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Income-tax References Nos. 757 and 758 of 1972, decided on 28^th March, 1985.

(a) Income-tax Act (XI of 1922)--

---S. 5(5)--Notification No. S.R.O. 1021(x)/65, dated 1-12-1965--Notification No. S.R.O. 1690(x) /67 dated 29-9-1967--Jurisdiction--Income-tax Officer had jurisdiction at the time of filing return by the assessee but did not have jurisdiction at the time h-e passed assessment order--Effect--Held, Income-tax Officer could not pass order unless he was specialty authorised to assess the return filed by the assessee--Assessment order passed by the Income-tax Officer was, therefore, without' jurisdiction.

(b) Income-tax Act (XI of 1922)--

---Ss. 64 & 5(5)--Notification No. S.R.0. 1021(x)/65, dated 1-11-1965-.-Notification No. S.R.O. 1690(x)/67, dated 29-9-1967- Jurisdiction, objection to--Question of law-- Question that Income-tax Officer had jurisdiction at the time of filing return by assessee but (lid not have jurisdiction at the time he passed assessment order raised for the first time before Appellate Tribunal on the ground that appellant did not know about the notification withdrawing jurisdiction of Income-tax Officer before--Question, held, involved a question of law and should not have been brushed aside by Income-tax Appellate 'Tribunal on the ground that it had not been raised earlier.

Iqbal Naeem Pasha for Appellant.

Waheed Farooqi for Respondents.

Date of hearing: 25^th March, 1985.

.-- Both the cases have been filed under Section 66 (1) of the Income-tax Act, 1922 by' M/s. Vishandas Sukhdev, Hyderabad, a partnership firm carrying on business of ginning, sale of ginned cotton and cotton-seeds and also doing commission business. They filed their Income-tax Returns fox the assessment years 1965-66 and 1966-67 with the Income-tax Officer, Central Reporting Agency, Karachi, then exercising jurisdiction under the Commissioner of Income-tax-, Central, Karachi. Their Income-tax Returns were assessed by the said Income-tax Officer, Central, Reporting Agency, Karachi. Being aggrieved by the assessment orders, they filed appeals. A.C. No.233/C/Hyd. and 234/C/Hyd. before the Income-tax Appellate Tribunal, Karachi. Their appeals were dismissed by the learned Income-tax Appellate Tribunal (5th Bench), Karachi by order dated 20-4-1972. One of the grounds agitated at the time of hearing of the appeals was that the Income-tax Officer, Central Reporting Agency, Karachi lacked jurisdiction in passing the assessment orders. The learned Appellate Tribunal did not entertain the objection on the ground that it was belated one and could not be entertained. The applicants have, therefore, filed the applications under Section 66 (1) of the Income-tax Act, 1922 for opinion of the High Court on the following five questions:-

(i) Whether on the facts and in the circumstances of the case it was open to the Tribunal to hold that the introduction of additional ground questioning the jurisdiction cannot be allowed to be taken up as a ground of Appeal before the Tribunal.

(ii) Whether on the facts and in the circumstances of the case there was any material before the learned Income-tax Appellate Tribunal (Fifth Bench), Karachi, to place reliance on their earlier decisions and refuse to allow additional ground of appeal relating to the matter of jurisdiction.

(iii) Whether on the facts and in the circumstances of the case the assessment was validly made by the learned Income-tax Officer, Central Reporting Agency, under the jurisdiction of the Commissioner of Income-tax Central, Karachi.

(iv) Whether on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal (Fifth Bench) Karachi, was justified in holding that the ex parte assessment made under Section 23 (4) of the Income-tax Act was validly made.

(v) Whether on the facts and in the, circumstances of the case, the learned Income-tax Appellate Tribunal was justified in not setting aside the order of the Income-tax Officer for the purpose of ascertainment of facts in regard to the matter of jurisdiction and ex part assessment made under Section 23 (4) of the Income-tax Act."

2. Since same questions have been referred to in both the applications having arisen from identical facts, they have been heard together. The learned counsel for the applicants has confined his submissions to the questions at serial Nos.1 and 3 only and has not pressed the other questions formulated in the applications. He has urged that the principal office of the applicants /assessees is situated at Hyderabad and they filed returns of their income for the years 1965-66 and 1966-67 with the Income-tax Officer, Central Reporting Agency, Karachi when he was seized of the jurisdiction over the area, but he had ceased to exercise the jurisdiction over that area at the time he passed the assessment orders on 29-9-1968. The learned counsel has made reference to the Notifications issued regarding the jurisdiction of the Commissioner of Income-tax. Referring to the Notification No. SRO 1021 (K)/65 dated 1-12-1965, he has pointed out that the Income-tax Officer, Central Reporting Agency was exercising jurisdiction under the Commissioner of Income-tax, Central, Karachi, who also exercised jurisdiction over the Civil Divisions of Hyderabad, Khairpur, Quetta and Kalat. He has next made reference to Notification No. SRO 1688(K) 67 dated 29-9-1967, whereby the jurisdiction conferred under SRO 1021 (K)/65 dated 1-12-1965, already referred to above, was revised and the Civil Divisions of Hyderabad, Khairpur Quetta, Kalat were taken out from the jurisdiction of Commissioner of Income-tax, Central, Karachi and they were assigned to the Commissioner of Income-tax, Karachi (West), Karachi, vide Notification No. SRO 1690 (K)/67 dated 29-9-1967. According to him, by virtue of the Notification referred to last viz. SRO 1690 (K)/67 dated 29-9-1967, the Income-tax Officer, Central Reporting Agency, ceased to have jurisdiction over the Civil Division of Hyderabad, with effect from 1st October, 1967 and the assessment orders passed by him on 29-9-1968 were without jurisdiction. The learned counsel has further urged that the question of jurisdiction involved the question of law and it should have, been entertained by the learned Income-tax Appellate Tribunal as the assessment orders passed without jurisdiction were nullity in the eyes of law.

3. On the other hand, the learned counsel for the respondent has contended that the change of the jurisdiction of the Commissioners of Income-tax notified in the aforesaid Notifications did not divest the Income-tax O9ficer, Central Reporting Agency Karachi of his jurisdiction of assessing the Income-tax returns filed by the applicants. He has further contended that the applicants did not object to the jurisdiction of the assessing Income-tax Officer nor did they agitate the question of jurisdiction in their memo of appeals and they could not advance that ground -at the subsequent stage of hearing of the appeals by the learned Income-tax Appellate Tribunal. He has made reference to Sections 5 and 64 of the Income-tax Act, 1922. .

4. It has been conceded that the Income-tax Officer, Central Reporting Agency, Karachi did have jurisdiction at the time the returns for both the assessment years were filed by the applicants. What has been agitated is that he did not have jurisdiction at the time he passed the assessment orders. In pursuance of the Notification No. SRO 1021 (K)/65 dated 1-12-1965, the Income-tax Officer, Central Reporting Agency, Karachi was exercising jurisdiction under the Commissioner of Income-tax, Central, Karachi. The Civil Divisions of Hyderabad, Khairpur, Quetta and Kalat were placed under the jurisdiction of the Commissioner of Income-tax, Central, Karachi under the same notification; but the Civil Divisions of Hyderabad, Khairpur, Quetta and Kalat were subsequently taken out from the jurisdiction of the Commissioner of Income-tax, Central, Karachi and placed under the jurisdiction of Commissioner of Income-tax Karachi (West), Karachi by Notification No. SRO 1690 (K)/67 dated 29-9-1967. The question, therefore, arises whether the Income-tax Officer, Central Reporting Agency who continued exercising his jurisdiction under the Commissioner of Income-tax, Central, Karachi still retained the jurisdiction of assessing the cases pertaining to the Civil Divisions of Hyderabad. It is, accordingly, necessary to make reference to the relevant provisions of the Income-tax Act, 1922. Section 5 of the Income-tax specifies the classes of Income-tax Authorities and also provides for the jurisdiction to be exercised by them. It is provided under subsection (5) of section 5 of Income-tax Act that the Income-tax Officers shall perform their functions in respect of all or any proceeding relating to such cases, or classes of cases or of such persons or classes of persons or of such incomes or classes of income or in respect of such areas as Commissioner of Income-tax may direct. It is follows that the Income-tax Officers are conferred jurisdiction by the respective Commissioners of Income-tax. Since the Income-tax Officer, Central Reporting Agency, Karachi exercised his jurisdiction under, the Commissioner of Income-tax, Central, Karachi, he ceased to have jurisdiction over Civil Division of Hyderabad as soon as that Division, was taken out from the jurisdiction of the Commissioner of Income-tax, Central, Karachi, by Notification dated 29-9-1967 and he did not' have jurisdiction to have passed the assessment order on 29-9-1968 unless it were shown that he was specially authorised to assess the returns filed by the applicants.

5. Objection to the jurisdiction of the assessing Income-tax Officer, Central Reporting Agency, Karachi was agitated before the learned Appellate Tribunal. The objection was turned down by the learned Appellate Tribunal on the ground that it had not been agitated earlier. The learned counsel appearing for the respondent has made reference to second proviso to subsection (3) of section 64 of Income-tax Act, 1922, which lays down that the place of assessment shall not be called in question by an assessee if he had disclosed in his return the principal place where he had carried on his business, profession or, vocation or .if he has not filed a return, he shall not call in question the place of assessment after the expiry of the time allowed by the notice under subsection (2) of section '2 or under section 34 of the Act for making of a return. But the place of assessment is riot disputed in the cases before us. What has been agitated by the applicants herein is the jurisdiction of the assessing Income-tax Officer, Central Reporting Agency Karachi. Since the Income-tax Officer, Central Reporting Agency, Karachi did have jurisdiction at the time' the returns were filed with him; there was no question for throwing; challenge to his jurisdiction. His jurisdiction is deemed to have been taken away be the notification, dated 29-9-1967, referred to above of course, the assessment proceeding were conducted thereafter and no jurisdictional objection seems to have a been raised at that stage but if has been stated by the applicant that they sere not aware oft the notification fated 29-9-1967 at that time. According to the', applicants, they became conscious of the change of the jurisdiction after filing of the appeals. The objection to the jurisdiction was advanced before the learned Income-tax Appellate Tribunal and it should not have been brushed aside on the ground that it had not been raised earlier, particularly in the circumstances that it involved the question of law.

6. For the reasons recorded above, we hold that on the facts and in the circumstances of the case the learned Income-tax Appellate Tribunal had to consider and decide the question of jurisdiction agitated before it; and we further hold that the assessment order passed by the Income-tax Officer, Central Reporting Agency, Karachi were without jurisdiction. We do not express our opinion on the other questions as they were not pressed before us. Both the applications are disposed of accordingly.

M.B.A./ K-27/ K Order accordingly.

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