TMI Blog1979 (7) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... on November 26, 1968, and to show cause why a penalty should not be imposed on the firm under s. 271(1)(c) of the Act. A similar notice dated February 24, 1969, was again served on the respondent fixing March 7, 1969, for hearing for the purpose. The respondent objected to the said notice by his written objection dated March 3, 1969, contending, inter alia, that the IAC, Range XXII, had no jurisdiction to issue such notice. Thereafter, on March 6, 1969, the respondent filed an application under art. 226 of the Constitution and contended that in the aforesaid circumstances the IAC, Range XXII, not having initiated the proceedings, he was incompetent in law to do so. Further, there was no satisfaction on the part of the IAC, Range XXII, about the alleged concealment of income by the respondent. The IAC, Range XXII, it was also contended, had no jurisdiction to issue notices under s. 274(2) since the penalty proceedings were not referred to him by the ITO. The respondent accordingly prayed for a writ in the nature of mandamus commanding the ITO. 'A' Ward, Howrah, the IAC, Range XXII, and the Commissioner, West Bengal III, to cancel or withdraw the aforesaid notices, and also for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice as also the proceedings thereunder before the IAC, Range XXII, were without jurisdiction as stated in the petition. The respondent-firm was never made aware of the Commissioner's order and there was never any concealment of income. It was, however, admitted that on October 15, 1968, the file of the assessee had been transferred to the ITO, 'G' Ward, Howrah. The learned judge referred to his earlier decision in similar circumstances in Jaswantrai Brothers v. ITO, in Matter No. 103 of 1969, dated February 18, 1972 (unreported). In this case, a penalty proceeding was referred by the ITO, 'A' Ward, District III(3), Calcutta, on March 22, 1967, to the IAC, Range IV. In exercise of the powers conferred by s. 127(1) and of all other powers enabling him in that behalf the Commissioner by order dated July 29, 1967, transferred the cases mentioned in col. III of the Schedule (G.I.R. III(1)-a/A Sri Jaswantrai Agarwalla) from the ITO mentioned in col. IV (ITO, A-Wd., District III(3), Calcutta), to the ITO mentioned in col. V thereof (ITO, 'C' Wd., Hundi Circle, Calcutta). The ITO, 'C' Ward, on the findings of the former ITO, made a reference to the IAC, Range V, who had jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be avoided due to lacuna in the Act and procedural irregularity. Following his decision in Jaswantrai's case, the learned judge in the case before us made the rule absolute and quashed the penalty proceedings by order passed on April 19, 1972. This appeal is against this decision. Mr. Balai Lal Pal, learned counsel appearing for the revenue, the appellants before us, contended that the learned judge committed an error in following his decision in Jaswantrai's case as the facts there are distinguishable from the facts of the instant case. In the earlier case, there was a second reference by the ITO unlike the position here while the question about the scope of s. 123(1) was kept open. Reference was made to the decision in Madhusudan Nandy v. Union of India in C.R. No. 2489(W) of 1969 by Chittatosh Mookerjee J., on May 2, 1972 (unreported) in support of the proposition that by an order similar to the one before us, the pending penalty proceedings also could be validly transferred from one IAC to another. It is necessary to examine this decision in some detail since strong reliance has been placed thereon by the revenue. In the course of assessment for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to the word "case" in the Explanation to s. 127, the learned judge was of opinion that the order of the Commissioner could not be interpreted to include pending cases only, but thereby the ITO, Special Circle I, became seized of jurisdiction in respect of all proceedings under the Act relating to the assessee which were pending on the date of the transfer order as also all proceedings which might be commenced after the date of the transfer. It was held that along with the transfer of the case to the ITO, Special Circle I, since the IACs have no independent jurisdiction, the IAC, Range V, having jurisdiction over the transferee-ITO, acquired jurisdiction over the assessee's file, while the IAC, Range III, on the said date ceased to have jurisdiction over areas and also incomes or persons or classes thereof under the erstwhile jurisdiction of the ITO, "B" Ward, District III(I). The IAC, Range V, under the provisions of s. 129 became entitled to exercise such jurisdiction over the proceedings under s. 271(1)(c) as successor-in-office. In both decisions, orders passed by the Commissioner under s. 127(1) of the I.T. Act transferring cases from one ITO to another, was the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of such officers though the order is not before us. The jurisdiction of the IACs to perform their functions is provided under s. 123(1) which here was linked with the jurisdiction of the ITOs in respect of areas or of persons or incomes or classes thereof. The relevant sections and their substituted provisions under the Finance (No. 2) Act of 1967, Act 20 of 1967, with effect from April 1,1967, are set out as follows : Section 123 (unamended). " (1) Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income as the Commissioner may direct ...... " Section 123 (substituted). "Jurisdiction of Inspecting Assistant Commissioners.-(1) Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct...... " Section 124 (unamended). " (1) Income-tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers and the offices of all such Income-tax Officers are situated in the same city, locality or place... (2) The transfer of a case under sub-section (1) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer or Income-tax Officers from whom the case is transferred. Explanation.-In this section and in sections 121, 123, 124 and 125, the word 'case' in relation to any person whose name is 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." Section 129. " Whenever in respect of any proceeding under this Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at present. Section 126 contains the powers of the Board to empower Commissioners, AACs, IACs and ITOs to perform their functions in respect of areas and of persons or income or classes of them as may be specified and thereupon such specified functions shall cease to be performed by other authorities under ss. 121, 122, 123 and 124. Section 127 authorises the Commissioner to transfer any case from any ITO to any other ITO, both being subordinate to him. Similar power has been given to the Board for transfer of any case from one ITO to any other ITO. This power is to be exercised after giving an opportunity to the assessee of being heard and also after recording reasons therefor except where offices of both the ITOs are situated in the same city, locality or place. The transfer of the case shall not render necessary the re-issue of any notice already issued by the original ITO. The Explanation clarifies the word "case" as meaning, (a) all proceedings pending on the date of the order, (b) all proceedings which may have been completed on or before such date, and (c) all proceedings which may be commenced after the order. Section 128 relates to the functions of an Inspector of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 123 and the ITOs in similar manner under s. 124. This power, in the absence of any prohibition or restriction, empowers the Commissioner to effect realignment of jurisdiction among IACs or ITOs over areas, persons or incomes and by amendment over cases as may be considered expedient by him as a matter of public policy. The Commissioner by order or direction, while divesting the authorities aforesaid of the power in respect of performance of their duties under the Act conferred earlier, may confer such jurisdiction to other authorities under the Act, either wholly or partially as he may direct. As soon as such order or direction is made completely divesting the jurisdiction of the authorities so long so empowered, all proceedings including those which might arise thereafter, before them as also proceedings pending before them, come within the jurisdiction of the newly conferred authorities unless any specific provision is made in respect of any pending proceeding. Such consequence is inevitable when there is withdrawal or realignment of jurisdiction which means automatic extinction of jurisdiction of one authority with simultaneous conferment of jurisdiction on another app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of them or areas conferred on him by the Commissioner under s. 123(1) over which the ITO, 'A' Ward, District Howrah, had jurisdiction. The penalty proceeding was pending before the IAC, Range XX, when by the impugned order of the Commissioner dated October 15, 1968, the jurisdiction of the IAC, Range XX, in respect of such matters over which the said ITO, 'A' Ward, District Howrah, had jurisdiction was completely taken away and simultaneously conferred on the IAC, Range XXIII, exclusively. It is also the admitted position that by an order of the same date, the cases relating to the assessee were transferred to the ITO, 'G' Ward, Howrah. In view of this complete divesting of jurisdiction of IAC, Range XX, and exclusive conferment of the same on IAC, Range XXII simultaneously by the order dated October 15, 1968, under s. 123(1), the penalty proceeding of the assessee pending before IAC, Range XX, came automatically before the IAC, Range XXII, from the stage it was before the IAC, Range XX, and the transferee-IAC, Range XXII, as successor-in-office became entitled to proceed with the said penalty proceeding of the assessee and to dispose of the same in accordance with law. At this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s officio on the date of the Commissioner's order has no bearing or effect on the impugned order of the Commissioner. It has been further contended that the removal of jurisdiction of one authority is not permissible in law in the absence of any provision for transfer of pending proceedings either expressly or by clear intendment. In this connection, we may conveniently refer to the decision in Colonial Sugar Refining Co. Ltd. v. Irving [1905] AC 369 (PC). The Privy Council was considering an application for dismissal of an appeal to the Privy Council from the decision of the Supreme Court of Queensland. This right of appeal from the Supreme Courts of the States of Australia to the Privy Council was taken away by the Australian Commonwealth Judiciary, Act, 1903, which came into force on August 25, 1903, whereby the appeal lay only to the High Court of Australia established by the said Act, which, however, was not made retrospective. The Privy Council held that if the matter in question was a matter of procedure only then the petition for dismissal of the appeal against the judgment of September 4, 1903, as not being maintainable was well founded. On the other hand, if it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction over the pending penalty proceeding which is simultaneously conferred on IAC, Range XXII. It has been further contended on behalf of the assessee that the impugned order suffers from a fatal infirmity. While it takes away the jurisdiction of the IAC, Range XX, in respect of proceedings under the Act relating to areas, incomes or persons, the order does not mention "cases" so that the jurisdiction in respect thereof has been still retained with the IAC, Range XX. Section 123 was substituted by new provisions by the Finance (No. 2) Act, 1967, with effect from April 1, 1967, whereby the words "cases or classes of cases" were imported in sub-s. (1) of ss. 123 and 124 as we have noted earlier and the support for this contention is sought to be made on account of absence of the word "cases or classes of cases" in the impugned order. The original order whereby the jurisdiction of IAC, Range XX, was created has not been produced. Even so we may presume that since the relevant assessment was made on March 30, 1967, and reference of penalty proceeding to IAC, Range XX, was made on March 23, 1967, these were obviously done by the ITO, "B" Ward, on the basis of the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and allocate the work on functional basis among two or more Inspecting Assistant Commissioners having concurrent jurisdiction over the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases." Clause 27, sub-clause (3)(i) " Under sub-sections (1) and (2) (of section 124), as substituted, it will be open to the Commissioner or the Inspecting Assistant Commissioner authorised by him in this behalf, by general or special order in writing, to distribute and allocate the work on functional basis amongst two or more Income-tax Officers having concurrent jurisdiction over the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases." We have given the extracts in some detail for the purpose of appreciating the reasons for the amendment of the relevant provisions which have a material bearing to decide the controversy between the parties. According to Mr. B. L. Pal, since in this case, there is only one ITO over the assessee to perform all the functions, it is sufficient compliance of s, 123(1) if the order thereunder directs that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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