TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 506
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....008, the office of Central Circle-16, New Delhi (which is now Central Circle-20, New Delhi since Assessment Year ["AY"] 2014-15) had jurisdiction over the case of the assessee. For the AY 2015-16, the assessee filed its Income Tax Return ["ITR"] before Central Circle-20, New Delhi declaring a total income of INR 7,920. Thereafter, the assessee's case was picked up for scrutiny. 3. However, on 21.03.2016 a notice under Section 143 (2) of the Act was issued to the assessee by the office of Income Tax Officer ["ITO"] Ward 21(1), New Delhi, pursuant to which, the assessee participated in the assessment proceedings, assuming that a valid transfer order was passed in its case. Thereafter, on 31.12.2017, an assessment order was passed by ITO Ward 21(1), New Delhi, whereby, an addition amounting to INR 1,35,11,59,300 was made under Section 56 (2) (viia) of the Act to the total income of the assessee. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) ["CIT(A)"] raising the ground of lack of jurisdiction and CIT(A) vide order dated 26.12.2018 rejected the appeal. Thereafter, the assessee preferred an appeal before the....
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....1(1), New Delhi. He further submitted that the legislative mandate of Section 127 of the Act clearly elucidates that the transfer of the case of the assessee can only be done through an order passed under Section 127 of the Act. 9. Mr. Ruchir Bhatia and Mr. Sanjay Kumar, learned counsels appearing on behalf of the Revenue, vehemently opposed the submissions advanced. They submitted that the transfer order had duly been passed, which was also reflected on the ITBA portal. They further argued that the ITO Ward 21(1), New Delhi has inherent jurisdiction as per the CBDT circular dated 15 November 2014 and therefore, the assessment orders do not suffer from any infirmity of jurisdictional error. 10. We have heard the learned counsel appearing on behalf of the parties and perused the record. 11. In our order dated 21.03.2024, we have succinctly captured the nature of the controversy involved in the current lis. For the sake of convenience, the order dated 21.03.2024 is reproduced herein:- "1. Mr. Bhatia, learned counsel appearing for the respondent has placed for our perusal a copy of the counter affidavit in W.P. (C) 3777/2022, which has been duly circulated. Let the s....
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....ation shall not exercise powers and perform functions, which have specifically been assigned through separate notification(s), to an Income-tax authority having designation other than those mentioned in column (2) below." 6. Let the matters be called again on 03.04.2024." 12. It is thus evident that the short controversy which is sought to be canvassed before us is whether, in the absence of any decentralization order or transfer order made under Section 127 of the Act, the case of the assessee can be transferred from the board of one AO to another? 13. The Revenue draws sustenance to the impugned action on the strength of the order dated 15.11.2014. At this juncture, it is relevant to point out that vide order dated 15.11.2014 passed under Section 120 of the Act under the pen of ACIT, the jurisdiction of certain income tax authorities was outlined. As per this order, the ITO Ward 21(1), New Delhi shall have jurisdiction over the companies registered under the Companies Act, 2013, having its registered office or principal place of business in NCT, Delhi. Furthermore, as per the postulates of such an order, the ITO Ward 21(1), New Delhi shall have jurisdiction over th....
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....nding entry in item (a) of column (5) whose names begin with the alphabet "Rai to Real" and having income or loss less than or equal to Rs. 30 Lakhs or as prescribed by the competent authority from time to time. (b) all cases of individuals being managing director or director or manager or secretary in the companies referred to in corresponding entry in item (a) of column (6). 14. Furthermore, the aforenoted order also highlights the Central Board of Direct Taxes ["CBDT"] notification dated 22.10.2014 which delineates the jurisdiction of the AO and also puts the embargo that the income tax authorities mentioned in the notification shall not exercise the powers which have been specifically assigned to other authorities vide the provisions of separate notifications. For the sake of convenience, the relevant extracts of the said notification are reproduced herein below:- "S.O. 27S2(E).-In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the Income Tax Act, 1961 (43 of 1961), and in supersession of Government of India, Central Board of Direct Taxes, notification number S.O. 732(E) dated the 31st July, 2001, published in the Gazette of India,....
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....to give the colour of inherent jurisdiction to ITO Ward 21 (1), New Delhi over the case of the assessee, on the purported anvil of a conjoint reading of the order dated 15.11.2014 passed under Section 120 of the Act under the pen of ACIT and the CBDT notification dated 22.10.2014. 18. We notice the underlying legislative mandate of Section 127 of the Act, whereby, it is clear that the transfer of cases under Section 127 of the Act is based on the objective of public interest and administrative convenience. The Constitution Bench of the Supreme Court in the case of Kashiram Aggarwalla v. Union of India 1964 SCC OnLine SC 26., discussed the scope and ambit of Section 127 of the Act while emphasizing upon the administrative character of the order. The relevant paragraphs of the said decision are reproduced herein below:- "6. There is another consideration which is also relevant. Section 124 of the Act deals with the jurisdiction of Income Tax Officers. Section 124 (3) provides that within the limits of the area assigned to him the Income Tax Officer shall have jurisdiction- (a) in respect of any person carrying on a business or profession, if the place at which he....
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....m the case is transferred. The argument which was urged before this Court in challenging the validity of this provision was that it infringed the citizens' fundamental rights conferred by Articles 14 and 19 (1) (g) of the Constitution. In support of this argument, reliance was placed on the fact that Section 64 (1) and (2) conferred a right on the assessee to have his tax matter adjudicated upon by the respective officers mentioned in the said provisions; and since Section 5 (7-A) authorised the transfer of the assessee's case from one Income Tax Officer to another, that involved infringement of his fundamental rights guaranteed by Articles 14 and 19 (1) (g) read with Section 64 (1) and (2). It is necessary to emphasise that Section 5 (7-A) authorised transfer of income tax cases from one officer to another not necessarily within the same place. In other words, the transfer authorised by Section 5 (7-A) would take the case from the jurisdiction of an officer entitled to try it under Section 64 (1) and (2) to another officer who may not have jurisdiction to try the case under the said provision. That, indeed, was the basis on which the validity of Section 5 (7-A) was challen....
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....ch had repulsed a siege laid to the vires of section 5 of the Indian Income-tax Act, 1922. The assessee had one of its branches in Calcutta where the karta of the Hindu undivided family resided and carried on business. The Hindu undivided family, however, was being assessed at Patna but the cases were transferred to Calcutta and subsequently to Circle-VI, New Delhi. Their Lordships observed thus (pages 580 and 587) : "Prima facie it would appear that an assessee is entitled under those provisions to be assessed by the Income-tax Officer of the particular area where he resides or carries on business. Even where a question arises as to the place of assessment such question is under section 64 (3) to be determined by the Commissioner or the Commissioners concerned if the question is between places in more States than one or by the Central Board of Revenue if the latter are not in agreement and the assessee is given an opportunity of representing his views before any such question is determined. This provision also goes to show that the convenience of the assessee is the main consideration in determining the place of assessment. Even so the exigencies of tax collection have go....
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....ued in a manner so as to make it workable. Even section 127 of the Act is the machinery provision. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner wherefor the statute was enacted. 11. In this conspectus and analysis of the law it will be relevant to note that, firstly, there is no fundamental right of an assessee to be assessed at a particular place. Under section 124, the assessment must be carried out at the principal place of business but when powers under section 127 are invoked, territorial nexus becomes irrelevant. Secondly, the determination of the venue of the assessment would be governed by the greatest exigencies for the collection of taxes. Thirdly, the decision to transfer cases cannot be capricious or mala fide. If the venue is changed from year to year, or periodically for no apparent reason, it would not manifest an instance of the exercise of power which is not available, but an example of an abuse of power in the manner in which it is exercised. Fourthly, whilst the convenience of the assessee should be kept in mind, it would always be subservient to the interests of adjudication and co....
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....ting for exercise of power and performance of functions by the Income-tax authorities and while doing so in terms of sub-section (3), the Board can take into consideration and have regard to the four-fold criteria, namely, territorial area ; persons or classes of persons ; incomes or classes of income ; and cases or classes of cases. Thus, the Act does not authoritatively confer exclusive jurisdiction to specific Income-tax authority. It is left to the Board to issue directions for exercise of power and functions taking into consideration territorial area, class/types of persons, income and case, and Board have been given wide power and latitude. The said section by necessary implication postulates and acknowledges that multiple or more than one Assessing Officer could exercise jurisdiction over the particular assessee. Concurrent jurisdictions are therefore not an anathema but an accepted position under the Act. The term "jurisdiction" in section 120 of the Act has been used loosely and not in strict sense to confer jurisdiction exclusively to a specified and single Assessing Officer, to the exclusion of others with concurrent jurisdiction. It would refer to "place of assessment",....
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.... within the area as it is not the case of the petitioner-assessee that the said officer did not have jurisdiction in view of location of the bank account and/or the petitioner's place of work. Section 124 (5) of the Act saves assessment made by an Assessing Officer provided that the assessment does not bring to tax anything other than income accruing, arising or received in that area over which the Assessing Officer exercises jurisdiction. However, notwithstanding section 124 (5), the Act does not postulate multiple assessments by different Assessing Officers, or assessment of part or portion of an income (see Kanji Mal and Sons v. CIT (1982) 138 ITR 391 (Delhi)). Thus, the Assessing Officers having concurrent jurisdiction must ensure that only one of them proceeds and adjudicates. This is the purport and objective behind sub-section (2) of section 124 of the Act." [Emphasis supplied] 22. Therefore, in light of the legislative mandate enshrined under Sections 120, 124 and 127 of the Act and the judicial pronouncements mentioned above, it is clear that Section 124 of the Act deals with the jurisdiction of the assessing officers, whereby, the AO has been vested with t....
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....Only because in the said provision the words "any case" has been mentioned, the same, in our opinion, would not mean that an order of transfer cannot be passed in respect of cases involving more than one assessment year. 14. It would not be correct to contend that only because Explanation appended to Section 127 refers to the word "case" for the purpose of the said section as also Section 120, the source of power for transfer of the case involving block assessment is relatable only to Section 120 of the Act. It is a well-settled principle of interpretation of statute that a provision must be construed in such a manner so as to make it workable. When the Income Tax Act was originally enacted, Chapter XIV-B was not in the statute book. It was brought in the statute book only in the year 1996. The power of transfer in effect provides for a machinery provision. It must be given its full effect. It must be construed in a manner so as to make it workable. Even Section 127 of the Act is a machinery provision. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner wherefore the statute was enacted." [....