ACIT Vs Jyothy Labs Limited (ITAT Mumbai)
The territorial jurisdiction of an ITAT Bench is determined by the location of the Assessing Officer who passed the assessment order, and not by the location of the assessee or the CIT(A); therefore, an appeal filed before a Bench lacking such jurisdiction cannot be decided on merits.
Summary: The appeal filed by the Revenue and the cross objection filed by the assessee arose from the order of the CIT(A)-56, Mumbai for AY 2014-15. The underlying assessment had been passed by the Deputy Commissioner of Income Tax, Corporate Circle 2(2), Chennai-34, under section 143(3) read with section 144C(3) of the Income-tax Act. The Revenue challenged the relief granted by the CIT(A) concerning a transfer pricing adjustment of ₹37,77,11,566/- and deduction under section 37(1) for sales promotion expenses. The assessee, through its cross objection, challenged the validity of the specified domestic transaction adjustment, the reference to the Transfer Pricing Officer and the initiation of penalty proceedings. Before considering the substantive grounds, the Tribunal examined the territorial jurisdiction of the Mumbai Bench. Relying upon the Supreme Court’s decision in PCIT Vs ABC Papers Ltd., the Tribunal observed that the relevant jurisdiction is connected with the location of the Assessing Officer who passed the assessment order. The Tribunal further relied upon the Bombay High Court decision in MSPL Limited Vs PCIT, which considered the territorial jurisdiction of ITAT Benches and the power to transfer pending appeals between Benches. Since the assessment order had been passed by the DCIT, Corporate Circle 2(2), Chennai, the Tribunal held that the appeal filed before the Mumbai Bench was under improper territorial jurisdiction. The cross objection arising from the same appellate order was also held incapable of adjudication by the Mumbai Bench. The Tribunal accordingly dismissed both the Revenue’s appeal and the assessee’s cross objection for want of territorial jurisdiction, while granting liberty to the parties to approach the appropriate Tribunal Bench. The Tribunal expressly left all substantive issues open for consideration by the Bench having territorial jurisdiction over the Assessing Officer who passed the assessment order.
Core Issue: The core issue before the Tribunal was whether the Mumbai Bench of the ITAT had territorial jurisdiction to adjudicate the Revenue’s appeal and the assessee’s cross-objection when the underlying assessment order had been passed by the DCIT, Corporate Circle 2(2), Chennai.
Facts: The assessee was engaged in the business of trading and marketing fast-moving consumer goods and filed its return for AY 2014-15 declaring a loss of ₹30.40 crore. During the relevant year, it entered into specified domestic transactions with related parties aggregating to approximately ₹113 crore. The matter was referred to the Transfer Pricing Officer, who proposed a transfer pricing adjustment. The Assessing Officer at Chennai subsequently passed an assessment order under Section 143(3) read with Section 144C(3), determining total income at ₹15.30 crore after making, inter alia, a transfer pricing adjustment of ₹37.77 crore. The CIT(A)-56, Mumbai decided the appeal, following which the Revenue filed an appeal and the assessee filed a cross-objection before the Mumbai Bench of the ITAT.
AO/CIT(A) Finding: The Assessing Officer at Chennai made the transfer pricing adjustment and other additions. During appellate proceedings, the CIT(A) held the assessment order to be null and void on a jurisdictional issue relating to the entity in whose name the assessment had been framed, while also adjudicating various issues on merits. The Revenue challenged the relief granted by the CIT(A), and the assessee filed cross-objections against the findings adverse to it.
ITAT Finding: Before examining the merits of the transfer pricing and other issues, the Tribunal considered its own territorial jurisdiction. It held that the ordinary territorial jurisdiction of an ITAT Bench is determined with reference to the location of the Assessing Officer who passed the assessment order from which the appeal arises. Since the assessment order had been passed by the DCIT, Corporate Circle 2(2), Chennai, the Mumbai Bench did not possess territorial jurisdiction over the appeal. The fact that the CIT(A) was located in Mumbai or that the appeal had been filed before the Mumbai Bench could not confer jurisdiction. The same principle applied to the assessee’s cross-objection arising from the very same assessment proceedings.
Cases Relied Upon: The Tribunal principally relied upon MSPL Limited Vs PCIT,, 2021 (5) TMI 739 – Bombay High Court, which examined Section 255 and the ITAT Rules and held that ordinary jurisdiction is determined by the location of the Assessing Officer. Reliance was also placed upon Pr. Commissioner of Income Tax-I, Chandigarh v. M/s ABC Papers Limited, 2022 (8) TMI 863 – Supreme Court, and PCIT Vs ABC Papers Ltd. , 2019 (3) TMI 501 – Punjab & Haryana High Court, emphasizing that territorial jurisdiction in income-tax proceedings is linked to the location of the Assessing Officer who passed the assessment order.
Outcome: The Revenue’s appeal and the assessee’s cross-objection were dismissed for want of territorial jurisdiction, with liberty to pursue the matter before the appropriate ITAT Bench having jurisdiction over the assessment proceedings originating from Chennai. All issues on merits were left open.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the Revenue and cross objection by the assessee are against the order of ld. CIT (A)-56, Mumbai vide order No. ITBA/APL/S/250/2025-26/1081355917(1), dated 30.09.2025, passed against the assessment order by Deputy Commissioner of Income Tax, Corporate Circle 2(2), Chennai-34, u/s. 143(3) r.w.s. 144C(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 20.12.2017, for Assessment Year 2014-15.
2. Grounds taken by the Revenue are reproduced as under:
1. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in partly allowing the appeal of assessee on the issue of transfer pricing adjustment of Rs.37,77,11,566/-?
2. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in allowing the deduction u/ s 37(1) of the I.T. Act for Sales promotion expenses of assessee?”
2.1. Grounds taken by assessee in its cross objection are reproduced as under:
1. That the Commissioner of Income Tax (Appeals) [“CIT(A)”] erred on the facts and in law, in upholding the determination of the arm’s length price of the specified domestic transaction (“SDT”) by the Transfer Pricing Officer (“ΤΡΟ”), without appreciating that clause (i) of section 92BA of the Income Tax Act, 1961 (the “Act”) had been omitted from the statute by the Finance Act, 2017. and thus, the entire adjustment made under the said section is liable to be deleted.
2. That ld. CIT(A) erred on the facts and in law, in upholding the reference made for determination. of the arm’s length price of the SDTs to the TPΟ, without ld. Assessing Officer demonstrating that such reference was necessary or expedient in accordance with the provisions of section 92CA of the Act.
3. That ld. CIT(A) erred on the facts and in law, in upholding the action of ld. TPO, who failed to appreciate that both assessee and the related party were liable to tax on their respective incomes and, therefore, no loss of revenue was caused to the exchequer on account of the SDTs entered into between the related parties.
4. That ld. Assessing Officer erred on facts and in law, in initiating penalty proceedings under section 271(1)(c) of the Act.
3. Brief facts as culled out from the records are that assessee is engaged in the business of trading and marketing of fast-moving consumer goods. It filed its return of income on 30.11.2014, reporting total income as a loss at Rs. 30,40,77,869/-. During the relevant year, assessee entered into specified domestic transactions with its related party/AE aggregating to Rs. 113,00,28,146/-. These comprised purchase of finished goods amounting to Rs. 77,51,78,887/-, payment of interest amounting to Rs. 34,50,47,259/- and reimbursement of rent amounting to Rs. 98,02,000/-. The matter was referred by ld. Assessing Officer to the ld. Transfer Pricing Officer (TPO) for determination of arm’s length price (ALP). Ld. TPO passed order under section 92CA(3) dated 26.10.2017. Ld. TPO, inter alia, rejected the comparables selected by the assessee and considered J.K. Helene Curtis Ltd. as the sole comparable. Ld. TPO also treated finance cost of Rs. 34,50,93,000/- as operating cost and recomputed the Profit Level Indicator (PLI) of the assessee. An adjustment was accordingly proposed. Ld. Assessing Officer thereafter passed the assessment order dated 20.12.2017 under section 143(3) read with section 144C(3) of the Act determining total income at Rs. 15,30,95,173/-, inter alia, after making transfer pricing adjustment of Rs. 37,77,11,566/- and other additions/disallowances. Aggrieved, assessee went in appeal before the ld. CIT(A).
4. During the first appellate proceedings, assessee also raised a specific jurisdictional challenge to the assessment order on the ground that the assessment had been framed in the name and PAN of a non-existent entity. Ld. CIT(A), after considering the facts, held the assessment order dated 20.12.2017 to be null and void and without jurisdiction. Ld. CIT(A), however, proceeded to adjudicate the various grounds on merits also. In particular, the contention of assessee regarding omission of clause (i) of section 92BA by the Finance Act, 2017 was rejected by ld. CIT(A), holding that the omission was prospective and did not invalidate the reference to ld. TPO in respect of earlier years. Ld. CIT(A) also dealt with assessee’s challenge to the validity of reference to ld. TPO under section 92CA. Aggrieved, Revenue is in appeal before the Tribunal against the relief granted by ld. CIT(A). Assessee has also filed its cross-objection against the same appellate order.
5. Before embarking upon the grounds raised by the Revenue as well as the cross-objection filed by assessee, we note that the impugned assessment order has been passed by the office of ld. DCIT, Corporate Circle 2(2), Chennai. The location of ld. Assessing Officer who passed the assessment order assumes significance for determining the ordinary territorial jurisdiction of the Bench of the Tribunal. In this respect, we take note of the decision of the Hon’ble Supreme Court in the case of PCIT vs. ABC Papers Ltd. [2022] 141 taxmann.com332 (SC). Hon’ble Court while considering the question of territorial jurisdiction held that the appropriate High Court for disposal of the appeal would be the High Court within whose jurisdiction ld. Assessing Officer who passed the assessment order is situated. It observed:
“35.2 We will first deal with the order passed by ld. Assessing Officer, Delhi dated 30-12-2010, against which an appeal was decided by CIT (Appeals) – IV, New Delhi on 16-2-2012, against which the ITAT, New Delhi disposed of an appeal on 11-5-2017, against which an appeal was filed in the High Court of Punjab & Haryana which it disposed of by order dated 7-2-2019, against which Civil Appeal No. 4252 of 2022 was filed before this Court. The said Civil Appeal is dismissed by holding the order dated 7-2-2019 passed by the High Court of Punjab & Haryana, with a direction that the appropriate High Court for disposal of the appeal would be the High Court of Delhi as the case was assessed by ld. Assessing Officer, Delhi.”
5.1. The aforesaid principle though laid down in the context of territorial jurisdiction of the High Court, is equally relevant for determining the ordinary territorial jurisdiction of the Bench of the Tribunal. The ordinary jurisdiction of the Bench is determined with reference to the location of the office of ld. Assessing Officer and not merely by the location of assessee or the appellate authority passing the impugned appellate order. In the present case, the assessment order dated 20.12.2017 has admittedly been passed by the office of ld. DCIT, Corporate Circle 2(2), Chennai. Therefore, the assessment proceedings from which the present appeal arises were undertaken by an Assessing Officer situated at Chennai, in the state of Tamil Nadu and not within the ordinary territorial jurisdiction of the Mumbai Bench of the Tribunal.
5.2. We further take note of the judgment of the Hon’ble jurisdictional High Court of Bombay in the case of MSPL Ltd. vs. PCIT & Ors., Writ Petition (L) No.3856 of 2020, dated 21.05.2021, wherein the Hon’ble Court had occasion to examine the question whether a pending appeal could be transferred administratively from one Bench of the Tribunal to another Bench situated outside the headquarters and in another State. Hon’ble Court after examining section 255 of the Act and the relevant provisions of the Income Tax Appellate Tribunal Rules held that the power of the President under section 255(5) of the Act to regulate the procedure of the Tribunal and its various Benches could not be construed as conferring a power to transfer a pending appeal from one Bench to another Bench situated in a different State. Hon’ble Court also considered Rules 4, 13 and 28 of the ITAT Rules and observed that the ordinary jurisdiction of the Bench is determined by the location of the office of ld. Assessing Officer. The relevant observations of the Hon’ble Bombay High Court are reproduced below:
“42. While on the Tribunal Rules, we may also refer to rules 13 and 28. Who may be joined as respondent in an appeal by assessee is dealt with in rule 13. In an appeal by an assessee under sub-section (1) of section 253, the concerned Assessing Officer shall be made a respondent to the appeal. Concerned Assessing Officer would mean ld. Assessing Officer who had passed the assessment order from which the appeal to the Tribunal arises. As per rule 28, Tribunal has the power to remand an appeal to the authority from whose order the appeal has been preferred or to the concerned Assessing Officer with such directions as the Tribunal may think fit.”
5.3. The Hon’ble Court further observed:
“43. Standing Order has been made in pursuance of sub rule (1) of rule 4 of the Tribunal Rules. Standing Order provides for hearing of appeals and applications by different Benches of the Tribunal. In other words, it provides for the territorial jurisdiction of the different Benches. … In so far the Benches at Mumbai are concerned, those have jurisdiction over Mumbai City, Mumbai Suburban and Thane Districts of Maharashtra. Clause 4 is interesting and it says that the ordinary jurisdiction of the Bench will be determined not by the place of business or residence of assessee but by the location of the office of ld. Assessing Officer.”
6. Applying the aforesaid principles to the facts of the present case, we find that the assessment order giving rise to the present proceedings was passed by the office of ld. DCIT, Corporate Circle 2(2), Chennai. The mere fact that the subsequent appellate order has been passed by ld. CIT(A)-56, Mumbai would not confer territorial jurisdiction upon the Mumbai Bench of the Tribunal. We therefore, find that the present appeal filed by the Revenue before this Bench is under improper jurisdiction since the assessment order from which the appeal arises was passed by ld. Assessing Officer situated at Chennai.
7. At this stage, we also take note of the cross-objection filed by the assessee under section 253(4) of the Act. The cross-objection is against the very same appellate order and arises out of the same assessment proceedings. Since the Revenue’s appeal itself is not maintainable before this Bench for want of territorial jurisdiction, the cross-objection arising from the same proceedings also cannot be adjudicated by this Bench.
8. We make it clear that we are not expressing any opinion on the merits of the grounds raised by either the Revenue or assessee. Accordingly, the issues are all left open for consideration by the appropriate Bench having territorial jurisdiction.
9. In view of the foregoing discussion and respectfully following the ratio laid down by the Hon’ble Supreme Court in ABC Papers Ltd. (supra), we dismiss the appeal filed by the Revenue as well as the cross-objection filed by assessee for want of territorial jurisdiction, with liberty to the respective parties to approach the appropriate Bench of the Tribunal having jurisdiction over ld. Assessing Officer who passed the impugned assessment order. It is further note that the period spent by the Revenue in prosecuting the present appeal before this Bench may be considered, in accordance with law, while dealing with any application for condonation of delay that may arise upon filing of the appeal before the appropriate Bench. Similar liberty shall also be available to assessee in respect of its cross-objection, in accordance with law.
10. In the result, appeal of the Revenue and the cross-objection of the assessee are dismissed with liberty as indicated above.
Order is pronounced in the open court on 02nd September, 2026
