2025 (6) TMI 161 - AT - Income Tax

Territorial Jurisdiction of the Delhi Benches to entertain these appeals/COs - appeals have been filed by the Revenue against Sahara Group - situs of the AOs who has passed the assessment orders in the respective appeals is in Lucknow - appeals filed in Lucknow Benches were transferred to Delhi Benches by the President ITAT in pursuance of Rule 4 of Income-Tax (Appellate Tribunal) Rules 1963 HELD THAT - Hon ble Apex Court in the case of PCIT vs. MSPL Ltd. 2023 (4) TMI 1181 - SC ORDER has reiterated the legal position that the seat of Tribunal and/or jurisdiction of concerned Hon ble High Court would depend upon where seat of the AO who has passed the assessment order. The fact that subsequently the cases are consolidated before another AO in exercise of power u/s.127 of the Act would not change the jurisdiction of appellate Authorities. No force in the argument of ld. Counsel for the assessee either that the decision rendered in the case of ABC Papers Ltd. 2022 (8) TMI 863 - SUPREME COURT will have no impact on the appeals which have been transferred to Delhi Benches from Lucknow Benches prior to the said judgment. The Hon ble Apex Court has explained the law as it has always been and has not expounded any new legal principle. Thus ITAT Delhi Benches do not have territorial jurisdiction to decide aforesaid appeals of Revenue and cross objections by the respondent/assessee. Hence the appeals and the cross objections are dismissed as not maintainable.

Summary

The core legal question considered in these appeals and cross objections is whether the Delhi Benches of the Income Tax Appellate Tribunal (ITAT) have territorial jurisdiction to entertain appeals and cross objections arising from assessment orders passed by Assessing Officers (AOs) situated at Lucknow, especially after the cases were transferred from the Lucknow Benches to the Delhi Benches under Rule 4 of the IT(AT) Rules, 1963.

Another related issue is the effect of the Supreme Court's rulings in PCIT vs. ABC Papers Ltd. and PCIT vs. MSPL Ltd. on the maintainability of appeals before the Delhi Benches, particularly whether the transfer of cases under Section 127(2) of the Income Tax Act, 1961 (the Act) impacts the jurisdiction of the Tribunal and the High Court for appeals.

These issues arise in the context of multiple appeals filed by the Revenue and cross objections filed by the assessee, all concerning the Sahara Group, where the original assessment orders were passed by AOs located in Lucknow but were subsequently consolidated and transferred to Delhi for administrative convenience.

Issue-wise Detailed Analysis

1. Territorial Jurisdiction of ITAT Delhi Benches to Entertain Appeals Transferred from Lucknow Benches

Relevant Legal Framework and Precedents: The IT(AT) Rules, 1963, particularly Rule 4, empower the President of the ITAT to transfer appeals from one Bench to another. Section 127(2) of the Income Tax Act allows for transfer of cases between Income Tax authorities. The Standing Order dated 16.09.1997 under IT(AT) Rules clarifies that the ordinary jurisdiction of the ITAT Bench is determined by the location of the AO's office and not by the assessee's place of business or residence.

The Supreme Court's decision in PCIT vs. ABC Papers Ltd. and PCIT vs. MSPL Ltd. is pivotal. The Court held that the jurisdiction of the Tribunal and the High Court for appeals lies strictly within the territorial limits where the AO who passed the assessment order is located. The transfer of cases under Section 127(2) of the Act affects only the jurisdiction of the Income Tax authorities but does not alter the appellate jurisdiction of the ITAT or the High Court.

Court's Interpretation and Reasoning: The Tribunal examined the Standing Order and the Supreme Court rulings and concluded that the Delhi Benches do not have jurisdiction over appeals arising from assessment orders passed by AOs at Lucknow, notwithstanding the transfer of cases to Delhi for administrative consolidation. The Tribunal emphasized that the Supreme Court's ruling clarifies the "lineal progression" of judicial remedies, where the appellate jurisdiction is fixed by the AO's location and cannot be altered by executive transfer under Section 127.

Key Evidence and Findings: The appeals were initially filed before the Lucknow Benches and later transferred to Delhi Benches by the ITAT President under Rule 4. The assessments were originally made by AOs at Lucknow. The assessee argued that consolidation of cases at Delhi justified the transfer and jurisdiction of Delhi Benches. The Department supported this view.

Application of Law to Facts: Applying the Supreme Court's ruling, the Tribunal found that the transfer of appeals to Delhi Benches was administrative and did not change the territorial jurisdiction for appeals. The original AO's situs at Lucknow fixes the jurisdiction for appeals and cross objections, and therefore, the Delhi Benches lack jurisdiction.

Treatment of Competing Arguments: The assessee contended that since the cases were consolidated in Delhi and the transfer order was passed prior to the Supreme Court's decision, the Delhi Benches have jurisdiction. The Tribunal rejected this, holding that the Supreme Court's ruling did not create a new legal principle but reaffirmed the existing law. The Department supported the assessee's position on jurisdiction but ultimately agreed with the Tribunal's jurisdictional conclusion.

Conclusions: The Tribunal concluded that the Delhi Benches do not have territorial jurisdiction to decide these appeals and cross objections. Consequently, the appeals and cross objections filed before the Delhi Benches are not maintainable and must be dismissed.

2. Effect of Supreme Court's Decisions on Previously Transferred Appeals

Relevant Legal Framework and Precedents: The Supreme Court in PCIT vs. ABC Papers Ltd. overruled prior decisions that allowed transfer of appellate jurisdiction by executive action. It underscored that the jurisdiction of the High Court and ITAT is independent of executive transfers under Section 127 of the Act.

Court's Interpretation and Reasoning: The Tribunal noted that the Supreme Court's decision was declaratory of the law "as it has always been" and not a new legal principle. Therefore, even though the transfer of appeals from Lucknow to Delhi Benches was made before the Supreme Court's ruling, the ruling applies retrospectively to clarify jurisdictional boundaries.

Key Evidence and Findings: The transfer order was dated 17.08.2006, while the Supreme Court's decision was pronounced on 18.08.2022. The Tribunal found that the earlier transfer could not override the jurisdictional mandate established by the Supreme Court.

Application of Law to Facts: The Tribunal applied the Supreme Court's ruling to dismiss the appeals before the Delhi Benches despite the prior transfer, holding that the jurisdiction remains with the Lucknow Benches.

Treatment of Competing Arguments: The assessee argued that the transfer order predates the Supreme Court ruling and should be binding. The Tribunal rejected this, emphasizing that the Supreme Court's decision clarifies existing law and must be followed.

Conclusions: The Tribunal held that the Supreme Court's ruling applies to all cases, including those transferred earlier, and therefore the Delhi Benches lack jurisdiction.

3. Procedural Relief and Directions

Recognizing that dismissal on jurisdictional grounds should not prejudice the parties, the Tribunal granted liberty to both the Revenue and the assessee to file fresh appeals and cross objections before the appropriate Bench at Lucknow within 60 days from the date of receipt of the order. The Tribunal also directed condonation of any delay arising from the filing of fresh appeals or cross objections.

Significant Holdings

"The power of transfer exercisable under section 127 is relatable only to the jurisdiction of the Income-tax Authorities. It has no bearing on the ITAT, much less on a High Court. If we accept the submission, it will have the effect of the executive having the power to determine the jurisdiction of a High Court. This can never be the intention of the Parliament."

"The jurisdiction of a High Court stands on its own footing by virtue of Section 260A read with Section 269 of the Act. While interpreting a judicial remedy, a Constitutional Court should not adopt an approach where the identity of the appellate forum would be contingent upon or vacillates subject to the exercise of some other power. Such an interpretation will clearly be against the interest of justice."

"In conclusion, we hold that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under section 127 for the same assessment year(s)."

Core principles established include:

• The territorial jurisdiction of the ITAT and High Courts for appeals is fixed by the location of the AO who passed the assessment order and cannot be altered by executive transfer of cases under Section 127.
• Transfers under Section 127 affect only the jurisdiction of Income Tax authorities, not the appellate jurisdiction of ITAT or High Courts.
• Executive transfer of jurisdiction without judicial intervention undermines the independence of the judiciary and is impermissible.
• Appeals filed before a Bench lacking territorial jurisdiction are not maintainable and must be dismissed.

Final determinations on the issues are that the Delhi Benches of the ITAT lack jurisdiction to entertain the appeals and cross objections arising from assessment orders passed by AOs at Lucknow, notwithstanding administrative transfer of cases to Delhi. Consequently, all 11 appeals of the Revenue and 9 cross objections of the assessee before the Delhi Benches are dismissed as not maintainable. However, liberty is granted to file fresh appeals and cross objections before the appropriate Lucknow Benches within the stipulated time.