Wp/3349/2022 Of Sarda Papaer Ltd. ( v. Principal Commissioner Of Income Tax-5, Mumbai And 2 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION PURTIDigitallysigned byPURTIPRASADORDINARY ORIGINAL CIVIL JURISDICTIONPRASADPARABPARABDate:2024.04.0210:56:16+0530WRIT PETITION NO. 3349 OF 2022 Sarda Paper Ltd. V/s.Principal Commissioner of Income Tax -5,Mumbai and Ors. ….Petitioner …Respondents ---- Mr. Vasudev Ginde i/b Mr. Kumar Kale for Petitioner.Mr. Akhileshwar Sharm for Respondents-Revenue.Mr. Devinder Kumar Gupta, PCIT – 5, Mumbai present. ---- CORAM : K.R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED : 27[th] MARCH 2024 P.C. : 1.Petitioner is impugning an order dated 25[th] March 2022 passedby the Principal Commissioner of Income Tax -5 (PCIT– 5), i.e., RespondentNo.1 under Section 264 of the Income Tax Act, 1961 (the Act). 2.Petitioner had filed its return of income for Assessment Year2016-17 on 17[th] October 2016 declaring total income at Rs.2,33,44,585/-.Thereafter assessee filed its revised return of income on 31[st] August 2017declaring total income at Rs.2,33,44,585/-. Subsequently, the return ofincome was processed under Section 143(1) of the Act on 29[th] March 2019assessing total income of Rs.4,53,21,056/-. The difference in returnedincome and assessed income was mainly due to denial of set off ofunabsorbed business loss of Rs.2,19,76,471/- against long term capital gaindeclared by assessee in the return of income. 3. Assessee thereafter filed Rectification Application underSection 154 of the Act against the intimation under Section 143(1) of theAct requesting to allow set off of unabsorbed business loss against long termcapital gain. It is stated in the impugned order that the CentralizedProcessing Center (CPC), vide an order dated 27[th] July 2020 did not makeany change in the income computed under Section 143(1) of the Act. 4.Petitioner thereafter filed an application under Section 264 ofthe Act on 26[th] March 2021. This application came to be rejected by PCIT –5, Mumbai on the ground that Deputy Commissioner of Income Tax (DCIT),CPC is not reporting to the PCIT – 1, Mumbai. According to PCIT – 5, PCIT– 1, Mumbai can neither exercise any kind of monitoring of the work ofDCIT, CPC nor can issue any directions to him. Therefore, he cannot betreated as subordinate to PCIT – 1, Mumbai and rejected the application.PCIT – 5 has not mentioned in the order which will be the PCIT in that casewho can hear petitioner’s application under Section 264 of the Act. Leastwe would have expected from the PCIT is to forward the application underadvise to assessee to the concerned PCIT who would be able to hear thematter. Atleast make a reference in the order than simply reject the same. 5.Mr. Ginde submitted, and rightly so, that under Section 143(1)(A) of the Act, the Board has formulated a scheme for centralised processingof returns with a view to expeditiously determining the tax payable by, or a refund due to, assessee as required under Sub Section (1) of the Act. TheCentral Board of Direct Taxes (CBDT) had also notified a scheme on 4[th]January 2012 in exercise of the powers conferred by Sub Section 1(A) ofSection 143 of the Act. 5.Mr. Ginde submitted, and rightly so, that under Section 143(1)(A) of the Act, the Board has formulated a scheme for centralised processingof returns with a view to expeditiously determining the tax payable by, or a refund due to, assessee as required under Sub Section (1) of the Act. TheCentral Board of Direct Taxes (CBDT) had also notified a scheme on 4[th]January 2012 in exercise of the powers conferred by Sub Section 1(A) ofSection 143 of the Act. 6.We agree with Mr. Ginde that the CPC only acts as a facilitatorto the Jurisdictional Assessing Officer (JAO) who holds jurisdiction overassessee under Section 120 of the Act. Merely because the return isprocessed by CPC, the regular jurisdiction of the JAO is not curtailed and hecontinues to hold the same jurisdiction. This is evident from the fact that ademand resulting from the processing of a return under Section 143(1) ofthe Act by CPC is also enforced by the JAO. It is JAO who issues a noticeunder Section 143 (2) of the Act if the return is to be selected for scrutinyand frames the assessment. We would also add that even under the facelessregime, once the assessment has been framed by the Faceless AssessingOfficer (FAO), all records are transferred to the JAO for recovery of demandand other incidental matters. In fact in many matters before us PCIT haveexercised jurisdiction in identical situation. 7.Therefore, for Respondent No.1 to say that he will have nojurisdiction to entertain petitioner’s application under Section 264 of the Actbecause the DCIT, CPC is not reporting to him is not correct. 8.An affidavit has been filed by one Mr. Devinder Kumar Gupta who is the present PCIT – 5 affirmed on 22[nd] March 2024 justifying thestand taken by PCIT - 1 Mr. Naresh Kumar Balodia in the impugned order.Our repeated queries to Mr. Sharma, then which will be the PCIT who willhave jurisdiction according to Mr. Gupta was met with total silence. Ofcourse, Mr. Sharma informed the court that Mr. Gupta has sought opinionon 22[nd] March 2024 of the CBDT to advise him as to which PCIT will havejurisdiction. In fact, it is rather strange that only when a counter affidavit isdirected to file when the concerned PCIT thinks it is necessary to seek theopinion of CBDT when the petition itself has been served on or about 7[th]July 2022. It reflects the sorry state of affairs and how much the officers areserious about attending to the issues pertaining to assessees. We also hopeCBDT would sensitize its officers and educate them as to how they shoulddeal with assessees. Moreover, the CBDT has issued directions on 18[th] September2020 (F No.187/3/2020-ITA-1) in which it is noted that the power underSection 263 and 264 of the Act will be exercised by the JurisdictionalPrincipal Commissioners of Income Tax concerned. Therefore, certainly ifthe powers can be exercised by the Jurisdictional Principal Commissionersof Income Tax and the faceless regime, certainly it only confirms our viewexpressed above that CPC only acts as a facilitator to the JAO and merelybecause the return is processed by CPC the regular jurisdiction of the JAO isnot curtailed and he continues to hold the jurisdiction. 9.At this stage, Mr. Sharma on instructions from Mr. DevinderKumar Gupta, PCIT – 5, who was present in the court, states that it wasuncertain whether he could exercise jurisdiction but if the court directs heshall certainly exercise jurisdiction. His reluctance should not be construedas a reluctance to exercise jurisdiction. 10.Since we have already expressed our view that the JAO willhave jurisdiction, we hereby quash and set aside the impugned order dated25[th] March 2022. Respondent No.1 – PCIT – 5 is directed to disposepetitioner’s application under Section 264 of the Act in accordance withlaw. Before passing order on merits petitioner shall be given personalhearing, notice whereof shall be communicated atleast five working days inadvance. The issue of jurisdiction shall not be raised by Respondent No.1. 10.Since we have already expressed our view that the JAO willhave jurisdiction, we hereby quash and set aside the impugned order dated25[th] March 2022. Respondent No.1 – PCIT – 5 is directed to disposepetitioner’s application under Section 264 of the Act in accordance withlaw. Before passing order on merits petitioner shall be given personalhearing, notice whereof shall be communicated atleast five working days inadvance. The issue of jurisdiction shall not be raised by Respondent No.1. 11.Mr. Sharma on instructions states that in view of theexplanation given in ground (a) for delay if any, the issue of delay also willnot be raised and the matter will be decided on merits. Section 264application shall be disposed on merits by 31[st] May 2024. 12.Petition disposed. (DR. NEELA GOKHALE, J.) (K.R. SHRIRAM, J.)