IN HIGH COURT OF JUDICATURE AT HYDERABAD FOR STATE OF TELANGANA AND STATE OF ANDHRA PRADESH I.T.T.A. Nos.102, 107, 112, 134 and 151 of 2004 Between: J.Aditya Rao ..Appellant And Assistant Commissioner of Income Tax, Hyderabad ..Respondent JUDGMENT PRONOUNCED ON: 22nd November, 2017 HON BLE SRI JUSTICE C.V.NAGARJUNA REDDY AND HON BLE SRI JUSTICE T.AMARNATH GOUD 1.Whether Reporters of local Newspapers may be allowed : No to see Judgments? 2. Whether copies of judgment may be marked to : Yes Law Reporters/Journals? 3. Whether their Ladyship/Lordship wish to see fair copy of : Yes Judgment? C.V.NAGARJUNA REDDY, J T.AMARNATH GOUD, J 2 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 * HON BLE SRI JUSTICE C.V.NAGARJUNA REDDY AND HON BLE SRI JUSTICE T.AMARNATH GOUD + I.T.T.A. Nos.102, 107, 112, 134 and 151 of 2004 % 22.11.2017 J.Aditya Rao ..Appellant Vs. Assistant Commissioner of Income Tax, Hyderabad ..Respondent ! Counsel for appellant: Mr.Challa Gunaranjan for Mr.B.Ravindra Counsel for respondent: Mr.J.V.Prasad, Standing Counsel for Income Tax Department Head Note: ? Cases referred: 1. (2011) 198 Taxman 518 (Uttarakhand) (FB) 2. (2015) 56 Taxmann.com 190 (Delhi) 3. (2016) 389 ITR 501 (SC) 4. 2001 Volume 252 ITR page 1 5. (1996) 89 Taxman 536 (Punjab & Haryana) 6. (2015) 56 Taxmann.com 72 (Punjab & Haryana) 7. (1993) 200 ITR 697 (Bombay) 8. (2013) 219 Taxman 1 (Allahabad) 9. (1991) 56 Taxman 190 (A.P.) 10. (2011) 200 Taxman 297 (Gujarat) 11. (2011) 196 Taxman 104 (Bombay) 12. (2007) 164 Taxman 61 (Delhi) 13. (2011) 339 ITR 37 (Calcutta) 14. (1976) 102 ITR 281 (SC) 3 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 HON BLE SRI JUSTICE C.V.NAGARJUNA REDDY AND HON BLE SRI JUSTICE T.AMARNATH GOUD I.T.T.A. Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 Between: J.Aditya Rao ..Appellant And Assistant Commissioner of Income Tax, Hyderabad ..Respondent Counsel for appellant: Mr.Challa Gunaranjan for Mr.B.Ravindra Counsel for respondent: Mr.J.V.Prasad, Standing Counsel for Income Tax Department Court made following: 4 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 COMMON JUDGMENT: (Per Hon ble Sri Justice C.V.Nagarjuna Reddy) This batch of appeals pertains to assessment years 1992-93 to 1996-97. They are filed against common order of Income Tax Appellate Tribunal, Hyderabad Bench (for short Tribunal ). 2. facts, in brief, leading to filing of these appeals are as under. appellant (hereinafter referred to as assessee ) was pilot employed by Indian Airlines. He was assessed to income tax at Hyderabad. His income was, accordingly, assessed for assessment years 1992-93 to 1996-97. However, at relevant point of time, assessee was employed in Mumbai and in connection therewith, he was residing at that place. Income Tax Officer, Ward 11(3), Mumbai, issued notice, dated 22.03.2001, to assessee under Section 148 of Income Tax Act, 1961 (for short Act ) proposing to reassess his income. assessee sent his reply, dated 26.04.2001, stating that as he was assessed at Hyderabad, he is submitting returns to Assessing Officer at Hyderabad i.e., Assistant Commissioner of Income Tax (ACIT), Ward/Circle 2(2), Hyderabad. Evidently, on said ground, no separate returns were filed at Mumbai by assessee in response to aforesaid notice issued under Section 148 of Act. Thereafter, further letter/notice was issued by ACIT, Circle 27(1), Mumbai, on 27.12.2001 stating that assessee filed his returns in Mumbai. reply to said letter/notice was sent by assessee on 07.01.2002 denying filing of such returns. few months thereafter, ACIT, Circle 5(1), Hyderabad, issued separate notices in pro forma, 5 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 dated 12.02.2002, to assessee purportedly under Section 143(2) of Act for aforementioned assessment years and in connection therewith, assessee was required to attend office of Assessing Officer on date specified therein. Accordingly, assessee attended office along with his representation on merits on points raised by Assessing Officer at Hyderabad. After considering submissions made by assessee/his representation, Assessing Officer/ACIT at Hyderabad passed orders under Section 143(3) read with Section 147 of Act on 18.03.2002. By these orders, Assessing Officer included certain allowances under taxable income of assessee and accordingly, he imposed additional tax as well as interest thereon under Section 234B(1) of Act. Assailing these orders, assessee filed separate appeals to Commissioner of Income Tax (Appeals)-V, Hyderabad. assessee challenged assessment orders on three grounds viz., i) that Income Tax Officer, Ward 11(3), Mumbai had no jurisdiction to issue notice under Section 148 of Act; ii) that quantum of allowances included under taxable income was not correct; and iii) that charging of interest is not sustainable. Commissioner (Appeals) rejected all these three grounds by his common order passed on 18.12.2002. assessee reiterated all above three grounds in further appeals filed by him before Tribunal, which, by its common order, confirmed order of Commissioner (Appeals). 3. During hearing, Mr.Challa Gunaranjan, learned counsel representing Mr.B.Ravindra, learned counsel for appellant-assessee, 6 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 has reiterated grounds raised before both Appellate fora. In addition to said grounds, learned counsel has also submitted that Assessing Officer at Hyderabad has not followed mandatory procedure prescribed under Section 127(2)(a) of Act. learned counsel has further argued that while respondent failed to show that there was valid transfer, even after such transfer, no fresh notice under Section 148 of Act was issued by Assessing Officer at Hyderabad and that therefore, entire proceedings initiated under Sections 147 and 148 of Act were vitiated by procedural illegalities and jurisdictional defects. In support of his submissions, learned counsel has placed reliance on judgments of Uttarakhand High Court in Director of Income-tax, International Taxation, Delhi-II vs. Maersk Co.Ltd.1, of Delhi High Court in Director of Income-tax, International Taxation vs. GE Packaged Power Inc.2 and of Supreme Court in Ian Peter Morris vs. Assistant Commissioner of Income-tax3. 4. Mr.J.V.Prasad, learned standing counsel for Income Tax Department appearing for respondent, has opposed above submissions and argued that though assessee may not have filed his returns at Mumbai, as he was working within territorial jurisdiction of Assessing Officer at Mumbai and receiving remuneration, said Assessing Officer has every jurisdiction to initiate proceedings under Section 148 of Act. In support of his submissions, learned 1 (2011) 198 Taxman 518 (Uttarakhand) (FB) 2 (2015) 56 Taxmann.com 190 (Delhi) 3 (2016) 389 ITR 501 (SC) 7 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 standing counsel has referred to and relied upon Sections 120 and 124 of Act. As regards objection with regard to transfer of case from Mumbai to Hyderabad, learned standing counsel has submitted that assessee has not only not raised this issue of transfer without notice before Assessing Officer as well as two Appellate fora, but also he has appeared before Assessing Officer at Hyderabad after such transfer and availed opportunity of putting-forth his objections during hearings and therefore, he cannot raise this objection for first time in these appeals before this Court. learned standing counsel has also sought to support levy of interest based on judgment of Supreme Court in Commissioner of Income-Tax vs. Anjum M.H.Ghaswala and others4. 5. We have carefully considered submissions of learned counsel for both parties with reference to record. 6. In Re first submission - Jurisdiction of Assessing Officer at Mumbai to initiate proceedings under Sections 147 and 148 of Act Section 2(7) of Act defined Assessing Officer as under: Assessing Officer means Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or Income-tax Officer who is vested with relevant jurisdiction by virtue of directions or orders issued under Sub- Section (1) or Sub-Section (2) of Section 120 or any other provision of this Act, and Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of Sub-Section (4) of that Section to exercise or perform all or any of powers and functions conferred on, or assigned to, Assessing Officer under this Act. 4 2001 Volume 252 ITR page 1 8 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 Section 120 of Act deals with jurisdiction of Income Tax Authorities. Sub-Sections (2) and (3) thereof read as under: (2) directions of Board under Sub-Section (1) may authorize any other income-tax authority to issue orders in writing for exercise of powers and performance of functions by all or any of other income-tax authorities who are subordinate to it. (3) In issuing directions or orders referred to in Sub-Sections (1) and (2), Board or other income-tax authority authorized by its may have regard to any one or more of following criteria, namely:- (a) territorial area; (b) persons or classes of persons; (c) income or classes of income; and (d) cases or classes of cases. Section 124 of Act envisages jurisdiction of Assessing Officers. Sub-Sections (1) and (2) thereof read as follows: (1) Where by virtue of any direction or order issued under Sub-Section (1) or Sub-Section (2) of Section 120, Assessing Officer has been vested with jurisdiction over any area, within limits of such area, he shall have jurisdiction.- (a) in respect of any person carrying on business or profession, if place at which he carries on his business or profession is situate within area, or where his business or profession is carried on in more places than one, if principal place of his business or profession is situate within area, and (b) in respect of any other person residing within area. (2) Where question arises under this Section as to whether Assessing Officer has jurisdiction to assess any person, question shall be determined by Director General or Chief Commissioner or Commissioner; or where question if one relating to areas within jurisdiction of different Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by Board or by such Director General or Chief Commissioner or Commissioner as Board may, by notification in Official Gazette, specify. 7. At relevant point of time, when notice under Section 148 of Act was issued by Assessing Officer at Mumbai, assessee was, admittedly, employed in Mumbai and residing thereat. It is not 9 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 pleaded case of assessee that no notification was issued by Competent Authority under Section 120(2) and (3) of Act vesting jurisdiction on Assessing Officers at Mumbai over persons residing in Mumbai. In absence of such plea, it is reasonable to presume that such notification existed empowering Assessing Officers in Mumbai to deal with persons, such as assessee in present case. Both Appellate fora have, indeed, proceeded on that premise in holding that Assessing Officer at Mumbai was conferred with jurisdiction to exercise powers under Sections 147 and 148 of Act. Even before this Court, assessee has not raised specific plea that no such notification was issued conferring territorial jurisdiction on Assessing Officer at Mumbai for issuing such notices. only premise on which assessee has questioned jurisdiction of Assessing Officer at Mumbai was that as he has not filed returns and was not assessed at Mumbai, Assessing Officer concerned at Mumbai had no jurisdiction. This plea, in our opinion, is wholly without any merit. jurisdiction of Assessing Officer does not depend upon fact whether person had filed his returns or not. It depends upon territorial area, person or classes of persons, income or classes of income and cases or classes of cases, with reference to which jurisdiction is conferred on Competent Authority concerned as per Section 120(3) read with Section 124 of Act. In this view of matter, we do not find any merit in this submission of assessee. 10 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 8. In Re second submission - Whether transfer of case on ground of purported non-compliance of Section 127(2)(a) of Act, is bad? No doubt, Clause (a) of Sub-Section (2) of Section 127 of Act envisages opportunity of being heard before case is transferred from one city to another city, from one locality to another locality or from one place to another place. Admittedly, assessee has not raised this objection after Assessing Officer at Hyderabad issued notice for appearance. On contrary, he appeared before Assessing Officer at Hyderabad and put-forth his objections on merits regarding reassessment. Even in two appeals filed by him before two Appellate fora, assessee has never raised this objection. 9. learned counsel for assessee has submitted that as ground of failure of issue of notice is jurisdictional one, it could be raised at any stage. learned counsel has submitted that before passing order of transfer, notice to assessee is mandatory and in support of this submission, he has relied upon judgments in Lt.Col.Paramjit Singh vs. Commissioner of Income-tax5, Piyush Shelters India (P) Ltd. vs. Commissioner of Income-tax, Gurgaon6, Devidas vs. Union of India7, Commissioner of Income-tax (Noida) vs. Deepak Gupta8, Vijayasanthi Investments (P) Ltd., vs. Chief Commissioner of Income-tax9, Madhu Khurana vs. Commissioner 5 (1996) 89 Taxman 536 (Punjab & Haryana) 6 (2015) 56 Taxmann.com 72 (Punjab & Haryana) 7 (1993) 200 ITR 697 (Bombay) 8 (2013) 219 Taxman 1 (Allahabad) 9 (1991) 56 Taxman 190 (A.P.) 11 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 of Income-tax10, Chaitanya vs. Commissioner of Income-tax11, Commissioner of Income Tax vs. Ganga Dhar Aggarwal12 and Smt.Smriti Dedia vs. Union of India13. learned counsel has also submitted that before passing order of transfer, recording of reasons is mandatory under Section 127 of Act and to buttress same, he has placed reliance on judgment of Supreme Court in Ajantha Industries vs. Central Board of Direct Taxes14. 10. Admittedly, assessee has not raised objections regarding failure to issue notice and non-recording of reasons before passing order of transfer either before Original Authority or before two Appellate fora. question that needs to be considered is whether on facts of present appeals, these aspects are relevant or not. With regard to non-recording of reasons, it is not known whether transfer order contained any reasons or not, because assessee has not put this aspect in issue before any of two Appellate fora. None of judgments on which reliance has been placed by assessee dealt with situation where this aspect was raised for first time in appeals before Courts which rendered said judgments. Similarly, effect of failure of assessee to raise objection of non-issue of notice before passing order of transfer, either before Assessing Officer or two Appellate fora did not fall for consideration of Courts which rendered judgments cited by assessee. While 10 (2011) 200 Taxman 297 (Gujarat) 11 (2011) 196 Taxman 104 (Bombay) 12 (2007) 164 Taxman 61 (Delhi) 13 (2011) 339 ITR 37 (Calcutta) 14 (1976) 102 ITR 281 (SC) 12 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 very initiation of proceedings and issue of notices under Sections 147 and 148 of Act constitute jurisdictional issue, which could be raised by aggrieved party at any point of time and at any stage, objections regarding non-recording of reasons and non-issue of notice before passing order of transfer would not go to root of matter enabling aggrieved party to raise these issues for first time before High Court not having raised earlier. reason for this is that these aspects raise mixed questions of fact and law. Unless assessee had raised these issues before lower fora, facts relevant thereto would not come on record. Therefore, assessee, having not raised objections with respect thereto before any lower fora, is not entitled to raise them for first time in these appeals before this Court. Even otherwise, assessee, having appeared before Assessing Officer, Hyderabad and invited decision on merits without raising such objections and also not having raised these objections before both Appellate fora, we are afraid, he cannot be permitted to raise them for first time in these appeals before this Court. There is another perspective from which this issue is required to be examined. In our opinion, both requirements of prior notice and recording of reasons before passing order of transfer were envisaged to enable party likely to be affected by such transfer to submit his objections. If assessee had any such sustainable objection, he is expected to have raised same before Assessing Officer at Hyderabad after transfer of case. From fact that assessee has not raised any such objection would clearly show that he had no grievance against 13 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 transfer as such. Indeed, assessee objected to jurisdiction exercised by Assessing Officer at Mumbai on ground that he was being assessed at Hyderabad. Transfer of case to Hyderabad is obviously in tune with his objection, which appears to be reason why assessee has not raised any objection on transfer. assessee has also not pleaded any prejudice on account of transfer or purported absence of reasons for such transfer. For aforementioned reasons, we reject this submission of assessee as well. 11. issue as to whether assessee, who is salaried employee, is liable to pay advance tax, is no longer res integra. Full Bench of Uttarakhand High Court in Maersk Co.Ltd (1 supra) elaborately discussed this aspect and held that assessee, whose income tax is liable to be deducted at source, is not liable to pay advance tax under Section 208 of Act and consequently, he is not liable to pay interest under Section 234B(1) thereof. similar view was taken by Delhi High Court in GE Packaged Power Inc. (2 supra). In recent judgment in Ian Peter Morris (3 supra), this issue is conclusively adjudicated by Supreme Court. Paragraph 4 of said judgment, which contains ratio, reads as under: perusal of relevant provisions of Chapter VII of Act (Part A, B, C and F of Chapter VII) would go to show that against salary deduction, at requisite rate at which income tax is to be paid by person entitled to receive salary, is required to be made by employer failing which employer is liable to pay simple interest thereon. provisions relating to payment of advance tax is contained in Part C and interest thereon in Part F of Chapter VII of 14 CVNR,J & TA,J I.T.T.A.Nos.102, 107, 112, 134 and 151 of 2004 22.11.2017 Act. In cases where receipt is by way of salary, deductions under Section 192 of Act is required to be made. No question of payment of advance tax under Part C of Chapter VII of Act can arise in cases of receipt by way of salary . If that is so, Part F of Chapter VII dealing with interest chargeable in certain cases (Section 234B Interest for defaults in payment of advance tax and Section 234C Interest for deferment of advance tax) would have no application to present situation in view of finality that has to be attached to decision that what was received by appellant assessee under Non-Compete Agreement was by way of salary. 12. In light of above position in law, orders of Assessing Officer and Commissioner of Income Tax (Appeals) as confirmed by Tribunal are set aside to extent of levy of interest under Section 234B(1) of Act on additional tax. These Appeals to this extent alone are allowed, while common order impugned in these Appeals is confirmed in all other respects. C.V.NAGARJUNA REDDY, J T.AMARNATH GOUD, J 22nd November, 2017 Note: L.R. copies to be marked. (B/o) GHN J. Aditya Rao v. Assistant Commissioner of Income-tax, Hyderabad