1972 (9) TMI 15 - SC - Income Tax

Residence status finding by tax authority cannot create jurisdiction; erroneous deduction leads to set-aside and remittal s.30(1A) excluded without deduction/payment

Dominant issue: Whether a quasi-judicial authority can confer jurisdiction on itself by erroneously deciding a jurisdictional fact (residence status of a ... Liability to deduct the income-tax payable at firm and pay the same to the Government - non-resident one - whether the firm in question was resident or non-resident - HELD THAT:- No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned single judge has done in this case, that the Income-tax Officer had clutched at the jurisdiction by deciding a jurisdictional fact erroneously, then the assessee was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasi-judicial authority like the Income-tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion, the Appellate Bench is wholly wrong in opining that the Income-tax Officer can ' decide either way '. Assuming that section 30(1A) applied to facts of the case, then before having recourse to that provision a person seeking to file an appeal under that provision must comply with two requirements, namely, that he must have first deducted the tax due from the non-resident assessee and must have paid the same to the Government. This provision cannot apply to the case of a person who contends that the firm to whom he made the payment is not a non-resident firm. If he is right in his contention, then he could not have deducted the tax due from the firm to whom he made the payment. For the reasons mentioned above, we allow this appeal, set aside the order of the Appellate Bench of the Allahabad High Court and remand the case back to that court for deciding the appeal afresh. It is open to the assessee to urge all the points that he has taken in the case. The costs of this appeal will be the costs in the cause. Issues: Jurisdiction of the Income-tax Officer to determine residency status of a firm; Competency of appeal under section 30(1A) of the Income-tax Act.In this case, the appellant was directed by the Income-tax Officer to pay tax on a sum remitted as selling commission to a firm in Indonesia. The appellant contended that the firm was not a non-resident firm, but the Income-tax Officer disagreed. The Appellate Assistant Commissioner rejected the appeal on the grounds of non-compliance with conditions under section 30(1A). The Tribunal upheld this decision. The High Court, in a writ petition, initially ruled in favor of the appellant, stating the firm was not non-resident. However, the Appellate Bench reversed this decision, asserting that the Income-tax Officer had the jurisdiction to determine the residency status. The Supreme Court disagreed, emphasizing that a quasi-judicial authority cannot assume jurisdiction by deciding a jurisdictional fact erroneously. The Court held that the Appellate Bench's conclusion was incorrect, and the High Court had the authority to review such decisions through a writ of certiorari.Regarding the competency of appeal under section 30(1A), the revenue argued that the appellant could have appealed if the tax amount had been deposited. However, the Court noted that this provision does not apply when the appellant disputes the non-resident status of the firm. If the appellant's contention is correct, they could not have deducted tax from a non-resident firm. Consequently, the Court allowed the appeal, set aside the Appellate Bench's order, and remanded the case for a fresh decision, enabling the appellant to present all relevant points. The costs of the appeal were to be borne by the appellant.