Income-tax assessment after case transfer request: late s.124 territorial jurisdiction objection rejected; assessment upheld, appeal dismissed

The dominant issue was whether the assessment was vitiated for lack of territorial jurisdiction under s. 124 of the Income-tax Act after the assessee sought transfer of the case. The HC held that s. 124(3)(b) bars an assessee from calling an AO's jurisdiction in question after one month from service of notice under s. 142(1) or after completion of assessment, whichever is earlier; consequently, s. 124(4) and the obligation to refer the dispute to the competent authority under s. 124(2) arise only if a timely objection is made. As no jurisdictional objection was raised within the statutory period, and there was no effective transfer of records despite temporary movement, the assessment by the AO was upheld and the appeal dismissed.

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Issues:
Jurisdiction of AO under s. 124 of the IT Act, 1961.

Analysis:
The appellant-assessee challenged an order passed by the Income-tax Appellate Tribunal regarding the jurisdiction of the Assessing Officer (AO) under s. 124 of the IT Act, 1961 for the assessment year 1992-93. The appellant raised substantial questions of law related to the interpretation of s. 124, the object of the IT Act, and the administrative decision-making process prescribed under s. 124. The AO had conducted a survey at the appellant's business premises and issued a notice under s. 142(1) for filing the return of income. The AO completed the assessment, which was set aside by the CIT(A) for fresh assessment. The Tribunal upheld the AO's jurisdiction based on s. 124(3) of the Act, stating that the appellant did not question the jurisdiction during the assessment proceedings.

The appellant argued that the jurisdiction issue should have been determined by the Director General or the Chief CIT or the CIT under s. 124(4) as the appellant had questioned the AO's jurisdiction. However, the respondent contended that the case fell under s. 124(3)(b) and the appellant was not entitled to question the jurisdiction as the return was filed within the due date. The High Court analyzed s. 124 of the Act, emphasizing that an assessee cannot challenge the AO's jurisdiction after the expiry of the specified time from the notice under s. 142(1). The Court noted that no objection to jurisdiction was raised until a later stage when the appellant requested a transfer of the case to Delhi.

The Court further observed that even if the records were temporarily transferred to New Delhi, the substantial business activities for the relevant year were conducted in Sirsa. Therefore, the argument that the assessment order by the AO in Sirsa was invalid due to the temporary transfer of records was rejected. The Court concluded that the appeal failed, answering the questions of law against the appellant and in favor of the Revenue. No arguments were addressed on certain questions raised, and thus no opinion was expressed on those issues.

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