2013 (6) TMI 228 - HC - Income Tax

Inquiries u/s 131(1A) - Jurisdiction - Notice issued by DDIT Moradabad (UP) - Assessee is filing returns in Delhi - Held that - the Assessing Officer has exclusive jurisdiction in respect of a person residing within his territory under Section 124 of the Act. While assessing, the Assessing Officer can exercise the powers under Section 132 and 135 also. But powers of the Assessing Officer under Section 132 and 135 of the Act are not exclusive. Under Section 120 (1) of the Act the Board is competent to assign jurisdiction on one or more authority. Section 135 provides that income-tax authority, while making an inquiry, shall have all the powers of Assessing Officers. Thus powers under Section 132 and 135 of the Act can be concurrently exercised by the Assessing Officer as well as other income-tax authorities. Jurisdiction of the Director is concurrent with the powers of Assessing Officer and has not been excluded under the Act. Thus the notices issued by Deputy Director of Income-tax(Investigation) Moradabad (respondent-2) were well within his jurisdiction. Pendency of assessment proceedings - held that - Use of the words notwithstanding that no proceedings with respect of such person or class of person are pending before him or any other income-tax authority used under Section 131 (1A), makes it clear that for exercising the jurisdiction under this section pendency of any matter before the income-tax authority is not a condition precedent. Person versus assessee - held that - Learned counsel for the petitioner reads the word person as assessee , which is not correct reading of section. - The word assessee is defined in Section 2(7) of the Act, which means by whom any tax or any other sum of money is payable under the Act. It is an inclusive definition. On a plain and simple reading of the aforesaid Sub-section (1A) of Section 131, the irresistible conclusion is that any person who is suspected to have concealed the income etc. within jurisdiction of the authorities mentioned in Sub-section (1A) of Section 131 of the Act, the authority concerned may issue notice for the purposes of investigation under Section 131(1A) of the Act. - Decided against the assessee.

Summary

Issues Involved:
1. Jurisdiction of Deputy Director of Income Tax (Investigation), Moradabad to issue notices under Section 131(1A) of the Income Tax Act, 1961.
2. Requirement of recording reasons to suspect before issuing notices under Section 131(1A).
3. Interpretation of "person" vs. "assessee" under Section 131(1A).

Detailed Analysis:

1. Jurisdiction of Deputy Director of Income Tax (Investigation), Moradabad:
The petitioners challenged the jurisdiction of the Deputy Director of Income Tax (Investigation), Moradabad, arguing that they were permanent residents of Greater Kailash, New Delhi, and filed their income tax returns there. Therefore, they claimed that the income tax authorities in Moradabad had no jurisdiction. However, the court noted that the petitioners had significant connections to Moradabad, including ancestral houses, business addresses, and bank accounts in the region. The court referred to Section 120 of the Income Tax Act, which allows the Central Board of Direct Taxes to assign jurisdiction to income tax authorities based on territorial area, persons, income, and cases. The court concluded that the Deputy Director of Income Tax (Investigation), Moradabad, had jurisdiction to issue the notices as per the notifications issued by the Central Board of Direct Taxes and the Director General of Income Tax (Investigation), Lucknow.

2. Requirement of Recording Reasons to Suspect:
The petitioners argued that the Deputy Director did not record any reasons to suspect income concealment before issuing the notices, making the exercise of power baseless. The court clarified that Section 131(1A) of the Act does not require the recording of reasons to suspect. It emphasized that subjective satisfaction based on relevant materials is sufficient. In this case, the court found that the satisfaction was based on substantial bank transactions involving large sums of money, which raised suspicion of income concealment. Therefore, the court held that the notices were validly issued based on the subjective satisfaction of the Deputy Director.

3. Interpretation of "Person" vs. "Assessee":
The petitioners contended that only an "assessee" could be subjected to notices under Section 131(1A), not a "person." The court rejected this argument, stating that the terms "person" and "assessee" have distinct definitions under the Income Tax Act. Section 2(31) defines "person" broadly to include individuals, companies, firms, and other entities, while Section 2(7) defines "assessee" more narrowly. The court emphasized that Section 131(1A) uses the term "person," which has a wider connotation and includes any individual or entity suspected of concealing income. The court concluded that the Deputy Director had the authority to issue notices to any person within his jurisdiction, regardless of whether they were an assessee or not.

Conclusion:
The court dismissed the writ petitions, holding that the Deputy Director of Income Tax (Investigation), Moradabad, had the jurisdiction to issue the notices under Section 131(1A) of the Income Tax Act. The court also clarified that the subjective satisfaction of the authority based on relevant materials was sufficient to issue the notices, and there was no requirement to record reasons to suspect. Additionally, the court affirmed that the term "person" in Section 131(1A) includes any individual or entity, not just an assessee, thereby validating the notices issued to the petitioners.