The Orissa High Court (HC) presided by Chief Justice Dr. S. Muralidhar and the Justice M.S. Raman quashed the reassessment proceedings of a non-resident company Vedanta Resources Limited (VRL) and notices issued due to lack of jurisdiction.
VRL is a non-resident company incorporated under the laws of the United Kingdom (UK) and is also a tax resident of the UK. It should be noted that VRL had listed its London location when applying for a Permanent Account Number (PAN), and the jurisdiction given to it by the Income Tax Department was the Deputy Commissioner of Income Tax (DCIT), International Tax.
The petitioner’s counsel claimed that the address listed in the portal for the “Circle International Taxation (1)(1)(1)” is New Delhi. The email address that is displayed belongs to the specified DCIT. It is argued that in light of this, ACIT International Taxation, Bhubaneswar could not serve the Petitioner with the contested notifications.
Added that no order issued under Section 127 of the Income Tax Act changing the jurisdiction over the petitioner from Delhi to Bhubaneswar had been communicated to or made known to the petitioner.
The bench observed the submission of the petitioner side that that Opposite Party No.1 merely relied upon Form 15CA filed by Vedanta Limited, an Indian company having a unit in Tuticorin in Tamil Nadu, and the order passed under Section 201(1)/1A of the Income Tax Act in the case of Vedanta Limited and concluded that VRL has business income arising in India in respect of the management consultancy fees paid to it by Vedanta Limited.
The Department in its reply affidavit that “the place of activity/operation of the Petitioner is at Jharsuguda, Odisha”. In support of such submission, it is stated by the Department that VRL had filed an application for a lower deduction certificate under Section 197 of the Income Tax Act. Also, the lower deduction certificate was issued from Bhubaneswar.
In response to the contention made by the respondent, the petitioner submitted a rebuttal in which he claimed that VRL never had a place of business in Jharsuguda. It was made clear that the reduced deduction certificate had only been requested since payment was to be collected in Jharsuguda and that, in any case, the aforementioned certificate was not used.
Further asserted that the above mentioned certificate is related to a transaction of 2020, while the current reassessment proceedings relate to the AYs 2013–2014 to 2017–2018, it is further noted.
The bench observed that a perusal of Section 127 (2) of the Income Tax Act indicates that it envisages transfer of cases of an Assessee to an Assessing Officer (AO) not subordinate to the same Commissioner, who originally exercises jurisdiction over the Assessee.
But in this instance, the CIT (IT)-1 will be required to issue orders transferring jurisdiction of the VRL cases to O.P. No. 1 in Bhubaneswar. The latter belongs to his equivalent in Kolkata rather than the CIT (IT)-1. In this situation, Section 127(2)(a) of Income Tax Act prohibits any transfer of jurisdiction without giving the Assessee a reasonable opportunity to be heard.
The Court, therefore, concluded that the impugned notices were issued by O.P. No.1 without jurisdiction and, therefore, are unsustainable in law. Also, the impugned notices and all other proceedings were quashed. However, the authorities can proceed further in accordance with law.
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