By TIOL News Service

NEW DELHI, JUNE 04, 2018: THE ISSUE is - Whether the term "jurisdiction" u/s 120 can be used in its strict sense so as to confer an exclusive jurisdiction to a specific Income Tax Authority even when no direction has been given by the CBDT. And the answer is NO.

Facts of the case:

The assessee, an individual, had returned income for the AY 2013-14 with ITO, Delhi. For the AY 2009-10, the assessee had returned income with ITO, Delhi. During the period relevant to the AY 2009-10, the Revenue in the counter-affidavit and additional affidavit had stated that based on 'Annual Information Return', information was forwarded to the ITO, Noida regarding the cash deposit in the assessee's bank account. As per bank records, the assessee had not mentioned his PAN Number. As per KYC, the assessee's address was A-32, Sector-5, Noida where as, his permanent address was FF-50, 3rd floor, Laxmi Nagar New Delhi-110092. On examining the said details, notices u/s 133(6) were issued to the assessee by the ITO, Noida. Again, another notice was issued to the assessee at the Laxmi Nagar address. I-T Inspector had visited the Laxmi Nagar address with the notice but the assessee could not be located and thereupon, the notice was affixed. ITO, Noida did not received any response and reply to those notices. Accordingly, the ITO, Noida, after recording reasons to believe, issued notice u/s 148 r/w Sec. 147 at the assessee's Noida address. However, the assessee did not file his return of income, nor did he stated that he had filed return of income for AY 2009-10 with the ITO, Delhi and was being assessed in the said Ward.

Further, notice u/s 142(1) was issued requiring the assessee to comply with the directions therein including filing of return for the AY 2009-10 and furnishing of information and documents regarding the cash deposits. The assessee belatedly responded by stating that he was regularly assessed and had returned income for AY 2009-10, with the ITO, Delhi. Accordingly, the assesse submitted that notice u/s 142(1) and "alleged" notice dated 18th February, 2016 u/s 148 were illegal and without jurisdiction. The assessee had also requested to furnish a copy of the 'reasons to believe'. The assessee, then stated that the property at Laxmi Nagar was owned by his mother and the same was sold vide registered sale deed dated 22nd October, 2008 hence, service by affixating the notice at Laxmi Nagar address was improper. The assessee also insisted that he was not served with letters sent at the Noida address since, the same was wrongly addressed to Abhishek Jaina instead of Abhishek Jain.

High Court held that,

++ the assessee had deliberately not responded at least to the notice dated 18th February, 2016 u/s 148. This muteness and belated response was intentional and malevolent as the assessee wanted to object to jurisdiction of the ITO post 31st March, 2016. Thereafter, in view of time mandate in Sec. 149, ITO, could not have issued fresh notice u/s 148. Contention of the assessee predicated on lack of jurisdiction of the ITO 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 in the case of S.S. Ahluwalia;

++ Sec. 120 relates to jurisdiction of the I-T authorities, which stipulates that 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 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; 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;

++ Sec. 120 by necessary implication postulates and acknowledges that multiple or more than one AO could exercise jurisdiction over particular assessee. Concurrent jurisdictions are therefore not an anathema but an accepted position under the Act. The term "jurisdiction" in Sec. 120 has been used loosely and not in strict sense to confer jurisdiction exclusively to a specified and single AO, to the exclusion of others with concurrent jurisdiction. It would refer to "place of assessment", a term used in the Income Tax Act, 1922. Sec. 120(5) again affirms and accepts that there can be concurrent jurisdiction of two or more AOs who would exercise jurisdiction over a particular assessee in terms of the four-fold criteria stated u/s 120(3). Second part of sub-section (5) states that where powers and functions are exercised concurrently by AOs of different classes, then the higher authority can direct the lower authority in rank amongst them to exercise the powers and functions;

++ concurrent jurisdiction is reflected and recognized in Sec. 124, which was interpreted in S.S. Ahluwalia wherein it was held that "... Sec. 124 postulates waiver of objection to assumption of jurisdiction by the AO. 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 AOs 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 AO in not following the procedure mentioned/stipulated in Sec. 124 ..." ;

++ this is not a case of a transfer u/s 127. This is a case in which the assessee had raised an objection stating that the ITO should not continue with the assessment as the assessee was regularly filing returns with the ITO, Delhi. Objection as raised were treated as made in terms of Sec. 124(3), notwithstanding the fact that there was delay and non-compliance. The ITO, Noida accepted the request/prayer of the assessee and had transferred pending proceeding to the AO, Delhi. Therefore, there was no need to invoke and follow the procedure mentioned in u/s 127(2). Sec. 127 would come into play when the case is to be transferred from the AO having jurisdiction to a third officer not having jurisdiction over an assessee (a case) in terms of the directions of the Board u/s 120. Sec. 127 could also apply when the department wants transfer of a case, and Ss 120 and 124 are not attracted;

++ the Counsel for the assessee had relied upon judgment of the Supreme Court in the case of Hasham Abbas Sayyad Vs. Usman Abbas Sayyad & Ors., 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., 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. Hence, objections as to the jurisdiction of AO in the present case cannot be equated with lack of subject matter jurisdiction. They relate to place of assessment. ITO, Noida would not per se lack jurisdiction, albeit he had concurrent jurisdiction with the ITO, Delhi.

(See 2018-TIOL-1059-HC-DEL-IT)