Facts of the Case

The Revenue filed an appeal challenging the order of the Income Tax Appellate Tribunal (ITAT), which had quashed the assessment order passed by the Assessing Officer, Kolkata for Assessment Year 2012-13.

The Revenue contended that:

  • The assessee’s PAN was under Kolkata jurisdiction.
  • Returns for several years were processed in Kolkata.
  • No objection to jurisdiction had been raised earlier.
  • No request for jurisdiction transfer under Section 127 had been made.

However, the Tribunal found that:

  • The assessee had been filing returns in New Delhi since inception (AY 2005-06).
  • Upon selection for scrutiny, the assessee raised objection within one month regarding jurisdiction.

Issues Involved

  1. Whether the Assessing Officer at Kolkata had valid jurisdiction to pass the assessment order.
  2. Whether the assessee’s objection to jurisdiction was raised within the statutory time limit under Section 124(3).
  3. Whether the Assessing Officer followed the mandatory procedure under Section 124(4) after receiving the objection.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in quashing the assessment order.
  • Jurisdiction was valid as the PAN was located in Kolkata.
  • The assessee had accepted Kolkata jurisdiction for prior years.
  • No formal request for transfer of jurisdiction under Section 127 was made.
  • The objection to jurisdiction was not properly appreciated.

Respondent’s Arguments (Assessee)

  • Returns had consistently been filed in New Delhi.
  • Jurisdiction properly lay with Delhi authorities.
  • Objection to Kolkata jurisdiction was raised within the time prescribed under Section 124(3).
  • The Assessing Officer failed to follow due process before proceeding with assessment.

Court’s Findings / Order

The Delhi High Court upheld the ITAT’s decision and dismissed the Revenue’s appeal, holding that:

  • The assessee had raised a valid and timely objection under Section 124(3).
  • Once such objection is raised, the Assessing Officer must refer the jurisdictional issue to the competent authority before completing assessment.
  • The Assessing Officer wrongly proceeded with assessment and referred the issue after 16 months.
  • The PCIT also failed to decide jurisdiction prior to assessment.

The Court concluded that:

  • The actions of the Assessing Officer and PCIT were contrary to Section 124(4) of the Act.
  • No substantial question of law arose in the matter.
  • Appeal was dismissed.

Important Clarification by Court

  • Jurisdictional objections must be decided before completion of assessment, not after.
  • Compliance with Section 124(4) is mandatory, not procedural.
  • Delay or improper handling of jurisdictional objections renders the assessment invalid.

Sections Involved

  • Section 124(3) – Time limit to object to jurisdiction
  • Section 124(4) – Procedure where jurisdiction is disputed
  • Section 127 – Transfer of cases

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2838-DB/MMH27072022ITA2282022_193923.pdf

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