1973 (5) TMI 29 - HC - Income Tax

Summary

Issues: Jurisdiction of Income-tax Officer to issue notices under section 206 of the Income-tax Act, 1961 and validity of penalty proceedings under section 276(b) for failure to furnish annual return.

Analysis:

The petitioner challenged a notice from the Income-tax Officer calling for the annual return for the financial year 1967-68. The petitioner, managing a tea estate, argued that the Officer lacked jurisdiction as the estate was assessed by a different Officer. The key issue was whether the Officer had the authority to issue the notices and initiate penalty proceedings under section 276(b) of the Act.

The Act mandates employers to deduct income tax on salaries and furnish annual returns under section 206 within 30 days from March 31 each year. Failure to comply may result in penalties under section 276(b) of the Act. The Rules specify the procedure for filing returns, including the form and delivery to the designated Income-tax Officer.

The respondents argued that an order by the Commissioner granted jurisdiction to the Officer for employees within Siliguri's revenue sub-division. However, the Court found that this order did not confer the authority to demand a return under section 206. The absence of an order under section 126 of the Act assigning jurisdiction to the Officer was crucial.

The Court emphasized that the Officer must have the competence and jurisdiction as per Rule 32(2) of the Rules to demand the return. The Officer's reliance on Rule 32(2)(ii) was deemed unsubstantiated as the petitioner's office responsible for paying salaries was not within the Officer's jurisdiction.

Consequently, the Court quashed the notices issued by the Officer and ordered to forbear from acting on them. The ruling did not address the petitioner's liability for penalties or consequences under the Act, preserving the right of the appropriate Officer to take lawful actions. The judgment was made absolute without costs.

In conclusion, the Court's decision centered on the Officer's lack of jurisdiction to demand the annual return under section 206 of the Act, leading to the nullification of the notices and penalty proceedings initiated by the Officer.