HIGH COURT OF PUBJAB AND HARYANA

Commissioner of Income-tax, Faridabad

v.

Motorola India Ltd.

M.K. Mumar and Ajay Kumar Mittal, JJ.

I.T. Appeal No. 44 of 2005

OCTOBER 3, 2007

Section 127, read with section 120 of the Income-tax Act, 1961 - Income-tax authorities - Power to transfer cases - Assessment year 1996-1997 - Assessee filed its return of income and assessment order was passed by Assessing Officer at Bangalore - Commissioner in exercise of jurisdiction under section 263 passed his order and Tribunal allowed assessee’s appeal against that order at Bangalore - Revenue filed appeal against that order in instant Court and assessee raised a preliminary objection concerning maintainability of appeal and also to territorial jurisdiction of instant Court to entertain same - Revenue contended that jurisdiction of Bench is required to be determined by location of office of Assessing Officer, which in instant case would be at Gurgaon after transfer of case under section 127 on assessee’s request - Whether jurisdiction of Court is to be determined on basis of place of passing of assessment order by Assessing Officer and not on Assessing Officer who exercises jurisdiction over assessee after transfer of case and, therefore, assessee’s preliminary objection that instant Court had no territorial jurisdiction over an order passed by Assessing Officer at Bangalore was to be sustained - Held, yes

Circulars and Notifications:

Notification No. F No. 63-Ad (AT)/97 dated 16-9-1997.

FACTS

The assessee filed its return by determining its income after adjusting the brought forward loss and unabsorbed depreciation of earlier years as against the current income. The assessee also claimed deduction under section 80HHC out of its income earned from export business. The Assessing Officer, Bangalore completed assessment by disallowing exchange loss. The Commissioner (Bangalore) passed a revision order under section 263 holding that relief under section 80HHC can be allowed on the profits of current year as reduced by the carried forward business loss and unabsorbed depreciation. The Commissioner observed that the Assessing Officer had calculated the deduction under section 80HHC before setting off the unabsorbed loss and depreciation of earlier years against the business profit which resulted in excess relief to assessee. Accordingly, the Commissioner directed the Assessing officer to modify the assessment and the Assessing Officer passed a fresh assessment order. On appeal, the Tribunal (Bangalore) held vacated the order under section 263 holding that the order of the Assessing Officer was not prejudicial and erroneous to the interest of the revenue.

In revenue’s appeal under section 260A, the assessee raised a preliminary objection concerning maintainability of the appeal and also to territorial jurisdiction of the instant Court to entertain the same as the appeals were disposed by the Tribunal, Bangalore Bench. The revenue submitted that the assessee had requested for transfer of its area from Bangalore to Gurgaon on 2-1-2002 on the ground that the registered office of the company has shifted to Gurgaon, and the records were accordingly transferred from Bangalore to Gurgaon, under section 127 which specifically stipulate the transfer of jurisdiction of the assessee from Bangalore to Gurgaon and that all proceedings under the Act in respect of any order, which may be pending on the date of such order or direction or which may have been completed on or before such date would be covered by the expression ‘case’ as used in section 120. The revenue further emphasisted that the instant Court had jurisdiction over the assessee. As the jurisdiction of the Court is not to be determined on the basis of the place of passing of assessment order by the Assessing Officer but the Assessing Officer who exercises jurisdiction over the assessee after the transfer of the case.

HELD

It was undisputed that the returns were filed by the assessee at Bangalore and the assessment order dated 31-3-l999 was passed by the Assessing Officer at Bangalore. Even the revisional order in exercise of jurisdiction under section 263 was passed by the Commissioner at Bangalore. All other orders had been passed by the revenue officers at Bangalore. Even the appeals before the Tribunal were decided on 29-6-2004 at Bangalore. According to Note 4 under sub-rule (1) of rule 4 of the Income-tax (Appellate Tribunal) Rules, 1963 it has been stipulated that ordinary jurisdiction of the Bench is to be determined not by the business or residence of the assessee but by the location of the office of the Assessing Officer. This statutory guidance is available from the standing order dated 16-9-1997 passed under sub-rule (1) of rule 4 of the 1963 Rules. (Para 10)

Moreover, the aforementioned legal position has been laid down by the Delhi High Court in the cases of Seth Banarsi Dass Gupta v. CIT [1978] 113 ITR 817 and Suresh Desai & Associates v. CIT [1998] 2320 ITR 912/99 Taxman 114. [Para 11]

The reasoning given by the Delhi High Court in case of Seth Banarsi Dass Gupta (Supra) was to be agreed with. Accordingly, the preliminary objection raised by the assessee was sustainable. (Para 12)

It is true that transfer order under section 127 had been passed on 20-5-2005 but it would not affect the assessment framed by the Assessing Officer in respect of the relevant assessment year 1996-97. The reliance of the revenue on the Explanation to section 127 with regard to the meaning of expression ‘case’ was wholly misplaced and was liable to be rejected because section 120 does not deal with jurisdiction of the Tribunal or the High Court. (Para 13)

A conjoint reading of the Provisions of sections 120 and 127 makes it evident that the Director General or the Chief Commissioner or the Commissioner is empowered to transfer any case from one or more Assessing Officers subordinate to him to any other Assessing Officer. It also deals with the procedure when the case is transferred from one Assessing Officer subordinate to a Director General or and Chief Commissioner or the Commissioner to an Assessing Officer who is not subordinate to the same Director General, Chief Commissioner or Commissioner. The aforementioned situation and the definition of expression ‘case’ in relation to jurisdiction of an Assessing Officer is quite understandable but it has got nothing to do with the territorial jurisdiction of the Tribunal or High Courts merely because section 127 dealing with transfer has been incorporated in the same chapter. Therefore, the argument raised by the revenue was completely devoid of substance and same was to be rejected. (Para 14)

Therefore, the appeal was to be dismissed by sustaining the preliminary objection that the instant Court had no territorial jurisdiction over an order passed by the Assessing Officer at Bangalore. Accordingly, the appeals were to be returned to the revenue-appellant for their filing before the competent Court of jurisdiction in accordance with law. (Para 15)

Case Review:

Seth Banarsi Dass Gupta v. CIT (1978) 113 ITR 817 (Del) and Suresh Desai & Associates v. CIT (1998) 230 ITR 912/99 Taxman 114 (Del) - Followed.