Commissioner of Income Tax, Bikaner vs Poonam Chand Surana

By way of this appeal u/s 260A of the Income Tax Act, 1961 [''the Act''], the revenue seeks to question the order dated 17.05.2013 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur [''ITAT''] in ITA No. 596/JU/2010 for the assessment year 2003-04 whereby, the ITAT has affirmed the order dated 22.10.2010, as passed in favour of the assessee (respondent herein) by the Commissioner of Income Tax (Appeals), Bikaner [''CIT (A)''] in Appeal No. 138/BKN/2009-10 while holding that the notice issued by the Income Tax Officer [''ITO''], Suratgarh to the assessee suffered from want of jurisdiction. The relevant background aspects of the matter are that on 05.03.2003, a survey u/s 133A of the Act was conducted at the business premises of the firm M/s. Vardhman Mills, said to be proprietorship concern of the respondent-assessee. A notice u/s 143(2) dated 06.04.2004 was issued by the ITO, Suratgarh. In response thereto, the respondent-assessee stated that the ITO at Suratgarh had no jurisdiction in the matter for himself and the family were residing at Chennai for last 25 years and he was filing returns of income with the Income Tax Officer-VII(2), Chennai; and prayed that the entire survey records be transferred to the concerned Income Tax Officer at Chennai. It appears that such proceedings were dropped on 18.10.2005. However, later on, a notice u/s 148 of the Act dated 03.04.2006 was issued by the ITO, Suratgarh for the assessment year 2003-04 which was served upon the respondent-assessee on 09.05.2006. The respondent-assessee again submitted that he was not residing at Suratgarh and reiterated the request for transfer of the records to Chennai. The respondent-assessee objected to the initiation of proceedings u/s 147 of the Act but the objections were rejected by the ITO by his order dated 05.07.2007. It is borne out that about 15 months after initiation of re-assessment proceedings, the ITO, Suratgarh started the proceedings u/s 127 of the Act for transfer of the respondent�s case from Chennai to Suratgarh. Meanwhile, the respondent-assessee filed a writ petition in this Court against initiation of re-assessment proceedings. The jurisdiction over the respondent�s case was finally transferred on 21.08.2007 from Chennai to Suratgarh; and the ITO, Suratgarh proceeded to complete the assessment in question u/s 147 read with Section 148 of the Act on 27.11.2007.

It appears that in the earlier round of proceedings, the CIT (A), by the order dated 18.03.2008, allowed the assessee''s appeal against the assessment in question on the ground of jurisdiction. The writ petition filed by the respondent-assessee in this Court on the issue of jurisdiction (CWP No. 6051/2007) was dismissed as infructuous on 08.07.2009. However, the ITAT, by its order dated 10.07.2009, remanded the matter to the CIT (A). Hence, the matter was before the CIT (A) for consideration afresh.

In the impugned order dated 22.10.2010, the CIT (A) proceeded to re-consider the question as to whether the ITO at Suratgarh had the jurisdiction over the assessee at the time of issuance of notice u/s 148 of the Act; and ruled in favour of the assessee with the following observations and findings:-

......... it is evident that the appellant was filling his returns of income regularly with ITO-VII(2), Chennai, both at the time of survey U/s. 133A as well as issue of notice U/s. 148. From the perusal of case records it could not be ascertained as to why the proceedings U/s. 143(2) were initiated on 06.04.2004 which were subsequently dropped on 18.10.2005. Secondly, soon thereafter i.e. on 03.04.2006 again proceedings U/s. 147/148 were initiated. All along the appellant had maintained that the ITO, Suratgarh did not have the required jurisdiction over the appellant. Instead of addressing the jurisdiction issue the AO apparently was not sure about the correct course of action to be followed in the appellant''s case. Equally noteworthy is the fact that much after the issuance of notice U/s. 148, it is only on 24.07.2007 that the proposal for transfer of jurisdiction from Chennai to Suratgarh was made which ultimately became effective on 21.08.2007. Thus, prior to 21.08.2007 the ITO, Suratgarh did not have the necessary jurisdiction over the appellant......

....... ........ .......

.......In the instant case, the ITO, Suratgarh got jurisdiction over the appellant only on 21.08.2007 with the passage of necessary notification in this regard by the CIT-7, Chennai. Prior to that the AO did not have jurisdiction. The pecuniary or territorial jurisdiction as contemplated U/s. 124 was also not applicable in view of the fact that the appellant was filling his return of income with ITO, Ward-VII (2), Chennai .......

(underlining supplied for emphasis)

It appears that the similar nature controversy was also involved in the case relating to another assessee Shri Gourav Surana, being the proprietor of M/s Gourav Industry, Suratgarh. The appeals in relation to the present assessee and the said other assessee were taken up for consideration by the ITAT together; and were dismissed by the impugned common order dated 17.05.2013.

The ITAT took note of the akin facts relating to the case of the said assessee Gourav Surana and observed that the assessee was regularly filing his returns of income at Chennai and the return of income for the year under consideration had also been filed at Chennai. The ITAT found that the ITO at Suratgarh sent a proposal to the concerned Commissioner of Income Tax at Chennai for transfer of jurisdiction over the assessee from Chennai to Suratgarh only on 24.07.2007; and held with reference to these facts and factors that at the time of issuance of notice u/s 148 of the Act, the ITO at Suratgarh was having no jurisdiction over the respondent-assessee. The ITAT, therefore, found the similar nature order passed by the CIT(A) in relation to the said other assessee justified and not calling for any interference. The appeal in relation to the present respondent-assessee was also dismissed after finding that the identical facts were involved in this case.

Seeking to question the order aforesaid, it is contended on behalf of the appellant-revenue that the CIT(A) and ITAT have erred in quashing the proceedings initiated u/s 148 of the Act on the ground of jurisdiction of the ITO, Suratgarh over the case of the respondent-assessee when the principal place of business of the assessee as also his residence are at Suratgarh. It is submitted that the assessee was not residing at Chennai and his returns also made out that the main source of his income had been from the business carried out at Suratgarh; and that he filed the returns at Chennai for the reasons best known to him. Other facts have also been referred to suggest that the assessee entered into partnership business of M/s Vardhman Industry at Suratgarh and, in the application submitted to the Commercial Taxes Department, declared his permanent home address being at E-14-A Industrial Area, Suratgarh. It is submitted that the CIT, Chennai had transferred the jurisdiction to the ITO, Suratgarh by the notification dated 21.08.2007 with the observations that the transfer was for coordinated investigation because of the assessee''s place of business being at Suratgarh. It is strenuously argued that in the given set of facts, the ITO at Suratgarh, the place where the assessee is residing and is having principal place of business, has the jurisdiction; and, therefore, the CIT(A) and ITAT have erred in holding want of jurisdiction with the ITO, Suratgarh.

The submissions, in our view, do not make out a case for entertaining this appeal. As noticed by the Appellate Authorities, the proceedings were initiated on 06.04.2004, which were subsequently dropped on 18.10.2005. Thereafter, on 03.04.2006, the proceedings u/s 147/148 of the Act were initiated but then, a proposal for transfer of jurisdiction from Chennai to Suratgarh was made only on 24.07.2007, which ultimately materialized on 21.08.2007. We find nothing of error or illegality in the observations of the CIT(A), as approved by the ITAT, that the ITO at Suratgarh got the jurisdiction over the respondent-assessee only on 21.08.2007 and prior to that, he was not having the jurisdiction over the assessee, particularly when the assessee was filing the returns of income with ITO-VII(2), Chennai. In the indisputable fact situation that the proposal for transfer of jurisdiction over the respondent-assessee, from Chennai to Suratgarh, materialized only on 21.08.2007, the proceedings initiated by the ITO, Suratgarh prior to this date by issuance of notice u/s 148 on 03.04.2006 cannot be considered authorized and competent.

The facts regarding place of business or residence of the assessee, as sought to be referred in this appeal, in our view, carry little relevance in the given indisputable fact situation that the assessee was indeed filing his returns at Chennai and the date/period when the proceedings were sought to be adopted by the ITO at Suratgarh, the jurisdiction for assessment in relation to the respondent-assessee was being exercised at Chennai.

In the aforesaid view of the matter, we are unable to find any cogent reason to entertain this appeal so as to interfere with the concurrent orders passed by the CIT (A) and ITAT. Accordingly, the appeal stands dismissed.