ORDER
T.V. Rajagopala Rao, President
1. These five appeals arose from the consolidated order dt. 30th July, 1996, passed by the CIT(A)-I, New Delhi. Following common order separate orders dt. 30th July, 1996 were passed for each of the assessment years in question. Only common grounds are involved in these appeals. It is enough if we extract one set of common grounds as under :
“1. Because the order of the learned CIT(A) is unauthorised, illegal, erroneous, vague, misleading and misconceived.
2. Because the learned CIT(A) has failed to quash and annul the unauthorised, illegal and arbitrary assessment order dt. 8th March, 1996, passed by the Asstt. CIT Co. Cir. I(4), New Delhi.
3. Because the learned CIT(A) has wrongly inferred that the Hon’ble Tribunal had directed the Chief CIT to settle the question of jurisdiction.
4. Because the learned CIT(A) has erred in relying upon the order under s. 124(2) dt. 14th February, 1996, passed by the Chief CIT, New Delhi, as a valid order, without the order of the Chief CIT, Kanpur as required under s. 124(2).
5. Because the learned CIT(A) has erred in seeking clarification to the order dt. 14th February, 1996, passed by the Chief CIT, New Delhi under s. 124(2) of IT Act, 1961 and has further erred in holding that the order dt. 14th February, 1996, was merely clarificatory in nature, and has wrongly relied upon the subsequent unauthorised communication dt. 4th June, 1996, from the office of the Chief CIT, New Delhi, as order under s. 124(2).
6. Because the learned CIT(A) has erred in upholding the validity of notice under s. 148, dt. 17th January, 1994 and notice under s. 142(1) dt. 23rd February, 1996, which were illegal, time-barred and without jurisdiction, on the basis of which no assessment could validly be made.
7. Because the learned CIT(A) has erred in upholding the second assessment order dt. 8th March, 1996, passed by the AO, on the same income with full knowledge of subsistence of the first order dt. 22nd March, 1991, passed by the Asstt. CIT, Ghaziabad and appellate order dt. 24th September, 1991 passed by the learned CIT(A), Muzaffarnagar, both of which were relied upon by the learned CIT(A), while passing the appellate order dt. 30th July, 1996.
8. Because the learned CIT(A) has failed to appreciate that there was no default on the part of the appellant which could vest the AO, the powers for framing assessment under s. 144. The ground of appeal in this regard and the submissions of the appellant, including an affidavit, were not considered by the learned CIT(A).
9. Because the learned CIT(A) has erred in directing the AO to verify the correctness of the loss of Rs. 86,300 whereas all the relevant details and documents were on record, and the order passed by the AO was unauthorised and without jurisdiction.”
Grounds 1 & 2
2. For all the above assessment years, the subject assessments were completed by the Asstt. CIT, Com. Cir. I(4), New Delhi, under s. 144 r/w s. 148 on 8th March, 1996. For each of the years under consideration, 148 notices were issued on 17th January, 1994.
3. The first question which arises for consideration in order to dispose of ground No. 2 extracted above is to consider in whose jurisdiction the assessee carried on business – is it in the jurisdiction of the AO at Ghaziabad who works under the administrative control of Kanpur, or in the jurisdiction of the AO, [Asstt. CIT, Com. Cir. I(4), New Delhi], who comes under the administrative control of Chief CIT, New Delhi. We have to decide this question on the basis of facts available on record. The material on record (paper-book filed by the assessee running into 96 pages) discloses the following facts.
4. The assessee-company voluntarily filed its returns for asst. yrs. 1986-87, 1987-88 and 1988-89 with the original TDS certificates in Delhi itself. The assessee-company is carrying on business as an investment and finance company and has also earned interest on loans and advances. The particulars of gross income, expenditure, net profits and income returned in different years were all given in the impugned CIT(A)’s order. Further, the impugned order of the CIT(A) also contained the incomes at which the assessee-company was assessed for the asst. yrs. 1987-88 to 1992-93. For the asst. yr. 1986-87, the assessee-company filed an appeal before the CIT(A), Muzaffarnagar. The date of filing of the appeal was 28th April, 1993. The said appeal was disposed of by the CIT(A), Muzaffarnagar, on 7th July, 1994. The appellate order is found provided at p. 75 of the assessee’s paper-book. In the cause title of the appellate order, the address of the assessee was given as follows :
“Amulya General Trading & Agencies Ltd., 316-ESSEL House, 10, Asif Ali Road, New Delhi.”
Only the New Delhi address of the assessee was continued to be given in the cause title of similar appellate orders passed by the CIT(A), Muzaffarnagar, for asst. yrs. 1987-88, 1988-89 and 1990-91 vide pp. 82B, 87 and 91 of the assessee’s paper-book. The appellate orders were dt. 28th March, 1993, 24th September, 1991, and 21st September, 1994, respectively for these years. on 20th March, 1989, itself, the Asstt. CIT, Com. Cir. I(4), New Delhi, had completed assessment against the assessee for asst. yr. 1986-87 under s. 144 on the basis of the return of income filed by the assessee-company voluntarily on 30th September, 1986. The assessment thus made against the assessee-company under s. 144 was furnished at pp. 94 to 98 of the assessee’s paper-book. The order dt. 7th July, 1994, passed by the CIT(A), Muzaffarnagar, camping at Ghaziabad is provided at pp. 75 to 79 of the assessee’s paper-book. Para 3 of the order clearly discloses that the original return disclosing loss of Rs. 5,26,163 was filed by the assessee on 30th September, 1986, before the AO, Ghaziabad. At p. 33 of the paper-book, the assessee itself has provided the date of acknowledgment of the assessee’s return filed before the AO, Ghaziabad, and according to that acknowledgment the return for the asst. yr. 1986-87 was received by the AO Ghaziabad on 30th September, 1996. Thus, it can be seen that for asst. yr. 1986-87 the assessee-company had filed its IT return before the AO, New Delhi, as well as before the AO, Ghaziabad, on the same day, i.e., 30th September, 1986.
5. Confirmations of borrowals by the assessee-company from third party creditors were also provided at pp. 28, 29, 31 and 32 of the assessee’s paper-book. Page 28 is the statement of account of Mayur Finance Ltd., B-192, Bokhla Industrial Area, New Delhi, under which the assessee-company had acknowledged to have received cash credit of Rs. 1.5 lacs on 26th September, 1985. This statement of account is an extract taken out from the assessee’s books of account itself. The correctness of the account was confirmed by Mayur Finance Ltd., on 20th August, 1987. In this statement of account, the firm address of the assessee-company was given, according to which it is said to be carrying on its business from A-10/11, Bhandare House, Dr. Mukherjee Nagar, Delhi-9. Similarly, at p. 29, statement of account of Hari Om Maheshwari as per the books of account of the assessee-company as on 30th September, 1985, is furnished. This was certified to be the correct account and even in that statement of account also while giving the assessee-company’s address, it was stated to be carrying on business from Bhandare House, Delhi-9. At p. 31, the statement of account of Sarwan Kumar Sathi, 19/9, Moti Nagar, New Delhi, as found in the books of the assessee-company is furnished. It would show that a sum of Rs. 17,340 was borrowed by the assessee-company from the said creditor on 1st October, 1985. The address of the assessee-company as given in the statement of account at that page was A-10/11, Bhandari House, Dr. Mukherjee Nagar, Delhi. Similarly, at p. 32 of the assessee’s paper-book, the statement of account of M. Sharda & Co., Chartered Accountants, as found in the books of account of the assessee-company is furnished. It would disclose that on 1st October, 1985, the balance due to the creditor by the assessee-company was Rs. 12,780 which is shown as brought forward figure. Again, on 30th September, 1986, a sum of Rs. 9,000 was said to have been borrowed by the assessee-company from the same party. The debtor’s name even at that page was found to be the assessee-company carrying on business at A-10/11, Bhandari House, Dr. Mukherjee Nagar, Delhi. It is significant that at pp. 28, 29, 31 and 32 of the assessee’s paper-book the address of the assessee-company as well as the places at which it is said to be carrying on business on the dates of borrowal were all given only by the assessee-company and hence, the address given at those pages can be taken to be a clear admission on the part of the assessee-company as to its place of business or principal place of business. The address of the assessee-company at all those pages was given as Delhi only and not as Ghaziabad or Bulandshahar. At pp. 57 to 62 of the assessee’s paper-book, the written submissions made by the assessee dt. 12th March, 1993, before the Asstt. CIT, Inv. Cir., Ghaziabad, are relevant to be taken note of. Subject, reference as well as para 1 of the submissions found on p. 57 are the following :
“Sub : Assessment for the Asst. yr. 1986-87
Ref : 1. Our submissions dt. 15th September, 1992 & 22nd January, 1993.
Your letters dt. 5th January, 1993, 27th January, 1993 and 4th February, 1993.
With reference to the above, we beg to submit as follows :
“1. That the assessment proceedings being conducted by your honour are without proper jurisdiction as we are no longer having any establishment in the State of U.P. and that the registered office of the company is situated in Delhi. We have been filing IT return with you simply because our IT files continue to remain with you and that in spite of our repeated requests to transfer our files to the Asstt. CIT, Com. Cir. I(4), New Delhi who are claiming their jurisdiction upon us and have served on us the notices for assessment for the year 1986-87 as well as written to the CIT, Meerut to transfer our case to Delhi, so far no action has been taken at your end for reasons best known to you. Under the circumstances, we have no option but to get ourselves assessed at Delhi where the legal and natural jurisdiction lies. However, as the proceedings are also pending with your honour, the information desired is being furnished.”
The above would clearly show that even according to the assessee-company, the proper jurisdiction for assessing the assessee-company vests with the AO at Delhi and not with AO, Ghaziabad.
5.1 It would show that the assessee-company from the beginning had no intention to submit to the jurisdiction of the Asstt. CIT, Ghaziabad. It further reveals that the assessee-company itself wrote to the Chief CIT, Kanpur to transfer the assessment of the assessee-company to Delhi. This clearly reveals that the assessee-company always bona fide believed that Asstt. CIT, Com. Cir I(4), New Delhi, only had requisite territorial jurisdiction to complete its assessments.
5.2 From the above, it would be seen that the assessee-company had its head office always at New Delhi. At p. 47, the assessment order, dt. 31st March, 1993, passed by Asstt. CIT, Inv., Cir., Ghaziabad, for asst. yr. 1990-91 is furnished. By giving the name and address in the assessment order, the following address was given :
“Amulya General Trading & Agencies Ltd., 316-Essel Building, 10, Asaf Ali Road, New Delhi.”
At p. 48 of the assessee’s paper-book, copy of the intimation sent to the assessee under s. 143(1) is provided which is dt. 31st December, 1991. The return was stated to have been filed before the AO, Ghaziabad. For the asst. yr. 1992-93 also, the IT return was filed before AO Ghaziabad, and the assessment was stated to have been completed under s. 143(1) as per the intimation dt. 31st December, 1992, provided at p. 49 of the assessee’s paper-book. Copies of the acknowledgements of income-tax statements which are provided at pp. 48 and 49 show that columns of income-tax statements are to be filled by the assessee in duplicate. That means, the names and addresses given in the income-tax statements were provided by none other than the assessee-company itself. The address of the company in both these acknowledgements of income-tax statements for asst. yrs. 1991-92 and 1992-93 reveal that the assessee was carrying on business at 5/5761, Dev Nagar, Street No. 2, Karol Bagh, New Delhi-5, and 316-Essel House, 10, Asaf Ali Road, New Delhi respectively. All the above material clearly make us hold that the assessee-company not only had its head office at New Delhi but also had carried on all its business activities from Delhi itself.
6. Sec. 124(1)(a) of the IT Act, 1961, is as follows :
124.(1) : “Where by virtue of any direction or order issued under sub-s. (1) or sub-s. (2) of s. 120, the AO 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 carried on his business or profession is situated 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.”
If the AO has jurisdiction over places where the business is carried, it confers territorial jurisdiction on him to complete the assessment. Suppose, if a person carries on business in more places than one, then it is the AO within whose jurisdiction the principal place of business is situated, has the requisite jurisdiction to assess the business income of that person. In this case, we already found that the assessee was carrying on business and had its head office at Delhi only for all the assessment years under consideration and, therefore, even without considering the special order passed by the Chief CIT, New Delhi in the facts of the case having due regard to the conferment of territorial jurisdiction, the AO, New Delhi, only is the proper assessing authority. This position is made further clear by sub-s. (5) of s. 124, which is as follows :
“(5) Notwithstanding anything contained in this section or in any direction or order issued under s. 120, every AO shall have all the powers conferred by or under this Act on an AO in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-s. (1) or sub-s. (2) of s. 120.”
Under sub-ss. (1) and (2) of s. 120, the jurisdiction can be conferred on an assessing authority on any of the following criteria :
(a) territorial area;
(b) persons or classes of persons;
(c) incomes or classes of income; and
(d) cases or classes of cases.
Inasmuch as the head office of the assessee-company was situated in Delhi and also because it carried on its business activities in Delhi, by virtue of conferment of territorial jurisdiction over the area, the Asstt. CIT,. Com. Cir. I(4), New Delhi, only has got the requisite jurisdiction to complete the assessments on the assessee-company for the assessment years under consideration, namely, 1988-89 to 1992-93. Therefore, we are unable to agree with the contention of the assessee that the learned CIT(A)’s impugned order is in anyway bad under law because he had failed to quash and annul the assessment order, dt. 8th March, 1996, passed by Asstt. CIT, Com. Cir. I(4), New Delhi. Thus grounds 1 and 2 are rejected.
Ground Nos. 3 to 5 :
7. These grounds are intimately connected with each other and hence, a joint consideration of all the grounds is found more appropriate and hence dealt with accordingly. The question of determining which assessing authority has got correct jurisdiction to assess the assessee-company for the asst. yr. 1986-87 was ultimately carried to the Tribunal. The ‘C’ Bench of the Tribunal decided the case and the said decision of the Bench is found published in Amulya General Trading Agencies Ltd. vs. Asstt. CIT (1995) 55 ITD 233 (Del). The ultimate order passed by the Tribunal in that case is found extracted in the last lines of the head note found at p. 235 and which is as follows :
“The interest of justice demanded that the AOs should refer the matter to the authority under sub-s. (2) of s. 124 for determination of correct jurisdiction over the case. Accordingly, after setting aside the impugned orders of the CIT(A) and of the AO, the matter was to be restored to the file of the AO.”
In order to have a complete understanding about the purport of the Tribunal’s order, the provisions of s. 124(2) have to be understood correctly and they are as follows :
“(2) Where a question arises under this section as to whether an AO has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief CIT, the CIT; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief CITs, by the Directors General or Chief CITs or CITs concerned or if they are not in agreement, by the Board or by such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, specify.”
In view of the above provisions of s. 124(2), the Tribunal set aside the assessment order as well as the appellate order thereon and restored the matter to the AO to follow the procedure set out under the above sub-section.
8. The case of the assessee was that the jurisdictional order passed by the Chief CIT, New Delhi, dt. 14th February, 1996 is not a valid order since the said order was not passed by Chief CIT, Kanpur, or that a specific consent order was not passed by the Chief CIT, Kanpur, assenting to the order of Chief CIT, New Delhi, dt. 14th February, 1996. Before dealing with the matter further, we have to know what is the order that was passed by Chief CIT, Delhi, on 14th February, 1996. The text of the order is as follows :
“Order under s. 124(2) of the IT Act.
In exercise of the powers conferred by the CBDT and as per the provisions of s. 124(2), I, Chief CIT, Delhi, hereby assigned the jurisdiction of the case particulars of which are referred in Col. No. 2 of the Schedule given below to the AO mentioned in Col. No. 3 thereof. The said jurisdiction is being decided after concurrence with the Chief CIT, Kanpur.”
SCHEDULE
S. No. Name of the assessee Name of charge
1. Amulya General Trading & Asstt. CIT, Com. Cir. 1(4),
Agencies Ltd. New Delhi
This order shall take effect from 16th February, 1996.”
At para 4.4 of the impugned order, the learned CIT(A) had stated the following with regard to dispute regarding jurisdiction :
“In the first place the issue relating to the determination of jurisdiction stands practically settled by the Tribunal’s order dt. 19th July, 1995 for the asst. yr. 1986-87 wherein they clearly held that it was only the Chief CIT who should settle the dispute regarding jurisdiction. Therefore, the CIT(A) cannot go into the merits of the order passed under s. 124(2) by the Chief CIT. In this case, however, the Chief CIT had conferred the jurisdiction to the AO at Delhi w.e.f. 16th February, 1996, without mentioning as to which AO had jurisdiction prior to that date. Accordingly, I sent a letter dt. 24th May, 1996 to the Chief CIT Delhi to clarify as to whether the Asstt. CIT Com. Cir. 1(4), New Delhi had jurisdiction over this case prior to 16th February, 1996. By a clarification dt. 4/5th June, 1996, the Chief CIT has clarified that the jurisdiction over this case was only with the AO at New Delhi right through, from the beginning.”
With regard to the jurisdictional order, the assessee-company had raised the following contentions :
(1) The order under s. 124(2) extracted above had come into effect from 16th February, 1996, and prior to that date the Asstt. CIT, Com. Cir. I(4), New Delhi, had no jurisdiction to complete the assessment proceedings of the assessee-company for any of the years and it was only the Asstt. CIT, Ghaziabad, who had jurisdiction. However, much prior to 16th February, 1996, the assessments for the years under consideration were completed by the Asstt. CIT, Ghaziabad. The same income cannot be assessed twice over and if an attempt is made to pass an assessment order second time for any of these assessment years, it was illegal. Reliance is placed upon the Supreme Court’s decision in State of Uttar Pradesh & Anr. vs. Raza Buland Sugar Co. Ltd. (1979) 118 ITR 50 (SC).
(2) In the facts of this case, s. 148 notice was issued on 17th January, 1994, by the Asstt. CIT, Com. Cir. I(4), New Delhi. Even after obtaining jurisdictional order dt. 16th February, 1996, the same proceedings continued. Prior to 17th January, 1994, the matter of jurisdiction was not preferred to Chief CIT, New Delhi, or Chief CIT, Kanpur, and either of them, who had the requisite jurisdiction, passed order transferring jurisdiction from Asstt. CIT, Ghaziabad, to Asstt. CIT, Com. Cir. I(4), New Delhi. Therefore, the whole proceedings under s. 148 are vitiated and in pursuance of such defective notice under s. 148, the subject assessments were vitiated and all of them are invalid.
(3) Prior to 16th February, 1996, not only the assessments were made or completed but also quantum appeals were filed before the CIT(A), Kanpur, and reliefs were granted by the said authority for some of the impugned assessment years.
9. Now, let us consider whether under law was there any necessity for the Chief CIT, Kanpur, to transfer jurisdiction from the AO, Ghaziabad, to Asstt. CIT, Com. Cir I(4), New Delhi. In our understanding of the legal provisions under ss. 120, 124 and 127, the question of taking away jurisdiction from AO, Ghaziabad, and conferring jurisdiction on the AO, New Delhi, would only require the consent of Chief CIT, Kanpur, or a specific order from the Chief CIT, Kanpur. This argument presumes that AO, Ghaziabad, had got rightful jurisdiction to complete the assessments of the assessee-company. If this premise does not hold good and if it is found that AO, Ghaziabad, had no jurisdiction at all or if he is found to be lacking inherent jurisdiction to assess any part of the income of the assessee-company, then the question of taking away jurisdiction from AO, Ghaziabad, does not arise. As already observed, the assessee-company carried on business as investment company. No material was placed before us to show that the assessee-company earned any part of business income or income from other sources, the only two heads under which only its income was disclosed for each of the assessment years under consideration was earned in the territorial jurisdiction of AO, Ghaziabad. The ordinary powers exercised by particular geographical area were given under s. 124(1). Sub-s. (5) of s. 124 is as follows :
“(S) Notwithstanding anything contained in this section or in any direction or order issued under s. 120, every AO shall have all the powers conferred by or under this Act on an AO in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-s. (1) or sub-s. (2) of s. 120.”
It contained non obstante clause. It is a saving provision and under its provisions the assessments duly completed by AO who had original jurisdiction over a particular geographical area assessing the business income or income from other sources, the two heads of income with which we are concerned are saved or such assessments, if completed before any order under s. 124(2) was passed, were valid assessments and they prevail over the proceedings which may be taken subsequent to passing of orders regarding change of jurisdictions. But, if AO, Ghaziabad, had no jurisdiction or if no part of income earned by the assessee-company was conclusively or convincingly shown to have been earned from the geographical area under the jurisdiction of AO, Ghaziabad, then, in our understanding, the AO, Ghaziabad, cannot exercise jurisdiction under s. 124(1) at all and the assessments made or completed by him prior to receipt of jurisdictional order dt. 14th February, 1996, would not be saved under s. 124(5). There is another important or vital point which should be considered at this juncture. The assessee-company sent a letter to AO, Ghaziabad, questioning his authority either to take up its assessments or completing them. In such a case, the wording of s. 124(4) was very much pertinent to be taken note of :
“(4) Subject to the provisions of sub-s. (3), where an assessee calls in question the jurisdiction of an AO, then the AO shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-s. (2) before the assessment is made.”
If the AO, Ghaziabad, is not satisfied with the plea of the assessee about his jurisdiction to take up or complete the assessments of the assessee-company for any of the assessments years, he shall hear the assessee on the question of jurisdiction and should refer the matter to the Chief CIT, Kanpur, and should await his orders on the question of jurisdiction under s. 124(2). The AO, Ghaziabad, did not do so. He neither heard the AO on the question of jurisdiction nor passed any order rejecting the contention of the assessee-company. No material is placed before us to show that he referred the question of jurisdiction to Chief CIT, Kanpur, under whom he was working. He did not also wait for the orders of the Chief CIT, Kanpur, if any, which may have been passed under s. 124(2). The assessments, which were passed by AO, Ghaziabad, for the assessment years, were completely in violation of the specific provisions of s. 124(4) and hence, the assessments passed by the AO, Ghaziabad, cannot be saved under s. 124(5) and for this reason we hold that those assessments which were passed by the AO, Ghaziabad, for these assessments were invalid of having been passed without jurisdiction.”
9-1. Here, we have to see what is the nature of the jurisdictional order dt. 14th February, 1996. Does it create jurisdiction for the first time in favour of AO, Com. Cir. I(4), New Delhi, over the assessee-company and empower him to complete the assessments only from the date of the order of does it only acknowledge such a jurisdiction which is already vested in him under s. 124(1) of the IT Act. Having due regard to the facts and circumstances of this case, the right and logical conclusion which can be drawn from the text of the jurisdictional order is to take it as having been passed in acknowledgment of jurisdiction which the Dy. CIT, Com. Cir. I(4), New Delhi, was already having and exercising by the date of the order. The said order should be construed as an order under s. 124(2). Sec. 124(2) is as follows :
“(2) Where a question arises under this section as to whether an AO has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief CIT or the CIT; of where the question is one relating to areas within the jurisdiction of different Directors General or Chief CITs or CITs by the Directors General or Chief CITs or CITs concerned of, if they are not in agreement, by the Board or by such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, specify.”
The specific order from the Chief CIT, Kanpur, only is required in cases where the transfer of particular cases from one jurisdiction to the other was ordered under the provisions of s. 127. Sec. 124 deals with the jurisdiction of AO, whereas s. 127 deals with the power to transfer cases. Sec. 127 assumes that the AO, from whose files a case was transferred, has got the requisite jurisdiction over the case. But, for valid reasons, the cases thus pending on the file of a particular AO are to be transferred to another AO. Such a transfer can be made when both the AOs are under the jurisdiction of the same Chief CIT or, in some cases, the cases can be transferred from the file of one AO to the file of another AO even though they are under different Chief CITs. In cases where they are under different Chief CITs, there was necessity for a case to be transferred by the CIT from whose jurisdiction the case is to be transferred. This is made very clear from the wording of s. 127(2) which contains two paras (a) and (b) and for the sake of easy comparison sub-s. (2) of s. 127 having two paras is extracted hereunder :
“(2) Where the AO or AOs from whom the case is to be transferred and the AOs to whom the case is to be transferred are not subordinate to the same Director General or Chief CIT or CIT, :
(a) where the Directors General or Chief CITs or CITs to whom such AOs are subordinate are in agreement, then the Director General or Chief CIT or CIT from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;
(b) where the Directors General or Chief CITs or CITs aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief CIT or CIT as the Board may, by notification in the Official Gazette, authorise in this behalf.”
If we closely compare the provisions of s. 124(2) with the provisions of s. 127(2), it will be apparent that in the case of the former, no order transferring the case from the jurisdiction of the AO to the jurisdiction of another AO under a different CIT is required, whereas, under the latter provision, the CIT from whose jurisdiction the case is to be transferred has not only to pass the order transferring the case but also he should afford a reasonable opportunity of being heard to the affected assessee before passing his order and reasons for transfer also should be recorded therein. Those requirements which are essential for a valid order to be passed under s. 127(2) are not necessary to be observed for passing an order under s. 124(2) because for the obvious reason that under s. 124 the correct territorial jurisdiction between the two AOs may be decided, whereas under s. 127 the transfer order is from the file of one AO who had admittedly having jurisdiction over the assessee to the file of another AO who may not have any such jurisdiction. Therefore, in our understanding, the specific order of the Chief CIT, Kanpur, transferring the case of the assessee to the file of Asstt. CIT, Com. Cir. I(4), New Delhi, is not required. To elaborate further, s. 124 presumes that there is real dispute as to the territorial jurisdiction in which the assessee is carrying on business or in which the assessee was having head office for his business. We have already extracted the jurisdictional order passed by the Chief CIT, New Delhi, dt. 16th February, 1996, as well as the clarificatory order dt. 4/5th June, 1996. The order under s. 124(2) would clearly disclose that the Chief CIT, New Delhi, was exercising the powers of the CBDT. In order to correctly appreciate the delegation of the powers of the Board to its subordinate officers, we will have to correctly understand the provisions of s. 120(1) and (2), which are as follows :
“120(1). IT authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.
(2) The directions of the Board under sub-s. (1) may authorise any other IT authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other IT authorities who are subordinate to it.”
Under s. 120(1), it is the CBDT who has got the power to confer territorial jurisdiction to AOs. The power to define the territorial jurisdiction of AO may be exercised by CBDT itself or it may also delegate such power to any of its subordinates and such delegated power (sic) would be exercising the powers of the CBDT and in the facts of the case before us, having regard to the text of the jurisdictional order dt. 14th February, 1996, we will have to understand that the Chief CIT, New Delhi, exercised the delegated powers of the CBDT while passing those orders. In order to have a correct understanding of the purport of the jurisdictional order dt. 14th February, 1996, we should bear in mind the cumulative effect of the provisions of s. 120(1) and (2) as well as the sub-s. (2) of s. 124. Under sub-s. (2) of s. 124, where the question is one relating to areas within the jurisdiction of different CITs or Chief CITs or if they are not in agreement, the power is to be exercised by the Board or by the CIT who is empowered in that regard by the Board. That empowerment by the Board delegating the powers of the Board may be notified in the Official Gazette. It is clearly stated in the jurisdictional order that the decision contained in the order is being given after getting concurrence of the Chief CIT, Kanpur. It is not the case of the assessee that the jurisdictional order dt. 14th February, 1996, was never passed by the Chief CIT, New Delhi. The only invalidating factor of the order, according to the assessee, was that the Chief CIT, Kanpur, had not passed a consent order. It is not ordained under s. 124(2) that it is essential to obtain the consent of Chief CITs always in writing. Consent may be oral or in writing. We have already held that since it was not an order passed under s. 127(2) and since it was only an order passed under s. 124(2), no such specific order from the Chief CIT, Kanpur, was required. Further, under s. 114E of the Evidence Act, there is a presumption that all judicial and official acts have been regularly performed. By invoking the said presumption, it follows that we will have to presume that the learned Chief CIT, Kanpur, had consented to the decision and on receipt of the requisite oral consent only, the order dt. 14th February, 1996, was passed by the Chief CIT, New Delhi. The correct jurisdiction to assess the assessee-company for all the assessment years under consideration was only with the Asstt. CIT, Com. Cir. I(4), New Delhi, having regard to the correct territorial jurisdiction of Asstt. CIT, Com. Cir. I(4), New Delhi. Thus, in our considered opinion, the provisions of s. 124(2) r/w s. 120(1) and (2) are fully complied with by the learned Chief CIT, New Delhi, while passing the jurisdictional order dt. 14th February, 1996. We understand that the Asstt. CIT, Com. Cir. I(4), New Delhi, was not conferred with jurisdiction to try the case of the assessee-company for the first time only after the passing of the jurisdictional order dt. 14th February, 1996. The said orders must be understood to be having acknowledged such jurisdiction which the Asstt. CIT, Com. Cir. I(4), New Delhi, was already having. In this connection, we have already recorded our finding that the assessee was not only having its head office at New Delhi, but also carried on its business activities at Delhi in which case the Asstt. CIT, Com. Cir. I(4), New Delhi, had complete jurisdiction. At this juncture, sub-s. (5) of s. 124 may be understood in its correct perspective. The said sub-section is already extracted above. It begins with a non obstante clause. The non obstante clause governs not only s. 124 but also any direction or order issued under s. 120. If the assessee is found carrying on business and earning business income in any jurisdictional area of Asstt. CIT, Com. Cir. I(4), New Delhi, then, notwithstanding anything contained in s. 124 sub-ss. (1) to (4), the Asstt. CIT, Com. Cir I(4), New Delhi, would have jurisdiction to complete the assessment in respect of income accruing or arising to the assessee within his jurisdictional area irrespective of orders subsequently issued under sub-s. (1) or (2) of s. 120. Thus, since there is definite evidence already on record that the assessee was not only having its head office but also was carrying on business at Delhi within the jurisdiction of Asstt. CIT, Com. Cir. I(4), New Delhi, he had due power and authority to complete the assessment regarding business and other source income earned by the assessee-company in his jurisdiction. Thus, once he has got the initial jurisdiction, nothing prevents him to issue notice under s. 148 also in order to bring any escapement of income. The mountainous objection canvassed on behalf of the assessee was that when the assessments were already completed prior to 14th February, 1996, by the Asstt. CIT, Ghaziabad, how can the assessments now passed on 8th March, 1996, by the Asstt. CIT, Com. Cir. I(4), New Delhi, would be valid ? How can there be two assessments for the same type of income earned by the assessee-company for the same assessment years ? We have considered this objection and we found ultimately the objection to be without force. In this connection, we have come across the Delhi High Court’s decision in Madhavnagar Cotton Mills Ltd. vs. Union of India & Anr. (1963) 50 ITR 144 (Del). In that case, the ITO, Sangli, was the officer who had territorial jurisdiction to assess the assessee. However, the then Central Board of Revenue issued a notification under s. 5(6) of the Indian IT Act, 1922, whereby the jurisdiction to assess the assessee for the asst. yr. 1946-47 and 1947-48 was transferred to ITO at Delhi. The assessments for 1946-47 and 1947-48 were completed by the officer at Sangli and the officer at Sangli also served notice of reopening under the then s. 34 of the Indian IT Act. Thereafter, a further notification was issued by the then Central Board of Revenue under s. 5(7A) of the Indian IT Act, transferring the jurisdiction to assess the assessee for all years to an ITO at Bombay. The ITO at Bombay completed the assessment under s. 34 for the years 1946-47 and 1947-48 for which no objection regarding jurisdiction was taken by the assessee. On appeal, the AAC annulled the assessments on the ground that the ITO, Bombay, had no jurisdiction. Thereafter, the ITO at Delhi issued notices of reassessment for those two assessment years under s. 148 of the IT Act, 1961. The assessee filed a writ petition in the High Court of Delhi seeking to quash the notices issued under s. 148 and seeking to prohibit the AO at Delhi from proceeding to make the assessments. On the above fulcrum of facts, the Delhi High Court held that by virtue of the notification under s. 5(6), the ITO at Sangli lost jurisdiction and the notices issued by him under s. 34 were invalid and the assessments made by the ITO, Bombay, on the basis of those notices were also consequently invalid. Those assessments did not bar the initiation of proceedings under s. 34 by the officer who had jurisdiction. Therefore, in our view, it is for the CBDT to recognise the correct territorial jurisdiction of an AO. The result of passing an order under s. 124(2) will be that the prior proceedings, if any, made by an AO, who had no jurisdiction, were invalid or nullity in the eyes of law and it is only the AO whose territorial jurisdiction was recognised as correct who had the ultimate jurisdiction to pass either the assessment orders or reopening the assessments under s. 148. In this view of the matter, the assessments completed by the Asstt. CIT, Ghaziabad, for the asst. yrs. 1988-89 to 1992-93 were all invalid and they do not bar the Asstt. CIT, Com. Cir, I(4), New Delhi, to issue notices under s. 148. In this connection, the Explanation provided under s. 127 of the IT Act is unequivocal and it is as follows :
“Explanation. – In s. 120 and this section, 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.
The order passed by the Chief CIT, New Delhi, with due authorisation obtained from the CBDT, dt. 14th February, 1996, is already extracted in the above paras. It is significant to note that the order specifically states that the necessary jurisdiction over the case, the particulars of which were given in the Schedule below the order, was assigned to Asstt. CIT, Com. Cir. I(4), New Delhi. It is significant that in the Schedule given under the said order the jurisdiction was not conferred to finalise the assessment proceedings of the assessee-company for any particular assessment year. On the other hand, it is a blanket order. That means, this order would govern, in our considered opinion, all assessment years for which the proceedings under the IT Act in respect of any year which may be pending on the date of such order or direction, and in case if no proceedings are pending by dint of the fact that they were all completed on or before such date, it authorises reopening of proceedings also after the date of such order or direction in respect of any year. In the facts of the case before us, 148 notices were issued for the asst. yrs. 1988-89 to 1992-93 on 17th January, 1994 itself. We have already recorded our finding that from the beginning the Asst. CIT, Com. Cir. I(4), New Delhi, only had the requisite territorial jurisdiction over the assessee to initiate the assessment proceedings and also to complete them. As far as the applicability of the effect of the Explanation to different categories of cases is concerned, the following appears to be correct position or true purport of it. There may be cases where the assessing authority may not have the requisite territorial jurisdiction from the beginning and such territorial jurisdiction was conferred for the first time only by the order passed under s. 124(2). There may also be cases where the territorial jurisdiction was already vested with a particular assessing authority and on a doubt having been expressed with regard to the correct jurisdiction by means of a specific order passed under s. 124(2), such territorial jurisdiction was continued to be recognised to have been vested in an assessing authority. In the second class of cases, whichever proceedings which were started earlier or prior to passing the jurisdictional order can validly be continued even after the passing of the jurisdictional order. Now, in this case, prior to 14th February, 1996, on 17th January, 1994 itself, the notices under s. 148 were issued relating to all these years by Asstt. CIT, Com. Cir. I(4), New Delhi. By dint of the fact that he was always having the requisite jurisdiction, the jurisdictional order passed on 14th February, 1996 removes any cloud or doubt expressed in that regard and puts the unquestionable jurisdiction of Asstt. CIT, Com. Cir. I(4), beyond the pale of any controversy. In such cases, the proceedings which were started earlier to the passing of the jurisdictional order can validly be continued from the stage at which they were pending prior to the passing of the jurisdictional order. The validity of continuation of proceedings already started earlier to the passing of the jurisdictional order can be traced to the Explanation or found in the Explanation provided under s. 127 extracted above. Even though the assessments for 1988-89 to 1992-93 were already completed by the Asstt. CIT, Ghaziabad, and no sort of proceedings were pending with Asstt. CIT, Ghaziabad, it cannot be a relevant factor at all which could have any influence whatsoever on the legal incidence which flows from the jurisdictional order. We have already held that the assessment proceedings completed by Asstt. CIT, Ghaziabad, for asst. yrs. 1988-89 to 1992-93 were invalid and, therefore, the fact that they were completed earlier to 14th February, 1996, can have no effect, much less adverse effect. Thus, the argument of the learned counsel for the assessee that since all the assessment proceedings for 1988-89 to 1992-93 were completed much prior to 14th February, 1996, and since no proceedings were pending by that date, those assessments became final and binding and, therefore, no further proceedings can be taken by the Asstt. CIT, Com. Cir. I(4), New Delhi, was without force and that argument cannot come in support of the assessee. Thus, ground Nos. 3 to 5 are rejected.
Ground No. 6 :
10. For the reasons already discussed elaborately in the above paras, we hold that the learned CIT(A) was perfectly justified while upholding the validity of the notices under s. 148 dt. 17th January, 1994, and notices under s. 142(1) dt. 23rd February 1996. In our considered opinion, those notices were neither illegal, time-barred nor without jurisdiction. We also do not agree that on the basis of such notices no assessment could validly be made. So, ground No. 6 is rejected.
Ground No. 7 :
11. For the reasons already discussed above in the above paras, we hold that the orders of assessment dt. 8th March, 1996, passed by the Asstt. CIT, Com. Cir. I(4), New Delhi, is perfectly valid. We do not agree with the contention that the order dt. 8th March, 1996, constituted a second assessment order on the same income. We have already held that the assessment order passed by the Asstt. CIT, Ghaziabad, and the appellate order dt. 24th September, 1991, passed by the learned CIT(A), Muzaffarnagar, were quite invalid and they do not confer any right in favour of the assessee. They also do not operate as a bar for completion of the assessment dt. 8th March, 1996, by the Asstt. CIT, Com. Cir. I(4), New Delhi. In our considered opinion, the assessment order dt. 8th March, 1996, is the only valid assessment order for each of these assessment years and it cannot be construed as a second order passed for each of these assessment years. Ground No. 7 stands rejected.
Ground No. 8 :
12. In this ground, it is contended that no default was committed by the assessee and there are no grounds to frame the assessments against the assessee under s. 144. After going through the order of the learned CIT(A) and the directions which were issued independently for each of the asst. yrs. 1988-89 to 1992-93, in our view, it would clearly show that he had duly appreciated the contention of the assessee that there were no defaults on its part. The learned CIT(A) had given appropriate directions to the AO for each of these assessment years. For instance, for the asst. yr. 1988-89, the following is what is stated :
“The present AO has disallowed the entire expenditure including the loss on sale of shares without any investigation whatsoever. He has even interchanged the figures of gross income and expenditure between the asst. yrs. 1987-88 and 1988-89, thereby showing non-application of mind. In the first place, I direct that the correct figures as disclosed in the accounts for this assessment year should be adopted. Also, the expenditure other than the loss on sale of shares of Rs. 86,300 should be allowed. So far as the said loss is concerned, the AO is directed to verify the correctness of the same by calling for further details in this regard. To this limited extent the matter is restored to the AO. The rest of the additions are deleted.”
For the asst. yr. 1989-90, he gave the following directions :
“In my opinion, the AO’s action in adding the entire expenditure and that too to the gross income is incorrect. He is directed to allow the expenditure as claimed except the loss on sale of shares of Rs. 1,79,418. So far as this loss in concerned, the AO will obtain complete details of the purchase and sales from the appellant and decide the issue on merits. To this extent, the matter is restored to the file of the AO and all other additions are deleted in full.”
For the asst. yr. 1990-91, the learned CIT(A) in his impugned orders has given the following directions :
“For this assessment year, the Asstt. CIT, Ghaziabad made an assessment on 31st March, 1993 by disallowing the loss on sale of shares of Rs. 1,38,491 but accepted all other expenditure. The present AO has disallowed the entire expenditure including the loss on sale of shares of Rs. 1,38,491 should be allowed as deduction. The CIT(A) in his order dt. 24th September, 1994, had restored the issue relating to the allowability of loss on sale of shares to the file of the AO. In my opinion, the AO should look into this aspect after calling for specific evidence in this regard and considering the same on merits. Accordingly, only this issue is restored to the AO and the rest of the expenditure is directed to be allowed.”
Similarly, for asst. yr. 1991-92, the learned CIT(A) has completely set aside the order passed by the AO with a direction to the AO to redo the assessment according to law. His direction is couched in the following words :
“In my opinion, the case deserves to be set aside in its entirety to the file of the AO to be redone according to law after according a fresh opportunity to the appellant of being heard and after verifying the genuineness of the purchase of 4.99 lakhs and also the correctness of the other expenditure claimed. The assessment is set aside with these directions.”
Even with regard to the asst. yr. 1992-93, the following direction is given :
“In my opinion, the AO erred in disallowing the entire expenditure without any basis whatsoever. He is directed to allow from the gross income, expenditure to the tune of Rs. 74,173 as claimed in the P&L a/c. However, he should re-examine the correctness of the claim of the write off of the balance to the tune of Rs. 1,49,065. To this limited extent, the issue is restored to the AO.”
13. Having observed that the learned CIT(A) had given several directions already quoted above, we cannot agree with the contention that the learned CIT(A) had confirmed the assessments under s. 144. In fact, we hold that the learned CIT(A) had duly considered the objections put forward by the assessee, appreciated all of them on correct lines and directed the AO to redo the assessments in deserving cases and asked the AO to reframe the assessments after affording opportunity of being heard to the assessee also. Therefore, we hold that this ground itself is invalid and against facts. Hence, ground No. 8 is rejected.
Ground No. 9 :
14. As far as the loss of Rs. 86,300 claimed by the assessee is concerned, the learned CIT(A) directed the AO to verify the correctness of the same by calling for further details in this regard and to this limited extent the matter was also restored to the AO. In view of these clear directions given by the CIT(A) and restoring the matter to the file of the AO, this ground is not well taken and deserves to be dismissed.
15. In the result, since all the grounds are found against the assessee, all these appeals are dismissed.