by itself cannot affect the jurisdiction of the Inspecting Assistant Commissioner in respect of proceedings pending before him. This is so because the jurisdiction of an Inspecting Assistant Commissioner can only be affected by an order under Section 123(1) [ITO v. Ashoke Glass Works [1980] 125 ITR 491 (Cal.)]. It may be remembered that the above principle is restricted to proceedings already pending before him and not in respect of any future proceedings. Such future proceedings have to be referred by the transferee. Income-tax Officer to his own Inspecting Assistant Commissioner.

Commissioner's order under Section 127(1) and that under Section 124(1)- fields of operation. If the case of a particular assessee is transferred under Section 127(1) by the Commissioner from one Income-tax Officer to another, the transferee officer gets exclusive jurisdiction to assess him. This is so because an order of transfer under Section 127(1) must necessarily be made in connection with a 'case' and for that matter with a particular assessee. But order under Section 124(1) is ordinarily not made with reference to a particular 'case' or assessee. The conferment and/or realignment of jurisdiction under Section 124(1) is made, inter alia, with reference to certain cases or class of cases.

Thus, where an Income-tax Officer 'A' continues to possess plenary jurisdiction over a particular assessee, mere conferment of concurrent, jurisdiction with a pecuniary limit on another Income-tax Officer 'B' cannot take away the jurisdiction of 'A' in respect of that assessee even though such assessee falls within the stated pecuniary limit [Kistoor Mall v. C.P. Singh, ITO [1983] 140 ITR 95 111-12 (Raj.)]. In that case, the assessee was being assessed at Bombay up to assessment year 1950-51. He closed his business at Bombay and shifted his residence to Jodhpur sometime in the year 1949. For subsequent years, he filed his returns at Jodhpur and was assessed by the Income-tax Officer, Jodhpur. The Jodhpur Officer issued reassessment notices to the assessee in respect of assessment years 1946-47 to 1949-50. It was held that in the facts of the case the notices were not without jurisdiction even though no transfer order under Section 5(7A) of the 1922 Act [corresponding to Section 127(1) of the 1961 Act] was made by the Board.(p. 2546) 16. In view of the above facts, the reasoning and the authoritative pronouncement of the Hon'ble Calcutta High Court in Ashoke Glass Works' case (supra), it has to be held that on the facts and in the circumstances of the case, with which we are seized of, the IAC, Indore, had no jurisdiction over the assessee and, accordingly, he could not have given directions under Section 144B and these directions could not have been made the basis for assessment in law inasmuch as there can be no confirmation of power through misconstruction of statute and jurisdiction cannot be conferred by parties or else by the consent of the assessee. There being no doctrine of implied powers or global jurisdiction, there was on the facts and in the circumstances of the case, a want of jurisdiction vis-a-vis the IAC, Indore and since a want of jurisdiction results in an order and proceedings which are void ab initio, the assessment order along with Section 144B proceedings are held to be so and amounts to a nullity. We hold and direct accordingly, with the result, that the orders of the lower authorities stand cancelled. The grounds by the assessee succeed and stand allowed.

17 to 23. [These paras are not reproduced here as they involve minor issues.)


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