Court Allows Reassessment Jurisdiction Review in Income Tax Case

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Case Name:

Ashick Abraham Vs Principal Chief Commissioner of Income Tax (High Court of Kerala)

WP(C).No.10100 OF 2020(J)

Date: 21st May 2020

Key Takeaways:

1. Reassessment proceedings under Section 148 (of Income Tax Act, 1961) are considered equivalent to filing a return under Section 139 (of Income Tax Act, 1961) for jurisdictional purposes.

2. The court emphasized the importance of addressing jurisdictional questions in tax assessments promptly.

3. The judgment highlights the need for tax authorities to consider taxpayer convenience in jurisdictional matters.

Issue: 

Can a taxpayer challenge the jurisdiction of an Income Tax Assessing Officer in reassessment proceedings initiated under Section 148 (of Income Tax Act, 1961)?

Facts:

1. The petitioner, an individual taxpayer, shifted his residence from Alappuzha to Ernakulam in 2015. 

2. His PAN card for Ernakulam was issued in December 2019. 

3. The Income Tax Department initiated reassessment proceedings for the assessment years 2013-14 and 2014-15 under Section 148 (of Income Tax Act, 1961). 

4. The petitioner requested a transfer of assessment proceedings from Alappuzha to Ernakulam. 

5. The Income Tax Department opposed this request, citing provisions of Section 124 (of Income Tax Act, 1961). 

Arguments:

Petitioner's Arguments:

1. The proceedings under Section 148 (of Income Tax Act, 1961) should be treated on par with proceedings under Section 139 (of Income Tax Act, 1961). 

2. The distance between Alappuzha and Ernakulam (60 km) and the convenience of the assessee should be considered. 

3. The Income Tax Authorities in Ernakulam would have jurisdiction over all aspects of the case. 

Income Tax Department's Arguments:

1. Section 124(3) (of Income Tax Act, 1961) bars questioning the jurisdiction after certain time limits. 

2. The petitioner did not disclose the issuance of reassessment notices for 2013-14 and 2014-15. 

3. There is a complete bar under subsections (3) and (4) of Section 124 (of Income Tax Act, 1961). 

Key Legal Precedents:

The judgment primarily relies on the interpretation of Sections 124 and 148 of the Income Tax Act, 1961. No specific case laws were cited in the judgment.

Judgement:

1. The court directed the 3rd respondent (Income Tax Officer) to reconsider the jurisdiction request under Section 124(4) (of Income Tax Act, 1961) or other relevant provisions. 

2. This reconsideration should be done within one month of receiving the judgment copy. 

3. The court clarified that proceedings under Section 148(reassessment) (of Income Tax Act, 1961) should be treated as equivalent to filing a return under Section 139 (of Income Tax Act, 1961). 

4. The ongoing proceedings may continue but should not be finalized until the jurisdictional issue is resolved. 

FAQs:

Q1: What is the significance of treating Section 148 (of Income Tax Act, 1961) proceedings as equivalent to Section 139 (of Income Tax Act, 1961)?

A1: This interpretation allows taxpayers to raise jurisdictional questions even in reassessment cases, which might otherwise be barred under strict reading of Section 124 (of Income Tax Act, 1961).

Q2: Does this judgment apply to all reassessment cases?

A2: While the principle may be broadly applicable, each case would need to be evaluated on its specific facts and circumstances.

Q3: What factors should the Income Tax Officer consider when reviewing the jurisdiction?

A3: The officer should consider the taxpayer's current residence, convenience, and the relevant provisions of the Income Tax Act, particularly Sections 124 and 148.

Q4: Can the Income Tax Department appeal this decision?

A4: Yes, the department could potentially appeal to a higher court if they disagree with the interpretation of the law in this judgment.

Q5: What happens if the Income Tax Officer doesn't review the jurisdiction within one month?

A5: The judgment doesn't specify consequences, but the taxpayer could potentially file a contempt petition if the order isn't followed.

1. Petitioner, an individual assessee of Income tax department and holder of a Permanent Account Number (PAN) Ext.P1 was subjected to assessment before he shifted his residence to Ernakulam from Alappuzha, But his PAN card of Ernakulam was issued on December 2019. Mr. C.K. Karunakaran learned counsel appearing on behalf of the petitioner submits that petitioner vide Exts.P3 and P4 addressed the request to the 3rd respondent Income Tax Officer Ward 1, Alappuzha for transfer of the assessment proceedings initiated under Section 148 (of Income Tax Act, 1961). However no action has been taken giving cause to approach this Court with a prayer to issue writ of mandamus for considering such request. He further submits that the distance between Ernakulam and Alappuzha is 60 Kilometeres and the convenience of the assessee has to be seen as the Income Tax Authorities at Ernakulam would have the jurisdiction to take into consideration all the aspects as would be applicable or otherwise. In support of the aforementioned contention, he relies upon the provisions of sub section (1) of Section 124 (of Income Tax Act, 1961).

2. Issue notice before admission. Sri. Joseph Jose accepts notice on behalf of Income Tax. He opposes the prayer for transfer by relying upon the provisions of sub section (3) of Section 124 (of Income Tax Act, 1961). In order to lay emphasis, he refers to the provisions of Sub section (a) of sub section 3 (of Income Tax Act, 1961), which specifies that no person shall be entitled to call in question the jurisdiction of an assessing officer if return under sub section (1) of Section 139 (of Income Tax Act, 1961) is filed, after expiry of one month from the date on which was served with a notice under sub section (1) Section 142 (of Income Tax Act, 1961) or sub section (2) of Section 143 (of Income Tax Act, 1961) or after the completion of the assessment whichever is earlier. Reference was also laid to sub section 4 (of Income Tax Act, 1961) which empowers the assessing officer to take a call on the jurisdiction in case assessee placed the aforementioned objection,and is not satisfied with the correctness of the claim. He thus submits that the aforementioned prayer as sought for is not acceptable. Another reason for rejection of the writ petition is non disclosure of the fact that for the assessment year 2012-13 petitioner filed a return under Section 139 (of Income Tax Act, 1961) and an assessment order was passed under Section 146(b) (of Income Tax Act, 1961). An appeal was preferred by the petitioner before the Commissioner of Income Tax under Section 246 (of Income Tax Act, 1961) A where demand were sought from the assessing officer pertaining to certain agriculture income. On receipt of the aforementioned report, the assessing officer issued a re- assessment notice pertaining to assessment year 2013-14 and 2014-15 under Section 148 (of Income Tax Act, 1961). All these aforementioned particulars have intentionally withheld as there is a complete bar under sub section (3) and sub section (4) of Section of 124 and urges this Court for dismissal of this writ petition.

3. In rebuttal, learned Counsel for the petitioner draws the attention of this court the provisions of sub section 1 (of Income Tax Act, 1961) of section 148 (of Income Tax Act, 1961) by submitting that the

proceedings under Section 148 (of Income Tax Act, 1961) are pari meteria to the proceedings under Section 139 (of Income Tax Act, 1961) and submits that there would not be any impediment for the 3rd respondent to take a call on the request, particularly Ext . P4.

4. I have heard the learned counsel for the parties.

5. For adjudication of the aforementioned controversy,it would be appropriate to extract the provisions of Sub Sections 1, 2 and 3 of Section 124 (of Income Tax Act, 1961) and as well as sub section 1 (of Income Tax Act, 1961) of Section 148 (of Income Tax Act, 1961), the same read as under.

124. Jurisdiction of Assessing Officers

“1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120 (of Income Tax Act, 1961), 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 principal 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 [Principal Director General or] Director General or the [Principal Chief Commissioner or] Chief Commissioner or the [Principal Commissioner or] Commissioner; or where the question is one relating to areas within the jurisdiction of different [Principal Directors General or] Directors General or [Principal Chief Commissioners or] Chief Commissioners or [Principal Commissioners or] Commissioners, by the [Principal Directors General or] Directors General or [Principal Chief Commissioners or] Chief Commissioners or [Principal Commissioners or] Commissioners concerned or, if they are not in agreement, by the Board or by such [Principal Director General or] Director General or [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner as the Board may, by notification in the Official Gazette, specify.

(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer -

(a) Where he has made a return [under sub-section

(1) of section 115WD (of Income Tax Act, 1961) or] under sub-section (1) of section 139 (of Income Tax Act, 1961), after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 (of Income Tax Act, 1961) or [sub-section (2) of section 115WE (of Income Tax Act, 1961) or] sub-section (2) of section 143 (of Income Tax Act, 1961) or after the completion of the assessment, whichever is earlier;

(b) where he has made no such return, after the expiry of the time allowed by the notice under [sub- section (2) of section 115WD (of Income Tax Act, 1961) or sub-section (1) of section 142 (of Income Tax Act, 1961) or under sub-section (1) of section 115WH (of Income Tax Act, 1961) or under section 148 (of Income Tax Act, 1961) for the making of the return or by the notice under the first proviso to section 115WF (of Income Tax Act, 1961) or under the first proviso to section 144 (of Income Tax Act, 1961)] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier;

(c) where an action has been taken under section 132 (of Income Tax Act, 1961) or section 132A (of Income Tax Act, 1961), after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 153A (of Income Tax Act, 1961) or sub-section (2) of section 153C (of Income Tax Act, 1961) or after the completion of the assessment, whichever is earlier.]

[148. Issue of notice where income has escaped assessment

[(1)] Before making the assessment, reassessment or recomputation under section 147 (of Income Tax Act, 1961), the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 (of Income Tax Act, 1961):]

[Provided that in a case-

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and

(b) subsequently a notice has been served under sub-section (2) of section 143 (of Income Tax Act, 1961) after the expiry of twelve months specified in the proviso to sub-section (2) of section 143 (of Income Tax Act, 1961), as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or re-computation as specified in sub-section (2) of section 153 (of Income Tax Act, 1961), every such notice referred to in this clause shall be deemed to be a valid notice:

Provided further that in a case-

(a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and

(b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 (of Income Tax Act, 1961) after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143 (of Income Tax Act, 1961), but before the expiry of the time limit for making the assessment, re- assessment or re-computation as specified in sub-section (2) of section 153 (of Income Tax Act, 1961), every such notice referred to in this clause shall be deemed to be a valid notice.]

[Explanation. – For the removal of doubts, it is hereby declared that nothing contained in the first proviso of the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.]

6. On perusal of the aforementioned provisions, no doubt an assessee is prevented to dispute the question of jurisdiction of the assessing officer, after the expiry of one month from the date when he was served with a notice under sub section (1) of Section 142 (of Income Tax Act, 1961) or sub section (2) of Section 143 (of Income Tax Act, 1961), and in case such objection is raised the assessing officer shall assign reasons regarding the correctness or otherwise of the claim for referring the matter for determination under sub section (2) before the assessment is made. The question which has arisen in the present writ petition is whether the proceedings under Section 148 (of Income Tax Act, 1961) ie re assessment would be taken at par with the proceedings under Section 139 (of Income Tax Act, 1961).

7. on perusal of the provisions of Section 148 (of Income Tax Act, 1961) extracted supra, it is axiomatic that the proceedings initiated under Section 148 (of Income Tax Act, 1961) shall be proceedings at the stage of filing of the return under Section 139 (of Income Tax Act, 1961). There is no doubt that the petitioner did not disclose about the issuance of the reassessment notice dated 30.12.2019, pertaining to assessment year 2013-14 and 2014-15. However, this aforementioned contention of Mr.Navaneeth N.Nath was attempted to be refuted by Sri.C.K.Karunakaran in view of the fact that Sub Section (4) of Section 124 (of Income Tax Act, 1961) enjoins upon the assessing authority to assign a reason by recording a satisfaction for reference of determination as and when any question of jurisdiction is raised.

8. It is a question of fact that the petitioner though shifted his residence in the year 2015 from Alappuzha to Ernakulam and issuance of Pan card Ext.P1 in the year 2019 is a testimony of the same for the remaining assessment years of course in case of any dispute with income tax the jurisdiction would be vested with the Income Tax Authority, Ernakulam.

9. I am of the view that all these points which have been urged before this Court can be conveniently taken and addressed by the authority, ie. the assessing officer under sub section (4) of Section 124 (of Income Tax Act, 1961). For the sake of reputition, the assessing officer is required to record the satisfaction as per the provisions of sub section (2) before the assessment is made. It is a matter of record that the request Ext.P4 is dated 04.01.2020, ie within few days of receipt of the reassessment notice dated 30.12.02019 under Section 148 (of Income Tax Act, 1961).

10. Having considered the aforementioned provisions of the Act and the rival contentions, I am of the view that the equity can be addressed, by directing 3rd respondent to take a call on the request Ext.P6 under sub section (4) of Section 124 (of Income Tax Act, 1961) or any other provisions of the Act regarding the jurisdiction of assessment or reassessment proceedings, by taking into consideration observation, herein above and the relevant provisions of the Act. Let this exercise be under taken within a period of one month from the receipt of a copy of this judgment after affording opportunity of hearing to the petitioner and by passing a speaking order. It is made clear that the 3rd respondent would take into consideration whether the claim made by the petitioner would or would not fall under sub section (2), when the original assessment 139 has been made or otherwise. It is further made clear that the proceedings may continue but shall not be finalised until and unless the request as envisaged under Ext.P6 within time frame afore-mentioned.

Sd/-

AMIT RAWAL JUDGE

WP(C).No.10100 OF 2020(J)

APPENDIX PETITIONER'S/S EXHIBITS:

EXHIBIT P1 TRUE COPY OF THE PAN CARD NO AACPE 5894 N OF THE PETITIONER EXHIBIT P2 TRUE COPY OF THE AADHAAR CARD NO 8771 6171 7265 OF THE PETITIONER

EXHIBIT P3 TRUE COPY OF PETITIONERS LETTER DATED 30.12.2019 ADDRESSED TO THE ITO NON CORPORATE WARD (1) ERNAKULAM

EXHIBIT P4 TRUE COPY OF LETTER DATED 4.1.2020 ADDRESSED TO THE 3RD RESPONDENT

EXHIBIT P5 TRUE COPY OF THE LETTER DATED 25.2.2020 COPIED TO THE 1ST RESPONDENT

EXHIBIT P6 TRUE COPY OF THE LETTER DATED 25.2.2020 ADDRESSED TO THE 2ND RESPONDENT