Vildirect: IncomeTax-caselaws-1973-VIL-28-SC-DT

1973-VIL-28-SC-DT

Equivalent Citation: [1973] 91 ITR 550 (SC)

Supreme Court of India

Date: 19.04.1973

INDUSTRIAL TRUST LIMITED

COMMISSIONER OF INCOME-TAX (CENTRAL AND RAJASTHAN)

BENCH

Judge(s) : H. R. KHANNA. and K. S. HEGDE.

JUDGMENT

The judgment of the court was delivered by

HEGDE J.--These are appeals by special leave. They arise from a common judgment of the Rajasthan High Court. The assessee-company was incorporated in the erstwhile State of Jaipur on March 10, 1943, under the Jaipur Companies Act. In these appeals we are concerned with the assessment of the assessee for the assessment years 1946-47, 1947-48 and 1949-50.

At the relevant time the headquarters of the assessee-company was at Jaipur. The Income-tax Officer, Ajmer, issued notices under section 34 of the Indian Income-tax Act, 1922 (to be hereinafter referred to as "the Act"), to the assessee calling upon it to submit its income-tax returns in respect of the assessment years mentioned earlier. In response to those notices the assessee submitted its returns on August 11, 1953. When those returns were pending before the Income-tax Officer, Ajmer, the Income-tax Officer, Central Circle IV, issued fresh notices to the assessee under section 34 calling upon it to submit its income-tax returns in respect of those very assessment years. The assessee did not submit any return. On the other hand, it wrote a letter to the Income-tax Officer, Central Circle IV, saying that it had already submitted its returns to the Income-tax Officer, Ajmer, and hence it could not be called upon to submit fresh returns. Ignoring the objection of the assessee the Income-tax Officer, Central Circle, assessed the assessee. He rejected the assessee's objection regarding jurisdiction with these words :

" By its letter dated 27th September, 1956, the assessee contended that under section 64(1) of the Indian Income-tax Act, the place of assessment should be where the assessee carried on business, profession or vocation and that as the principal place of the business was at Jaipur, the place of assessment should have been at Jaipur. The assessee also relied upon the decision of Bidi Supply Co. v. Union of India in support of its contention. This objection of the assessee regarding the jurisdiction was duly referred to the Commissioner of Income-tax, Delhi, who vide his letter dated 30th January, 1957, addressed to the assessee-company, informed that the case of the assessee has been transferred to the Income-tax Officer, Central Circle IV, under section 5(7A) of the Indian Income-tax Act, and that in view of the facility of investigation and proper assessments it was not possible to accede to the request of the company for transfer of the case back to the territorial Income-tax Officer. Moreover, the case of Pannalal Binjraj v. Union of India has already decided the issue regarding the vires of section 5(7A). The contention of the assessee regarding jurisdiction is, therefore, rejected."

From the above observations it is clear that the contention taken before the Income-tax Officer, Central Circle, was that the assessee should be assessed by the Income-tax Officer, Jaipur, who possibly had acquired territorial jurisdiction over the assessee by the time the assessment proceedings were going on before the Central Circle. No objection appears to have been taken on the ground that the Ajmer Income-tax Officer was seized of the proceedings in view of the notices issued by him under section 34. The contention now advanced, namely, that in view of the circumstances that the Ajmer Income-tax Officer had already issued notices under section 34 and that the assessee had already submitted its returns in response to their notices the Income-tax Officer, Central Circle, was incompetent to initiate fresh proceedings under section 34 against the assessee does not appear to have been taken before the Income-tax Officer, Central Circle.

The assessee went up in appeal to the Appellate Assistant Commissioner against the assessments made by the Income-tax Officer, Central Circle. Before that officer, the assessee contested the jurisdiction of the Income-tax Officer, Central Circle, to assess the assessee. The Appellate Assistant Commissioner also rejected that contention. He observed :

" The proceedings under section 34(1A) for the assessment year 1946-47 appear to have been started on valid grounds in accordance with law. A notice under section 34(1)(a) for that year was issued by the Income-tax Officer, Ajmer, after taking the previous approval of the Commissioner of Income-tax, Delhi. A return was filed, but the assessment was not completed. Later on, it was found that the Income-tax Officer, Ajmer, was not empowered and had no jurisdiction to issue notice under section 34(1)(a) in respect of the pre-integration period. The proceedings started by him were, therefore, not valid in the eye of law. Thereafter, the Income-tax Officer, Central IV, Delhi, issued notice under section 34(1A) after obtaining the prior approval of the Central Board of Revenue. On receipt of this notice, the company in its letter dated April 2, 1955, informed the Income-tax Officer that a return had already been filed for that year and requested him to treat the said return as one submitted in compliance with the notice under section 34(1A). The Income-tax Officer only complied with the request. Under the circumstances, there is no merit in the appellant's contention that the Income-tax Officer was not competent to issue the notice under section 34(1A) for the assessment year 1946-47."

Here again, it may be noticed that the only contention taken before the Appellate Assistant Commissioner was that the notice issued by the Income-tax Officer, Central Circle, under section 34(1A) was invalid in respect of the assessment year 1946-47, and not in respect of other assessment years. It may be noticed that by its letter dated April 2, 1955, the assessee had requested the Income-tax Officer, Central Circle, to assess him on the basis of the returns submitted by it to the Income-tax Officer, Ajmer. The Income-tax Officer, Central Circle, complied with that request. The circumstance under which the Income-tax Officer, Central Circle, came to issue notices under section 34 is set out in the order of the Appellate Assistant Commissioner. The Appellate Assistant Commissioner's order indicates that in respect of Jaipur, which was formerly a native State, there have been some changes as regards the income-tax set up. Possibly for some time, after Jaipur's integration with India, Jaipur was under the jurisdiction of the Income-tax Officer, Ajmer. But that is not clear from the records. All the same it is necessary to note that it was the contention of the assessee that the Income-tax Officer, Central Circle, was not competent to initiate proceedings against it in view of the notices issued by the Income-tax Officer, Ajmer. We have only to examine the correctness of that contention.

Before the Tribunal, it was urged that as the Income-tax Officer, Ajmer, had already initiated proceedings under section 34(1)(a), the Income-tax Officer, Central Circle, was incompetent to initiate fresh proceedings under section 34(1A). The Tribunal accepted that contention. Consequently, the Tribunal held that the notices issued by the Income-tax Officer, Central Circle, were invalid notices. Thereafter, at the instance of the Commissioner of Income-tax, the following question was submitted by the Tribunal to the High Court in respect of the assessment year 1946-47 :

" Whether, on the facts and in the circumstances of the case, a fresh action under section 34(1A) could be initiated on February 21, 1955, and an assessment made thereon on March 24, 1956, when a return dated August 11, 1953, was already pending before the Income-tax Officer ?"

The High Court answered that question in favour of the department. Somewhat similar questions were submitted to the High Court in respect of the assessment years 1947-48 and 1949-50. Those questions were also answered in favour of the department.

There is no dispute that if the assessment proceedings under section 34 initiated by the Income-tax Officer, Ajmer, are valid proceedings, the Income-tax Officer, Central Circle, would not have had jurisdiction to issue fresh notices under section 34. The case for the department is that the Income-tax Officer, Ajmer, had no jurisdiction over the assessee in respect of the assessment years with which we are concerned and, consequently, the notices issued by him under section 34 in respect of those years were invalid notices. We have to see whether that submission is correct. If we hold that the notices issued by the Income-tax Officer, Ajmer, are invalid notices, then we have to uphold the judgment of the High Court. At no stage before the authorities under the Act, the assessee had put forward the case that any Income-tax Officer other than the Income-tax Officer, Ajmer, or the Income-tax Officer, Central Circle, had jurisdiction over it in respect of the assessment years in question.

Section 5, sub-section (6) of the Act, provides :

" The Central Board of Revenue may, by notification in the official Gazette, empower Commissioners of Income-tax, Appellate or Inspecting Assistant Commissioners of Income-tax and Income-tax Officers to perform such functions in respect of such classes of persons or such classes of income or such area as may be specified in the notification, and thereupon the functions so specified shall cease to be performed in respect of the specified classes of persons or classes of income or area by the other authorities appointed under sub-sections (2) and (3)."

Ordinarily, an assessee has to be assessed by the Income-tax Officer within whose territorial jurisdiction he resides. But it is open to the Central Board of Revenue to assign any particular class of assessees or any particular type of assessments to an Income-tax Officer of its choice. It was urged on behalf of the department that the Income-tax Officer, Ajmer, had no jurisdiction to assess the assessee in respect of the assessment years with which we are concerned, in view of the notification issued by the Central Board of Revenue on July 1, 1952. That notification, to the extent relevant for our purpose, may now be set out. It reads thus :

" Notification No. S.R.O. 1214, dated the 1st July, 1952.

In exercise of the powers conferred by sub-section (6) of section 5 of the Indian Income-tax Act, 1922 (XI of 1922), and in supersession of its Notification No. 13/I.T. dated the 12th February, 1949, the Central Board of Revenue appoints the officers specified in the 3rd, 4th, 5th and 6th columns of the Schedule annexed hereto, to perform all the functions of an Income-tax Officer, Inspecting Assistant Commissioner of Income-tax, Appellate Assistant Commissioner of Income-tax and the Commissioner of Income-tax respectively in respect of the persons specified in the corresponding entry in the 2nd column thereof :

Provided that nothing herein contained shall apply to cases or classes of cases assigned to a Commissioner of Income-tax appointed under sub-section (2) of section 5 of the Indian Income-tax Act, 1922, without reference to area.

S No.	Persons	Insp. Income-tax	I.T.O.	Asst. Commr.,	A.A.C., Inc.-tax.	Commr. of Inc.-tax.
	* * * * * *
(56)	77. Persons (excluding those who fall under S. Nos. 69 and 76) not resident in the taxable territories and not assessed through statutory agents under s. 43 with any income for direct assessment, etc. house property, interest etc., residing in the following Indian States :	Jaipur.	I.T.O., Ajmer.	I.A.C., Delhi.	A.A.C., Delhi.	C.I.T., Delhi.
(57) to (100)	* * * * * *

This item will apply only to Pending assessments for period or periods before the integration or merger of the Indian States. (Emphasis is supplied).

Jaipur was integrated into India on 7th April, 1949, but for the purposes of income-tax it was integrated as from 1st April, 1950. In view of the aforementioned notification it is clear that the Income-tax Officer, Ajmer, had jurisdiction over the residents of Jaipur after the issue of that notification only in respect of the assessments pending before him and not in respect of any other assessments. Quite clearly the assessee's assessments were not pending before the Income-tax Officer, Ajmer. Hence, the contention advanced on behalf of the assessee that the Income-tax Officer, Ajmer, had jurisdiction over it in respect of the assessment years in question cannot be upheld. It was never urged either before the Income-tax Officer or before the Appellate Assistant Commissioner or even before the Tribunal that the Income-tax Officer, Central Circle, had no jurisdiction per se over the assessee. That question did not come up for consideration before any of the authorities under the Act. We are not called upon to decide that question nor is it possible to decide that question on the basis of the material before us, Hence, the rule laid down by this court in Commissioner of Income-tax v. Ranchhoddas Karsondas relied on by the appellant has no application to the facts of this case.

It was next contended by Mr. B. Sen, learned counsel for the assessee, that whether the Income-tax Officer, Ajmer, had jurisdiction over the assessee or not, that officer, having issued notices to the assessee under section 34 and the assessee having submitted its returns in response to those notices, the Income-tax Officer, Central Circle, was not competent to initiate assessment proceedings against the assessee. In support of that contention reliance was placed on the decision of the Madras High Court in S. Raman Chettiar v. Commissioner of Income-tax. That decision was affirmed by this court in Commissioner of Income-tax v. S. Raman Chettiar. The question that arose for decision in Raman Chettiar's case was whether a return submitted to an Income-tax Officer having jurisdiction, in response to an invalid notice under section 34, is a valid return. The High Court as well as this court held that such a return was a valid return. But that is not the case here. Herein, the return was submitted to an Income-tax Officer who had no jurisdiction, territorial or otherwise, over the assessee. Hence, the rule laid down in Raman Chettiar's case does not bear on the question arising for decision in this case.

For the reasons mentioned above, we are in agreement with the conclusion reached by the High Court. We, accordingly, dismiss these appeals with costs : hearing fee, one set.

Appeals dismissed.

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