2021 (5) TMI 1079 - AT - Income Tax

Company's business location determines tax officer jurisdiction under Section 120, not PAN database address allocation

ACIT, Circle-27 (1), New Delhi. Versus M/s. UV Realtors Pvt. Ltd.

ITAT Delhi held that territorial jurisdiction of AO is determined by CBDT under Section 120 based on business location or residence, not PAN allotment ... Validity of the jurisdiction of the AO - New Delhi v/s Kolkata - objection to the jurisdiction of ITO, Ward-10(2), Kolkata - PAN data base shows that the PAN jurisdiction was with Ward10(2), Kolkata - as submitted that the assessee was registered at New Delhi and has a registered office at New Delhi and it neither had any business nor any business connection in Kolkata, therefore, jurisdiction under the Income Tax Act lies with the Assessing Officer at New Delhi not at Kolkata - AO intimated that jurisdiction on assessee would lie to him on account of PAN data base and the PAN of the assessee was allotted from Kolkata - AO rejected the objection raised by the assessee at his own level without even invoking the provision of Section 124(4), wherein reference to PCIT has to be made mandatorily - assessee has challenged the jurisdiction and transfer of jurisdiction from Kolkata to Delhi by way of an alternative plea HELD THAT:- All the returns of income have been filed electronically up till 2014-15 and the designation of the Assessing Officer has always been shown as Range-18, New Delhi. The question of jurisdiction which was raised by the assessee before the ITO, Ward-10, Kolkata at the very first instance should have been referred to the ld. PCIT to decide the question of jurisdiction; and secondly even if the matter was referred to him by ld. DCIT, Circle-10 on 14.12.2014 then Ld. PCIT was bound to decide the issue of jurisdiction first, before directing the AO to pass the assessment. The Assessing Officer cannot on its own asked the assessee to move an application u/s.127 for migration of PAN, because the power of transferring the case u/s.127, lies with higher authorities. Power u/s. 127 has been given to PDG/DG/PCC/CC/PCIT or CIT to transfer the case of an assessee from one jurisdiction to other under various circumstances The entire case of the revenue hinges upon the interpretation that allotment of PAN is the criteria and foundation of deciding the jurisdiction of the AO - Nowhere in the statute it has been provided that PAN address will decide the territorial jurisdiction of the AO. Section 139A merely provides who are the persons required to obtain PAN having regard to the nature of transaction of business and other conditions laid down that, AO may allot a PAN and other procedure and mechanism of allotment of the PAN. The territorial jurisdiction is decided by the CBDT in terms of Section 120 only. The jurisdiction of the AO over an assessee is decided by the CBDT on the basis of from where the assessee is either carrying the business in that area assigned to the Assessing Officer u/s.120 or the assessee is residing within that area. Admittedly, the assessee company does not only have registered office in New Delhi but also has been carrying out all its activities from which it has been earning income from New Delhi and has been filing the return of income from New Delhi. Even in the software of the Income Tax Department where return of income is uploaded online, the designation of the Assessing Officer as per the address has always been mentioned as Range-18, New Delhi. Had there been the allotment of jurisdiction by virtue of PAN, then the software of the Department would have assigned the jurisdiction as when assessee uploads the return of income electronically online. Be that as it may, nowhere in the statute it has been provided that allotment of a PAN would be the determinative factor for jurisdiction of the AO. Thus, we hold that ITO, Ward-10(2)/DCIT, Circle-10(2), Kolkata did not have any jurisdiction over the assessee company and any order passed without jurisdiction is null and void. Appeal of assessee is allowed. Issues Involved:1. Validity of the jurisdiction of the Assessing Officer.2. Deletion of additions by CIT(A) without providing an opportunity to the AO.3. Cross Objection by the assessee challenging the validity of the assessment.Detailed Analysis:1. Validity of the jurisdiction of the Assessing Officer:The primary issue raised by the assessee in the Cross Objection was the jurisdiction of the Assessing Officer (AO). The assessee argued that the AO in Kolkata did not have valid jurisdiction over the case as the company was registered and had its principal place of business in New Delhi. The assessee continuously filed its returns in New Delhi and had no business connection in Kolkata. The AO in Kolkata issued notices and completed the assessment ex-parte under Section 144 without referring the jurisdictional question to higher authorities as mandated by Section 124(4).The CIT(A) initially dismissed the assessee's jurisdictional challenge, stating that the assessee had not rebutted the AO's findings and had not applied for a transfer of jurisdiction under Section 127. However, upon further review, it was found that the AO in Kolkata did not follow the proper procedure under Section 124(4) when the jurisdiction was questioned by the assessee. The AO should have referred the matter to the Principal Commissioner of Income Tax (PCIT) to determine the jurisdiction. The failure to do so rendered the assessment order null and void.The Tribunal noted that the assessee had consistently filed returns in New Delhi, and the designation of the AO in the Income Tax Department's software always showed Range-18, New Delhi. The Tribunal concluded that the jurisdiction of the AO cannot be determined solely based on the PAN address and must follow the criteria set by the Central Board of Direct Taxes (CBDT) under Section 120. The Tribunal held that the AO in Kolkata did not have jurisdiction over the assessee, and the assessment order passed was invalid.2. Deletion of additions by CIT(A) without providing an opportunity to the AO:The Revenue appealed against the CIT(A)'s order, which deleted several additions made by the AO, including:- Addition of Rs. 15,02,655/- on account of Rates and Taxes (House Tax).- Addition of Rs. 2,88,61,495/- on account of credits (total unsecured loans).- Addition of Rs. 6,61,873/- on account of depreciation.The Revenue contended that the CIT(A) admitted additional evidence filed by the assessee without providing an opportunity to the AO, thereby contravening the principles of natural justice. However, since the Tribunal quashed the assessment order on jurisdictional grounds, the merits of these additions were not adjudicated.3. Cross Objection by the assessee challenging the validity of the assessment:The assessee's Cross Objection challenged the validity of the assessment on the grounds that the AO in Kolkata did not have valid jurisdiction. The Tribunal upheld the assessee's objection, stating that the AO in Kolkata lacked jurisdiction, and any order passed without jurisdiction is null and void. Consequently, the Tribunal allowed the Cross Objection and quashed the assessment order.Conclusion:The Tribunal concluded that the AO in Kolkata did not have jurisdiction over the assessee, and the assessment order passed was invalid. The Tribunal allowed the assessee's Cross Objection and quashed the assessment order. Consequently, the grounds raised in the Revenue's appeal on merits were dismissed. The Revenue's appeal was dismissed, and the Cross Objection of the assessee was allowed.