1984 (6) TMI 106 - AT - Income Tax

Summary

Issues Involved:
1. Validity of transfer of jurisdiction under sections 123, 127, and 144B of the Income-tax Act, 1961.
2. Jurisdiction of the Inspecting Assistant Commissioner (IAC) and the Income-tax Officer (ITO) in the assessment proceedings.

Detailed Analysis:

1. Validity of Transfer of Jurisdiction under Sections 123, 127, and 144B of the Income-tax Act, 1961

The primary issue revolves around whether the transfer of jurisdiction from the ITO, B-Ward, Bhopal, to the ITO I, Indore, and subsequently from the IAC, Bhopal, to the IAC (Assessment), Indore, was valid under the provisions of the Income-tax Act, 1961.

The assessee contended that while the transfer of jurisdiction under section 127 from the ITO, Bhopal, to the ITO, Indore, was valid, there was no corresponding valid transfer of the pending reference under section 144B(1) from the IAC, Bhopal, to the IAC (Assessment), Indore. The assessee argued that the IAC (Assessment), Indore, did not automatically assume jurisdiction over the reference as a consequence of the order passed under section 127. The assessee supported this contention by citing the judgment of the Calcutta High Court in the case of ITO v. Ashoke Glass Works [1980] 125 ITR 491.

The Commissioner (Appeals) dismissed this contention, stating that the scheme of the Act did not require a separate order under section 123(1) for the transfer of a reference under section 144B from one IAC to another IAC. The Commissioner argued that the transfer of jurisdiction was automatic by reason of the existing orders under section 123, and no separate order was necessary. The Commissioner also noted that the Calcutta High Court judgment cited by the assessee was based on obiter dicta and did not directly decide the issue at hand.

2. Jurisdiction of the IAC and ITO in the Assessment Proceedings

The assessee argued that the IAC, Indore, lacked jurisdiction to issue directions under section 144B, as the jurisdiction over the reference had not been validly transferred from the IAC, Bhopal. The assessee contended that the assessment order, based on the directions of the IAC, Indore, was a nullity due to the inherent lack of jurisdiction. The assessee relied on several judicial pronouncements, including Narinder Singh Dhingra v. CIT [1973] 90 ITR 110 (Delhi), P. V. Doshi v. CIT [1978] 113 ITR 22 (Guj.), and the Special Bench decision in East Coast Marine Products (P.) Ltd. v. ITO [1983] 4 ITD 73.

The revenue's stand was that the jurisdictions of the ITO and the IAC were interlinked and general in nature, and once there was a change of jurisdiction from one ITO to another ITO, the IAC automatically assumed jurisdiction under section 144B. The revenue contended that no separate order was required for the IAC to assume jurisdiction, and any infirmity in the directions issued by the IAC, Indore, amounted to an irregularity and not a nullity.

Tribunal's Findings:

The Tribunal examined the provisions of sections 123, 124, and 127 of the Income-tax Act, 1961, and concluded that the jurisdiction of the ITO and the IAC is vested in them by the Commissioner and is not automatic or interlinked. The Tribunal noted that the transfer of jurisdiction under section 127 affected the jurisdiction of the ITO but did not automatically transfer the jurisdiction of the IAC.

The Tribunal referred to the authoritative pronouncement of the Calcutta High Court in Ashoke Glass Works' case, which held that an order under section 127(1) by itself could not affect the jurisdiction of the IAC in respect of proceedings pending before him. The Tribunal concluded that the IAC, Indore, had no jurisdiction over the assessee and could not have issued directions under section 144B. Consequently, the assessment order based on these directions was a nullity due to the lack of jurisdiction.

The Tribunal held that the assessment order and the proceedings under section 144B were void ab initio and amounted to a nullity. The orders of the lower authorities were cancelled, and the grounds raised by the assessee were allowed.

Conclusion:

The Tribunal concluded that the IAC, Indore, lacked jurisdiction to issue directions under section 144B, and the assessment order based on these directions was a nullity. The orders of the lower authorities were cancelled, and the grounds raised by the assessee were allowed.