Gauhati High Court
Commissioner Of Income Tax vs Ganga Bani Mercantile And Finance (P) ... on 21 August, 2007
Author: D. Biswas
Bench: D. Biswas, A. Hazarika
JUDGMENT D. Biswas, J.
1. Heard Mr. U. Bhuyan, learned standing counsel for the IT Department, appearing for the appellant. Also heard Dr. A.K. Saraf, learned senior counsel appearing for the respondent assessee.
2. This appeal has been filed under Section 260A of the IT Act, 1961, hereinafter referred to as the "Act", against the order dt. 12th Sept., 2005, passed by the Income-tax Appellate Tribunal (Tribunal), Guwahati Bench, in ITA No. ll/Gau/2003 pertaining to assessment made for the block period 1988-89 to 1998-99.
By the aforesaid impugned order, the Tribunal has accepted the challenge made on behalf of the assessee and has held that as the assessee company was registered with the Registrar of Companies at Calcutta, the jurisdiction in respect of the assessee company could lie only with the IT authorities at Calcutta. Since no order under Section 127 of the Act has been passed by the IT authorities at Calcutta transferring the case to Guwahati it is held that neither the AO nor the CIT(A-2), Guwahati, would have jurisdiction in respect of the assessee. Accordingly, it is held that the notice under Section 158BD of the Act issued by the AO at Guwahati completely lacks jurisdiction.
On the basis of such finding regarding the lack of jurisdiction, the Tribunal by the impugned order has quashed the assessment order passed as void ab initio for want of jurisdiction and on the same reasoning, the first appellate order of the CIT(A-2) was also set aside. The Tribunal did not go into the other issues raised, as the issue on the jurisdiction, was answered in favour of the assessee.
3. Before examining the legality of the impugned decision of the Tribunal, the salient facts may be noticed. There was a search in the Gogoi group of companies on 20th Nov., 1997, under Section 132 of the IT Act, 1961, resulting in seizure of substantial number of pass books, cheque books and other documents relating to a large number of bank accounts, investments in different names, organizations and financial institutions. On the basis of the statement on oath of Shri J.K. Gogoi that some of the investments were made by the assessee in support of which he filed confirmatory letter (copy of audited account dt. 24th Aug., 1998), the AO at Guwahati issued a notice under Section 158BD dt. 22nd Nov., 1999, and served the same on the assessee company requesting them to file return for the block period. The assessee company filed the return of income for the block period on 6th Dec, 1999, showing nil as undisclosed income. Audited balance sheet, P&L a/c for the year ended 31st March, 1998, were also enclosed therewith. Accordingly, notices under Sections 143(2) and 142(1) were issued and served on the assessee. A detailed questionnaire dt. 30th May, 2000, was also served, in response to which Shri. P. Kr. Agarwal and Shri Rupak Kr. Gogoi appeared but neither any explanation nor any details were furnished. Accordingly, the AO passed the impugned order, after hearing Shri Pawan Kr. Agarwal, accountant, Authorised Representative considering the written submission filed by him with reference to the questionnaire dt. 30th May, 2000, computing total undisclosed income for the block period at Rs. 1,40,17,200.
On receipt of the notice under Section 158BD of the Act, the assessee addressed an explanation regarding source of funds in their communication dt. 8th June, 2000, addressed to the Addl. GIT Assessment, Special Range-I, Guwahati. In the said response dt. 8th June, 2000, the assessee had contended as under:
8th June, 2000 To The Addl. CIT, Assessment, Special Range-1, Guwahati. Sub : Explanation regarding Sources of Funds. Ref. : (i) Your Notice G-9/JCIT(A)/SR-I/GHY/360 & 361 dt. 30th May, 2000.
(ii) GIR No.G-9/JCIT/SR-II.
Sir, With reference to above it is respectfully submitted
1. That sir, in response to your notice under Section 158BD, we had submitted return in Form No. 2B under protest on 6th Dec, 1999. The notice and proceedings under Section 158BD is invalid and without jurisdiction on the facts of the case.
2. That sir, as will be clear from the audited balance sheet furnished, the only source of funds are shareholders funds. The detailed list of the same is enclosed herewith.
3. That sir, the shareholders funds are also reflected in the balance sheet, audited prior to the date of search, which means these transactions were duly recorded prior to date of search. However no return under Section 139 was filed because income did not exceed maximum amount which is not chargeable to tax. On these facts it can never be said that these have not been or would not have been disclosed for the purpose of IT Act. As such the same is out of definition of 'undisclosed income' under Section 158BB of the IT Act.
4. That sir, in this connection reliance is also placed on CW v. Stellar Investment Ltd. .
Hope Your Honour will find the above explanation upto your satisfaction. Your humble petitioner is ready to furnish such further details/explanation as may be called for.
The AO considered the challenge made by the assessee on the validity of the proceeding initiated under Section 158BD of the Act and found that no cogent evidence and reasons have been put forward to show how the assessee company could be outside the jurisdiction of the AO at Guwahati. Accordingly, the AO was not inclined to accept the claim regarding lack of jurisdiction and proceeded to assess the company. The Asstt. CIT, Circle-IV, Guwahati held that the assessee company failed to explain its source of investment amounting to Rs. 1,26,75,554 and assessed the company for income-tax amounting to Rs. 1,40,17,200 under Section 158BD of the Act.
4. Being aggrieved, the assessee filed an appeal being Guwa-172/2001-02 before the CIT(A)-2 where, apart from other issues, the jurisdiction issue was also raised by the assessee. The CIT(A)-2 sought the comments of the AO on the issues raised by the assessee. The AO.indicated that the assessee had carried out all its activities at Guwahati and had received the notices and had complied with the notices also at Guwahati and just because the address at Calcutta is shown by the assessee, they cannot escape from the burden of income-tax by raising the issue of jurisdiction. It was further submitted that there is no dispute so far as jurisdiction of the AO is concerned and accordingly, there is no question for referring the issue to the higher authorities under Section 124(2) of the Act.
The CIT(A)-2 found that the protest made by the assessee through their communication dt. 8th June, 2000 (extracted as above) was a general one and no specific reason was cited, indicating why the AO at Guwahati lacked jurisdiction. The appellate authority also found that the said objection was vague and not specific. The comments of the AO were also noted and the appellate authority found that the entire business operation of the assessee company is conducted within Guwahati jurisdiction and the heads, brains and the management of the company are entirely within Assam. It was further found that the assessee, although had their registered office at Calcutta, had never filed any return nor was ever assessed by the IT authorities at Calcutta.
Accordingly, it was held that the AO at Guwahati had exercised his jurisdiction correctly under Section 158BD of the Act and since it found that there is no other material, other than the Calcutta address, to indicate that the assessee company carried on any business within the jurisdiction of the IT authorities at Calcutta.
On the basis of the aforesaid finding, the proceeding initiated by the AO at Guwahati was held to be valid and the jurisdictional question was answered in favour of the Revenue by the appellate order dt. 10th Dec, 2002.
5. Being aggrieved, the assessee preferred a second appeal before the Tribunal, Guwahati and the same was taken up as ITA No. 11/Gau/2003. The Tribunal examined the issue regarding the jurisdiction of the assessing authorities at Guwahati to issue the notices under Section 158BD of the Act. The Tribunal found that the assessee company is registered with the Registrar of Companies in West Bengal and on this sole basis, held that the jurisdiction of the case could only be with the Chief CIT, Calcutta and accordingly, the assessing authority as well as the appellate authority at Guwahati could have no jurisdiction to proceed against the assessee under Section 158BD of the Act.
The Tribunal also considered the address shown as 71, Matalf Street, Calcutta-700 069 as the address of the assessee while issuing notice under Section 158BD of the Act, to be a non-curable mistake and on the basis of such conclusion, declared the proceeding initiated by the AO at Guwahati to be void ah initio.
6. On the basis of the aforesaid finding of total lack of jurisdiction of the IT authorities at Guwahati, the assessment order was quashed as void ah initio for want of jurisdiction and consequently, the appellate order passed by the CIT(A) was also set aside. In view of such finding against the Revenue, the other issues were not discussed by the Tribunal.
7. In order to decide on the validity of the finding regarding lack of jurisdiction of the authorities at Guwahati, it would be necessary to take note of the objection regarding absence of jurisdiction taken by the assessee through their letter dt. 8th June, 2000. It is apparent that the objection taken was not a specific one and was in very general terms by stating that "the notice and proceedings under Section 158BD is invalid and without jurisdiction on the facts of the case".
The objection as to the jurisdiction of the AO was obviously general in nature as is evident from the letter dt. 8th June, 2000. But it would appear that the representative of the assessee argued the question of jurisdiction before the AO and the AO deliberated upon the question and eventually, proceeded to assess the tax liability of the assessee rejecting the plea of lack of jurisdiction. Therefore, the question of lack of jurisdiction was very much an issue before the AO.
8. Section 124 of the Act provides for jurisdiction of the AO. Under Clause (a) of Section 124(1), it is provided that jurisdiction would be determined by looking at the "principal place" of business or profession. An AO will assume jurisdiction over any person if the place where he carries on his business or profession is situate within the area. If the business or profession of a person is carried on in more places than one, the AO having jurisdiction over the principal place of business or profession will have jurisdiction to assess the tax liability of such person. The learned Tribunal disposed of the appeal setting aside the findings of the AO as well as the first appellate authority merely because the registered office of the assessee is located at Calcutta. This by itself would not be conclusive. The learned Tribunal ought to have recorded a clear finding on the facts before coming to the aforesaid conclusion. We have perused the documents filed by the Revenue along with the memo of appeal. The assessee filed a remand note submitted by the AO. From all these documents it is not discernible as to whether the assessee carries on its business in more places than one and therefore, we are not in a position to determine conclusively the question raised in this appeal.
9. In our view, the reason cited by the Tribunal in declaring that the authorities at Guwahati would have no jurisdiction is not correct as the location of the registered office of the assessee company could be of no consequence, without any other relevant material, to decide on the principal place of business of the assessee company. If the assessee company does not carry on any business activities within the jurisdiction of the IT authorities at Calcutta and instead conducts all its business under the jurisdiction of the IT authorities at Guwahati, the principal place of the business of the assessee company could very well be at Guwahati.
10. There is no doubt that when an objection regarding lack of jurisdiction of an AO is raised, the AO ought to have made a reference to the higher authorities for a decision as provided in Section 124(2) of the Act. In the instant case, though the objection raised was not specific, yet the AO considered the same and proceeded to deal with the matter himself. As mentioned hereinbefore, in the given situation, it may not be correct to take a view that an adjudicable jurisdictional issue was not involved in the instant case. Therefore, recourse to the provision of Section 124(2) of the Act would have been the only course left with the AO.
11. At this belated stage, we do not think it appropriate to refer back the matter to the AO for making a reference under Section 124(2) of the IT Act. In our considered opinion, it would be appropriate to refer the matter back to the learned Tribunal to decide the issue after due consideration of the materials on record in reversal of its impugned judgment.
12. We, therefore allow this appeal, set aside the impugned judgment and remit the matter back to the learned Tribunal to re-examine the issue of jurisdiction in the light of the discussion made hereinbefore on the basis of the materials available on record and to record its finding thereon. If necessary, the assessee may be given an opportunity to furnish more details about his business. No costs.