2014 (3) TMI 624 - HC - Income Tax

Jurisdiction of the ACIT to pass the order - transfer of case u/s 127 - Whether the ITAT was correct in law in holding that the order of assessment passed by the ACIT, Investigation Circle 8(1), New Delhi were without jurisdiction and therefore void ab initio Held that - As decided in KK. Loomba Versus Commissioner Of Income Tax & Ors. 1998 (11) TMI 61 - DELHI High Court - each year is separate and distinct year and in case the assessee shifts his residence or place of business or work etc. - the Assessing Officer of the place where the assessee has shifted or otherwise, will have jurisdiction and it is not necessary that an order under Section 127 of the Act should be passed This does not mean that the Assessing Officer where the returns of income were earlier filed ceases to have jurisdiction, provided the assessee has residence in his area, place of business, class, income etc. Residence can mean permanent residence as well as current or temporary residence of some permanence - There is no specific finding by the Tribunal with reference to Section 124 of the Act on the question of jurisdiction on the basis of residence, class, income etc. The AO, Delhi was wrong in assuming that as returns for the assessment years 1980-81 to 1983-84 were filed in Delhi, he would alone continue or had exclusive jurisdiction for assessment year 1985-86 onwards as well - ITO, Dimapur wrongly accepted the contention and had erroneously understood the legal provisions - the question of jurisdiction or the place of filing has to be examined each year with reference to provisions of Section 124 of the Act - thus, there was failure on the part of the Assessing Officer, Delhi and ITO, Dimapur in not following the procedure prescribed under Section 124 of the Act, but this would not make the assessment in the first round a nullity - The assessment order passed should have been set aside as was directed by CIT(Appeals) and assessments remitted for a fresh decision Decided in favour of Revenue. Jurisdiction of WTO officer - Whether the Tribunal was correct in law in holding that the Wealth Tax Officer has no jurisdiction to pass the assessment order Held that - The assessee did not challenge and object to the jurisdiction of the Assessing Officer at any stage - Reference to the Commissioner/Commissioners was not required as per the Section 124 of the Act - There was waiver and assessee had accepted jurisdiction of the AO, Delhi - Tribunal could not have held to the contrary Decided in favour of Revenue.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in Delhi.
2. Validity of assessment orders passed by AO, Delhi.
3. Compliance with procedural requirements under Sections 120, 124, and 127 of the Income Tax Act.
4. The effect of non-compliance with procedural requirements on the validity of assessment orders.
5. The impact of concurrent jurisdiction and transfer of cases between different AOs.
6. The validity of wealth tax assessments and the jurisdiction of the Wealth Tax Officer.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) in Delhi:
The respondent, an IAS officer, was assessed in Delhi from 1980-81 to 1983-84. For the assessment years 1985-86, 1986-87, and 1987-88, the AO in Delhi issued notices under Section 147/148. The respondent raised objections to the jurisdiction of AO, Delhi within the statutory time limit. Notices were issued to the respondent at his residential address in Delhi. The return for 1984-85 was filed in Dimapur, and proceedings initiated by AO, Delhi were dropped. The ITO, Dimapur issued notices under Section 148 for the assessment years 1985-86 and 1986-87, and regular assessment proceedings for 1987-88.

2. Validity of Assessment Orders Passed by AO, Delhi:
The assessment orders passed by AO, Delhi were challenged on the grounds of jurisdiction. The CIT (Appeals) set aside the assessments for non-compliance with Section 124 but allowed AO, Delhi to proceed further. The Tribunal later annulled these assessments, holding them void ab initio due to jurisdictional errors. However, the High Court held that the failure to follow Section 124 procedure did not make the assessments a nullity but an irregularity, remitting the matter for fresh assessment.

3. Compliance with Procedural Requirements under Sections 120, 124, and 127:
Sections 120, 124, and 127 of the Income Tax Act outline the jurisdiction and procedural requirements for AOs. The High Court analyzed both pre and post-amendment provisions, emphasizing that the Act provides flexibility and recognizes concurrent jurisdiction. The procedural lapse in not following Section 124 does not invalidate the assessment but requires rectification. The Tribunal's decision to annul the assessments was incorrect, and the CIT (Appeals) had rightly set aside the assessments for fresh proceedings.

4. The Effect of Non-Compliance with Procedural Requirements on the Validity of Assessment Orders:
Non-compliance with procedural requirements under Section 124 results in an irregularity, not a nullity. The High Court held that the assessments should be set aside and remitted for fresh decision, not annulled. This approach ensures that procedural lapses are corrected without rendering the entire assessment process void.

5. The Impact of Concurrent Jurisdiction and Transfer of Cases Between Different AOs:
The High Court recognized that multiple AOs could have concurrent jurisdiction based on residence, place of business, or class of income. The ITO, Dimapur, and AO, Delhi had concurrent jurisdiction. The transfer of cases requires compliance with Section 127, which was not initially followed. An order under Section 127 was eventually passed, transferring the case to AO, Delhi, which was not challenged by the respondent.

6. The Validity of Wealth Tax Assessments and the Jurisdiction of the Wealth Tax Officer:
The Tribunal annulled wealth tax assessments based on the Income Tax Tribunal's decisions. The High Court found that the respondent did not challenge the jurisdiction of the Wealth Tax Officer during the assessment proceedings. The procedural requirements under Section 124 were not invoked, and there was a waiver by the respondent. The Tribunal's decision to annul the wealth tax assessments was incorrect, and the High Court remitted the matter for fresh decision on merits.

Conclusion:
The High Court held that procedural lapses under Sections 120, 124, and 127 do not render assessments void but require rectification. The assessments by AO, Delhi were set aside for fresh proceedings. The wealth tax assessments were also remitted for fresh decision on merits. The Tribunal's annulment of assessments was reversed, emphasizing the need for compliance with procedural requirements and rectification of irregularities.

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