Introduction
In the case of Nimir Kishore Mehta v. Assistant Commissioner of Income-tax[i], the Bombay High Court (‘HC’) addressed the issue of jurisdictional competence. The residency status of an individual taxpayer became the crux of contention, highlighting the challenges in taxation matters. This decision is significant for both taxpayers and the revenue department as it exemplifies the judiciary’s commitment to upholding jurisdictional integrity in tax proceedings, providing clarity and reassurance to those navigating complex tax regimes.
Brief Facts
The Petitioner was a non-resident Indian (‘NRI’) since the Assessment Year (‘AY’) 2017-2018. For the AY 2016-17, he filed a return of income (‘ROI’) declaring Rs. 38,98,110/-.
The assessing officer (‘AO’) issued a notice under s. 148A(b) of the Income-tax Act, 1961 (‘IT Act’), alleging that Petitioner’s income had escaped assessment. The notice was based on the information that the Petitioner had engaged in financial transactions with a company known for providing bogus sale/purchase accommodation entries and unsecured loans in exchange for cash.
The Petitioner responded that he had only received a loan, which was repaid in the following financial year, and he informed the AO of his non-resident status, thereby disputing the AO's jurisdiction and the validity of the notice.
Despite the Petitioner’s objection and his non-resident status, the assessment order was passed under s. 148A(d) of the IT Act, thereby compelling the Petitioner to challenge the jurisdictional validity of the order.
Decision
The HC quashed the notice and the assessment order issued by the AO, ruling that these actions were without any legal cost to the Petitioner.
It observed that the Petitioner’s NRI status was well established through his return filings, which confirmed that jurisdiction over the Petitioner rightly belonged to an IT officer or commissioner in charge of international taxation. The AO in this case exceeded his jurisdictional authority by relying on transferred information that did not legally empower him to issue the notice against the Petitioner, given his evident NRI status from previous tax assessments and filings.
The HC disregarded the AO’s justification for his actions as unsatisfactory, highlighting that the stand taken by the AO was dishonest. This reinforced the decision to set aside the erroneous notices and orders.
Our Analysis
The HC's decision to uphold the Petitioner’s jurisdictional objection reaffirms the principle that jurisdiction cannot be assumed arbitrarily but must be strictly aligned with statutory provisions and factual realities. This case highlights the necessity for meticulous scrutiny of jurisdictional assertions by AOs to prevent unwarranted harassment of taxpayers and ensure procedural fairness. The observations made by the HC serve to establish clear jurisdictional and statutory boundaries that revenue authorities must not overstep under any circumstances.
End Note
[i] [2024] 161 taxmann.com 553 (Bombay) [28-03-2024]
Authored by Jitin Bharadwaj, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.