Appeals Against Decision Of ITAT Shall Lie Only Before HC Within Whose Jurisdiction AO Is Situated - SC

The Supreme Court bench comprising Justice U. U. Lalit, Justice S. Ravindra Bhat, and Justice P. S. Narasimha considered the question concerning the appellate jurisdiction of the High Courts under Section 260A of the Income Tax Act, 1961 against the judgments of the Income Tax Appellate Tribunals as the benches of the ITAT are constituted in such a way as to exercise jurisdiction in more than one state.

The Court while adjudicating upon the issue observed, "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)."

Another question that arose for the consideration of the Court was that the jurisdiction of the High Court consequent upon administrative order of transfer of a 'case' under Section 127 of the Act from one assessing authority to another Assessing Officer located in a different State. These questions arose due to the difference of opinion between the Punjab and Haryana High Court and Delhi High Court. 

The facts that gave rise to these questions were that the Appellant was a company engaged in the manufacture of writing and printing papers. The Assessee filed Income Tax before the Assessment Officer, New Delhi for 2008-2009 on 30.09.2008. The Deputy Commissioner of Income Tax, New Delhi issued a notice to him under Section 143(2) and followed it up by an order of assessment. Aggrieved by that order an appeal was preferred before the Commissioner of Income Tax where the appeal was allowed. The Revenue carried the matter before the ITAT, New Delhi aggrieved by order of the Commissioner. The ITAT, New Delhi upheld the order of the Commissioner of Income Tax. Aggrieved by the order Revenue appealed before the High Court of Punjab and Haryana.

During these proceedings, the search operation was undertaken by the Directorate of Income Tax (Investigation), Ludhiana,  and certain places in the State of Punjab at the office and factory of the Assessee. Another development that happened was that the by an order dated 26.06.13 passed under section 127 centralized the case of the Assessee for the Assessment years 2006-07 to 2013-14 and transferred it to the Central Circle, Ghaziabad.

Following up on the order, Deputy Commissioner Ghaziabad passed an assessment order. Aggrieved of the order the Assessee filed an appeal which came to be allowed by the Commissioner of Income Tax, Kanpur. The Revenue preferred an appeal to ITAT, New Delhi where the appeal was dismissed and then Revenue approached the High Court of Punjab and Haryana against the order of ITAT Delhi. Before approaching the High Court the case was re transferred to the Deputy Commissioner Chandigarh. The High Court disposed off the matter holding that, notwithstanding the order under Section 127 of the Act which transferred the cases of the Assessee to Chandigarh, the High Court of Punjab & Haryana would not have jurisdiction as the Assessing Officer who passed the initial assessment order is situated outside the jurisdiction of the High Court. Then the Revenue filed the appeal before the Supreme Court.

The Court observed that, "The binding nature of decisions of an appellate court established under a statute on subordinate courts and tribunals within the territorial jurisdiction of the State, is a larger principle involving consistency, certainty and judicial discipline, and it has a direct bearing on the rule of law. This 'need for order' and consistency in decision making must inform our interpretation of judicial remedies."

The Court had also stated that, "The power of transfer exercisable under Section 127 is relatable only to the jurisdiction of the Income Tax Authorities. It has no bearing on the ITAT, much less on a High Court. If we accept the submission, it will have the effect of the executive having the power to determine the jurisdiction of a High Court. This can never be the intention of the Parliament. The jurisdiction of a High Court stands on its own footing by virtue of Section 260A read with Section 269 of the Act. While interpreting a judicial remedy, a Constitutional Court should not adopt an approach where the identity of the appellate forum would be contingent upon or vacillates subject to the exercise of some other power. Such an interpretation will clearly be against the interest of justice."

The Court while disposing off the matter held 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."

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