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Choice of place of assessment
November, 25th 2006
The assessee cannot have the choice of asking for a particular officer or a place for the assessment to be made.

The place of assessment is generally determined by the locality of residence in the case of a tax-payer who does not have business or professional income, or at the place falling within the jurisdiction of an Assessing Officer where the business or profession is conducted. Difficult questions arise where the business or profession is undertaken at different locations in India.

The choice of place where the cases are to be transferred is fully within the domain of the transferring authority.

The assessee can have no choice to ask for a particular officer or a particular place for the assessment to be made when power under Section 127(2) of the Income-Tax Act, 1961 is to be exercised.

An assessee can raise a plea against a transfer to a particular place in case it is found that there is no business activity at all at the proposed place of transfer of the group companies/firms/individual assesses.

Very often, tax-payers complain of inconvenience and even harassment while objecting to an order of transfer of assessment proceedings from one city to another.

Exigencies of tax collection

In Pannalal Binjraj vs. Union of India [31 I.T.R. 565 (SC)], the Apex Court held that the question whether one or the other of the authorities will proceed to assess a particular assessee has to be determined not only having regard to the convenience of the assessee but also the exigencies of tax collection.

To assess the tax payable by an assessee more conveniently, it may be necessary to have him assessed by an Assessing Officer of an area other than the one in which he resides or carries on business.

It may be that the nature and volume of his business operations are such as require investigation into his affairs in a place other than the one where he resides or carries on business, or that he is so connected with other individuals or organisations in the way of his earning his income as to render such extra-territorial investigation necessary before he may be properly assessed.

These are instances of situations which may arise wherein it may be considered necessary by the Income-tax authorities to transfer his case from the Assessing Officer of the area in which he resides or carries on business to another Assessing Officer whether functioning in the same State or not. In Dayaldas Kushiram vs. C.I.T. (8 I.T.R. 139), the Bombay High Court observed that in effect this Section does not give a right to the assessee to have his assessment at a particular place but determines the Assessing Officer who is to have power to assess him.

G. Mohandas vs. C.I.T. (244 I.T.R. 32 (Mad) was a case where on the request of the assessee the assessments were transferred from Kerala to Chennai as they proposed to shift their entire business activities to Chennai. Later, on the report of the Assistant Commissioner of Income-Tax, the cases were re-transferred from Chennai to Kerala .

The Court, while considering the power to transfer the cases, did observe that in doing so, the convenience of the assessee cannot stand in the way but further held that the power should not be exercised arbitrarily or on flimsy grounds, nor for extraneous or irrelevant considerations.

The Court further held that the requirements can easily be assessed from the reasons given in the order as it is mandatory for the officer to give such reasons under Section 127 of the Act.

The order of transfer (retransfer) was quashed by the High Court considering the submissions of counsel for the petitioner that most of the assessments were completed after transfer to the Chennai office, and the assessees had already transferred the registered office to Chennai and they were gradually closing down the business at Trivandrum.

Facts and circumstances

The validity of an order is to be tested in the light of the facts and circumstances as they existed on the day of its passing.

Any subsequent development or event cannot make the order bad nor can it be set aside on that ground, unless such an event has the effect of nullifying the order. It would be a different matter where any subsequent development or event, if relevant, may give opportunity to the aggrieved person for approaching the authority concerned for consideration of such an event.

Section 127 confers power to transfer the cases of an assessee at the discretion of the authority if it is necessary to do so in the interest of revenue and for proper assessment of tax and collection thereof. The discretion is neither guided nor controlled by the provisions of Section 124.

This Section defines the jurisdiction in normal circumstances, whereas Section 127 can be attracted only when it is felt by the Commissioner or the Central Board of Direct Taxes or the competent authority that it is proper or appropriate to exercise power under this provision in the interest of revenue and for proper adjudication of the tax liability or collection thereof.

Co-ordinated assessment

It follows from this principle that the transfer of cases can be ordered for facilitating the task of effective investigation and for best and co-ordinated assessment.

The discretion to pass such an order has to be exercised keeping in mind the in-built restraint that such an action should not be taken arbitrarily or for an extraneous reason or with an ulterior motive but only to get the correct assessment of tax done.

The factors that may be taken into account are that the business of the assessee group is scattered and its activities are not confined at one place but at different places.

Thus, it is necessary to have the assessment under one single authority that may require access to all the records, which if seen together and cross-checked, may give the correct picture of the income on which the assessment of tax is to be made.

Further, if the accounts are maintained by different assessees of a group where there are inter-transactions of money, inter-lacing of funds and of business activities with sister concerns, this would also require consolidation of files in all such cases.

There cannot be a straitjacket formula under which the discretion of transfer of cases can be exercised.

Each case will depend on its own facts and the reasons for transfer of a file must be stipulated in the order based on cogent reasons.

H. P. Ranina
(The author, a Mumbai-based advocate specialising in tax laws)

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