APPELLATE JURISDICTION OF HIGH COURT FOR INCOME TAX CASES

[Mr. M. GOVINDARAJAN]

Appeal before High Court

Section 260A of Income Tax Act, 1961 (‘Act’ for short) provides that an aggrieved person against the order of Income Tax Appellate Tribunal (‘ITAT’ for short) may file an appeal within 120 days from the receipt of the order of ITAT.  The appeal shall be in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.  The High Court may admit an appeal after the expiry of the period of 120 days if it is satisfied that there was sufficient cause for not filing the same within that period.

 Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.   The appeal shall be heard only on the question so formulated.  The respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question.    The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

The High Court may determine any issue which-

• has not been determined by the Appellate Tribunal; or
•  has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law.

Appropriate Court

The Benches of the ITAT are constituted to exercise jurisdiction over more than one State, each state having a separate High Court.  Therefore the question arises as to which High Court is the appropriate Court for filing appeal under section 260A.  Should it be the High Court of the State in which the ITAT is physically located or the High Court of the State in which the Assessee is residing and/or doing its business or the High Court where the Assessing Officer who assessed the assessee is located.   Section 260A does not specify the High Court before which an appeal would lie in cases where Tribunals operated for plurality of States.  Section 260A is open textual.

In exercise of power under sub-Section (5) of Section 255, the ITAT notified the Income Tax (Appellate Tribunal), Rules 1963. As per Rule 313, a Bench shall hold its sittings at its headquarters or at such other place as authorized by the President. Under Rule 414, a Bench shall hear and determine such appeals as the President may by order direct.  Benches are sometimes constituted in a way that their jurisdiction encompasses territories of more than one state. For example, the Allahabad Bench includes parts of Uttarakhand. The Amritsar Bench has within its jurisdiction the entire State of Jammu & Kashmir. Delhi Bench includes parts of Haryana and U.P. The Guwahati Bench comprises of Arunachal Pradesh, Meghalaya, Mizoram, Assam, Manipur, Nagaland and Tripura. Further, the Bangalore Bench excludes large parts of Karnataka such as Belgaum, Mangalore, Karwar and North Kanara, and these excluded districts form part of the Panaji Bench which includes Goa.

In ‘SETH BANARSI DASS GUPTA VERSUS COMMISSIONER OF INCOME-TAX, DELHI (CENTRAL) - 1978 (3) TMI 100 - DELHI HIGH COURT, it was held that the appropriate High Court would be the one where the Assessing Authority is situated. This judgment has been followed in subsequent cases.

Transfer of cases

Section 127 of the Act gives powers to The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner of Principal Commissioner or Commissioner to transfer any case from one or more  Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or  Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.  The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.  In such cases what is the jurisdiction of the High Court consequent upon administrative order of transfer of a ‘case’ under Section 127 of the Act from one Assessing Authority to another Assessing Officer located in a different State.

In PR. COMMISSIONER OF INCOME TAX – I, CHANDIGARH VERSUS M/S. ABC PAPERS LIMITED - 2022 (8) TMI 863 - SUPREME COURT, the assessee is a company engaged in the manufacture of writing and printing paper.  The assessee filed its income tax return for the assessment year 2008 – 2009 on 30.09.2008.  A notice under section 143(2) of the Act was issued to the assessee by the Deputy Commissioner and passed an assessment order on 30.12.2010.  The assessee, being aggrieved by the order of Deputy Commissioner, filed an appeal before Commissioner (Appeals), who allowed the appeal vide their order dated 16.02.2012. 

Against the order of Commissioner (Appeals), the Revenue filed appeal before ITAT.  The ITAT dismissed the appeal filed by the Department and upheld the order of Commissioner (Appeals).  Against this order the Revenue filed appeal before the Punjab and Haryana High Court. 

While the appeal is pending before Commissioner (Appeals) a search operation was conducted on 04.05.2011 at the office and factory of the Assessee in Chandigarh and certain places in the State of Punjab, by the Directorate of Income Tax (Investigation), Ludhiana.  The Commissioner of Income Tax (Central), Ludhiana, centralized the cases of the Assessee for the assessment years 2006-07 to 2013-14 and transferred the same to Central Circle, Ghaziabad vide his order dated 26.06.2013. 

The High Court of Punjab & Haryana by its judgment dated 07.02.2019, disposed the appeal by holding that, notwithstanding the order under Section 127 of the Act which transferred the cases of the Assessee to Chandigarh, the High Court of Punjab & Haryana would not have jurisdiction as the Assessing Officer who passed the initial assessment order is situated outside the jurisdiction of the High Court.  Therefore the High Court dismissed the appeal as not maintainable. 

Aggrieved by the decision of the High Court of Punjab & Haryana refusing to entertain the appeals against the orders of the ITAT dated 11.05.2017 and 01.09.2017, the Revenue filed the present appeals, being Civil Appeal No. 4252 of 2022 PR. COMMISSIONER OF INCOME TAX – I, CHANDIGARH VERSUS M/S. ABC PAPERS LIMITED - 2022 (8) TMI 863 - SUPREME COURT  (against the order of the High Court of Punjab & Haryana in ITA No. 517 of 2017 PR. COMMISSIONER OF INCOME TAX-1, CHANDIGARH VERSUS M/S ABC PAPERS LIMITED - 2019 (3) TMI 501 - PUNJAB AND HARYANA HIGH COURT) and Civil Appeal No. 4253 of 2022  PR. COMMISSIONER OF INCOME TAX – I, CHANDIGARH VERSUS M/S. ABC PAPERS LIMITED - 2022 (8) TMI 863 - SUPREME COURT   (against the order of the High Court of Punjab & Haryana in ITA No. 130 of 2018 PR. COMMISSIONER OF INCOME TAX-1, CHANDIGARH VERSUS M/S ABC PAPERS LIMITED - 2019 (3) TMI 501 - PUNJAB AND HARYANA HIGH COURT)) before the Supreme Court.

The Revenue also filed an appeal, being ITA No. 515 of 2019 before the High Court of Delhi against the very same order of the ITAT, New Delhi, dated 11.05.2017. The High Court of Delhi having noted the decision of the High Court of Punjab & Haryana dated 07.02.2019 holding that it does not have jurisdiction, nevertheless, dismissed the appeal by its order dated 21.05.2019 on the ground of lack of territorial jurisdiction of the High Court of Delhi.   Aggrieved against the order of Delhi High Court, the Revenue filed appeal before the Supreme Court.

The Supreme Court is to resolve the issue as to which High Court would have the jurisdiction to entertain an appeal against a decision of a Bench of the ITAT exercising jurisdiction over more than one state, particularly when case(s) of same assessment year are transferred under Section 127 of the Act.

The Supreme Court analyzed the provisions of the Act in regard to filing appeal before High Court against the order of ITAT and transfer of cases by the Administrators from one Bench of ITAT to another Bench.  The Supreme Court observed that Section 260A is open textual and does not specify the High Court before which an appeal under Section 260A of the Act would lie.    A judicial remedy must be effective, independent and at the same time certain. Certainty of forum would involve unequivocal vesting of jurisdiction to adjudicate and determine the dispute in a named forum.   A Division Bench of the High Court of Delhi in the case of Seth Banarsi Dass Gupta held that the ‘most appropriate’ High Court for filing an appeal would be the one where the Assessing Officer is located. 

The Supreme Court further observed that the appeals and references cannot be made to a High Court only on the basis that a bench of the ITAT is located within the jurisdiction of the said High Court, as it will create an anomalous situation for that as well as other High Courts.

Thus, it is well-settled that the appellate jurisdiction of a High Court under Section 260A is exercisable by a High Court within whose territorial jurisdiction the assessing officer is located.

The Supreme Court then considered the issue as to whether the jurisdiction of a High Court would also change following an order of transfer under Section 127.   Under Section 127, the authorities have the power to transfer a case either upon the request of an assessee or for their own reasons. Though the decision under Section 127 is subject to judicial review or even an appellate scrutiny, the  Court for larger reasons would avoid an interpretation that would render the appellate jurisdiction of a High Court dependent upon the executive power.

The  ITAT held that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s)

The Supreme Court held that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s).