Income Tax Appellate Tribunal - Amritsar
Ram Bhaj & Sons (P) Ltd. vs Ito on 13 April, 2006
Equivalent citations: (2006)102TTJ(ASR)695
ORDER
Joginder Pall, A.M. By this order, I shall dispose of this appeal of the assessee filed against the order of the Commissioner (Appeals), Jalandhar, for the assessment year 2000-01.
2. The only effective issue raised in this appeal is that the learned Commissioner (Appeals) was not justified in rejecting the plea of the assessee that the order of the assessing officer was without jurisdiction. The facts of the case are that the assessee filed a return on 30-11-2000 declaring therein loss of Rs. 4,84,025 in the office of Dy. CIT, Central Circle, Jalandhar. The return was processed by the said assessing officer on 21-3-2001 at loss of Rs. 3,14,550. Thereafter, a notice under section 143(2) was issued by the Dy. CIT, Central Circle on 1-2-2001. Subsequently, the case was transferred to Assistant Commissioner, Range-1, Jalandhar and later the same was transferred to Income Tax Officer Ward-1(4), Jalandhar. Then Income Tax Officer, Ward 1(4), issued a notice under section 143(2) on 11-7-2002. Subsequently, the assessing officer who completed the assessment under section 143(3), issued a notice under section 143(2) on 29-8-2002. Thereafter, notices under section 143(2) and 142(l) along with questionnaire were issued on 24-92002. The notice issued was attended to by the learned counsel and the accountant of the assessee prior to 3rd Dec., 2002. Only part information was furnished. However, on 3-12-2002, the learned counsel sought adjournment. This request was allowed and the case was refixed for 5-12-2002. None attended the proceedings. The assessing officer issued a letter dated 10-12-2002 informing the assessee that the required information had not been furnished and the books of account have also not been produced. Since the assessment was time-barring, the assessing officer requested the assessee to comply with the information. However, the assessee informed the assessing officer that an application to CIT, Jalandhar-I for transfer of the case to assessing officer in the jurisdiction of CIT, Jalandhar-II has been filed. However, this petition was rejected by the CIT, Jalandhar-I. Thereafter, the assessee informed that an application has been filed with the Chief Commissioner of Income-Tax (hereinafter referred to as "the Chief CIT"), Ludhiana for transferring the case to the assessing officer in the jurisdiction of CIT, Jalandhar-II. The assessee did not furnish the information called for by the assessing officer. Subsequently, the assessing officer informed the assessee vide his letter dated 11-2-2003 that Chief CIT, Ludhiana vide his letter dated 11-2-2003 had issued directions that no transfer of cases will take place and all time-barring assessments should be completed by the present assessing officer. Transfer of cases if any, required, could be considered only after 15-4-2003. Therefore, the assessing officer completed the assessment on 24-2-2003 by making additions aggregating to Rs. 6 lakhs and accordingly determined the net taxable income at Rs. 2,40,975.
3. Being aggrieved, the assessee filed an appeal before the Commissioner (Appeals) challenging the action of the assessing officer in assuming jurisdiction over the case. It was submitted before the Commissioner that jurisdiction over the case vested with the CIT, Jalandhar-II and, therefore, an application was moved before the CIT, Jalandhar-I for transferring the case to assessing officer in the charge of CIT, Jalandhar-II. However, this request of the assessoe was rejected by the CIT, Jalandhar-I. Thereafter, the assessee had moved an application with Chief CIT, Ludhiana with a request to transfer the case to proper jurisdiction, but the Chief CIT declined to transfer the case till the completion of time-barring assessment. It was submitted that limitation of section 124 objecting to transfer did not apply to the facts of the present case. The reliance was also placed on certain decisions noted on p. 3 of the impugned order. However, these submissions did not find favour with the learned Commissioner (Appeals), who observed that the assessing officer had rightly completed the assessment as the jurisdiction over the case vested with him and the assessee's request was also rejected by CIT, Jalandhar-I and later by Chief CIT, Ludhiana. He also observed that reliance of the assessee on the decisions of Tribunal Delhi Bench in the case reported in Amulya General Trading & Agencies Ltd. v. Assistant Commissioner (1995) 55 ITD 233 (Del) and Tribunal, Calcutta Bench in the case reported as Income Tax Officer v. Prix Small Savings & Investments Ltd. (1999) 69 ITD 51 (Cal) was not correct as these cases were distinguishable on facts and hence, the decisions were not applicable to the facts of the present case. Thus, the order of the assessing officer was upheld by recording following findings in last para of the impugned order :
"I have carefully considered the submissions of the appellant. The objection was raised against jurisdiction of CIT-I, Jalandhar, whereas as gathered subsequent assessments were completed under the charge of CIT-1 and even though in last years there was no scrutiny assessment -yet the jurisdiction vested with AC Range- 1, under CIT- 1 as informed by appellant. Coming to year under consideration no objection was taken by appellant under section 124(3) of Income Tax Act after filing the return and objection was raised on issue of jurisdiction after inspector from office of CIT-II, Jalandhar visited the premises of appellant to get status report vis-a-vis returns of income. The appellant then raised the objection which was rejected by CIT-I and assessing officer was bound by the said order. The matter was even referred to Chief CIT, Ludhiana but due to time-barring matter involved, the request was rejected. Thus assessing officer's order in view of abovementioned decision of higher authorities cannot be said to be without jurisdiction and more so when the record for subsequent years remained within jurisdiction of CIT-I, thus, the objections/ground of the appellant on the issue of jurisdiction cannot be sustained. The application of appellant was rejected by the concerned CIT and appeal against said order does not lie with Commissioner (Appeals) as the objections of appellant are against said order of CIT-I, Jalandhar and against any such order appeal is not maintainable with the first appellate authority. Coming to the case laws quoted by the appellant the facts in the case decided by Tribunal Delhi Bench vide 55 ITD 233 (supra) are distinguishable as herein the assessing officer has not decided himself the question of jurisdiction but acted under orders of higher authorities. Similarly the fact of the case as reported in 69 ITD 51 (Cal) (supra) are materially different from the facts of the appellant. The decision of Hon'ble jurisdictional High Court in the case reported at 50 ITR 144 (supra) is relied upon to question the order passed by Chief CIT, Ludhiana which cannot be agitated and decided by undersigned lacking jurisdiction. Therefore, the ground taken by appellant is rejected."
The assessee is aggrieved by the order of Commissioner (Appeals). Hence, this appeal before the Tribunal.
4. The learned counsel for the assessee, Sh. Nirmal Mahajan filed written submissions vide letter dated 21-3-2006 wherein he has reiterated the submissions made before the authorities below. He relied on following judgments/decisions :
(i) Madhav Nagar Cotton Mills Ltd. v. Union of India (1963) 50 ITR 344 (P&H) in support of the contention that Chief CIT, rejected assessee's request for transfer of the case from Chief CIT-I, Jalandhar to CIT-II, Jalandhar, without granting personal hearing. He stated that "the rule being that specific must prevail over general. "
(ii) Relying on the judgment of Hon'ble Calcutta High Court in the case of West Bengal State Electricity Board v. Dy. CIT (2005) 278 ITR 218 (Cal), the learned counsel submitted that issue regarding jurisdiction can be raised for the first time before the Tribunal.
(iii) Relying on decision of Tribunal, Calcutta Bench in the case of ITO v. Prix Small Savings & Investment Ltd. (supra), the learned counsel submitted that assessment completed by the assessing officer was nullity because the assessing officer had no jurisdiction over the case.
(iv) Reliance was also placed on the decision of Tribunal, Delhi Bench in the case of Amulya General Trading Agencies v. Asstt. CIT (supra), where it was held that the assessing officer could not create his territorial jurisdiction nor the same could be vested in him by the assessee by filing return with him. It is a matter to be determined in accordance with law.
5. The learned Departmental Representative, Sh. H.S. Lall, on the other hand heavily relied on the orders of the authorities below. He submitted that CBDT vide SO 732(E) Notification No. 228 of 2001, dated 3-7-2001 issued under section 120(1)/(2) of the Income Tax Act, reported in (2001) 169 CTR (St.) 93 had specified the powers and functions of various CIT of the country in respect of cases falling in their territorial jurisdiction as specified therein. He submitted that the assessee had filed the return of income mentioning therein the address at Nakodar Road, Jalandhar. He submitted that as per order of the CIT, Jalandhar-I, the jurisdiction over the cases falling in the territorial area on both sides of Nakodar Road in east and west starting from Balmiki Chowk to the municipal limit vested with the assessing officer, who completed the assessment in the present case. He further stated that even the assessee's application for transfer of case to CIT-II, Jalandhar was rejected by CIT-I, Jalandhar. The assessee then moved an application before Chief CIT, Ludhiana, for transfer of case from CIT- I to CIT-II. However, the Chief CIT, declined to accept this request and directed the assessing officer to complete the time-barring assessment. Thus, he submitted that jurisdiction over the case vested with the assessing officer who completed the assessment and the learned Commissioner (Appeals) rightly upheld the completion of such assessment by the assessing officer.
6. I have heard both the parties and carefully considered the rival submissions with reference to facts, evidence and material on record. From the facts discussed above, it is obvious that only objection of the assessee is about assumption of jurisdiction by the assessing officer for completing the assessment and the various additions of Rs. 6 lakhs made by the assessing officer were accepted and were not subject-matter of appeal either before the Commissioner (Appeals) or even before the Tribunal. The action of the assessing officer in completing the assessment could neither be considered capricious nor vindictive. Moreover, the dispute relating to jurisdiction was confined to the same station i.e., whether the assessment should be completed by the assessing officer in the charge of CIT, Jalandhar City-1 or assessing officer in the charge of CIT, Jalandhar, City-II. There was no inconvenience involved in the case. Thus, completion of an assessment by the said assessing officer has not resulted in denial of justice to the assessee. Further, it is also clear that even the assessments/ processing of returns for the subsequent assessment years was done by the assessing officer in the charge of CIT, Jalandhar-I. From the facts discussed above, it is also obvious that the assessee had filed the return with Dy. CIT, CC, Jalandhar-I, who had the jurisdiction over the case at the relevant time. But subsequently the case was transferred to Assistant Commissioner, Range-1, Jalandhar, who it appears had concurrent jurisdiction with Income Tax Officer Ward 1(4), Jalandhar over the cases falling in territorial area on both sides of Nakodar Road. Notice under section 143(2) was issued by the predecessor in office of the assessing officer on 11-7-2002. The assessee never raised any objection on the point of jurisdiction at that time. Again notices under section 143(2) and 142(l) along with questionnaire were issued by the assessing officer on 24-9-2002. There was partial compliance by the assessee. No objection on the point of jurisdiction was raised before the assessing officer. While the assessment proceedings were in progress, the assessee for the first time wrote to the assessing officer vide his letter dated 4-12-2002 that the correct jurisdiction over the case vested with CIT-II, Jalandhar and, therefore, a request for transfer was made to CIT-1, Jalandhar. The CIT-I, Jalandhar, rejected such request vide his letter dated 2-1-2003 on the ground that as per address given by the assessee itself in the return of income filed, the jurisdiction over the case vested in the charge of CIT-
I, Jalandhar. The assessee has never denied that as per address given in the return filed, the jurisdiction over the case vested with assessing officer in the charge of CIT, Jalandhar-I. The assessee claimed jurisdiction only on the ground that when Inspector of the department visited the place he informed that jurisdiction falls in the charge of CIT, Jalandhar-II. This statement is not supported by any other evidence. Subsequently, the assessee moved a petition before Chief CIT, Ludhiana on 9-1-2003 requesting for transfer of the case. In response to such request the Chief CIT asked the assessee vide his office letter dated 21-1-2003 to clarify how its interest was adversely affected on being assessed by assessing officer in the charge of CIT-I, Jalandhar. In reply to this notice, the assessee submitted a reply vide his letter dated 27-1-2003 stating therein that the assessment completed by the assessing officer in charge of CIT-I, would be invalid and without jurisdiction. After considering such reply, Chief CIT, informed vide his office letter dated 11-2-2003 that no transfer of case will take place till time-barring action is completed by the present assessing officer. The decision of the Chief CIT, Ludhiana is to be seen in the light of facts that assessment in question was time-barring and time left was short. Eventually, the case resulted in making additions of Rs. 6 lakhs by the same assessing officer and the assessee did not even contest the additions. Therefore, the decision of Chief CIT, Ludhiana not to transfer the case to assessing officer in the charge of CIT, Jalandhar-II could neither be considered arbitrary nor unreasonable more so when the assessee was asked to state its grievance on being assessed by the assessing officer in the charge of CIT-I. Thus, it is not correct on the part of the assessee to contend that Chief Commissioner, Ludhiana did not allow an opportunity to the assessee before rejecting its request to transfer the case.
6.1 I have also referred to the relevant provisions of the Income Tax Act, which deal with the jurisdiction of various authorities constituted under the Income Tax Act. Section 116 of the Income Tax Act refers to the various IT authorities, which also include Income Tax Officer. Section 117 of the Income Tax Act provides the powers of the Central Government to appoint IT authorities referred to in section 116 of the Act. Section 120 of the Income Tax Act provides jurisdiction of the IT authorities and provides that the IT authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by an or any of those authorities. It also provides that the Board under sub-section (1) may authorise any other IT authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other IT authorities, who are subordinate to it. It is also provided that the Board or any other IT authority authorised by it may having regard to any one or more of the following criteria assign jurisdiction, namely
(a) territorial area-,
(b) person or classes of persons;
(c) income or classes of income; and
(d) cases or classes of cases.
It is also provided that the Board may authorise the Director General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or, as the case may be, assigned to the assessing officer (sic). Section 2(7A) of the Act defines the "assessing officer", who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act and the Jt. CIT or Jt. Director (sic). The combined reading of aforesaid provisions of the Income Tax Act reveal that the IT authorities exercise jurisdiction and powers as are assigned to them either by the Board or by the Chief Commissioner or the Commissioner. They exercise their powers and perform functions in accordance with such direction and notification.
6.2 Now in the present case, the assessing officer assumed jurisdiction by virtue of the notification issued by the CIT- 1, Jalandhar. On the basis of address given in the return of income filed by the assessee himself, the jurisdiction over the case vested with the Income Tax Officer, Ward-1(4), Jalandhar. As already mentioned above despite the notices under section 143(2) were issued by the same assessing officer right from 11-7-2002 and were also partly complied with, the assessee did not raise the issue of jurisdiction till 4-12-2002. As per provisions of sub-section (2) of section 124, the assessee is allowed to raise objection to the jurisdiction and the same has to be determined by the authorities mentioned therein, i.e., by the Chief CIT/Director General of IT or the CIT/Director of IT and if there is a dispute the same is to be decided by the CBDT. Sub-section (3) of section 124 debars the assessee to call in question the jurisdiction of the assessing officer after expiry of certain period which inter alia provides that after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or after the completion of the assessment, whichever was earlier. In the present case, first notice under section 143(2) was issued by the assessing officer, who completed the assessment on 11-7-2002. This notice must have been served within a reasonable time and as per clause (a) of sub-section (3) of section 124, the assessee could raise such objection within a period of one month from the date of service of notice under section 143(2) of the Act. No such objection was raised within such time. In fact, notices issued by the assessing officer were partly complied with. Now even in a case where assessee raises an objection, the assessing officer is required to refer the matter for determination of the correct jurisdiction to the authorities mentioned in sub-section (2) of section 124 subject to the provisions of section 124(3) of the Act. Since the assessee did not raise an objection within the, time allowed under section 124(3), even reference to the authorities mentioned in section 124(2) of the Act, was not necessary. Further, this course of action is necessary only if the assessing officer is not satisfied with the correctness of the claim. Be that as it may, the authorities to whom this matter was referred to by the assessee rejected such request as is clear from the letter of CIT-I, Jalandhar dated 2-1-2003 and subsequently by Chief Commissioner, Ludhiana as intimated vide his office letter dated 11-2-2003. Once the matter is decided by the CIT, Jalandhar-I and Chief CIT, Ludhiana, the assessee cannot raise this issue before the Tribunal. Thus, the jurisdiction over the case vested with the assessing officer who completed the assessment in this case and there is no merit in the submission of the assessee that the same was without jurisdiction.
6.3 Further, the issue relating to allocation of functions to IT authorities is procedural in character and, therefore, the defect of procedure does not invalidate the assessment. The machinery for resolving such dispute is the administrative machinery and not the Courts. The Courts have limited role to decide whether the assessing officer correctly assumed the jurisdiction as per notification issued by the administrative authorities assigning the jurisdiction. Now for example, if the assessee was carrying on business at Jalandhar and had office at Jalandhar, but assessing officer at Chandigarh proceeds to complete the assessment by issue of notice on the basis that assessee had its branch office at Chandigarh without referring the matter to CIT/Chief CIT, such assessment completed by the assessing officer at Chandigarh would be illegal and without jurisdiction. The Courts can Certainly intervene and quash such assessment. But if the assessing officer assumes the jurisdiction as per notification or after dispute is decided by CIT/Chief CIT, the Courts cannot intervene. In this regard, reliance is placed on the judgment of Hon'ble Allahabad High Court in the case of Hindustan Transport Co. v. IAC (1991) 189 ITR 326 (AR), where after, considering the provisions contained in sub-sections (2), (3) and (4) of section 124, the Hon'ble Allahabad High Court has held as under :
"Being an enactment aimed at collecting revenue, the legislature did not intend collection of revenue to be bogged down on account of technical plea of jurisdiction. It has, therefore, prescribed the limit upto to which the plea of jurisdiction may be raised. As provided in section 125(5)(a), the right is lost as soon as the assessment has been completed. Even where the right is exercised before the assessment is completed, the question is to be decided by the Commissioner or by the Board. Courts do not come into the picture.
From the above provisions of the Act, it is apparent that the Act does not treat the allocation of functions to various authorities or officers as one of substance. It treats the matter as one of procedure and a defect of procedure does not invalidate the end action. The answer to the first question, therefore, is that the power is administrative and procedural and is to be exercised in the interest of exigencies of tax collection and the answer to the second question is that, under the Act, a defect arising from allocation of functions is a mere irregularity which does not affect the resultant action."
In this case even the procedural lapse or irregularity does not exist. The matter was raised before the CIT and Chief CIT. Since these authorities declined to transfer the case to the assessing officer falling in the jurisdiction of CIT-II, Jalandhar and the jurisdiction correctly vested with the assessing officer falling in the charge of CIT-I, Jalandhar, I am of the opinion that no fault could be found with the assessing officer in assuming jurisdiction and completing the assessment. The learned Commissioner (Appeals) was justified in upholding such action. However, the discussion in the matter would be incomplete without referring to certain judgments which the assessee has relied upon. These are mentioned hereunder :
(i) Madhav Nagar Cotton Mills Ltd. v. Union of India (supra). In this case territorial jurisdiction over the cases was changed by a notification. Even after the notification was issued, the Income Tax Officer, who had jurisdiction earlier, initiated reassessment proceedings under section 34 of the Old Act (s. 148 of the present Act) and completed the reassessment. Since the power of the assessing officer was taken away by notification, the Hon'ble High Court held that such assessment completed by the assessing officer was without jurisdiction. These are not the facts of the present case as the power of the assessing officer who completed the assessment was not taken away by issue of any notification. Therefore, the ratio of this decision is not applicable to the facts of the present case.
(ii) West Bengal State Electricity Board v. Dy. CIT (supra). In this case, the Calcutta High Court held that sub-section (1) of section 120 prescribes that the Board may confer such jurisdiction to such officer as it may deem fit. Once a particular jurisdiction is created, the same must be prospective and cannot be retrospective. The High Court further held that it is the existence of the jurisdiction on the date of initiation of the proceedings which is material. In the present case, the assessing officer who completed, assessment had valid jurisdiction on the date when he issued a notice under section 143(2) for the purpose of completing the assessment and such jurisdiction was never taken away by any authority till the date of completion of the assessment. Therefore, the ratio of this decision is also of no help to the assessee.
(iii) CIT v. Pearl Mechanical Engineering & Foundry Works (P) Ltd. (2004) 267 ITR 1 (SC). In this case, the Hon'ble Supreme Court considered the jurisdiction of the competent authority to make an order for the acquisition of immovable property. The Apex Court held that the assessing officer assumed jurisdiction only after publication of the notice in the official gazette. The Apex Court also observed that any error or mistake committed in the service of the notice does not in any manner affect the jurisdiction conferred upon the competent authority to take proceedings for acquisition of property because service of notice prior to publication in the official gazette was merely an irregularity committed during the course of proceedings and cannot have the effect of nullifying proceedings which commenced only after publication of the notice in the Official Gazette. These are not the facts of the present case. The assessing officer had not committed any irregularity either at the time of initiating the assessment proceedings by issue of notice under section 143(2) or at the time of completing the assessment as the jurisdiction over the case vested with him. Therefore, the ratio of this judgment is also not applicable to the facts of the present case.
(iv) Amulya General Trading Agencies v. Asstt. CTT (supra). In this case, the assessee filed two returns, i.e., at Delhi and at Ghaziabad. The assessee had registered office at Ghaziabad. Both the assessing officer's made two assessments, one at Delhi and another at Ghaziabad, though the jurisdiction of the assessing officer at Delhi was questioned during the course of assessment proceedings. The assessing officer at Delhi completed the assessment without making a reference to the authority specified under sub-section (2) of section 124 of the Act. On these facts, the Tribunal, Delhi held that only authorities specified under sub-section (2) of section 124 are empowered to go into the question of territorial jurisdiction of assessing officer. It was held that the assessing officer was not empowered and competent to decide such matter. These are not the facts of the present case. Even when the question of jurisdiction was raised before the assessing officer, the same was referred and decided by the authorities specified under sub-section (2) of section 124 i.e., CIT-I, Jalandhar and Chief CIT, Ludhiana. Therefore, ratio of this decision is also not applicable to the facts of the present case.
(v) Income Tax Officer v. Prix Small Savings & Investment (P) Ltd. (supra). In this case, the assessee had registered office at Siliguri. Unknowingly, the assessee filed its return for the assessment year 1984-85 at Calcutta. However, the returns for the subsequent two assessment years were filed with assessing officer at Siliguri. The assessments for those two assessment years were completed by the Income Tax Officer, Siliguri with whom returns for these two assessment years were filed. However, the assessing officer at Calcutta initiated proceedings under section 147 by issue of notices under section 148 for those two assessment years and completed the same ex parte despite objections raised by the assessee during the course of assessment proceedings. On these facts, the Tribunal, Calcutta, held that the assessments completed by the Income Tax Officer Calcutta were nullity for having not followed the procedure laid down in section 124 as he did not refer the case to the authority specified in sub-section (2) of section 124 and proceeded to complete the assessment on his sweet will. Such assessments completed by the assessing officer at Calcutta were cancelled. These are not the facts of the present case. It is not a case where two assessments were completed. It is also not a case where proper procedure as laid down under section 124 was not followed. Therefore, the ratio of this decision is also not applicable to the facts of the present case.
7. Thus, in the light of detailed discussions in the preceding paragraphs and legal position discussed above, I am of the considered opinion that the learned Commissioner (Appeals) was justified in sustaining the assessment completed by the assessing officer. Therefore, the order of Commissioner (Appeals) is upheld and the grounds of appeal of the assessee are rejected.
8. In the result, the appeal filed by the assessee is dismissed.