2023 (2) TMI 531 - HC - Income Tax

Jurisdiction of ACIT Bhubaneswar consequent to transfer of case - Opposite Party No.1 can exercise jurisdiction over the Petitioner-VRL which is a non-resident company incorporated in UK - ACIT at Bhubaneswar exercising jurisdiction over the Petitioner - HELD THAT - A perusal of Section 127 (2) indicates that it envisages transfer of cases of an Assessee to an AO not subordinate to the same Commissioner, who originally exercises jurisdiction over the Assessee. In the present case, it is CIT (IT)-1, New Delhi who would have to pass orders transferring jurisdiction of the cases of VRL to O.P. No.1 in Bhubaneswar. The latter is not subordinate to the CIT (IT)-1, New Delhi, but to his counterpart in Kolkata. In such event u/s 127(2)(a), no such transfer of jurisdiction can take place without affording the Assessee a reasonable opportunity of being heard in the matter. Department in the present case has not been able to produce any such order, transferring the jurisdiction vis- -vis VRL from the CIT (IT)-1, New Delhi to Opposite Party No.1 in Bhubaneswar. While in terms of Section 120 of the Act, it might be possible for the CIT (IT), New Delhi to transfer jurisdiction from one Assessing Officer to another within his jurisdiction, there is no power u/s 120 of the IT Act to transfer jurisdiction to an AO who is not subordinate to the CIT (IT), Delhi. For that purpose, it is only Section 127(2)(a) of the IT Act that could apply. In similar circumstances, the Delhi High Court in an order in Louis Dreyfus Company Asia Pte. Ltd. v. Commissioner of Income Tax (International Taxation-2 2022 (5) TMI 1505 - DELHI HIGH COURT quashed the notices issued to the Petitioner by the DCIT in Mumbai when in fact that case was subject to the jurisdiction of the DCIT (IT) in New Delhi. For the aforementioned reasons, the Court is not satisfied that the Department has been able to explain the legal basis for Opposite Party No.1 i.e. ACIT at Bhubaneswar exercising jurisdiction over the Petitioner and issuing the impugned notices under Section 148 - The Court, therefore, concludes that the impugned notices were issued by O.P. No.1 without jurisdiction and, therefore, are unsustainable in law. The impugned notices and all proceedings consequent thereto are hereby quashed. This will however not preclude the Department from proceeding hereafter in accordance with law.

Summary

Issues:
Challenge to jurisdiction of Opposite Party No.1 to issue notices under Section 148 of the Income Tax Act for various Assessment Years.

Analysis:
1. The petitioner, a non-resident company incorporated in the UK, challenged the jurisdiction of Opposite Party No.1 to issue notices for reassessment for the AYs 2013-14 to 2017-18. The petitioner argued that its jurisdiction was assigned to the DCIT in New Delhi, not Bhubaneswar.

2. The petitioner contended that the reassessment was based on incorrect premises. The Department relied on Form 15CA filed by Vedanta Limited and an order related to Vedanta Limited's tax matters, which were under different jurisdictions than Bhubaneswar. This raised questions about the jurisdiction of Opposite Party No.1.

3. The Department claimed jurisdiction over the petitioner based on an order proposing the transfer of jurisdiction from Delhi to Bhubaneswar. However, the petitioner denied having any business operations in Jharsuguda, Odisha, as claimed by the Department. The petitioner's activities were not based in Jharsuguda, and the reassessment was not related to any transactions in that location.

4. The legal basis for Opposite Party No.1's jurisdiction was further challenged by the petitioner, highlighting the lack of a formal order transferring jurisdiction from Delhi to Bhubaneswar. The absence of such an order raised doubts about the validity of the notices issued by Opposite Party No.1.

5. The Court analyzed the relevant legal provisions, including Section 127 of the Income Tax Act, which governs the transfer of cases between Assessing Officers. Without a proper order transferring jurisdiction, the Court found that Opposite Party No.1 did not have the legal authority to issue the notices for reassessment.

6. Citing a similar case where notices were quashed due to jurisdictional issues, the Court concluded that the impugned notices were issued without jurisdiction. As a result, the Court quashed the notices and subsequent proceedings, allowing the Department to proceed lawfully in the future.

7. The judgment highlighted the importance of jurisdictional clarity in tax matters to ensure fairness and adherence to legal procedures. The Court's decision emphasized the need for proper legal basis and jurisdictional authority when initiating reassessment proceedings.