Sowmiya Rajendrakumar
Published on: 19 August, 2022 at 21:47 IST
Settling a crucial issue, the Supreme Court, on Thursday, held that appeals against orders of Income Tax Appellate Tribunal (ITAT) will lie only before the High Court within whose jurisdiction the assessing officer is situated.
The Apex Court clarified that even if the case is transferred in exercise of power under Section 127 of the Income Tax Act, which enables a higher authority to transfer a ‘case’ from one Assessing Officer to another Assessing Officer, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. The same principle would be applicable even if the transfer under Section 127 is for the same assessment year.
A Bench comprising Justices U.U. Lalit, S. Ravindra Bhat and P.S. Narasimha reiterated for clarity and certainty that the jurisdiction of a High Court is not dependent on the location of the ITAT, as sometimes a Bench of the ITAT exercises jurisdiction over plurality of states(Pr. Commissioner of Income Tax-l, Chandigarh v. M/s. ABC Papers Limited).
The broad issue before the Apex Court was that when some Benches of the ITATs are having jurisdiction over more than one state, each state having their own High Courts, which High Court would have appellate jurisdiction under Section 260A of the Income Tax Act, 1961. The Court noted that as Section 260A does not spell out the High Court that would have jurisdiction to entertain appeal, it is creating a great deal of confusion and the issue needs to be settled.
In the facts of the present case, both Punjab and Haryana High Court and the Delhi High Court had refused to entertain appeal on the ground of lack of territorial jurisdiction.
Thus the Apex Court determined the contour of the issue as under “We are thus tasked to resolve the issue as to which High Court would have the jurisdiction to entertain an appeal against a decision of a Bench of the ITAT exercising jurisdiction over more than one state, particularly when case(s) of same assessment year are transferred under Section 127 of the Act.”
The Benches of the ITAT does not follow the structure contemplated in Article 1 of the Constitution, which divides the Union into States and Union Territories. Often the jurisdiction of one Bench encompasses territories of more than one state.
It was of the opinion that the legal structure under Section 260A must be seen as a linear progression of judicial remedies. It also refused to accept the contention that Section 127 of the Income Tax Act, which enables a higher authority to transfer a ‘case’ from one Assessing Officer to another Assessing Officer, determines the jurisdiction of the High Court where appeal would lie. The jurisdiction of a High Court would also change following an order of transfer under Section 127.
It further observed- “For the reasons stated above, we hold that the decision of the High Court of Delhi in Sahara and Aar Bee do not lay down the correct law and therefore, we overrule these judgments”.
It was held: “In conclusion, we hold that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s)”