Can objections as to the jurisdiction of assessing officer be equated with lack of subject matter jurisdiction? - Held No
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.
As far as territorial or pecuniary jurisdictions are concerned, objection should be taken at the earliest possible opportunity and /or before the settlement of issues and not at the subsequent stage. Jurisdiction as to the subject matter is distinct and stands on a different footing.
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.
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 Incometax 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 Incometax 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 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 18th 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 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 19th 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 18 th 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 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 issued three letters under Section 133(6) dated 16 th August, 2015, 14 th December, 2015 and 11 th 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 14 th 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 IncomeTax 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.
(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 IncomeTax 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 DelhiXVI 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 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.
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. 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 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.”
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 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).”
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. Subsection (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 petitionerassessee 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 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 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 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.
Cases Referred to
1. RaiBahadur Seth Teomal Vs. The Commissioner of Income Tax, 36 ITR 9(SC)
2. Kanji Mal & Sons vs. C.I.T. (1982) 138 ITR 391 (Del)
3. Grindlays Bank vs. Income Tax Officer AIR 1980 656 (SC)
4. Budhia Swain and Ors.Vs. GopinathDev and Ors.(1999) 4 SCC 396
5. MahalliramRamniranjan Das vs. CIT (1985) 156 ITR 885
6. Guduthur Bros. vs. ITO (1960) 40 ITR 298 (SC)
YOU CAN ALSO SEARCH FOR YOUR DESIRED TOPICS:
If You Appreciate What We Do Here On TaxPundit, You Should Consider:
- Subscibe to our Case Laws Plans (it starts at only Rs. 200/month).
- Support us by purchasing our Appeal Plans for drafting and filing online appeals.
- Support us by purchasing Banner Ads on this website.
- Stay Connected to: Twitter | Facebook | Google Plus | LinkedIn | Youtube
- Subscribe to our email updates: Sign Up Now
- Spend some time on our Forum and start participating- Visit Forum Now
- Support us by sending Unreported Case Laws, Circulars, Notifications, Case Analysis, Articles, Opinions etc.: Send Useful Content
We are thankful for your never ending support.