Pr. Commissioner Of Income Tax 4 vs U.B. Cotton Pvt. Ltd

J.B. Pardiwala, J

This Tax Appeal under Section 260-A of the Income Tax Act, 1961 [for short, "the Act, 1961"] challenges the order dated 30th November 2016 passed by the Income Tax Appellate Tribunal, "F" Bench, Mumbai in the I.T.A. No. 6642/Mum/2013 for the assessment year 2007-08.

The Revenue has proposed the following substantial questions of law for the consideration of this Court:

"[A] Whether the Tribunal is right in law and on facts in deleting the additions of Rs. 5,05,82,170/- on account of bogus expenditure of purchases, when the assessee failed to produce the cogent evidences relating to purchase of cotton and that the decision of the Tribunal is perverse as relevant was not considered by it.

[B] Whether the Tribunal has erred in law by not setting aside the order of the CIT(A) as he relied on fresh evidence in violation of Rule-46A of the I.T. Rule.

[C] Whether the Tribunal is right in law and on facts in deleting the additions of Rs. 1,34,78,753/- u/s. 40A(2)(b) to the Directors of the company alternatively when the provisions of the section u/s. 36(1)(ii) of the Act also prohibits such payments?

[D] Whether the Tribunal is right in law and on facts in deleting the disallowance of Rs. 37,86,489/- on account of ginning charges, when the assessee failed to produce the cogent evidences relating to purchase of bales cotton?

[E] Whether the Tribunal is right in law and on facts in deleting the disallowance of Rs. 5 Lakh on account of professional fee paid to family members of the Directors?

[F] Whether the Tribunal is right in law and on facts in deleting the disallowance of Rs. 78,81,521/- on account of clearing and forwarding expenses, when the assessee failed to produce the cogent evidences relating to purchase of bales cotton?

At the very outset, Mr. Parth Bhatt, the learned counsel appearing for the respondent - assessee raised a preliminary objection with regard to the maintainability of the present Tax Appeal before this High Court. Mr. Bhatt, the learned counsel pointed out that the impugned order has been passed by the Mumbai Bench of the Tribunal. Thus, according to Mr. Bhatt, the order passed by the Appellate Tribunal, Mumbai Bench can be challenged before the High Court of Bombay and not before this Court. Mr. Bhatt, in support of his preliminary objection, has placed reliance on a recent decision of the Bombay High Court in the case of Pr. Commissioner of Income Tax - 3, Pune v. Sungard Solutions (I) Pvt. Ltd. [Income Tax Appeal No. 1142 of 2016 decided 26th February 2019], wherein, in paras 11, 12, 13 and 14, the following has been observed:

"11. The bare reading of the above provisions will establish that Chapter XIII of the Act would be applicable only to the Income Tax Authorities under the Act as listed out in Section 116 thereof Thus, it follows that the provisions of Section 120, 124 and 127 of the Act will also apply only to the Authorities listed in Section 119 of the Act. The Tribunal and the High Court are not listed in Section 116 of the Act as Income Tax Authorities under the Act. Therefore, Section 124 and 127 of the Act being relied upon by the Revenue can have no bearing while dealing with the issue of which High Court will have jurisdiction over the orders of the Tribunal.

The jurisdiction of the Court which will hear appeals from the orders passed by the Tribunal, would be governed by the provisions of Chapter XX of the Act which is a specific provision dealing with appeals, amongst others to the High Court. In particular Section 260A and 269 of the Act, when read together would mean that the High Court referred to in Section 260A of the Act will be the High Court as provided/defined in Section 269 of the Act i.e. in relation to any State, the High Court of that State. Therefore, the seat of the Tribunal (in which State) would decide the jurisdiction of the Court to which the appeal would lie under the Act. Thus, in the present facts, the High Court which would have jurisdiction over the place where the Tribunal (when not exercising jurisdiction over more than one State) is situated and passed the order. Therefore, in the facts of this case, on the bare examination of the provisions, it would be clear that in case of orders passed by the Banglore Bench of the Tribunal, appeal from such orders would lie only to the Karnataka High Court at Bangalore.

The submission on behalf of the Revenue that the seat of the Assessing Officer alone would decide the jurisdiction of the High Court on the basis of Section 127 of the Act, is misplaced. This for the reasons that the bare reading of the provisions show that the Court to which appeal would lie is not governed by the seat of the Assessing Officer. It for this reason that, the Income Tax Appellate Tribunal (ITAT) Rules specifically provides in Rule 4(i) thereof, the Bench which shall hear the appeals, filed before it in terms of Section 253 of the Act, shall be decided by the President of the Tribunal. Therefore, which bench/seat of the Tribunal will hear the appeals is not decided by the seat of the Assessing Officer as provided in Section 127 of the Act, as it does not apply in case of the Tribunal as it is not an Income Tax Authority under the Act. It is the President of the Tribunal in exercise of his powers under Rule 4(1) of the ITAT Rules, issued a standing order No. 63/97 dated 2.72013 as amended, inter alia, providing the jurisdiction of the bench dependent upon the areas from where the impugned orders have originated. In the above standing order, Note 4 specifically states that the jurisdiction of a bench will not be determined by the place of business or residence of the assessee but by the location of the office of the Assessing Officer. If the seat of the Assessing Officer were in terms of Section 127 of the Act, to govern/control the jurisdiction of the Authorities other than those listed in Section 116 of the Act, then a specific provision in terms of Note 4 in the standing order issued by the President of the Tribunal was not called for/required. Thus in terms, the above standing order where an assessment proceedings have been transferred from one place to another under Section 127 of the Act, then the bench of the Tribunal before which appeals would lie, may shift with the seat of the Assessing Officer before the filing/hearing of the appeal Moreover, it is important to note that, the Bombay High Court Rules while providing for appeals from the Tribunal does not specifically exclude its jurisdiction in case of orders passed by the Tribunal at Mumbai or provide for the court entertaining appeals dependent upon the seat of the Assessing Officer at the time of filing the appeal. In fact, the inter se, distribution of Appeals between the different benches of this court is on the basis from where an appeal originated. Therefore, the Appellate Court from which an appeal would lie from the order of the Tribunal would necessarily be the High Court exercising jurisdiction over the places where the Tribunal which passed the order, is situated.

The above plain reading of the provisions is also supported by jurisdictional/constitutional principles. The Tribunal which passes orders is bound by the orders passed by the jurisdictional High Court where the Tribunal is situated. In the above view, in the present facts, the Tribunal which passed the impugned order is situated in Bangalore. Therefore, the Tribunal would be bound by the orders passed by the Karnataka High Court at Bangalore. However, it is likely that there could be divergence of opinion between two High Courts on a particular issue, one view by the Court where the Tribunal is situated i.e. Bangalore and the other view by the Court where the Assessing Officer is now situated i.e. Pune, leading to an incongruous situation. On what paramaters would the High Court to which an appeal is filed on the basis of where the seat of the transferee Assessing Officer is situated by virtue of Section 127 of the Act would apply to the order of the Tribunal passed at seat of the transferor Assessing Officer in this case by the Bangalore Bench of the Tribunal. Thus, the Parliament keeping in view the fact that, all Authorities/Tribunals functioning within a particular State are bound by the view of the High Court of that State. This has been so provided in terms of Section 260A read with 269 of the Act. It is, therefore, for the above reason that the orders passed by the Tribunal are subject to an appeal before the High Court under which it exercises jurisdiction. If the submission of the Revenue is to be accepted, then we would have a peculiar situation where the powers under Articles 226 and 227 of the Constitution, would be exercised by the Court which exercises jurisdiction over the seat of the Tribunal which is passing the order while for the purposes of appeal under the Act, the Court which would entertain the appeal would be a Court different from the Court which would exercise jurisdiction under Articles 226 and 227 of the Constitution. It is to be noted that, for relief under Article 226 of the Constitution, no part of the case of action would have arisen in Mumbai giving rise to the jurisdiction of this Court. Thus, harmonious reading of the various provisions of law would require that the appeal from the order of the Tribunal is to be filed to the Court which exercises jurisdiction over the seat of the Tribunal."

Thus, in view of the dictum as laid by the High Court of Bombay in the aforesaid decision, we are of the view that this appeal is not maintainable before this Court. The Revenue should challenge the order passed by the Income Tax Appellate Tribunal, Mumbai Bench before the High Court of Bombay.

We dispose of this Tax Appeal, without going into the merits of the questions of law, as proposed by the Revenue, as not maintainable before this Court, with liberty to the Revenue to approach the High Court of Bombay.