2007 (12) TMI 476 - HC - Income Tax

Interpretation of provisions of s. 124 - Assumption of Jurisdiction with the AO - vests with the Director General or Chief CIT or CIT respectively - No objection with regard to jurisdiction of the AO raised - transferring the case of the appellant-assessee - HELD THAT - A perusal of sub-s. (3)(b) of s. 124 of the Act shows that the jurisdiction of an AO cannot be called in question by an assessee after the expiry of one month from the date on which he was served with a notice under sub-s. (1) of s. 142 of the Act or after completion of assessment which was to be earlier. It is further evident that sub-s. (4) of s. 124 has been made subject to the provisions of sub-s. (3) in case an assessee has questioned the jurisdiction of an AO. It is only in those jurisdiction that the AO is to refer the matter for determination to the Director General or the Chief CIT or the CIT as per the provisions of s. 124(2) of the Act. It is thus evident that before (sic-after) the expiry of the period of one month from the date of service of notice under sub-s. (1) of s. 142 of the Act no right to question the jurisdiction of an AO would survive. In the present case notice under s. 142(1) of the Act was issued to the appellant-assessee on 25th Feb. 1993 and the return was to be filed on or before 15th March 1993 which in fact has been filed on 1st March 1993. No objection to the jurisdiction till 6th Sept. 1994 was raised when the appellant-assessee requested for transfer of the case to Delhi. Therefore it is not possible to conclude that the AO was under obligation to refer the question of jurisdiction to the Director General or Chief CIT as per the provisions of s. 124(2) r/w s. 124(4) of the Act as is contended by learned counsel for the appellant-assessee. We are further of the view that it would not make any difference even if at one stage accounts for AY 1992-93 were transferred to New Delhi which were returned to the AO Sirsa because there was no effective transfer of record. Moreover the substantial business in the financial year 1992-93 was transacted at Sirsa. The argument that the record at one stage was transferred and therefore the assessment order passed by the AO at Sirsa is bad cannot be accepted and we have no hesitation to reject such an argument. Thus this appeal fails. The questions of law are answered against the appellant-assessee and in favour of the Revenue.

Summary

Issues:
Jurisdiction of AO under s. 124 of the IT Act, 1961.

Analysis:
The appellant-assessee challenged an order passed by the Income-tax Appellate Tribunal regarding the jurisdiction of the Assessing Officer (AO) under s. 124 of the IT Act, 1961 for the assessment year 1992-93. The appellant raised substantial questions of law related to the interpretation of s. 124, the object of the IT Act, and the administrative decision-making process prescribed under s. 124. The AO had conducted a survey at the appellant's business premises and issued a notice under s. 142(1) for filing the return of income. The AO completed the assessment, which was set aside by the CIT(A) for fresh assessment. The Tribunal upheld the AO's jurisdiction based on s. 124(3) of the Act, stating that the appellant did not question the jurisdiction during the assessment proceedings.

The appellant argued that the jurisdiction issue should have been determined by the Director General or the Chief CIT or the CIT under s. 124(4) as the appellant had questioned the AO's jurisdiction. However, the respondent contended that the case fell under s. 124(3)(b) and the appellant was not entitled to question the jurisdiction as the return was filed within the due date. The High Court analyzed s. 124 of the Act, emphasizing that an assessee cannot challenge the AO's jurisdiction after the expiry of the specified time from the notice under s. 142(1). The Court noted that no objection to jurisdiction was raised until a later stage when the appellant requested a transfer of the case to Delhi.

The Court further observed that even if the records were temporarily transferred to New Delhi, the substantial business activities for the relevant year were conducted in Sirsa. Therefore, the argument that the assessment order by the AO in Sirsa was invalid due to the temporary transfer of records was rejected. The Court concluded that the appeal failed, answering the questions of law against the appellant and in favor of the Revenue. No arguments were addressed on certain questions raised, and thus no opinion was expressed on those issues.