2023 (2) TMI 531 - HC - Income Tax

Invalid Jurisdiction: UK Company not subject to reassessment. Importance of legal basis in tax matters.

The Court found that Opposite Party No.1 lacked jurisdiction to issue notices for reassessment to a non-resident UK company for Assessment Years 2013-14 ... Jurisdiction of Assessing Officer - transfer of cases under Section 127 - exercise of jurisdiction in reassessment under Section 148 - reopening of assessment - place of activity/operation - lower deduction certificate under Section 197Jurisdiction of Assessing Officer - transfer of cases under Section 127 - exercise of jurisdiction in reassessment under Section 148 - Whether the ACIT, International Taxation, Bhubaneswar had jurisdiction to issue notices under Section 148 to Vedanta Resources Ltd. for AYs 2013-14 to 2017-18. - HELD THAT: - The Court found that VRL is a non-resident incorporated in the UK and that its jurisdiction was assigned to the DCIT (International Tax) Circle-1(1)(1), New Delhi. The Department's reliance on an application by VRL for a lower deduction certificate (Form 13) and an order issued in 2020 to infer a place of activity at Jharsuguda was an erroneous factual premise, particularly because the certificate related to a 2020 transaction which was not acted upon and the AYs under reassessment pre-date that transaction. Section 127(2)(a) contemplates transfer of a case to an AO not subordinate to the same Commissioner only after affording the assessee a reasonable opportunity of being heard and after recording reasons; no such transfer order from CIT (IT)-1, New Delhi to the Bhubaneswar AO was produced. Section 120 cannot effect transfer to an AO who is not subordinate to the transferring Commissioner. In the absence of any valid transfer under Section 127, Opposite Party No.1 lacked jurisdiction to issue the impugned Section 148 notices and proceed with reassessment for the specified AYs. [Paras 11, 12, 15, 16, 17]The impugned notices under Section 148 issued by ACIT, Bhubaneswar were issued without jurisdiction and are unsustainable.Final Conclusion: The writ petitions are allowed; the notices dated 31st March, 2021 and all consequential proceedings for AYs 2013-14 to 2017-18 issued by Opposite Party No.1 are quashed for want of jurisdiction. This does not preclude the Department from proceeding in accordance with law. Issues:Challenge to jurisdiction of Opposite Party No.1 to issue notices under Section 148 of the Income Tax Act for various Assessment Years.Analysis:1. The petitioner, a non-resident company incorporated in the UK, challenged the jurisdiction of Opposite Party No.1 to issue notices for reassessment for the AYs 2013-14 to 2017-18. The petitioner argued that its jurisdiction was assigned to the DCIT in New Delhi, not Bhubaneswar. 2. The petitioner contended that the reassessment was based on incorrect premises. The Department relied on Form 15CA filed by Vedanta Limited and an order related to Vedanta Limited's tax matters, which were under different jurisdictions than Bhubaneswar. This raised questions about the jurisdiction of Opposite Party No.1.3. The Department claimed jurisdiction over the petitioner based on an order proposing the transfer of jurisdiction from Delhi to Bhubaneswar. However, the petitioner denied having any business operations in Jharsuguda, Odisha, as claimed by the Department. The petitioner's activities were not based in Jharsuguda, and the reassessment was not related to any transactions in that location.4. The legal basis for Opposite Party No.1's jurisdiction was further challenged by the petitioner, highlighting the lack of a formal order transferring jurisdiction from Delhi to Bhubaneswar. The absence of such an order raised doubts about the validity of the notices issued by Opposite Party No.1.5. The Court analyzed the relevant legal provisions, including Section 127 of the Income Tax Act, which governs the transfer of cases between Assessing Officers. Without a proper order transferring jurisdiction, the Court found that Opposite Party No.1 did not have the legal authority to issue the notices for reassessment.6. Citing a similar case where notices were quashed due to jurisdictional issues, the Court concluded that the impugned notices were issued without jurisdiction. As a result, the Court quashed the notices and subsequent proceedings, allowing the Department to proceed lawfully in the future.7. The judgment highlighted the importance of jurisdictional clarity in tax matters to ensure fairness and adherence to legal procedures. The Court's decision emphasized the need for proper legal basis and jurisdictional authority when initiating reassessment proceedings.