Case Law Details
Biswajaya Dagara Vs ACIT (Orissa High Court)
The background facts are that the Petitioner initially carried out his business activities from Bhubaneswar, Odisha and he was filing returns there for the AYs 2006-07, 2007-08, 2008-09 and 2009- 2010, assessment orders under Section 143(3) of the IT Act passed by the AO, Bhubaneswar. Statutory appeals had also been filed against those assessment orders before the Commissioner of Income Tax (Appeals-I), Bhubaneswar [CIT (A)]. However, surprisingly pursuant to the said order passed by the CIT (A), Bhubaneswar, an order on 31st March, 2015 under Section 251 of the Income Tax Act was issued by the ACIT, Balasore Circle, Balasore.
The Petitioner was surprised that the jurisdiction had been shifted from Bhubaneswar to Balasore and he accordingly filed an objection on 10th March, 2016. In this letter, he mentioned that from the beginning he had been filing his returns at Bhubaneswar and since AY 2011-12 had been filing the returns at Kolkata. He was unaware the transfer of jurisdiction to Balasore. He accordingly prayed that the assessment records should be transferred to Kolkata.
The fact remains that merely because the Petitioner happens 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.
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 (Annexure-10 series in W.P.(C) No.7861 of 2016).
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.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. In these two petitions filed by the same Assessee, the notices issued under Section 142(1) of the Income Tax Act, 1961 (IT Act) by the Assistant Commissioner of Income Tax, Balasore Circle, Balasore [hereafter ‘Assessing Officer (AO)’] for the assessment year (AY) 2013-14 have been challenged inasmuch as the 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.
2. The background facts are that the Petitioner initially carried out his business activities from Bhubaneswar, Odisha and he was filing returns there for the AYs 2006-07, 2007-08, 2008-09 and 2009- 2010, assessment orders under Section 143(3) of the IT Act passed by the AO, Bhubaneswar. Statutory appeals had also been filed against those assessment orders before the Commissioner of Income Tax (Appeals-I), Bhubaneswar [CIT (A)]. However, surprisingly pursuant to the said order passed by the CIT (A), Bhubaneswar, an order on 31st March, 2015 under Section 251 of the Income Tax Act was issued by the ACIT, Balasore Circle, Balasore.
3. The Petitioner was surprised that the jurisdiction had been shifted from Bhubaneswar to Balasore and he accordingly filed an objection on 10th March, 2016. In this letter, he mentioned that from the beginning he had been filing his returns at Bhubaneswar and since AY 2011-12 had been filing the returns at Kolkata. He was unaware the transfer of jurisdiction to Balasore. He accordingly prayed that the assessment records should be transferred to Kolkata. However, on 8th March, 2016 the ACIT, Balasore again issued notice to the Petitioner under Section 142(1) of the IT Act requiring presence on 29th March, 2016 in connection with the returns filed by him for AY 2013-14. Along with this notice, a notice under Section 274 read with Section 271 of the IT Act was also enclosed alleging non‑compliance with the earlier notices and proposing penalties under Section 271(1)(b) of the IT Act.
4. P.(C) No.5586 of 2016 was filed by the Petitioner at that stage contending that under Section 124(2) of the IT Act, the matter had to referred to the competent authority for determining the jurisdiction and without such order the ACIT, Balasore could not have simply proceeded to issue notice to the Petitioner. In this petition, a direction was issued to the Department by this Court on 13th May, 2016 to produce the assessment records.
5. When further notice was issued by the ACIT, Balasore on 29th March, 2016 along with a demand notice of the same date, the second writ petition i.e. W.P.(C) No.786 1 of 2016 was filed by the Petitioner in which an interim order was passed staying the said notice and consequential demand notice.
6. In the counter affidavit filed on behalf of the Department in W.P.(c) No.7861 of 2016, it sought to be contended in para 6 as under:
“6. That as per the existing jurisdiction order U/s. 120 of the I.T. Act, 1961 was passed on 15.11.2014. It has been indicated that where a person is a director in a company or a partner in a firm, jurisdiction over him/her will lie with the officer where the company or the firm is assessed. In the instant case, M/s. Nabadurga Construction Pvt. Ltd., Rairangpur, Mayurbhanj bearing PAN AABCN-0853-A is accompany assessed in Balasore Circle, in which the present Petitioner is one of the director having 10% share. He is also a partner of M/s. Nabadurga Minerals bearing PANAABFN-8099-H assessed to tax in Balasore circle, which is under the S.I.T. for unearthing black money. Therefore, it is crystal clear that the jurisdiction over the Petitioner lies with the Balasore Circle. These facts were intimated to the Petitioner by communication dated 14.10.2015. After receiving notices u/s. 143(2) on 10.09.2015 and 14.10.2015 did not object to the notice on the issue of jurisdiction as per provision u/s. 124(3) of the I.T. Act. In spite of adequate opportunity provided, the petitioner failed to comply with the said notices.”
7. The fact remains that merely because the Petitioner happens 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. In this connection, the following observations of the Bombay High Court in the decision in Devidas v. Union of India [1993] 200 ITR 697 (Bom) are relevant:
“8. Learned counsel for the petitioner contends – and in our view rightly – that, considering the letter and/or spirit of section 127, there is no reason to draw, in the matter of an opportunity, a distinction between an order of transfer made despite opposition of an assessee and an order not made despite his request, specially when section 124(3) has given him a right to call in question the jurisdiction of a particular Assessing Officer. The total scheme relating to jurisdiction and transfer (sections 120, 124 and 127) is a proportionate mix of consideration for convenience of an assessee and interest of the Revenue and it aims at striking a balance between the private and public interest. The provisions of section 124 are a combination of the provisions of sections 5(5) and 64 of the Indian Income-tax Act, 1922. Section 124 speaks of a vested right of an assessee to have his assessment made at the principal place of his business and in the case of any objection relating thereto to have the same determined at the hands of a high authority like the Commissioner. The following observations of this court in the case of Dayaldas Kushiram v. CIT at pages 237 and 238 though made in the context of the scheme under the Indian Income-tax Act, 1922, need notice :
“In my opinion, section 64 was intended to ensure that as far as practicable an assessee should be assessed locally, and the area to which an Income-tax Officer is appointed must, so far as the exigencies of tax collection allow, bear some reasonable relation to the place where the assessee carries on business or resides.
…… A plain reading of section 64 shows that the same is imperative in terms. It also gives to the assessee a valuable right. He is entitled to tell the taxing authorities that he shall not be called upon to attend at different places and thus upset his business.”
9. Thus, in the matter of objection to the jurisdiction of the Assessing Officer and transfer of a case, a valuable right of an assessee is clearly involved which cannot be adversely adjudicated upon without affording him an opportunity of hearing and disclosing to him the reasons for not accepting his point of view.”
8. 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 (Annexure-10 series in W.P.(C) No.7861 of 2016).
9. 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.
10. The writ petitions are disposed of in the above terms. An urgent certified copy of this order be issued as per rules.
