2004 (9) TMI 93 - HC - Income Tax

Petitioner is challenging jurisdiction of the third respondent to initiate recovery proceedings including garnishee proceedings under section 226(3) - whether the third respondent forfeits his jurisdiction for recovery of arrears of tax assessed by him on account of shifting of residence by the petitioner making the officer at Bangalore the present Assessing Officer based on exhibit P3 circular issued by the Central Board of Direct Taxes in exercise of powers under section 120(1) and (2) of the Act. - It is for the third respondent to complete recovery and transfer the file or otherwise transfer the files to enable the officer at Bangalore to continue recovery proceedings. The Board is free to issue appropriate proceedings in the matter as exhibit P3 is silent about pending matters and recovery - held that garnishee proceedings are valid,

Summary

Issues:
Challenge to garnishee proceedings under section 226(3) of the Income-tax Act, 1961 based on jurisdictional grounds.

Analysis:
The petitioner contested the garnishee proceedings initiated by the third respondent for arrears of income tax assessed for the year 1998-99, arguing that after shifting residence to Bangalore, the third respondent lost jurisdiction. The petitioner relied on a circular by the Central Board of Direct Taxes regarding jurisdiction based on the place of residence. However, the Senior standing counsel for the Income-tax Department argued that the third respondent retained jurisdiction as the Assessing Officer for recovery proceedings related to assessments completed by him, even after the petitioner's relocation and subsequent rectification of assessment.

The court noted that jurisdiction over individual assessees like the petitioner is typically with officers in the area of the assessee's residence. The petitioner was initially assessed by the third respondent until the year 2001-02 when assessment was completed by an officer in Bangalore. The failure to transfer files or call for back files did not impact the third respondent's jurisdiction for recovery. The court emphasized that the third respondent completed the assessment for 1998-99 and had the authority to do so. The critical issue was whether the third respondent lost jurisdiction for recovery due to the petitioner's change of residence, making the officer in Bangalore the new Assessing Officer.

The court found that the circular relied upon by the petitioner did not address pending assessments or recovery of assessed tax upon a change of residence. As the third respondent completed the assessment for 1998-99 and rectified it post the petitioner's relocation, the court held that the third respondent retained jurisdiction as the Assessing Officer for recovery. The court suggested that the Department could transfer files to the officer in Bangalore for continued recovery proceedings. Since the garnishee proceedings were deemed valid, the third respondent was permitted to proceed with recovery and transfer files as necessary.

In conclusion, the court dismissed the original petition, affirming the validity of the garnishee proceedings and allowing the Income-tax Department to continue with recovery actions under the jurisdiction of the third respondent until file transfers were completed as per procedural requirements.