Orissa High Court: Transfer of Jurisdiction Cannot Occur Without Affording Assessee Reasonable Opportunity to be Heard
Orissa High Court: Transfer of Jurisdiction Cannot Occur Without Affording Assessee Reasonable Opportunity to be Heard
The Orissa High Court while quashing reassessment notice issued against Vedanta Resources Limited (VRL)- petitioner, observed that under Section 127(2)(a) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), no transfer of jurisdiction can take place without affording the Assessee a reasonable opportunity of being heard in the matter. The Opposite Party/Department- The Assistant Commissioner of Income Tax International Taxation (ACIT), Bhubaneswar in the present case had not been able to produce any order, transferring the jurisdiction vis-à-vis VRL from the Commissioner of Income Tax (International Taxation-1) (in short CIT (IT)-1), New Delhi to Opposite Party in Bhubaneswar.
The division bench of Chief Justice Dr. S. Muralidhar and Justice M.S. Raman were adjudicating the writ petition which had challenged the impugned notices and the reasons for reopening of the assessment for the Assessment Years (AY) 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18 and that the Department lacked jurisdiction to issue the said notices.
VRL pleaded that it is a non-resident company incorporated under the laws of United Kingdom (UK) and is also a tax resident of UK. VRL had mentioned its London address and according to the web portal of the Department in the page titled 'Know Your Jurisdictional AO,' the jurisdiction of the Petitioner was indicated as 'Circle International Taxation (1)(1)(1) with its address at New Delhi.
It was contended that Opposite Party i.e. ACIT International Taxation, Bhubaneswar could not have issued the impugned notices to the Petitioner. It was pointed out that the Petitioner has not been made aware of or provided any order passed under Section 127 of the Act transferring the jurisdiction vis-à-vis the Petitioner from Delhi to Bhubaneswar.
VRL stated that at no point in time did VRL have a place of business at Jharsuguda. It was clarified that the lower deduction certificate had been applied for only because the payment was to be received at Jharsuguda and in any event the certificate was not acted upon. The certificate pertained to a transaction of 2020 whereas the reassessment proceedings pertain to AYs 2013-14 to 2017-18.
The Department asserted that ACIT International Taxation, Bhubaneswar shall have jurisdiction over the petitioner since "the place of activity/operation of the Petitioner was at Jharsuguda, Odisha."
To which the Petitioner refuted that in absence of order made under Section 127, the jurisdiction could not have been transferred by the CIT (IT)-I, New Delhi to his counterpart in Kolkata and much less to International Taxation in Bhubaneswar.
The key issue raised was whether the CIT International Taxation, Bhubaneswar can exercise jurisdiction over the VRL which is a non-resident company incorporated in UK.
The bench at the very outset remarked that there appeared to be an erroneous factual presumption drawn by the Department that the Petitioner has its "place of activity/operation" at Jharsuguda in Odisha. The Court noted that the Department had been unable to contradict the assertion of the Petitioner it had no place of operation or activity at Jharsuguda in Odisha. It continues to be a non-resident company incorporated in UK. It had applied for a lower deduction certificate in Odisha in 2020 only because it was to receive payment there and in any event such certificate was not acted upon.
Further, the bench stated that the AYs in question- 2013-14 to 2017-18 did not involve any such transaction of receiving payment at Jharsuguda in Odisha. The Court discerned that the reopening of the assessment appeared based on the payment received towards management consultancy fees from Vedanta Limited having a unit in Tuticorin which is under the jurisdiction of the Madurai Commissionerate of the Department. Vendanta Limited itself is being assessed to tax on its PAN in New Delhi, stated the bench.
The bench observed, "a perusal of Section 127 (2) of the Act indicates that it envisages transfer of cases of an Assessee to an Assessing Officer (AO) not subordinate to the same Commissioner, who originally exercises jurisdiction over the Assessee. In the present case, it is CIT (IT)-1, New Delhi who would have to pass orders transferring jurisdiction of the cases of VRL to O.P. No.1 in Bhubaneswar. The latter is not subordinate to the CIT (IT)-1, New Delhi, but to his counterpart in Kolkata. In such event, under Section 127(2)(a), no such transfer of jurisdiction can take place without affording the Assessee a reasonable opportunity of being heard in the matter. The Department in the present case has not been able to produce any such order, transferring the jurisdiction vis-à-vis VRL from the CIT (IT)-1, New Delhi to Opposite Party in Bhubaneswar."
Further, the Court reckoned that while in terms of Section 120 of the Act, it might be possible for the CIT (IT), New Delhi to transfer jurisdiction from one Assessing Officer to another within his jurisdiction, there is no power under Section 120 of the Act to transfer jurisdiction to an AO who is not subordinate to the CIT (IT), Delhi. For that purpose, it is only Section 127(2)(a) of the IT Act that could apply.
The Court was not satisfied with the submissions forwarded by the Department on legal basis for ACIT at Bhubaneswar exercising jurisdiction over the Petitioner and issuing the notices under Section 148 of the Income Tax Act. Thus, the Court ruled that notices issued by ACIT at Bhubaneswar were without jurisdiction and, therefore, were unsustainable in law.
