No power to Tribunal to transfer case from a bench in one State to another bench in another State having different headquarters
Fact and Issue of the case
Petitioner is a company incorporated under the Companies Act, 1956 on 18.10.1961 having its registered office at Maharshi Karve Road, Mumbai. It is stated that since its incorporation its registered office has remained unchanged at Mumbai. Petitioner is engaged in the business of mining, running gas unit and generating power through windmills. It has two mining divisions i.e. mining division-1 and mining division-2 at Hospet, Karnataka. A search and seizure operation under section 132 of the Income Tax Act, 1961 was carried out in the business premises of the petitioner on 26.10.2007. Pursuant to the search action, proceedings were initiated under section 153A of the Income Tax Act, 1961 (briefly “the Act” hereinafter). Consequently, assessment proceedings were drawn up in respect of four assessment years i.e. assessment years 2005-06, 2006-07, 2007-08 and 2008-09. Separate assessment orders were passed by the Assessing Officer i.e. Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore on 31.12.2009 for the above four assessment years. In so far the first three assessment years are concerned, the assessments were made under section 143(3) read with section 153A of the Act.
However, for the assessment year 2008-09, the assessment was made under section 143(3). In the assessment proceedings petitioner filed report under section 10B of the Act along with audit report under section 44AB of the said Act and claimed deduction under section 10B for the assessment years 2006-07, 2007-08 and 2008-09. Petitioner also claimed deduction on account of expenditure and depreciation for use of aircrafts for all the four assessment years. Assessing Officer negatived the claim of the petitioner for deduction under section 10B of the Act as according to the Assessing Officer petitioner had violated the conditions laid down under section 10B(2) of the Act. Thus, vide the assessment orders dated 31.12.2009 it was held that petitioner would not be entitled to deduction under section 10B in respect of the assessment years 2006-07, 2007-08 and 2008-09. Accordingly such claim was disallowed and brought to tax as income of the respective years. In so far claim of expenditure and depreciation for use of aircraft is concerned, the Assessing Officer disallowed 50% of the operational expenses as well as depreciation.
Being aggrieved by the aforesaid orders of the Assessing Officer dated 31.12.2009 for the four assessment years from 2005-06 to 2008-09, petitioner filed four separate appeals before the Commissioner of Income Tax (Appeals)-VI, Bangalore [briefly “the CIT(Appeals)” hereinafter]. All the four appeals were heard together and were disposed of by a common order dated 03.02.2011. In so far disallowance of deduction under section 10B of the Act is concerned, CIT(Appeals) upheld the decision of the Assessing Officer. Regarding disallowance of operational expenses and depreciation of aircraft to the extent of 50% by the Assessing Officer, the same was upheld for the assessment year 2005-06. However, for the remaining three assessment years certain reliefs were granted to the petitioner. In the result, the appeal for the assessment year 2005-06 was dismissed and the appeals for the assessment years 2006-07, 2007-08 and 2008-09 were partly allowed.
Aggrieved by the order dated 03.02.2011 passed by the CIT (Appeals), petitioner filed four appeals on 06.04.2011 before the Income Tax Appellate Tribunal, Bangalore Bench for the four assessment years which were registered as follows :-
i) ITA No.371/B/2011 for the assessment year 2005-06.
ii) ITA No.372/B/2011 for the assessment year 2006-07.
iii) ITA No.373/B/2011 for the assessment year 2007-08.
iv) ITA No.374/B/2011 for the assessment year 2008-09.
One of the grounds taken in the appeals was that the search and seizure action carried out in the business premises of the petitioner under section 132 of the Act was invalid as no satisfaction note was recorded prior to the search and seizure as is the requirement under section 132 of the Act.
It may be mentioned that petitioner had requested Bangalore Bench of the Tribunal to provide personal hearing before disposing of the transfer application. In this connection petitioner submitted objections dated 27.06.2019. Departmental representative filed written submissions on 12.12.2019 in support of the prayer for transfer of the appeals. The matter was heard by the Bangalore Bench of the Tribunal on 20.02.2020.
On 11.09.2020 petitioner received a copy of the impugned order dated 20.08.2020 passed by the President of the Tribunal under rule 4 of the Income Tax Appellate Tribunal Rules, 1963 directing that the four subject appeals be transferred from the Bangalore Bench of the Tribunal to be heard and determined by the Mumbai Benches of the Tribunal at Mumbai.
Subsequently, when the petitioner sought for a copy of the order passed by the Bangalore Bench of the Tribunal following which the President had passed the impugned order dated 20.08.2020, it was provided with a copy of order dated 19.03.2020 passed by the Bangalore Bench of the Tribunal accepting the request for transfer and placing its views to enable the President to pass necessary orders.
Aggrieved, petitioner has preferred the present writ petition for quashing of the two orders dated 19.03.2020 and 20.08.2020 and for a direction to continue the hearing of the four subject appeals by the Bangalore Bench of the Tribunal.
Observation of the Court
In the present case, the Assessing Officer is Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore and the first appellate authority is Commissioner of Income Tax (Appeals)-VI, Bangalore. In terms of rule 13 of the Tribunal Rules, in the four subject appeals filed by the petitioner, Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore is the respondent which is also reflected in the impugned order dated 20.08.2020. Further, in the event of remand in terms of rule 28, the matter would go back to the Commissioner of Income Tax (Appeals)-VI, Bangalore against whose orders the appeals were filed before the Tribunal or to the Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore, the Assessing Officer.
Because of search and seizure action under section 132 of the Act against the petitioner in connection with the mining operations at Hospet in the State of Karnataka consequential assessment proceedings were initiated for the assessment years 2005-06, 2006-07, 2007-08 and 2008-09. In so far the first three assessment years are concerned, the assessment orders were passed under section 153A of the Act read with 143(3) thereof. For the last assessment year i.e. 2008-09, the assessment order was made under section 143(3). Following centralization of the cases at Bangalore, the assessments were carried out at Bangalore and in all the assessment orders the Assessing Officer was Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore. As we have already seen, the first appeals against the assessment orders were preferred before CIT-A at Bangalore whereafter the appeals were filed before the Tribunal at Bangalore and rightly so because the Assessing Officer i.e., the respondent was from Bangalore.
Though provisions of the Civil Procedure Code, 1908 may not be applicable to the Act as well as to proceedings before the Tribunal, nonetheless as a matter of principle, we can advert to section 20 thereof, which says that every suit shall be instituted in a court within the local limits of whose jurisdiction the defendant or in the case of multiple defendants, each of the defendants resides or carries on business or personally works for gain. This principle finds manifestation in clause 4 of the Standing Order. Whether it be a suit or an appellate proceeding before the Tribunal the place of institution of the suit would be where the defendants reside or works for gain and in case of appeal under the Tribunal Rules where the Assessing Officer is located.
It is needless to say that under the Income Tax law assessment proceeding for each assessment year is a separate proceeding. Merely because for assessment years prior to assessment year 2005-06, the Assessing Officer was at Mumbai or for the subsequent assessment years i.e. subsequent to assessment year 2008-09 the Assessing Officer is at Mumbai would be no ground to transfer a pending appeal or appeals pertaining to assessment years 2005-06 to 2008-09 from one Bench of the Tribunal in a different State / Zone to another Bench of the Tribunal in another State / Zone. Petitioner has explained and it has not been denied that post search and seizure assessments for the four assessment years under consideration were carried out in Bangalore along with other cases following centralization of assessment. Now for assessment years subsequent to assessment year 2008-09 the assessment jurisdiction of the petitioner has been reverted back to Mumbai and conferred upon DCIT-1(2)(2), Mumbai. This would not mean DCIT-1(2)(2) Mumbai to be the Assessing Officer for the four assessment years i.e. assessment years 2005-06, 2006-07, 2007-08 and 2008-09 in respect of which Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore continues to be the Assessing Officer and as a consequence the respondent in the subject appeals; DCIT-1(2)(2), Mumbai is not and cannot be the respondent in the said appeals.
Petitioner is the appellant in all the four subject appeals before the Bangalore Bench of the Tribunal. In other words it is the petitioner who had filed the appeals. Petitioner does not want the appeals to be transferred from Bangalore to Mumbai and wants to prosecute the appeals at Bangalore where we have seen the appeals were rightly filed. Ordinarily if a court has jurisdiction to hear a case, the case ought to proceed in that court only. This principle can certainly be extended to appeals before the Tribunal. In such circumstances transfer cannot be forced upon the appellant i.e. the petitioner against its express objection.
It is also a settled proposition that convenience of a party in a case can hardly be a criteria for transferring a case out of a State. [Please see judgment and order dated 07.05.2021 passed by the Supreme Court in Transfer Petition (Criminal) No.17 of 2021, Rajkumar Sabu -Vs- M/s. Sabu Trade Pvt. Ltd.]. Plea that records were transferred from Bangalore to Mumbai and that it would be convenient for the revenue if the appeals are heard at Mumbai cannot be a valid ground for transfer. Cases are transferred to serve the ends of justice and justice must not only be done but must be seen to have been done, that too, from the perspective of the litigant.
In the order dated 19.03.2020 Bangalore Bench of the Tribunal noted in paragraph 11 that the power to transfer of the appeal can be exercised by the Tribunal at the request of either party to the proceedings before it, be it the appellant or the respondent and that the primary consideration while considering such a request is the balance of convenience of the parties. In so far convenience of a party is concerned we have already dealt with it in the preceding paragraph. What is of significance is that even according to the Tribunal the power to transfer can be exercised at the request of either party to the proceedings before the Tribunal, be it the appellant or the respondent. Appellant in the subject appeals is the petitioner and the respondent is Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore. While petitioner has objected to the transfer, there is nothing on record to show that the respondent i.e. Assistant Commissioner of Income Tax, Central Circle-2(1), Bangalore had filed any application before the Bangalore Bench of the Tribunal or even before the President for transfer of the appeals from Bangalore to Mumbai. As we have seen the application for transfer was filed by the Commissioner of Income Tax-1, Mumbai before the Vice President of the Tribunal on 12.08.2013; subsequently, Chief Commissioner of Income Tax (OSD), Mumbai addressed a letter dated 11.04.2019 to the President of the Tribunal requesting transfer of the appeals from Bangalore Bench to Mumbai Benches. Neither the Commissioner of Income Tax-1, Mumbai nor the Chief Commissioner of Income Tax (OSD), Mumbai who had filed the applications for transfer are respondent in the subject appeals.
Therefore not being parties to the appeals, they were not competent to make the applications for transfer. In such circumstances the applications for transfer of appeals were invalid and on such invalid applications no order for transfer of appeals could have been passed. In so far the contention of the respondents that it is not open to the petitioner to object to transfer of the appeals because it did not object to transfer of jurisdiction under section 127, in our view the said contention has got no substance at all. Section 127 of the Act deals with transfer of any case from one Assessing Officer to another Assessing Officer. In other words, it deals with transfer of assessment jurisdiction from one Assessing Officer to another Assessing Officer. While certainly the appropriate authority under section 127 has the power and jurisdiction to transfer a case from one Assessing Officer to another Assessing Officer subject to compliance of the conditions mentioned therein, principles governing the same cannot be read into transfer of appeals from one Bench of the Tribunal to another Bench that too in a different State / Zone, for the simple reason that it is not a case before any Assessing Officer.
Petitioner may have expressed no objection to transfer of assessment jurisdiction from the Assessing Officer at Bangalore to the Assessing Officer at Mumbai after assessment for the assessment years covered by the search period, but that cannot be used to non-suit the petitioner in his challenge to transfer of appeals from one Bench of the Tribunal to another Bench in a different State and in a different Zone. The two are altogether different and have no nexus with each other. So, the preliminary objection raised on behalf of the respondents on this count has to fail.
The other preliminary objection raised by the respondents, more particularly by Mr. Desai, learned senior counsel for respondent No.2 that firstly, the writ petition should have been filed before the Karnataka High Court and secondly an appeal under section 260A of the Act ought to have been filed instead of a writ petition, we find both the objections to be without any merit. The opinion rendered by the Bangalore Bench of the Tribunal vide order dated 19.03.2020 attained finality when the President of the Tribunal passed the impugned order dated 20.08.2020 which order was passed at Mumbai. That apart, clause (2) of Article 226 makes it clear that the power to issue directions, orders or writs by any High Court within its territorial jurisdiction would also extend to a cause of action or even a part thereof which arises within the territorial limits of the High Court notwithstanding the fact that the seat of the authority is not within the territorial limits of the High Court. Therefore, in the light of the above
and having regard to the mandate of clause (2) of Article 226 of the Constitution of India, this Court certainly has the jurisdiction to entertain the writ petition. In so far filing of appeal instead of writ petition is concerned, a careful reading of section 260A(1) would go to show that an appeal shall lie to the High Court from “every order” passed in appeal by the Tribunal if the High Court is satisfied that the case involves a substantial question of law. Mr. Desai has laid great emphasis on the expression “every order” to contend that an appeal shall lie from the order dated 19.03.2020 passed by the Tribunal as well. We are afraid we cannot accept such a submission. “Every order” in the context of section 260A would mean an order passed by the Tribunal in the appeal. In other words, the order must arise out of the appeal; it must relate to the subject matter of the appeal. The order with which we are concerned is order dated 19.03.2020. It is not an order on the merit of the appeal. In other words, it is not an order passed in the appeal. It is an order related to transfer of the appeal. Such an order would be beyond the scope and ambit of sub section (1) of section 260A of the Act.
Thus, having regard to the discussions made above and upon thorough consideration of the matter, we are of the view that both the orders dated 19.03.2020 and 20.08.2020 are wholly unsustainable in law and are accordingly set aside and quashed.
Consequently, the writ petition is allowed by the Bombay High court.
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