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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WRIT PETITION (CIVIL) No. 11844/2016
Reserved on: 23rd April , 2018
% Date of Decision: 1st June, 2018
ABHISHEK JAIN ..... Petitioner
Through: Mr. Arvind Kumar and Mr. Harsh
Vardhan Sharma, Advocates.
Versus
INCOME TAX OFFICER, WARD - 55(1)
NEW DELHI & ANOTHER & ANR. ..... Respondent
Through: Mr. Ashok K. Manchandani,
Sr. Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J.
Abhishek Jain, as an individual, has filed the present writ petition for
quashing notice dated 18th February, 2016 issued under Section 148 read
with Section 147 of the Income-tax Act, 1961 (hereinafter referred to as the
'Act') for the assessment year 2009-10 by the Income-tax Officer, Ward
No.1 (1), Noida, as without jurisdiction and consequently the proceedings
pending on transfer before the Income-Tax Officer ward No.58(2), Delhi are
bad and void.
WP(C) 11844/2016 Page 1 of 29
2. Petitioner states that he has been filing returns in Delhi with the
Income-Tax Officer, Ward No.36(1), Delhi and pursuant to re-adjustment
of Wards with effect from assessment year 2014-15 with the Income-Tax
Officer, Ward No. 58(2), Delhi.
3. The second contention raised by the petitioner is that transfer of
case/proceedings by Income-tax Officer, Ward No.1(1), Noida to Income-
tax Officer Ward 58(2), Delhi, pursuant to notice under Section 148 of the
Act for the assessment year 2009-10 issued by the former, is void and bad in
law as (i) Income-tax Officer, Ward No.1(1), Noida did not have
jurisdiction and (ii) the procedure prescribed for transfer of case as per
section 127(2)(a) of the Act was not followed since the Chief Commissioner
having jurisdiction over the Income-tax Officer Ward No.1(1), Noida had
not passed any order for transfer of the case.
4. To decide the legal controversy, we would first refer to the facts and
while doing so we would also examine certain disputed facts. Petitioner, as
stated above is an individual who has been filing returns with the Income-
tax Officer Ward No.36(1) Delhi and thereafter from the assessment year
2013-14 with the Income-tax Officer, Ward No.58(2) Delhi. For the
assessment year 2009-10, the petitioner had filed return with Income-Tax
officer, Ward No. 36(1) Delhi on 29th March, 2010.
5. Respondents in the counter-affidavit and additional affidavit have
stated that based on 'Annual Information Return' information was forwarded
to the Income-Tax Officer Ward No.1(1), Noida regarding deposits in cash
amounting to Rs.12,89,609/- in the savings bank account No.628401512177
of the petitioner in ICICI Bank Limited, Branch Noida Sector-27, Uttar
Pradesh, during the period relevant to the assessment year 2009-10. As per
WP(C) 11844/2016 Page 2 of 29
bank records, communication address of the petitioner was A-32, Sector-5,
Noida-201301 and his permanent address was FF-50, 3rd floor, Laxmi Nagar
New Delhi-110092. The petitioner had not mentioned his Permanent
Account Number (PAN Number). As per Know Your Customer
Certification, the petitioner's address was A-32, Sector-5, Noida. Account
Opening Form along with the particulars and details mentioned therein are
not disputed. The petitioner also does not dispute that the account belongs
to him.
6. As per the respondents, the aforesaid details were examined and
thereupon notices under Section 133(6) dated 16th August, 2015 and 11th
January, 2016 were issued by registered/speed post by the Income-tax
Officer, Ward No.1(1) to the petitioner at A-32, Sector-5 Noida and third
notice dated 14th December, 2015 was issued to the petitioner at the second
address at FF-50, 3rd floor, Laxmi Nagar New Delhi-110092. Income-Tax
Inspector had visited the Laxmi Nagar address with the notice dated 14th
December, 2015 but the petitioner could not be located and the notice was
thereupon affixed.
7. Income-Tax Officer Ward No.1 (1), Noida did not receive any
response and reply to the above notices.
8. Left with no option, Income-Tax Officer Ward No.1(1), Noida after
recording reasons to believe in writing had issued notice dated 18 th
February, 2016 under Section 148 read with Section 147 of the Act, which
was sent by registered post at the Noida address. The petitioner did not file
return of the income, in terms of the notice nor did he come forward and
state that he had filed return of income for assessment year 2009-10 with the
WP(C) 11844/2016 Page 3 of 29
Income-Tax Officer, Ward No.36(1), Delhi and was being assessed in the
said Ward.
9. On 27th April, 2016 Income-Tax officer, Ward No.1(1), Noida issued
notice under Section 142 (1) of the Act, requiring the petitioner to comply
with the directions therein including filing of return for the assessment year
2009-10 and furnishing of information and documents regarding cash
deposits.
10. The petitioner belatedly responded vide letter dated 19 th May, 2016
stating that he was regularly assessed and had filed return of income for
assessment year 2009-10, with the Income-tax Officer Ward No.36(1)
Delhi. Accordingly, notice dated 27th April, 2016 under Section 142(1) and
"alleged" notice dated 18th February, 2016 under Section 148 of the Act
were illegal and without jurisdiction. Without prejudice, the petitioner had
enclosed a copy of his return filed on 29th March, 2010 with the Income-tax
Officer, Ward No.36(1) Delhi with the request to treat this return as filed in
response to the notice. Request was made to furnish a copy of the reasons
to believe to enable the petitioner to file detailed objections. This letter did
not specifically state that the petitioner had not been served with the notice
dated 1st February, 2016 under Section 148 of the Act for the assessment
year 2009-10 at the Noida address.
11. Petitioner in his objections filed on 15th November, 2016 did not
again specifically dispute service of notice under Section 148 dated 18th
February, 2016, albeit had stated that this notice was not served on him till
31st March, 2016.
12. Petitioner states that property bearing no. FF-50, 3rd Floor, Laxmi
Nagar, Delhi-92 was owned by his mother and was sold by her vide
WP(C) 11844/2016 Page 4 of 29
registered sale deed dated 22nd October, 2008. It is submitted that service
by affixation or pasting at Laxmi Nagar address was improper and not in
accordance with law. The petitioner asserts and insists that he was not
served with letters dated 16th August, 2015 and 11th January, 2016 sent at
the Noida address. It is submitted that copy of the postal receipts have not
been placed on record and that notice dated 11th January, 2016 was wrongly
addressed to Abhishek Jaina, 32, Sector-5 Noida, instead of Abhishek Jain,
A-32, Sector-5 Noida.
13. We would recapitulate the facts in brief.
(i) Petitioner accepts that the savings account in ICICI Bank,
Sector 27, Noida, U.P. with communication address as A-32,
Sector-5, Noida-201301 i.e. factory, where the petitioner works
belongs to him. Petitioner had furnished a copy employee
identity card and a letter from the employer confirming the
Noida address. KYC form records the address of the petitioner
as A-32, Sector-5, Noida.
(ii) Petitioner has not given his Permanent Account Number or
updated his permanent address in the bank account.
(iii) Petitioner has not specifically challenged and disputed cash
deposits of Rs.12,18,609/- in the savings bank account in the
period relevant to the assessment year 2009-10. This
Information regarding cash deposits was mentioned in the
'Annual Information Return', filed by the ICICI Bank.
(iv) As the address of the petitioner mentioned in the bank account
was located in Noida, Income-Tax Officer Ward No.1(1),
Noida was informed. Income-Tax Officer Ward No.1(1) had
WP(C) 11844/2016 Page 5 of 29
issued three letters under Section 133(6) dated 16th August,
2015, 14th December, 2015 and 11th January, 2016, to the
petitioner seeking information and clarification. The first and
the third letters were sent by the registered post to the petitioner
at A-32, Sector-5, Noida, and the second letter was sent to the
petitioner at FF-50, 3rd floor, Laxmi Nagar New Delhi-110092.
The two letters sent to the Noida address were not received
back unserved and the letter dated 14th December, 2015 was
served by affixture at the Laxmi Nagar, Delhi address.
(v) In the aforesaid circumstances the Income-Tax Officer, Ward
1(1), Noida recorded reasons to believe and had issued notice
dated 18th February, 2018 under Section 148 of the Act.
(vi) This notice dated 18th February, 2018 under Section 148 of the
Act was sent by speed post on 19th February, 2018.
(vii) Petitioner did not respond or file his return of income in
response to this notice.
(viii) The Income-tax Officer Ward No.1 (1), Noida, had then issued
notice under Section 142(1) of the Act dated 27th April, 2016
requiring the petitioner to comply with the directions contained
therein including filing of return.
(ix) The petitioner thereafter responded and wrote to the Income-
Tax Officer Ward No.1 (1), Noida for the first time on 19th
May, 2016.
(x) The petitioner in his response dated 19th May, 2016 did not
specifically dispute receipt of the notice under Section 148 of
the Act, though the word "alleged" was used.
WP(C) 11844/2016 Page 6 of 29
(xi) Petitioner in his objections dated 15th November, 2016, had
stated that the alleged notice under Section 148 had not been
served on him till 31st March, 2016 and hence, notice (sic.
proceeding) was illegal and barred by time. Impliedly, the
petitioner had accepted that notice dated 18th February, 2016
under Section 148 of the Act was served.
14. Petitioner, we have no hesitation in observing, had deliberately not
responded at least to the notice dated 18th February, 2016 under Section 148
of the Act. This muteness and belated response was intentional and
malevolent as the petitioner wanted to object to jurisdiction of the Income-
Tax Officer Ward No.1(1), Noida post 31st March, 2016. Thereafter, in
view of time mandate in Section 149 of the Act, Income Tax Officer, Ward
No. 36(1), Delhi, could not have issued fresh notice under Section 148 of
the Act.
15. Contention of the petitioner predicated on lack of jurisdiction of the
Income-Tax Officer Ward No.1(1), Noida on first glance appears to have
strength, but on thoughtful consideration the contention must be rejected
and should fail in view of the statutory provisions and peculiar facts of this
case. On the legal position, we would like to refer to the decision dated 14th
March, 2014 of the Delhi High Court authored by one of us (myself) in
Income-Tax Appeal No. 255/2002, Commissioner of Income-tax Delhi-
XVI Vs. S.S. Ahluwalia. However, we begin by reproducing Section 120
and Section 124 of the Act which read:
"120. (1) Income-tax authorities shall exercise all or any of
the powers and perform all or any of the functions conferred
WP(C) 11844/2016 Page 7 of 29
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 all or any of those
authorities.
[Explanation.--For the removal of doubts, it is hereby
declared that any income-tax authority, being an
authority higher in rank, may, if so directed by the Board,
exercise the powers and perform the functions of the
income-tax authority lower in rank and any such
direction issued by the Board shall be deemed to be a
direction issued under sub-section (1).]
(2) The directions of the Board under sub-section (1) may
authorise any other income-tax authority to issue orders
in writing for the exercise of the powers and performance
of the functions by all or any of the other income-tax
authorities who are subordinate to it.
(3) In issuing the directions or orders referred to in sub-
sections (1) and (2), the Board or other income-tax
authority authorised by it may have regard to any one or
more of the following criteria, namely :--
(a) territorial area;
(b) persons or classes of persons;
(c) incomes or classes of income; and
(d) cases or classes of cases.
(4) Without prejudice to the provisions of sub-sections
(1) and (2), the Board may, by general or special order,
and subject to such conditions, restrictions or limitations
as may be specified therein,--
(a) authorise any Director General or Director to
perform such functions of any other income-tax
WP(C) 11844/2016 Page 8 of 29
authority as may be assigned to him by the
Board;
(b) empower 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 by or under this Act in
respect of any specified area or persons or
classes of persons or incomes or classes of
income or cases or classes of cases, shall be
exercised or performed by a 25[Joint]
Commissioner 26[or a 25[Joint] Director], and,
where any order is made under this clause,
references in any other provision of this Act, or
in any rule made thereunder to the Assessing
Officer shall be deemed to be references to
such 25[Joint] Commissioner 26[or 25[Joint]
Director] by whom the powers and functions are
to be exercised or performed under such order,
and any provision of this Act requiring approval
or sanction of the 25[Joint] Commissioner shall
not apply.
(5) The directions and orders referred to in sub-sections
(1) and (2) may, wherever considered necessary or
appropriate for the proper management of the work,
require two or more Assessing Officers (whether or not
of the same class) to exercise and perform, concurrently,
the powers and functions in respect of any area or
persons or classes of persons or incomes or classes of
income or cases or classes of cases; and, where such
powers and functions are exercised and performed
concurrently by the Assessing Officers of different
classes, any authority lower in rank amongst them shall
WP(C) 11844/2016 Page 9 of 29
exercise the powers and perform the functions as any
higher authority amongst them may direct, and, further,
references in any other provision of this Act or in any
rule made thereunder to the Assessing Officer shall be
deemed to be references to such higher authority and any
provision of this Act requiring approval or sanction of
any such authority shall not apply.
(6) Notwithstanding anything contained in any direction
or order issued under this section, or in section 124, the
Board may, by notification in the Official Gazette, direct
that for the purpose of furnishing of the return of income
or the doing of any other act or thing under this Act or
any rule made thereunder by any person or class of
persons, the income-tax authority exercising and
performing the powers and functions in relation to the
said person or class of persons shall be such authority as
may be specified in the notification.]
XXXXX
124. Jurisdiction of Assessing Officers.- (1) Where by
virtue of any direction or order issued under sub-section
(1) or sub-section (2) of section 120, the Assessing
Officer has been vested with jurisdiction over any area,
within the limits of such area, he shall have jurisdiction--
(a) in respect of any person carrying on a business or
profession, if the place at which he carries on his
business or profession is situate within the area, or
where his business or profession is carried on in
more places than one, if the principal place of his
business or profession is situate within the area, and
WP(C) 11844/2016 Page 10 of 29
(b) in respect of any other person residing within the
area.
(2) Where a question arises under this section as to
whether an Assessing Officer has jurisdiction to assess
any person, the question shall be determined by the
Director General or the Chief Commissioner or the
Commissioner; or where the question is one relating to
areas within the jurisdiction of different Directors
General or Chief Commissioners or Commissioners,
by the Directors General or Chief Commissioners or
Commissioners concerned or, if they are not in
agreement, by the Board or by such Director General
or Chief Commissioner or Commissioner as the Board
may, by notification in the Official Gazette, specify.
(3) No person shall be entitled to call in question the
jurisdiction of an Assessing Officer--
(a) where he has made a return under sub-section (1)
of section 115WD or under sub-section (1) of section
139, 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
115WE or sub-section (2) of section 143 or after the
completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the
expiry of the time allowed by the notice under sub-
section (2) of section 115WD or sub-section (1) of
section 142 or under sub-section (1) of section
115WH or under section 148 for the making of the
return or by the notice under the first proviso to
section 115WF or under the first proviso to section
144 to show cause why the assessment should not be
WP(C) 11844/2016 Page 11 of 29
completed to the best of the judgment of the
Assessing Officer, whichever is earlier.
(4) Subject to the provisions of sub-section (3), where
an assessee calls in question the jurisdiction of an
Assessing Officer, then the Assessing Officer shall, if
not satisfied with the correctness of the claim, refer the
matter for determination under sub-section (2) before
the assessment is made.
(5) Notwithstanding anything contained in this section
or in any direction or order issued under section 120,
every Assessing Officer shall have all the powers
conferred by or under this Act on an Assessing Officer
in respect of the income accruing or arising or received
within the area, if any, over which he has been vested
with jurisdiction by virtue of the directions or orders
issued under sub-section (1) or sub-section (2) of
section 120."
16. Section 120 of the Act which relates to jurisdiction of the Income-tax
Authorities stipulates that Income-tax Authorities shall exercise any of the
powers and perform all or any of the functions conferred or assigned to such
authority by or under this Act as per the directions of the Board i.e., Central
Board of Direct Taxes. As per Explanation to sub-section(1), the power can
also be exercised, if directed by the Board, by authorities higher in rank.
Under sub-section (2), the Board can issue orders in writing 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;
WP(C) 11844/2016 Page 12 of 29
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 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",
a term used in the Income Tax Act, 1922. Sub-section (5) to Section 120 of
the Act again affirms and accepts that there can be concurrent jurisdiction of
two or more assessing officers who would exercise jurisdiction over a
particular assessee in terms of the four-fold criteria stated in sub-section (3)
to Section 120. Second part of sub-section (5) states that where powers and
functions are exercised concurrently by Assessing Officers of different
classes, then the higher authority can direct the lower authority in rank
amongst them to exercise the powers and functions.
17. Concurrent jurisdiction is reflected and recognized in Section 124 of
the Act, which was interpreted in S.S. Ahluwalia (Supra), in the following
words:-
34. On analyzing the new Section 124, it is viewed that as per
subsection (1), Assessing Officer has jurisdiction in respect of
persons carrying on business or profession where such business
WP(C) 11844/2016 Page 13 of 29
or profession was being carried out or situated within the area
or where the business or profession was carried on in different
areas, if the principal place of business or profession was
situated within the area. Assessing Officer under sub-clause (b)
also had jurisdiction in respect of any other person(s) residing
within the area. Residence and place of business being the
basis. Sub-section (2) stipulates that question/ dispute of
jurisdiction among two or more Assessing Officers, if raised,
shall be determined by the Director- General, Chief
Commissioner or the Commissioner, or if the question relates
to areas falling within the jurisdiction of different Directors-
General, Chief Commissioners or Commissioners, then by the
Directors- General, Chief Commissioners or Commissioners
concerned, and if they are not in agreement, by the Board or by
such Director-General, Chief Commissioner or Commissioner
that the Board may by an Official Gazette specify. Subsection
(3) further stipulates that the objection to the jurisdiction could
be questioned by an assessee or a person within one month
from the date on which return of income under Section 139(1)
was made or within one month from the date of issuance of
notice under Section 142(1) or 143(2) or after completion of
assessment, whichever was earlier. If no return of income was
made, objection to the jurisdiction could be entertained, if
made within the time allowed by way of notice under Section
115WD(2)/142(1)/115WH(1)/148 of the Act to make the return
or by notice under first proviso to Sections 115WF or 144 to
show cause why the assessment should not be completed by the
best judgment of the Assessing Officer, whichever was earlier.
Sub-section (4) lays down that when an assessee raises a
dispute regarding jurisdiction of the Assessing Officer and the
Assessing Officer if not satisfied with the correctness of the
claim, he shall refer the matter for determination as per sub-
section (2) of Section 124, however, this should be done before
the assessment was made. The aforesaid Section, therefore,
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postulates waiver of objection to assumption of jurisdiction by
the Assessing Officer. Time limit for raising the objection
stands stipulated. Principle of deemed waiver applies. This
could only happen when the authority does not lack or suffer
from inherent lack of subject matter jurisdiction. When there is
inherent lack of subject matter jurisdiction, principle of waiver
does not apply. The principle being simple that by consent one
cannot confer jurisdiction on authority which lacks inherent
subject matter jurisdiction. The provisions ensure that conflict
between Assessing Officers having concurrent jurisdictions is
avoid and curtailed and the assessment proceeding do not get
misdirected on side issues. Such deviation should be avoided. It
is also clear that question of jurisdiction cannot be made
subject matter of appeal, as the issue has to be decided on the
administrative side by the Commissioner/Commissioners/
Board. Appeal can, however, be filed questioning the action of
the Assessing Officer in not following the procedure
mentioned/stipulated in Section 124. In Wallace Brothers &
Co. Ltd. v. CIT [1945] 13 ITR 39, Federal Court had held that
the objection to place of assessment could not be raised in an
appeal against the assessment under the Income Tax Act, 1922.
This view was affirmed by the Supreme Court in RaiBahadur
Seth Teomal Vs. The Commissioner of Income Tax,[1959] 36
ITR 9(SC) holding that the objection as to the place of
objection under the 1922 Act could not be made a subject or
issue before the appellate forums including the Tribunal and
reference to the High Court. Thus, the question of place or
authority of the particular Assessing Officer was the matter of
administrative convenience and not strictly a matter of subject
matter jurisdiction and where there was an error or erroneous
exercise by the Assessing Officer/Commissioner
notwithstanding the challenge within stipulated time, it could
be corrected by way of writ jurisdiction. The position is no
different under the Act i.e. Income Tax Act 1961, as was
WP(C) 11844/2016 Page 15 of 29
elucidated by a Division Bench of this Court in Kanji Mal &
Sons vs. C.I.T. (1982) 138 ITR 391 (Del), wherein reference to
said two decisions was made and it was observed that if the
assessee fails to raise objection before the Income Tax Officer
within the time, he will be shut out from raising the question
altogether. Further, if the issue was raised and decided by the
Commissioner, the decision would be final and cannot be
questioned in the appellate forums but where the Income Tax
Officer does not refer the question to the Commissioner, the
following proposition emerges:
"But where he raises the issue but the ITO does not refer
the question to the CIT as in the present case (or the CIT
or the Board does not decide the question before the
assessment is completed) what will be the result of such
failure ? Clearly, one answer to the question would be
that this failure should not be held to vitiate the
assessment altogether and that it should be open to the
appellate authority to set aside the assessment for being
redone in accordance with law after having the matter
referred to the CIT and obtaining his decision. There is
nothing wrong in adopting this course and it will not
prejudice anyone. By adopting this course, the appellate
authority will not be deciding the question of jurisdiction
itself but will only be getting it done by the appropriate
authority. The appellate order will not also help the
department in any way if eventually the CIT (or the
Board) comes to the conclusion that the ITO, who
completed the assessment, had no jurisdiction in the
matter and it will not confer any right on any other ITO
having jurisdiction to proceed against the assessee, if he
is otherwise not competent to do so. It will only help the
department in the event of the CIT (or the Board) coming
WP(C) 11844/2016 Page 16 of 29
to the conclusion that the ITO who completed the
assessment had the jurisdiction so to do.
The above approach to the issue derives support from the
recent decision of the Supreme Court in the case of
KapurchandShrimal v. CIT [1981]131ITR451. In that
case (under the 1922 Act) the ITO completed the
assessments of an HUF without disposing of the claim
for partition that had been made by the members of the
family. Before the Tribunal, the assessee contended that
the assessments should be cancelled but the department
contended that even if there had been a violation of s.
25A of the Act the proper order to be passed was either
to direct the ITO to give effect to Section 25A or to set
aside the assessments with a direction to the ITO to pass
fresh orders of assessment. The Tribunal came to the
conclusion that the assessments were in clear violation of
the procedure prescribed for that purpose in s. 25A and
cancelled the same. The Tribunal added : "We do not
consider it necessary to direct first assessments. It would
be open to the ITO to do so if the law otherwise so
permits."
The Supreme Court held that this was not the right
procedure to be adopted. It observed as follows (p.460) :
"The Tribunal was, Therefore, right in holding that the
assessments in question were liable to be set aside as
there was no compliance with s. 25A(1) of the Act. It is,
however, difficult to agree with the submission made on
behalf of the assessee that the duty of the Tribunal ends
with making a declaration that the assessments are illegal
and it has no duty to issue any further direction. It is well
known that an appellate authority has the jurisdiction as
well as the duty to correct all errors in the proceedings
under appeal and to issue, if necessary, appropriate
WP(C) 11844/2016 Page 17 of 29
directions to the authority against whose decision the
appeal is preferred to dispose of the whole or any part of
the matter afresh unless forbidden from doing so by the
statute. The statute does not say that such a direction
cannot be issued by the appellate authority in a case of
this nature. In interpreting s. 25A(1), we cannot also be
oblivious to cases where there is a possibility of claims
of partition being made almost at the end of the period
within which assessments can be completed making it
impossible for the ITO to hold an inquiry as required by
s. 25A(1) of the Act by following the procedure
prescribed therefor. We, however, do not propose to
express any opinion on the consequence that may ensue
in a case where the claim of partition is made at a very
late stage where it may not be reasonably possible at all
to complete the inquiry before the last date before which
the assessment must be completed. In the instant case,
however, since it is not established that the claim was a
belated one, the proper order to be passed is to set aside
the assessments and to direct the ITO to make
assessments in accordance with the procedure prescribed
by law. The Tribunal, Therefore, erred in merely
cancelling the assessment orders and in not issuing
further directions as stated above."
It was further observed:-
"It is, however, possible to look at the matter from
another point of view. It can be said that the issue
involved is one of jurisdiction and when an assessed puts
it in challenge immediately he receives a notice or files a
return, it must be resolved one way or the other in the
manner provided for in the statute before the ITO can
assume jurisdiction to proceed further and complete an
assessment. The statute requires this to be done before
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the assessment is made. A failure to do so will render the
assessment null and void and without jurisdiction as held
in Dina NathHemraj v. CIT [1927] 2 ITC 304 (All)
which has been referred to and in no way disapproved in
Teomal's case [1959]36ITR9(SC). Once the ITO fails to
follow the statutory course prescribed before assessment,
it can be said, he misses the bus and cannot be given a
second chance to rectify matters. It appears that the
Tribunal was inclined to accept this line of argument and
to hold "that the AAC could not have rendered an
assessment which was illegal into a legal assessment by
putting the clock back, so to speak, and enabling the
Commissioner to decide the question of jurisdiction." In
the view of the Tribunal, "for the exercise of the
Commissioner's jurisdiction, the sands had clearly run
not". It is for this reason that the Tribunal also said that
the department could not rely upon Jajodia's case
[1971]79ITR505(SC) to uphold the validity of a direction
of the redoing of the assessment."
However, in the facts of the said case, the Division Bench
refrained from expressing their final conclusion on the question
raised, though they were inclined to accept the former view that
the assessment would not be a nullity, as the order of the
Tribunal in the said case had attained finality and there was no
reference at the instance of the Commissioner. It would be also
important to reproduce the conclusion drawn by the Division
Bench of the High Court on the said aspect which reads:-
"(2) The failure of the ITO to follow the above procedure
may not render the assessment invalid. A view is
possible that, in appeal, it is open to the AAC or the
Tribunal to set aside the assessment and direct a fresh
assessment after following the procedure mentioned in
s.124(4) & (6) provided such a direction does not
WP(C) 11844/2016 Page 19 of 29
prejudice or affect the right of the assessee to challenge
the reassessment as not being in accordance with any
other provision of the Act. It is, however, not necessary
to decide this question as the view of the Tribunal seems
to be that such an assessment would be invalid and this
matter is not in issue before us."
35. The said issue directly arises before us in the present
appeals and it is time we give affirmative approval to the
aforesaid principle as the question has been raised by the
Commissioner. Reasons for the same are mentioned by the
Division Bench of this Court in Kanji Mal's case (supra) and
is also apparent and clear to us. Sub-section (4) and (6) of
Section 124 and for that matter sub-section (2) and (4) of
Section 124 after amendment w.e.f. 1st April, 1988 are
procedural sections. They relate to administration and exercise
of powers/authority by the Assessing Officers/Income Tax
Officers and are not part of the substantive law. That the Act
i.e. Income Tax Act 1961 being a complete code deals with
substantive and procedural aspects. Section 120/124/127
govern the process of procedure for assessment and not the
subject matter or its purpose. They relate to conduct of the
Assessing Officer/Income Tax Officers and the assessees in
respect of the assessment proceedings. It is a matter of merely
a process. A irregularity in procedure need not result in
annulment unless the statute specifically stipulates to the
contrary. The appellate authorities have right to put a clock
back and direct the Income Tax Officer/Assessing Officer to
follow the procedure notwithstanding the difference between
mandatory and directory procedural norms. In Grindlays Bank
vs. Income Tax Officer AIR 1980 656 (SC), the Supreme
Court quashed the assessment order but then issued directions
to make fresh assessment in the circumstances of the case. The
said principle has been followed in cases of violation of
WP(C) 11844/2016 Page 20 of 29
principles of natural justice wherein an order of remit/remand
when justified are passed. The courts have taken recourse of
pragmatism and exigencies of the situation rather than legalistic
approach of void and voidable (see Principle of Administrative
Law, M.P. Jain and S.N. Jain, Fifth Edition, 2007 at pages 592-
95).
36. In Budhia Swain and Ors.Vs. GopinathDev and
Ors.(1999) 4 SCC 396, it was highlighted that distinction exists
and was well recognized between lack of jurisdiction and mere
error in exercise of jurisdiction. Lack of jurisdiction strikes at
the very root of the action/act and want of jurisdiction might
vitiate proceedings rendering the orders passed and exercise
thereof, a nullity. But a mere error in exercise of jurisdiction
would not vitiate the legality and validity of the proceedings
and the said order was valid unless set aside in the manner
known to law by laying a challenge, subject to law of
limitation. The following portion of HiraLalPatni vs. Kali
Nath, AIR 1962 SC 199 was quoted:
"... The validity of a decree can be challenged in
execution proceedings only on the ground that the court
which passed the decree was lacking in inherent
jurisdiction in the sense that it could not have seisin of
the case because the subject matter was wholly foreign
to its jurisdiction or that the defendant was dead at the
time the suit had been instituted or decree passed, or
some such other ground which could have the effect of
rendering the court entirely lacking in jurisdiction in
respect of the subject matter of the suit or over the
parties to it."
37. The view we have taken, finds support from the decision
of the Patna High Court in MahalliramRamniranjan Das vs.
WP(C) 11844/2016 Page 21 of 29
CIT (1985) 156 ITR 885, wherein the decision of Delhi High
Court in Kanji Mal & Son's case (supra) was referred to.
Reference was also made to the decision of the Supreme Court
in Guduthur Bros. vs. ITO (1960) 40 ITR 298 (SC), and the
matter was remanded to the authority to continue with the
proceedings from the stage irregularity had occurred. It was
observed that the tribunal was not right in annulling the
assessment. It would be also appropriate here to refer to the
decision in Hindustan Transport Co. vs. Inspecting Asstt.
Commissioner of Income Tax and Anr. (1991) 189 ITR 326 of
the Allahabad High Court-Lucknow Bench, wherein it has been
observed as under:-
"A survey of the above provisions of the Act highlights
the following situations. After creating the various
Income Tax authorities, the Act does not prescribe their
respective jurisdiction or functions. Any case can be
dealt with by any Income Tax authority with the possible
exception of the Board. Accordingly, the various Income
Tax authorities are of co-ordinate jurisdiction. What
function or functions, which authority or officer, shall
perform is left to be decided either by the Board or by
the Commissioner. On what principles the Board and the
Commissioner will allocate the functions is not indicated
in the Act. The principle is, however, apparent from the
nature of the enactment. The Act has been enacted with
a view to collect revenue. Income Tax is the main source
of revenue for the State. It is through revenue that the
machinery of the State is run. It is desirable that the tax
should be collected as early as possible. Collection of tax
is preceded by assessment thereof. It is consequently
desirable that the assessment proceedings should be
completed expeditiously but expeditious disposal of an
assessment does not mean that the assessee may be put
to unwarranted harassment or prejudice. Therefore, the
Board and the Commissioner shall take into account the
convenience of the assessee also. It is with this purpose
WP(C) 11844/2016 Page 22 of 29
in view that it has been provided in Sub-section (1) of
Section 127 that, whenever possible, an opportunity of
hearing may be given to the assessee while transferring a
case from one place to another. Since the assessee does
not suffer any inconvenience or prejudice if a case is
transferred locally, no such opportunity has been
prescribed. From these provisions it is obvious that the
Board and the Commissioner will exercise the power of
allocation of functions to various authorities or officers
in the exigency of tax collection with due regard to the
convenience of the assessee. In other words, the
allocation is a measure of administrative convenience. In
such a situation, the concept of jurisdiction cannot be
imported and, certainly, not in the sense of invalidating
the resultant action on account of the defect in the
exercise of functions.
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 up to
which the plea of jurisdiction may be raised. As
provided in Section 124(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."
WP(C) 11844/2016 Page 23 of 29
38. In Commissioner of Income Tax vs.
ShivkumarAgrawal (1990) 186 ITR 734 (Orissa), it was held
that imposition of penalty by the Assistant Commissioner in
view of the amendment was without jurisdiction in light of an
earlier judgment but there was no dispute about validity of
initiation of the said proceedings. Once proceedings were
validly initiated but disposed of by an officer having no
jurisdiction, the proceedings do not come to an end but should
be finalized by an officer having jurisdiction. Therefore, while
accepting the decision of the tribunal on the question of
cancellation of penalty, the High Court held that the
proceedings had not been finalized and could be finalized by
the Income Tax Officer. In the present case, proceedings were
initiated both by the AO, Delhi and ITO, Dimapur. Even if it
is assumed that the proceedings initiated by AO, Delhi were
not in accordance with law, there is no finding and indeed the
respondent did not contest the proceedings initiated by ITO,
Dimapur. ITO, Dimapur had accepted that the assessment
order should be passed by AO, Delhi. Even if the said
opinion/belief was wrong, it would not affect the initial
initiation of proceedings by ITO, Dimapur, who had passed the
assessment orders in the second round.
39. A Division Bench of Bombay High Court in
Commissioner of Income Tax vs. BharatkumarModi (2000)
246 ITR 693, referred to the well settled principle of law;
setting out the difference between lack of jurisdiction and
irregular exercise of authority/ jurisdiction. Proceedings are a
nullity when the authority taking it, has a no power to have
seisin over the case. But an order is not a nullity or in exercise
of void abintio jurisdiction, when the Assessing Officer does
not confront the assessee with the material in his possession.
The said error is an irregularity which could be corrected by
remitting the matter. Powers of annulment and power to set
WP(C) 11844/2016 Page 24 of 29
aside and remit the case, have to be exercised keeping in mind
the distinction between lack of jurisdiction and irregularity in
exercise of authority/jurisdiction. The latter can be rectified
and should be rectified as early as possible. Annulment of
assessment would mean that the entire assessment proceedings
would become ab initio void and the consequences were
different from merely setting aside."
18. S.S. Ahluwalia (supra), examines several decisions which were relied
upon by the assessee in the said case and were held to be not germane and
applicable. This decision also explains provisions of Section 127 of the Act
and scope and ambit of the said power, to observe that the section does not
speak of the transfer of jurisdiction but transfer of case as defined in Section
127. Expression "concurrent jurisdiction" is mentioned in sub-section (3) to
Section 127 of the Act. Elucidating the legal effect of Sections 120, 124
and 127 of the Act, it was observed in S.S. Ahluwalia (Supra) :-
"(13)The provisions indicate that Sections120, 124 and 127 of
the Act recognizes flexibility and choice, both with the assessee
and the authorities i.e. the Assessing Office before whom return
of income could be filed and assessment could be made. The
Assessing Officer within whose area an assessee was carrying
on business, resided or otherwise income had accrued or arisen
( in the last case, subject to the limitation noticed above) has
jurisdiction. Similarly, the Assessing Officer also has authority
due to class of income or nature and type of business. The Act,
therefore, recognized multiple or concurrent jurisdictions.
Provisions of Section124 ensure and prevent two assessments
by different assessing officers, having or enforcing
concurrent jurisdiction. There cannot be and the Act does not
envisage two assessments for the same year by different
officers. (Reassessment order can be by a different officer)."
WP(C) 11844/2016 Page 25 of 29
19. We would reiterate that sub-section (1) to Section 124 states that the
Assessing Officer would have jurisdiction over the area in terms of any
direction or order issued under sub-section (1) or sub-section (2) to Section
120 of the Act. Jurisdiction would depend upon the place where the person
carries on business or profession or the area in which he is residing. Sub-
section (3) clearly states that no person can call in question jurisdiction of an
Assessing Officer in case of non-compliance and/or after the period
stipulated in clauses (a) and (b), which as observed in S.S. Ahluwalia
(supra) would negate and reject arguments predicated on lack of subject
matter jurisdiction. Where an assessee questions jurisdiction of the
Assessing Officer within the time limit and in terms of sub-section (3), and
the Assessing Officer is not satisfied with the correctness of the claim, he is
required to refer the matter for determination under sub-section (2) before
the assessment is made. Reference of matter under sub-section (2) would
not be required when Assessing Officer accepts the claim of the assessee
and transfers the case to another Assessing Officer in view the objection by
the assessee. (In terms of sub-section (3) to Section 124 of the Act, the
petitioner had lost his right to question jurisdiction of the Income Tax
Officer, Ward No. 1(1), Noida.)
20. Sub-section (5) to Section 124, though limited in scope, would also
be applicable in the facts and circumstances of the present case as the
Income-Tax Officer, Ward-1 (1), Noida had the power to assess income
accruing or arising 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 petitioner's place of work. Section 124(5) of the
Act saves assessment made by an assessing officer provided that the
WP(C) 11844/2016 Page 26 of 29
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 Kanjimal & Sons Vs. Commissioner of
Income Tax, New Delhi, (1982) 138 ITR 391 (Del)]. Thus, it is necessary
that the Assessing Officers having concurrent jurisdiction ensure that only
one of them proceeds and adjudicate. This is the purport and objective
behind sub-section (2) to Section 124 of the Act.
21. Contention of the petitioner that the transfer by Income-Tax Officer,
Ward-1(1), Noida to Income-Tax Officer, Ward-58 (2), Delhi required an
order under Section 127 of the Act is fallacious and without merit. Section
127 relates to transfer of case from one Assessing Officer having
jurisdiction to another Assessing Officer, who is otherwise not having
jurisdiction as per directions of the Board under Section 120 and Section
124 of the Act. Under sub-section (1), transfer order under Section 127 can
be passed by the Director General, Chief Commissioner or Commissioners
from one Assessing Officer to another Assessing Officer subordinated to
them. Sub-section (2) applies where the Assessing Officer to whom the
case is to be transferred is not subordinated to the same Director General,
Chief Commissioner or Commissioners of the Assessing Officer from
whom the case is to be transferred. This is not a case of a transfer under
Section 127 of the Act. This is a case in which the assessee had raised an
objection stating that the Income-Tax Officer, Ward-1 (1), Noida should not
continue with the assessment as the petitioner-assessee was regularly filing
returns with the Income-Tax Officer, Ward-58 (2), Delhi. Objection as
WP(C) 11844/2016 Page 27 of 29
raised were treated as made in terms of sub-section (3) to Section 124,
notwithstanding the fact that there was delay and non-compliance. The
Income-Tax Officer, Ward-1 (1), Noida accepted the request/prayer of the
petitioner and had transferred pending proceeding to the Assessing Officer,
Ward-58 (2), Delhi. Therefore, there was no need to invoke and follow the
procedure mentioned in sub-section (2) to Section 127 of the Act. Section
127 of the Act would come into play when the case is to be transferred from
the Assessing Officer having jurisdiction to a third officer not having
jurisdiction over an assessee (a case) in terms of the directions of the Board
under section 120 of the Act. Section 127 of the Act could also apply when
the department wants transfer of a case, and Sections 120 and 124 of the Act
are not attracted.
22. Counsel for the petitioner had relied upon judgment of the Supreme
Court in Hasham Abbas Sayyad Vs. Usman Abbas Sayyad & Ors., (2007)
2 SCC 355 which draws distinction between a person or authority lacking
inherent jurisdiction which makes the order passed by them a nullity, and
therefore, principle of estoppel, waiver and acquiescence or even res
judicata which are procedural in nature, would not have any application.
Such orders passed without jurisdiction would suffer lack of coram non
judice and cannot be given effect to. This decision refers to Harshad
Chiman Lal Modi Vs. DLF Universal Ltd. & Anr., (2005) 7 SCC 791,
which classifies and draws jurisprudential difference amongst - territorial or
local jurisdiction; pecuniary jurisdiction; and jurisdiction over the subject
matter. As far as territorial or pecuniary jurisdictions are concerned,
objection should be taken at the earliest possible opportunity and /or before
WP(C) 11844/2016 Page 28 of 29
the settlement of issues and not at the subsequent stage. Jurisdiction as to
the subject matter is distinct and stands on a different footing.
23. In view of the above discussion, objections as to the jurisdiction of
assessing officer in the present case cannot be equated with lack of subject
matter jurisdiction. They relate to place of assessment. Income-Tax Officer
Ward 1(1), Noida would not per se lack jurisdiction, albeit he had
concurrent jurisdiction with the Income-Tax Officer Ward 36(1)/58, Delhi.
In the facts of the present case the contention raised about the lack of
jurisdiction would not justify quashing the notice under Section 147 /148 of
the Act.
24. Accordingly, we do not find any merit in the present petition and the
same is dismissed. Stay order is vacated. However, in the facts of the
present case there would be no order as to costs.
(SANJIV KHANNA)
JUDGE
(CHANDER SHEKHAR)
JUDGE
June 1st, 2018
Ssn/VKR
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