2007 (3) TMI 658 - AT - Income Tax

Tribunal Quashes Tax Order Over Jurisdiction; Reorders Interest Recalculation, Moots Surcharge Issue for Resident Status.

Ziaulla Sheriff Versus Assistant Commissioner of Income-tax

Ziaulla Sheriff Versus Assistant Commissioner of Income-tax - [2009] 316 ITR 92 Issues Involved:1. Residential status of the assessee.2. Jurisdiction of the Assistant Commissioner of Income-tax (International Taxation).3. Inclusion of notional rent from property.4. Admission of additional evidence.5. Quantum of interest under section 244A of the Income-tax Act.6. Levy of surcharge on the assessee.Issue-wise Detailed Analysis:1. Residential Status of the Assessee:The assessee challenged the order of the Commissioner of Income-tax (Appeals) which held the status of the assessee as 'resident.' The assessee argued that he was in India for only 180 days during the financial year 2000-01 and thus did not qualify as a resident under section 6(1)(a) of the Income-tax Act, 1961. The assessee contended that the term 'employment outside India' should be interpreted broadly to include business activities. However, the Tribunal concluded that the term 'employment' does not include business activities and upheld the status of the assessee as a 'resident.'2. Jurisdiction of the Assistant Commissioner of Income-tax (International Taxation):The assessee filed the return of income with the Assistant Commissioner of Income-tax (International Taxation), Circle-19(1), Bangalore, claiming non-resident status. The Tribunal found that the jurisdiction of the Assistant Commissioner of Income-tax (International Taxation) is limited to non-residents. Since the assessee was determined to be a resident, the Tribunal held that the Assistant Commissioner of Income-tax (International Taxation) did not have jurisdiction to assess the assessee and quashed the assessment order on the grounds of lack of jurisdiction.3. Inclusion of Notional Rent from Property:The assessee challenged the inclusion of notional rent from a property at Primrose Road, arguing that he was unable to occupy the property due to personal circumstances. The Tribunal referred to section 23(2) of the Act, which allows for the annual value of a property to be taken as nil if the owner cannot occupy it due to employment, business, or profession at another place. The Tribunal rejected the assessee's claim, stating that since the assessee and the property were in the same city (Bangalore), the notional rent should be included in the total income.4. Admission of Additional Evidence:The assessee sought to admit additional evidence in the form of a letter from the Reserve Bank of India, which stated that a resident Indian could continue as a partner in a firm on becoming a non-resident Indian. The Commissioner of Income-tax (Appeals) had refused to admit this evidence. The Tribunal did not specifically rule on the admissibility of this additional evidence but focused on the jurisdictional issue and the residential status of the assessee.5. Quantum of Interest under Section 244A of the Income-tax Act:The assessee challenged the determination of the quantum of interest under section 244A of the Act. The Tribunal directed the Assessing Officer to examine and rework the interest calculation in accordance with the provisions of law, as the Commissioner of Income-tax (Appeals) should have considered this claim.6. Levy of Surcharge on the Assessee:The assessee argued that surcharge was not leviable on a non-resident for the assessment year in question. However, since the Tribunal upheld the status of the assessee as a resident, this ground became infructuous.Conclusion:The Tribunal allowed the appeal, quashing the assessment order due to lack of jurisdiction by the Assistant Commissioner of Income-tax (International Taxation). The Tribunal also addressed the issues of notional rent inclusion and interest calculation under section 244A, directing the Assessing Officer to rework the interest calculation. The levy of surcharge on the assessee was deemed irrelevant due to the resident status determination.