2022 (4) TMI 862 - HC - Income Tax

Court rules notice under Section 21 invalid; stresses Commissioner's authority. Waiver not applicable for jurisdiction.

The High Court held that the notice issued under Section 21 of the E.T. Act by the Assistant Commissioner of Income Tax was without jurisdiction, ... Commissioner of Income Tax jurisdiction under Expenditure Tax Act, 1987 - Revision of orders by the Commissioner - Assistant Commissioner empowered to act in place of the Commissioner under Section 21 of the ET Act - notice under Section 21 of the E.T. Act dated 01/10/2002 was issued and signed by the Assistant Commissioner of Income Tax - HELD THAT:- Record was examined by the Assistant Commissioner and not by the Commissioner of Income Tax. Section 21 of the E.T. Act mandates the examination of records by the Commissioner of Income Tax and for issuance of notice under Section 21 of the E.T. Act Commissioner of Income Tax himself is required to apply his mind. The Commissioner of Income Tax cannot pass an order in revision order on the basis of a notice issued by his subordinate officer. The Assistant Commissioner of Income Tax in his notice dated 01/10/2002 nowhere stated that the said notice was issued on the instructions or direction of the Commissioner of Income Tax. Insofar as principle of waiver is concerned, it is settled position of law that the same cannot be invoked so as to confer jurisdiction. In this case, the Assistant Commissioner Income Tax had issued notice under Section 21 of the E.T. Act who admittedly had no jurisdiction. In terms of Section 21 of the E.T. Act, the Commissioner of Income Tax is the competent authority vested with that power. Therefore, the notice under Section 21 of the E.T. Act has necessarily to be issued by the Commissioner of Income Tax and not by the Assistant Commissioner. As a consequence, the notice being without jurisdiction, all the proceedings subsequent thereto are without authority of law. In Sahni Silk Mills (P) Ltd.. [1994 (7) TMI 312 - SUPREME COURT] the Supreme Court was considering the legality of resolution empowering the Director General to authorize any other Officer to exercise his powers. The Court found that in the absence of enabling provision, such delegation would not be permissible and that the legislature can permit any statutory authority to delegate its power to any other authority after such a policy is indicated in the statute itself and when parliament has specifically appointed an authority to discharge a function, it cannot be readily presumed that it had intended that its delegate should be free to empower another person to act in his place. In the instant case, nothing has been shown to us whereby the Assistant Commissioner was empowered to act in place of the Commissioner under Section 21 of the ET Act.. As we can see from the aforesaid decisions, an Officer superior in rank to the Assessing Officer was found to have no jurisdiction to issue the notice in question. Applying these principles at the case at hand, we have no hesitation in concluding that the Assistant Commissioner could not have issued the notice in the instant case. Issues:1. Jurisdictional validity of notice under Section 21 of the E.T. Act2. Authority of the Commissioner of Income Tax to pass orders based on notices issued by subordinate officers3. Application of the principle of waiver in challenging jurisdiction4. Legal implications of delegation of power to subordinate officersAnalysis:Issue 1: Jurisdictional validity of notice under Section 21 of the E.T. ActThe case involved an appeal challenging the validity of a notice issued under Section 21 of the E.T. Act by the Assistant Commissioner of Income Tax, instead of the Commissioner. The High Court observed that the notice was without jurisdiction as the law mandates examination of records by the Commissioner himself. The Court emphasized that the Commissioner is the competent authority vested with the power under Section 21, and the notice being issued by the Assistant Commissioner rendered all subsequent proceedings unauthorized.Issue 2: Authority of the Commissioner of Income Tax to pass orders based on notices issued by subordinate officersThe Court analyzed the legal framework of Section 21 of the E.T. Act, which empowers the Commissioner to revise orders passed by subordinate officers. It was held that the Commissioner cannot base revision orders on notices issued by subordinate officers. The Court highlighted the necessity for the Commissioner to personally apply his mind and issue notices under Section 21, emphasizing that orders passed by the Commissioner on such notices are illegal.Issue 3: Application of the principle of waiver in challenging jurisdictionThe principle of waiver was discussed in the context of the respondent's participation in proceedings following the notice issued by the Assistant Commissioner. The Court clarified that waiver cannot confer jurisdiction, especially when there is inherent lack of jurisdiction. It was concluded that mere participation in proceedings before an officer lacking jurisdiction does not validate the proceedings or preclude challenging jurisdiction subsequently.Issue 4: Legal implications of delegation of power to subordinate officersThe judgment referred to legal precedents, including the case of Sahni Silk Mills (P) Ltd., to discuss the delegation of powers within statutory frameworks. It was emphasized that delegation must be expressly permitted by law, and in the absence of such authorization, subdelegation of powers is impermissible. The Court found no evidence of authorization for the Assistant Commissioner to act in place of the Commissioner under Section 21 of the E.T. Act, reinforcing the requirement for strict adherence to statutory provisions.In conclusion, the High Court answered the substantial questions of law in favor of the respondent/assessee, highlighting the importance of jurisdictional validity, authority of the Commissioner, limitations on delegation of powers, and the inapplicability of waiver in challenging jurisdiction. The appeal was disposed of with no order as to costs.