Report No. 12
Notes to clause 131
All provisions regarding the jurisdiction of Income-tax authorities have been brought together in this section. The only changes that need comments are the following:-
Sub-clause (3)- Paragraph (b) is new and is intended to give recognition to the existing practice. The practice is, in a sense, impliedly authorised by existing section 5(6).
Such transfers from one Appellate Assistant Commissioner to another are usually made wholesale in accordance with the volume of work before each Appellate Assistant Commissioner, and therefore, it is not practicable to give notice to the individual assessees whose cases are to be transferred. Hence, this sub-clause does not prescribe the requirement of notice, unlike section 5 (7A) as embodied in the draft.
Sub-clause (5)- Existing section 5(5), latter part, authorises the Commissioner to direct that the powers of the Income-tax Officer shall be exercised by the Inspecting Assistant Commissioner in respect of any specified case or class of cases. To this, an addition has been made, in the draft, authorising such orders in respect of any specified person or classes of persons also.
Sub-clause (7)- Existing section 5(6), last line, provides that when the Central Board of Revenue empowers any particular Income-tax authority to perform functions thereunder, the functions shall cease to be performed by the other authorities "appointed under subsections (2), and (3)".
Now, so far as the reference to sub-section (2) is concerned, it is to be construed as a reference, not to the opening line of section 5(2), but to the second sentence beginning with.
"and they shall perform their functions
The mere appointment of a person to a post is not relevant; what is important is, the allotment of functions.
This portion of section 5(2) has, in the draft, been embodied in sub-clause (2), and therefore draft sub-clause (7) makes a reference to draft sub-clause (2).
So far as the reference to section 5(3) is concerned, it appears to be inappropriate, because that sub-section does not deal with allotment of functions but only with the appointment. Hence that reference has been omitted.
Existing section 5(4), latter part, and section 5(5), earlier part, also deal with allotment of functions and, therefore, the corresponding sub-clauses (3) and (4) have also been referred to in the draft sub-clause under discussion.
The second part of the draft sub-clause is new and makes a provision which is obviously desirable. Existing section 5, sub-section (7A) main para, latter part, may be compared.
Sub-clause (8)- This is intended to make it clear that where the Inspecting Assistant Commissioner performs the functions of the Income-tax Officer, provisions requiring his sanction etc. cease to have any effect. The position regarding appeals has also been stated in clear terms. The existing provision in section 5(5), latter half, concluding portion, enacts that references to the Income-tax Officer and the Appellate Assistant Commissioner shall be deemed to be references to the Inspecting Assistant Commissioner and the Commissioner respectively. That has been preserved in draft sub-clause (5); but draft sub-clause (8) attempts merely an application of that principle for certain important matters.
Notes to clause 132
Sub-clause (1)- The words "also subordinate to him" have been added for the sake of precision. It has also been made clear that the transferring authority must record its reasons in writing.
Sub-clauses (2) and (3)- Sub-clause (2) is new and gives effect to the following observations of the Supreme Court in a centre ease1:-
1. Panna Lal Binj Raj v. Union of India, (1957) 31 ITR 565 (589, 590): AIR 1957 SC 397 (410) para 96.
"We may, however, before we leave this topic, observe that it would be prudent if the principles of natural justice are followed, where circumstances permit, before any order of transfer under section 5(7A) of the Act is made by the Commissioner of Income-tax or the Central Board of Revenue as the case may be, and notice is given to the party affected and he is afforded a reasonable opportunity of representing his views on the question and the reasons of the order are reduced, however briefly, in writing......".
The Supreme Court pointed out that section 64(3) requires an opportunity to be given to the assessee of representing his views when any question as to the place of assessment is to be determined.
Under draft sub-clause (3), the transferring authority is given the power, in special cases, to dispense with an opportunity to the assessee before the order is passed. But it has been provided that the assessee shall in such cases have a right to move for a retransfer within one month.
Explanation.-This embodies the existing Explanation, which was inserted to get the situation created by a decision of the Supreme Court1 whereby a whole-sale transfer of cases, without reference to the year of assessment, was held to be illegal. After the Explanation was inserted, the question of its validity came up before the Supreme Court in a later case2. The Supreme Court upheld the validity of the Explanation and explained its scope by pointing out that when a case of any particular assessee pending before one Income-tax Officer is transferred to another Income-tax Officer under section 5(7A), then-
1. Bidi Supply Co. v. Union of India, 1956 SCR 267: AIR 1956 SC 479 (484): (1956) 29 ITR 717.
2. Panna Lal Binj Raj v. Union of India, (1957) 31 ITR 565: AIR 1957 SC 937 (411).
(a) all proceedings pending against him in respect of the same year as also previous years are meant to be transferred simultaneously; and
(b) all proceedings which may be commenced after the date of transfer in respect of any year what ever are also included therein.
The result is that the transferee Income-tax Officer would be in a position to continue pending proceedings and also to institute fresh proceedings.
This aspect of the Explanation, namely, that it amounts to a transfer of proceedings for past assessment years also and that its inclusive part applies to proceedings for any assessment year whether part or future, has in the draft been brought out by suitable amendments (though the existing provision is clear enough on this point).
Incidentally, it will be noticed that the definition of "case" contained in the Explanation under discussion is confined to section 5(7A). Where the whole-sale transfer of cases, past and future, of an assessee is to be done under section 5, sub-section (2), latter part, or section 5, sub-section (5) latter part, that can be done, not by calling it a transfer of cases but by treating it as a transfer of jurisdiction in respect of "persons". It may be noted here that section 5, sub-section (5), latter part, has, in the draft, been amended so as to add a reference to specified person.
Notes to clause 133
No comments are needed.
Notes to clause 134
This clause is new. Some doubt has been felt as to the Income-tax authority which is entitled to prosecute or defend an appeal in the High Court etc. whenever the assessee's case is transferred from one authority to another. For example, when one Commissioner files an appeal, and the case of the assessee is transferred to the jurisdiction of another Commissioner, the question arises whether the transferee Commissioner can continue the appeal. Provision has, therefore been made to make it clear that the authority for the time being seized of the case would be the person competent to initiate or continue such proceedings.
For the sake of simplicity the cases of Commissioner and of the Income-tax Officer have been dealt with in separate sub-clauses.
The principle underlying the provision is not new. Nor is it confined to the particular provisions referred to in the draft clauses; it should be applicable for all provisions of the Act. But, since difficulties have been felt only in regard to certain provisions, the draft clause is confined to these provisions. The provisions of existing section 5, sub-section (7C) cover cases where a proceeding is pending before an Income-tax authority who is transferred.
Notes to clause 135
This clause corresponds to section 64 of the existing Act. The question whether the section confers a right on the assessees has come up before the courts more than once and has now been settled once for all by the Supreme Court1. The discussion in the case just cited makes it clear that it is too late in the day to say that there is no right to be assessed by the Income-tax Officer of a particular area. The earlier decision of the Supreme Court2, holding that the benefit conferred on the assessee by sub-sections (1) and (2) of the section 64 is to be regarded as a right, has been reinforced by the later decisions referred to above.
1. Panna Lal Binj Raj v. Union of India, AIR 1957 SC 397 (406), paras 20-22; (1957) 31 ITR 565.
2. Bidi Supply C. v. Union of India, 1956 SCR 267 (276): AIR 1956 SC 479 (488); (1956) 29 ITR 717.
The marginal note of the section "place of assessment" is, however, slightly misleading, because the section does not deal with the place where the assessment is actually made but with the Income-tax Officer having jurisdiction. The marginal note, has, therefore, been altered accordingly.
Sub-clause (1)- does not need any comments.
Sub-clause (2)- does not need any comments.
Sub-clause (3)- In the proviso, the words "representing his views" have been replaced by "being heard in respect of the question" which are more appropriate; it has been also made clear that the opportunity to be afforded to the assessee should be "reasonable".
The second and third provisos to existing section 64(3) have, for simplicity, been dealt with in separate sub-clauses.
Sub-clause (4)- Slight verbal changes have been made to secure simplicity and clarity. Sub-clause (5)-does not need any comments.
Sub-clause (6)- embodies existing section 64(4), which is obviously intended to make it clear that even where the assessee resides or carries on business within the jurisdiction of another Income-tax Officer, an Income-tax Officer may exercise powers in respect of income of such assessee accruing or arising within his jurisdiction.
Sub-clause (7)- The only change made is the omission of words that were intended to emphasise the retrospective operation of the provision.