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1984 Supreme(Pat) 259
PATNA HIGH COURT
S.K.Jha and Nazir Ahmad JJ.
Mahalliram Ramniranjan Das
Versus
Commissioner Of Income Tax
Taxation Case No. 78 of 1974 ;
Decided On : JULY 19, 1984
Where an assessee raises an objection to the jurisdiction of the Income-tax Officer and the matter is not referred to the Commissioner as required under sections 124(4) and (6) of the said Act, the assessment can be set aside and fresh assessment can be ordered to be made with a direction that it should be done after following the procedure mentioned in sections 124(4) and (6) of the said Act.
Headnote:
INCOME TAX - Assessment - Jurisdiction - Objection to jurisdiction of Income-tax Officer - Reference to Commissioner not made - Assessment completed - Appellate Assistant Commissioner setting aside assessment - Whether justified.
Fact of the Case:
The assessee filed a return before the Income-tax Officer, A-Ward, Patna, on October 20, 1964, and the Income-tax Officer issued notices under sections 143(1) and 143(2) of the said Act and the assessee appeared before him and produced books of account. However, on December 30, 1967, the Commissioner of Income-tax passed an order regarding the jurisdiction of the various Income-tax Officers of Patna and he directed that the cases of the assessees under Ward No. 30 will remain under the jurisdiction of the Income-tax Officer, A-Ward, but the cases of the assessees having income from hotel business were to be assessed by the Income-tax Officer, C-Ward. As the assessee had income from Marwari Hotel, the Income-tax Officer, C-Ward, issued notice to the assessee under Section 142(1) of the said Act and even when the assessee objected to the jurisdiction of the Income-tax Officer, C-Ward, he completed the assessment on March 30, 1968.
Finding of the Court:
The Appellate Assistant Commissioner was justified in setting aside the assessment order for making a fresh assessment according to law and the Appellate Tribunal was justified in upholding the order of the Appellate Assistant Commissioner.
Issues: Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not annulling the assessment and in confirming the order of the AAC setting aside the assessment ?
Ratio Decidendi: The irregularity has occurred at the stage after a petition was filed objecting to the jurisdiction of the Income-tax Officer, C-Ward, to proceed with the case and the Income-tax Officer without referring the matter to the Commissioner of Income-tax for deciding the matter himself completed the assessment. Thus the irregularity was at that stage and so the case has to be restored to that stage and so the Appellate Assistant Commissioner was justified in setting aside the assessment order for making a fresh assessment according to law and the Appellate Tribunal was justified in upholding the order of the Appellate Assistant Commissioner.
Final Decision: The answer to the question referred by the Tribunal is in favour of the department-opposite party and against the assessee-petitioner. However, in the peculiar circumstances of the case, the parties will bear their own costs.
Nazir Ahmad, J.
1. This is a reference under Sec.256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as " the Act "), by the Income-tax Appellate Tribunal, Patna Bench "A", Patna, in the matter of assessment of income-tax on M/s. Mahalliram Ramniranjan Das, Patna City, for the assessment year 1963-64.
2. The following question of law has been referred to this court for opinion by the Tribunal:
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not annulling the assessment and in confirming the order of the AAC setting aside the assessment ? "
3. It appears that the jurisdiction of the Income-tax Officer, C-Ward, Patna, was challenged. The Income-tax Officer has pointed out that in the course of proceedings, the assessee objected to the exercise of jurisdiction by him over his case. He has pointed out that he holds jurisdiction over all hotel business and their partners. Since the assessee is a partner in M/s. Marwari Hotel, Frazer Road, Patna, which is assessed by him, his objection challenging the jurisdiction of the Income-tax Officer has no merit and is overruled. Assessment order of the Income-tax Officer is annexure " A " to the statement of the case.
4. The other facts are; available from the order of the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner, an argument was advanced that the Income-tax Officer, C-Ward, Patna, made assessment without jurisdiction. It was stated that the assessment had been made by the Income-tax Officer, A-Ward, Patna, and the assessee had filed a return before him on October 20, 1964. The Income-tax Officer, A-Ward, thereafter, issued notices under Sections 143(1) and 143(2) and the assessee appeared before him and produced the. books of account. Before the assessment could be made, the Commissioner issued a circular regarding the jurisdiction of the various Income-tax Officers of Patna on December 30, 1967. by which this case was transferred to the Income-tax Officer, C-Ward, Eatna. The Income-tax Officer, C-Ward, issued a notice under Sec.142(1) which was received by the assessee on February 14, 1968. On February 20, 1968. the assessee stated that the jurisdiction over the case was with the Income-tax Officer, A-Ward, and not with the Income-tax Officer, C-Ward, and requested the Income-tax Officer for determination of the question of jurisdiction before the assessment was taken up on merits. The jurisdiction was challenged once again on March 12, 1968, and the Income-tax Officer asked the Inspector to enquire into the matter relating to the actual location of the assessees business. The Inspector reported that the business came under Ward No. 30 which was under the jurisdiction of the Income-tax Officer, A-Ward. The Income-tax Officer referred the matter to the Inspecting Assistant Commissioner and he ordered that the jurisdiction was with the Income-tax Officer, C-Ward. The Appellate Assistant Commissioner has pointed out that this was presumably because the assessee was a partner in a firm, named and styled as Marwari Hotel and the assessment was made on March 30, 1968, jby the Income-tax Officer, C-Ward, and so the Income-tax Officer held that since the assessee was a partner in Marwari Hotel, he had jurisdiction in the matter.
5. The predecessor of the Appellate Assistant Commissioner had referred the matter back to the Income-tax Officer for a report on this point. The Income-tax Officer merely referred to an order of the Commissioner dated December 30, 1967, in which it was stated that all the persons under Ward No. 30 should be assessed by the Income-tax Officer, A-Ward, except those having hotel business which should be under the Income-tax Officer, C-Ward, and all the partners of a firm were to be assessed by the Income-tax Officer assessing the firm. It was submited before the Appellate Assistant Commissioner that the principal place of business of the assessee was in Ward No. 30 and he had
