2023 (1) TMI 1176 - HC - Income Tax

Transfer of jurisdiction - Validity of notices issued u/s 142(1) by ACIT, Balasore Circle, Balasore - transfer of jurisdiction of the Income Tax Circle of the Petitioner for the said AY from Kolkata to Balesore was without complying with Section 124 (4) of the IT Act - HELD THAT - The fact remains that merely because the Petitioner hapens to be a Director of M/s. Nabadurga Minerals, Rairangpur, Mayurbhanj which has been assessed in the Balasore Circle would not automatically transfer the jurisdiction as far as Petitioner is concerned from Kolkata to Balasore. What the counter affidavit, however, does not answer is how the transfer of jurisdiction could take place without complying with the mandatory requirement of Section 124(3) of the IT Act. See DEVIDAS VERSUS UNION OF INDIA AND OTHERS (AND OTHER PETITIONS) 1991 (9) TMI 18 - BOMBAY HIGH COURT No convincing answer given by the Department to shift the jurisdiction to the Balasore Circle, when admittedly, the Petitioner has already shifted to Kolkata and has been filing returns there. Accordingly, the Court quashes the impugned notices issued by the ACIT, Balasore to the Petitioner. It is clarified that the Petitioner will continue to be within the jurisdiction of the relevant Income Tax Circle at Kolkata where he has been filing his returns. This order will not preclude the Department from proceeding in accordance with law if it proposes to transfer the jurisdiction of the Petitioner to any other circle.

Summary

Issues:
Challenge to notices issued under Section 142(1) of the Income Tax Act for AY 2013-14 due to transfer of jurisdiction from Kolkata to Balasore without complying with Section 124(4) of the IT Act.

Analysis:
1. The petitioner contested the notices issued by the Assistant Commissioner of Income Tax, Balasore, challenging the transfer of jurisdiction from Kolkata to Balasore for AY 2013-14 without complying with Section 124(4) of the IT Act. The petitioner had been filing returns in Bhubaneswar and Kolkata previously, and the sudden transfer of jurisdiction raised concerns regarding procedural compliance.

2. The petitioner, having shifted business activities from Bhubaneswar to Kolkata, was surprised by the transfer of jurisdiction to Balasore. The petitioner objected to this transfer, emphasizing the historical filing locations and lack of awareness regarding the jurisdictional shift. Despite objections, the ACIT, Balasore, continued issuing notices under Section 142(1) and proposed penalties under Section 271(1)(b) of the IT Act.

3. The petitioner filed a writ petition contending that the transfer lacked the necessary referral to the competent authority as per Section 124(2) of the IT Act. The court directed the Department to produce assessment records, highlighting the procedural irregularities in transferring jurisdiction without proper authorization.

4. The Department justified the transfer based on the petitioner's association with companies assessed in Balasore Circle. However, the court emphasized that mere directorship in a company within a specific jurisdiction does not automatically transfer an individual's jurisdiction. The court referenced the Bombay High Court's decision, emphasizing an assessee's right to challenge an Assessing Officer's jurisdiction.

5. The court noted the absence of a valid reason for shifting jurisdiction to Balasore when the petitioner had already transitioned to filing returns in Kolkata. Consequently, the impugned notices issued by the ACIT, Balasore, were quashed, reaffirming the petitioner's jurisdiction within the Kolkata Income Tax Circle for filing returns.

6. The judgment clarified that while the petitioner's jurisdiction remains in Kolkata, the Department retains the right to proceed lawfully if considering transferring jurisdiction to another circle. The writ petitions were disposed of accordingly, with the order emphasizing the importance of procedural adherence and protecting the assessee's rights during jurisdictional transfers.