K.K. LOOMBA vs COMMISSIONER OF INCOME TAX and Others

C. K. Mahajan, J.

Mrs. Uma Loomba, the petitioner, in CWP No. 3710 of 1997 is the wife of Dr. K.K. Loomba, the petitioner, in CWP No. 2983 of 1997. These writ petitions have been filed by them seeking quashing of an order u/s 124(2) of the Income Tax Act, 1961, passed by the CIT, Delhi-VII, and also seeking quashing of the notices u/s 148 of the Act issued by the Assistant Commissioner, Investigation Circle. 11(1), New Delhi, for the assessment years 1987-88 to 1992-93. The relevant facts in'' both the petitioners are common and are briefly stated hereinafter.

Dr. K.K. Loomba is an individual, a doctor by profession. He was deriving income from Loomba Clinical Laboratories, Amritsar, as. a sole proprietor since 1974 and was also a partner in New Bhandari Hospital, Amritsar, up to May 1984. With effect from May, 1984, he retired from the partnership and started his independent practice as doctor at Amritsar. He claims to have filed returns for the assessment years 1980-81 to 1992-93 with the Income Tax Officer, Amritsar.

In July, 1984, during the assessment year 1985-86, he started his profession at 17, West Patel Nagar, New Delhi, in rented premises. However, he continued to file his return of income at Amritsar. No return of income has been filed for the assessment year 1993-94 onwards.

Mrs. Uma Loomba is an individual having tuition income at Amritsar since the assessment year 1982-83. With effect from 4th July, 1984, relevant to the assessment year 198586, she started her independent proprietary business at Delhi under the name and style of Loomba Clinic Laboratory and Genetic Centre.

According to her, returns of income for the years 1982-83 to 1992-93 have been filed with the Income Tax Officer, Amritsar. No return of income has been filed for the assessment year 1993-94 onwards.

On 18th July, 1989, and 8th Feb., 1990, search and seizure operations within the meaning of section 132(1) of the Act were carried out by the DI (Investigation) Delhi, upon both the petitioners. Based on such search and seizure operations, the Assistant Commissioner, Investigation Circle 11(1), New Delhi, issued notices u/s 148 of the Act in February, 1993, for the assessment years 1988-89 to 1990-91 to both the petitioners. Notice u/s 148, dated 22nd March, 1994, for the assessment years 1985-86 to 1987-88 and dated 31st March, 1995, for the assessment year 1992-93 were also issued to the petitioners. The petitioners filed their returns under protest and also objected to the jurisdiction of the Assistant Commissioner, respondent No. 2.

The Assistant Commissioner, Delhi, finalised the assessments for the years 1987-88 to 199293, The petitioners preferred appeals. The appeals have been allowed by the Commissioner (Appeals) on 20th Dec., 1995, for the assessment years 1988-89 and 1989-90 and on 15th March, 1995, for the assessment year 1991-92 and assessments remanded to the assessing officer with a direction to afford the petitioners opportunity of hearing on the question of jurisdiction.

The following excerpts from the order dated 21st March, 1997, passed by the CIT, Delhi u/s 124(2) of the Act in respect of both the petitioners are relevant and are Therefore, extracted and reproduced hereunder :

"3. It was in July, 1984, that both Shri and Smt. Loomba shifted to Delhi and started living in 17, West Patel Nagpur, New Delhi, which were rented premises and started their business/profession at this place. This was after they had closed their business/profession at Amritsar. However, as the facts are, the two persons continued filing their returns at Amritsar despite their business/ "profession being carried on in Delhi .......

In the instant case, as the facts are and which have been admitted by the assessees also, it was in July, 1984, that the two assessees shifted their business/profession from Amritsar to New Delhi. They also shifted their residence from Amritsar to New Delhi. Since 1984, they have been carrying on their business/profession in Delhi. Their business/profession in Amritsar stands closed since 1984. In view of this, their natural jurisdiction lies with the assessing authority in Delhi who holds jurisdiction over the area where the assessees are carrying on their business/profession. Here, his jurisdiction is clearly determined by section 124(1) of the Income Tax Act.

In view of the facts discussed above, I am convinced that the natural jurisdiction over the two assessees lies with the assessing officer at Delhi after July, 1984, the period when they shifted their business/profession to New Delhi and the assessing officer at Delhi automatically holds jurisdiction over them. There was absolutely no need of making an order u/s 127 for transferring the jurisdiction over these two assessees from Amritsar to Delhi even though they had been filing their IT returns at Amritsar. Actually, it was incumbent upon the two assessees themselves to file their returns at Delhi once they had shifted their business/ profession from Amritsar to this place. Filing of returns at Amritsar does not in anyway alter the correct position of jurisdiction. The assessees have regularly filed their returns at Amritsar, which is their fault and the department could not be blamed for that. The assessing officer Therefore, directed to make the assessments on the two assessees as he is legally holding jurisdiction over them."

Here itself we would like to make it clear that the finding of fact recorded by the CIT in his order u/s 124(2) dated 21st March, 1997, is that both the petitioners had shifted their business and profession to New Delhi after they had closed their business/profession at Amritsar. Exercising writ jurisdiction we will not enter into disputed questions of fact. At the same time we see no reason to doubt the correctness of the facts and the finding recorded by the CIT in his order dated 21st March, 1997. We would proceed on the factual premises as recorded in the order of the CIT above said.

So also in the counter filed before this Court, the respondents do not admit the petitioners having filed any return of income at Amritsar for the assessment year 198889 onwards. We will, Therefore, proceed on the premises that for the assessment years 1988-89 and onwards the petitioners have not filed any return of income at Amritsar. However, this finding, as will be seen in the later part of the judgment, is not very material.

Learned counsel for the petitioners has attacked the validity of the impugned order u/s 124(2) and the notices u/s 148 of the Act issued by the assessing officer at Delhi on two grounds. Firstly, it is submitted that once the jurisdiction over the assessed was assumed by the assessing officer at Amritsar the same would continue year after year and the assessed would continue to file his return at Amritsar and as a corollary any proceedings under the Act can be initiated against the assessed only by the assessing officer at Amritsar, unless and until the cases of the petitioners were transferred from Amritsar, unless and until the cases of the petitioners were transferred from Amritsar to Delhi by an order passed u/s 127 of the Act. Secondly, in the assessments have been finalised or could have been finalised only at Amritsar no officer of Income Tax at Delhi can issue notice u/s 148 to the petitioners.

On behalf of the respondents the stand taken is that the jurisdiction is to be decided by reference to sections 120 and 124 of the Act. Each year''s case is a separate case. The assessed must file the return by finding out the jurisdiction of the assessing officer by reference to these provisions on the date of filing of the return. On the same principles would be determined the jurisdiction to initiate any proceedings under the Act against an assessee. Merely because an assessed was assessed by an assessing officer having jurisdiction in earlier years he would not continue to exercise jurisdiction over the assessed though he has lost the same by reference to sections 120 to 124 of the Act. If jurisdiction (called-natural jurisdiction), changes between the years by reference to sections 120 and 124 of the Act, no order u/s 127 is called for.

The relevant provisions are extracted and reproduced hereunder:

"120. Jurisdiction of Income Tax authorities.-(1) IT authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.

(2) The directions of the Board under sub-section (1) may authorise any other IT authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other IT authorities who are subordinate to it.

(3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other IT authority authorised by it may have regard to any one or more of the following criteria, namely:

(a) territorial area.,

(b) persons or classes of persons;

(c) incomes or classes of income; and

(d) cases or classes of cases.

Jurisdiction of AOs.-(1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the assessing officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction-

(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principle place of his business or profession is situate within the area, and

(b) in respect of any other person residing within the area.

(2) Where a question arises under this section as to whether an assessing officer has jurisdiction to assess any person, the question shall be determined by the Director- General or the Chief CIT or the CIT; or where the question is one relating to areas within the jurisdiction of different Directors -General or Chief CIT''s or CIT''s , by the Directors- General or Chief CIT or CIT concerned or, if they are not in agreement, by the Board or by such Director-General or Chief CIT, or CIT as the Board may, by notification in the Official Gazette, specify .......

(5) Notwithstanding anything contained in this section or in any direction or order issued u/s 120, every assessing officer shall have all the powers conferred by or under this Act on an assessing officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120.

Power to transfer cases.-(1) The Director- General or Chief CIT or CIT may, after giving the assessed a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more assessing officer subordinate to him (whether with or without concurrent jurisdiction) to any other assessing officer or assessing officer (whether with or without concurrent jurisdiction) also subordinate to him .......

Explanation.-In section 120 and this section, the word ''case'', in relation to any person whose name in specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year."

A detailed discussion and extensive analysis of the above said provisions is not called for inasmuch as the field is covered by the law laid down by the Supreme Court. We would, Therefore, straightaway proceed to refer to the decisions.

In Bidi Supply Co. Vs. The Union of India (UOI) and Others, , the Constitution Bench has held that the notice and the return are to be confined to a particular assessment year and what is contemplated is the transfer of such a .1 case", i.e., the assessment case for a particular year.

In Pannalal Binjraj Vs. Union of india (UOI), their Lordships have vide para. 20 analysed the scheme of the provisions in the Income Tax Act relating to jurisdiction and transfer of cases. Their Lordships have held that an assessed is entitled to be assessed by the Income Tax Officer of the particular area where he resides and carries on his business. If a question may arise as to the place of assessment it is to be determined by the CIT. The principles underlying determination of jurisdiction on which the provisions are based are : (i) convenience of the assessee, and (ii) efficiency of the department (i.e. the exigencies of tax collection). Both the ends would be achieved by conferring jurisdiction on the assessing officer of an area where the. assessed to have his assessment at a place but determines the Income Tax Officer who is to have power to assess him.

Vide para 32, their Lordships have held that there is no fundamental right of the assessed to be assessed in a particular area or locality.

Sec, 120 provides for jurisdiction conferred on the IT authorities to exercise the powers and perform the functions conferred by the Act. The jurisdiction between different authorities can be divided by reference to (i) territorial area, (ii) person or persons, (iii) income and classes of income, and (iv) cases or classes of cases. Sec. 124(1) has relevance to territorial jurisdiction. If area wise jurisdiction has been conferred on the assessing officer then a person carrying on business or profession must find out the assessing officer having jurisdiction over the place within which business or profession is being carried on. If the assessed be a person not carrying on a business or profession then he is subject to the jurisdiction of the assessing officer vested with jurisdiction over the area where he is residing.

Sec. 127 does not speak of power to transfer jurisdiction; it speaks of transfer of 11 case", as defined in the Explanation enacted to section 127.

That being the position of law, we are very clear in our mind that the petitioners having shifted their business/profession and residence-both in July, 1984, from Amritsar to Delhi, the return could have been filed only before an assessing officer having jurisdiction over the area where the business/profession of the petitioners was situated. If there was any doubt, the petitioners could have moved u/s 124(2) for determining the question of jurisdiction which the petitioners have not done. The proceedings finalised at Amritsar after the petitioners had ceased to have their business/profession at Amritsar would be without jurisdiction. However, this observation would not obviously apply to such proceedings which have been taken without any objection as to the jurisdiction by either side and permitted to achieve a finality.

In Sardar Baldev Singh Vs. Commissioner of Income Tax, Delhi and Ajmer, the assessed was a resident of Lahore in the year 1944. On 14th Oct., 1944, he was assessed at Lahore for the assessment year 1944-45. After partition in 1947, the assessed shifted to Delhi. The Income Tax Officer, Delhi, on 10th April, 1948, issued a notice u/s 34 of the Indian Income Tax Act, 1922, to the assessed then residing in Delhi requiring him to file revised return for the year 1944-45 as a part of his income for that year had escaped assessment. The assessed filed the return under protest. The question of jurisdiction arose. Their Lordships opined that the contention of the assessed was without foundation."

"Now the place where an assessment is to be made pursuant to a notice u/s 22(2) has to be determined u/s 64. Indeed that is the only provision in the Act for deciding the proper place for any assessment. There is nothing which makes section 64 inapplicable to an assessment made u/s 34. Therefore, it seems to us clear, that the place where an assessment u/s 34 can be made has to be decided u/s 64. Now the appellant was not carrying on any business, profession or vocation. He was working as the defense Minister of the Government of India and residing in Delhi. He could be properly assessed by the Income Tax Officer, Delhi, u/s 64(2) if the assessment was the original assessment. This is not in dispute. It follows that no objection can legitimately be taken by the appellant to his assessment u/s 34 by the Income Tax Officer, Delhi.

Their Lordships applied the test who could properly assess the assessed if the assessment was the original assessment ? It was held that the Income Tax Officer, Delhi, could have made the original assessment and, Therefore, no objection can legitimately be taken to the assessment under s, 34 (of the 1922 Act) by the Income Tax Officer, Delhi.

It is relevant to note that the term ''assessment" as defined in clause (8) of section 2 of the Act includes reassessment.

In view of the fact that ever since July, 1984, the two petitioners were having their business/profession and also residence at Delhi, the issuance of notices u/s 148 of the Income Tax Act, 1961 by the assessing authority exercising jurisdiction to make the original assessment on the date of issuance of the notice cannot be found fault with.

In M. Ramasamy Asari Vs. Second Income Tax Officer, Madurai., the Division Bench has held (headnote) :

In regard to the business income of an assessed it is only the Income Tax Officer having jurisdiction over the place where his business activities are concentrated who would have jurisdiction to assess; where the assessed has no business it is the place of residence that determines jurisdiction. No other officer except the officer having territorial jurisdiction, either over the place where the assessed is carrying on business or over the place where the assessed is carrying on business or over the place where he is residing, if there is no business, would have jurisdiction, and any assessment passed by any other officer would be illegal. "

In Kanjimal and Sons Vs. Commissioner of Income Tax, New Delhi, , a Division Bench decision of the Delhi High Court makes an illuminating discussion of the several aspects relevant to jurisdictional issues arising under the Income Tax Act. Out of the several principles laid down the relevant parts for our purpose are extracted and reproduced hereunder (headnote)

"That the non obstinate clause in section 124(7) was very wide and made it clear that it was intended as a saving provision against the technical objections and disputes that might be raised in view of sub-ss. (1) to (6) of section 124. If in a particular case the assessment could fall within the scope of section 124(7), then that assessment would be a valid assessment notwithstanding that it might have been completed by an officer who otherwise might have had no jurisdiction in the case and also in spite of the fact that the assessment might have been made by that officer without following the procedure outlined by section 124(4) in the face of specific objection put forward by the assessee. The Tribunal was, Therefore, correct in holding that the legality of the assessment should be determined on a harmonious reading of section 124(4) and section 124(7) and that unless the assessment could be said to be outside the purview of even section 124(7) it could not be said to be invalid merely because the Income Tax Officer failed to make a reference and get the jurisdiction determined within the time outlined by section 124(4) .......

If a case falls u/s 124(4) then the question of jurisdiction can be resolved only in the manner outlined in that section and it cannot be challenged before or decided by the appellate authorities. If the assessment can be supported under s, 124(7), the provisions of section 124(4) will not apply and there is nothing to bar the jurisdiction of the appellate authorities to uphold the assessment on that ground. In such a case, there is no conflict between the procedure outlined in sub-sections (4) and (6) and the appellate powers of the Appellate Assistant Commissioner and the Tribunal.

Sec. 124(7) is very limited in its operation. All that it saves is an assessment made by an Income Tax Officer (whether he has or not jurisdiction otherwise) provided that the assessment does not bring to tax anything other than income accruing, arising or received within the area over which he exercises territorial jurisdiction.

Once it has been found that the two petitioners had their business/ profession situated at Delhi, the assessing authority having natural jurisdiction over the area would have jurisdiction to assess them, issue notices under s 148 as well, though referable to the period when they were assessed or were assessable at Amritsar by virtue of sections 124(1) and 124(5) read with section 120(1). No order u/s 127 or even section 124(2) was called for. Such an interpretation and the view of the law satisfies the twin test of (i) the convenience of the assessee, and (ii) the exigencies of tax collection.

Learned counsel for the petitioners placed reliance on Industrial Trust Ltd. Vs. Commissioner of Income Tax, Delhi (Central and Rajasthan), . For the assessment years 1946-47, 1947-48 and 1949-50, the assessee- company having its headquarters at Jaipur, was assessed by the Income Tax Officer, Ajmer, where the returns were filed and who had jurisdiction to make an assessment then. The Income Tax Officer, Central Circle-IV, issued notices u/s 34. Proceedings initiated by the Income Tax Officer, Central Circle, were held to be invalid on the ground that the notification conferring jurisdiction did so by reference to pending assessments only. However, their Lordships have very clearly held that an assessed has to be assessed by the Income Tax Officer within whose territorial jurisdiction he resides and that the return submitted to the Income Tax Officer who had no jurisdiction, territorial and otherwise over the assessed is not a valid return. In our opinion, the decision supports the respondents.

Lt. Col. Paramjit Singh Vs. Commissioner of Income Tax and Another, a Division Bench decision by the Punjab High Court was relied on. This decision supports the plea of the petitioner inasmuch as the ratio is that a notice for reassessment can be issued only by the assessing officer who had concluded the proceedings. However, the decision by the Supreme Court in Baldev Singh''s v. CIT (supra) was not brought to the notice of the Punjab High Court. We express our respectful dissent with the view so taken for the reasons stated above.

There is yet another reason why we are not inclined to inference with the notices under s. 148. The notices were issued in the years 1993 and 1995. petitions have been filed in the year 1997, i.e., after a lapse of more than four two years, respectively, from the dates of the notices. Assessments have been finalised. The question of jurisdiction having received the attention of the CIT(A) was left at large to be dealt with by the AO pursuant to the ''A remand At such at belated stage the petitioner cannot be shown in exercise of writ jurisdiction of this Court.

For the foregoing reasons, we find the petitioners not entitled to any relief in of writ jurisdiction of this Court. Both the petitions are dismissed though without any order as to costs.