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www.taxpublishers.in Income Tax Act, 1961, Section 264 Revision under section 264--PCIT denied exercising of jurisdiction due to passing order by Dy. CIT, CPC--Validity of *Conclusion:* Where CPC only acts as a facilitator to JAO and merely because assessee's return was processed by CPC, the regular jurisdiction of JAO, would not be abridged and he would continue to hold the jurisdiction, it was not justified on the part of PCIT to reject assessee's application under section 264 on the ground that Dy. CIT, CPC, could not be treated as subordinate to him. Assessee's return of income was processed under section 143(1), whereby CPC denied set-off of unabsorbed business loss against LTCG declared by assessee. Assessee filed a rectification application under section 154, which was dismissed on the ground that CPC did not make any change in income computed under section 143(1). Subsequently, assessee filed an application under section 264, which came to be rejected by PCIT on the ground that Deputy Commissioner (Dy. CIT), CPC was not reporting to him. According to PCIT, he could neither exercise any kind of monitoring of work of Dy. CIT, CPC nor could issue any directions to him, therefore, Dy. CIT, CPC, could not be treated as subordinate to him. Assessee submitted that CPC only acts as a facilitator to jurisdictional assessing officer (JAO), who holds jurisdiction over assessee under section 120 and merely because return was processed by CPC, the regular jurisdiction of JAO, would not be abridged. *Held:* CPC only acts as a facilitator to JAO, who holds jurisdiction over assessee under section 120, which was evident from the fact that a demand resulting from processing of return under section 143(1) by CPC is also enforced by JAO. Even under faceless regime, once assessment has been framed by Faceless assessing officer (FAO), all the records are transferred to JAO for recovery of demand and other incidental matters. Therefore, for PCIT to say that he was not having jurisdiction to entertain assessee's application because Dy. CIT, CPC, was not reporting to him, was not correct. Moreover, CBDT issued directions on 18-9-2020 (F No. 187/3/2020-ITA-1), as per which, powers under sections 263 and 264, will be exercised by Jurisdictional Principal Commissioners concerned. Thus, certainly if powers could be exercised by Jurisdictional Principal Commissioners under faceless regime, then it was confirmed that CPC would only act as a facilitator to JAO and therefore, merely because assessees' return was processed by CPC, the regular jurisdiction of JAO would not be curtailed and he would continue to hold the jurisdiction. Hence, impugned order was quashed and set aside and PCIT was directed to dispose of assessee's application under section 264 in accordance with law. *Decision:* In assessee's favour IN THE BOMBAY HIGH COURT K.R. SHRIRAM & NEELA GOKHALE, JJ. Sarda Paper Ltd. v. Pr. CIT Writ Petition No. 3349 of 2022 27 March, 2024 Petitioner by: Vasudev Ginde & Kumar Kale. Respondents-Revenue by: Akhileshwar Sharm, & Devinder Kumar Gupta, Pr. CIT-5, Mumbai present. *P.C.* 1. Petitioner is impugning an Order dated 25-3-2022 passed by the Principal Commissioner-5 (Pr. CIT 5), i.e., Respondent No. 1 under section 264 of the Income Tax Act, 1961 (the IT Act). 2. Petitioner had filed its return of income for assessment year 2016-17 on 17-10-2016 declaring total income at Rs. 2,33,44,585. Thereafter assessee filed its revised return of income on 31-8-2017 declaring total income at Rs. 2,33,44,585. Subsequently, the return of income was processed under section 143(1) of the Act on 29-3-2019 assessing total income of Rs. 4,53,21,056. The difference in returned income and assessed income was mainly due to denial of set off of unabsorbed business loss of Rs. 2,19,76,471 against long-term capital gain declared by assessee in the return of income. 3. Assessee thereafter filed Rectification Application under section 154 of the Act against the intimation under section 143(1) of the Act requesting to allow set off of unabsorbed business loss against long-term capital gain. It is stated in the impugned order that the Centralized Processing Center (CPC), vide an Order dated 27-7-2020 did not make any change in the income computed under section 143(1) of the Act. 4. Petitioner thereafter filed an application under section 264 of the Act on 26-3-2021. This application came to be rejected by Principal Commissioner-5, Mumbai on the ground that Deputy Commissioner (Dy. CIT), Centralized Processing Center is not reporting to the Principal Commissioner-1, Mumbai. According to Principal Commissioner-5, Principal Commissioner-1, Mumbai can neither exercise any kind of monitoring of the work of Deputy Commissioner, Centralized Processing Center nor can issue any directions to him. Therefore, he cannot be treated as subordinate to Principal Commissioner-1, Mumbai and rejected the application. Principal Commissioner-5 has not mentioned in the order which will be the Principal Commissioner in that case who can hear petitioner's application under section 264 of the Act. Least we would have expected from the Principal Commissioner is to forward the application under advise to assessee to the concerned Principal Commissioner who would be able to hear the matter. At least 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 processing of 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. The Central Board of Direct Taxes (CBDT) had also notified a scheme on 4-1-2012 in exercise of the powers conferred by sub-section 1(A) of section 143 of the Act. 6. We agree with Mr. Ginde that the Centralized Processing Center only acts as a facilitator to the jurisdictional assessing officer (JAO) who holds jurisdiction over assessee under section 120 of the Act. Merely because the return is processed by Centralized Processing Center, the regular jurisdiction of the jurisdictional assessing officer is not curtailed and he continues to hold the same jurisdiction. This is evident from the fact that a demand resulting from the processing of a return under section 143(1) of the Act by Centralized Processing Center is also enforced by the jurisdictional assessing officer. It is jurisdictional assessing officer who issues a notice under section 143 (2) of the Act if the return is to be selected for scrutiny and frames the assessment. We would also add that even under the faceless regime, once the assessment has been framed by the Faceless assessing officer (FAO), all records are transferred to the jurisdictional assessing officer for recovery of demand and other incidental matters. In fact in many matters before us Principal Commissioner have exercised jurisdiction in identical situation. 7. Therefore, for Respondent No. 1 to say that he will have no jurisdiction to entertain petitioner's application under section 264 of the Act because the Deputy Commissioner, Centralized Processing Center is not reporting to him is not correct. 8. An affidavit has been filed by one Mr. Devinder Kumar Gupta who is the present Principal Commissioner-5 affirmed on 22-3-2024 justifying the stand taken by Principal Commissioner-1 Mr. Naresh Kumar Balodia in the impugned order. Our repeated queries to Mr. Sharma, then which will be the Principal Commissioner who will have jurisdiction according to Mr. Gupta was met with total silence. Of course, Mr. Sharma informed the court that Mr. Gupta has sought opinion on 22-3-2024 of the CBDT to advise him as to which Principal Commissioner will have jurisdiction. In fact, it is rather strange that only when a counter affidavit is directed to file when the concerned Principal Commissioner thinks it is necessary to seek the opinion of CBDT when the petition itself has been served on or about 7-7-2022. It reflects the sorry state of affairs and how much the officers are serious about attending to the issues pertaining to assessees. We also hope CBDT would sensitize its officers and educate them as to how they should deal with assessees. Moreover, the CBDT has issued directions on 18-9-2020 (F No. 187/3/2020-ITA-1) in which it is noted that the power under section 263 and 264 of the Act will be exercised by the Jurisdictional Principal Commissioners concerned. Therefore, certainly if the powers can be exercised by the Jurisdictional Principal Commissioners and the faceless regime, certainly it only confirms our view expressed above that Centralized Processing Center only acts as a facilitator to the jurisdictional assessing officer and merely because the return is processed by Centralized Processing Center the regular jurisdiction of the jurisdictional assessing officer is not curtailed and he continues to hold the jurisdiction. 9. At this stage, Mr. Sharma on instructions from Mr. Devinder Kumar Gupta, Principal Commissioner-5, who was present in the court, states that it was uncertain whether he could exercise jurisdiction but if the court directs he shall certainly exercise jurisdiction. His reluctance should not be construed as a reluctance to exercise jurisdiction. 10. Since we have already expressed our view that the jurisdictional assessing officer will have jurisdiction, we hereby quash and set aside the impugned Order dated 25-3-2022. Respondent No. 1 Principal Commissioner-5 is directed to dispose petitioner's application under section 264 of the Act in accordance with law. Before passing order on merits petitioner shall be given personal hearing, notice whereof shall be communicated at least five working days in advance. The issue of jurisdiction shall not be raised by Respondent No. 1. 11. Mr. Sharma on instructions states that in view of the explanation given in ground (a) for delay if any, the issue of delay also will not be raised and the matter will be decided on merits. Section 264 application shall be disposed on merits by 31-5-2024. 12. Petition disposed.

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Income Tax Act, 1961, Section 264

Revision under section 264--PCIT denied exercising of jurisdiction due to passing order by Dy. CIT, CPC--Validity of

Conclusion: Where CPC only acts as a facilitator to JAO and merely because assessee's return was processed by CPC, the regular jurisdiction of JAO, would not be abridged and he would continue to hold the jurisdiction, it was not justified on the part of PCIT to reject assessee's application under section 264 on the ground that Dy. CIT, CPC, could not be treated as subordinate to him.

Assessee's return of income was processed under section 143(1), whereby CPC denied set-off of unabsorbed business loss against LTCG declared by assessee. Assessee filed a rectification application under section 154, which was dismissed on the ground that CPC did not make any change in income computed under section 143(1). Subsequently, assessee filed an application under section 264, which came to be rejected by PCIT on the ground that Deputy Commissioner (Dy. CIT), CPC was not reporting to him. According to PCIT, he could neither exercise any kind of monitoring of work of Dy. CIT, CPC nor could issue any directions to him, therefore, Dy. CIT, CPC, could not be treated as subordinate to him. Assessee submitted that CPC only acts as a facilitator to jurisdictional assessing officer (JAO), who holds jurisdiction over assessee under section 120 and merely because return was processed by CPC, the regular jurisdiction of JAO, would not be abridged. Held: CPC only acts as a facilitator to JAO, who holds jurisdiction over assessee under section 120, which was evident from the fact that a demand resulting from processing of return under section 143(1) by CPC is also enforced by JAO. Even under faceless regime, once assessment has been framed by Faceless assessing officer (FAO), all the records are transferred to JAO for recovery of demand and other incidental matters. Therefore, for PCIT to say that he was not having jurisdiction to entertain assessee's application because Dy. CIT, CPC, was not reporting to him, was not correct. Moreover, CBDT issued directions on 18-9-2020 (F No. 187/3/2020-ITA-1), as per which, powers under sections 263 and 264, will be exercised by Jurisdictional Principal Commissioners concerned. Thus, certainly if powers could be exercised by Jurisdictional Principal Commissioners under faceless regime, then it was confirmed that CPC would only act as a facilitator to JAO and therefore, merely because assessees' return was processed by CPC, the regular jurisdiction of JAO would not be curtailed and he would continue to hold the jurisdiction. Hence, impugned order was quashed and set aside and PCIT was directed to dispose of assessee's application under section 264 in accordance with law.

Decision: In assessee's favour

IN THE BOMBAY HIGH COURT

K.R. SHRIRAM & NEELA GOKHALE, JJ.

Sarda Paper Ltd. v. Pr. CIT

Writ Petition No. 3349 of 2022

27 March, 2024

Petitioner by: Vasudev Ginde & Kumar Kale.

Respondents-Revenue by: Akhileshwar Sharm, & Devinder Kumar Gupta, Pr. CIT-5, Mumbai present.

P.C.

1. Petitioner is impugning an Order dated 25-3-2022 passed by the Principal Commissioner-5 (Pr. CIT 5), i.e., Respondent No. 1 under section 264 of the Income Tax Act, 1961 (the IT Act).

2. Petitioner had filed its return of income for assessment year 2016-17 on 17-10-2016 declaring total income at Rs. 2,33,44,585. Thereafter assessee filed its revised return of income on 31-8-2017 declaring total income at Rs. 2,33,44,585. Subsequently, the return of income was processed under section 143(1) of the Act on 29-3-2019 assessing total income of Rs. 4,53,21,056. The difference in returned income and assessed income was mainly due to denial of set off of unabsorbed business loss of Rs. 2,19,76,471 against long-term capital gain declared by assessee in the return of income.

3. Assessee thereafter filed Rectification Application under section 154 of the Act against the intimation under section 143(1) of the Act requesting to allow set off of unabsorbed business loss against long-term capital gain. It is stated in the impugned order that the Centralized Processing Center (CPC), vide an Order dated 27-7-2020 did not make any change in the income computed under section 143(1) of the Act.

4. Petitioner thereafter filed an application under section 264 of the Act on 26-3-2021. This application came to be rejected by Principal Commissioner-5, Mumbai on the ground that Deputy Commissioner (Dy. CIT), Centralized Processing Center is not reporting to the Principal Commissioner-1, Mumbai. According to Principal Commissioner-5, Principal Commissioner-1, Mumbai can neither exercise any kind of monitoring of the work of Deputy Commissioner, Centralized Processing Center nor can issue any directions to him. Therefore, he cannot be treated as subordinate to Principal Commissioner-1, Mumbai and rejected the application. Principal Commissioner-5 has not mentioned in the order which will be the Principal Commissioner in that case who can hear petitioner's application under section 264 of the Act. Least we would have expected from the Principal Commissioner is to forward the application under advise to assessee to the concerned Principal Commissioner who would be able to hear the matter. At least 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 processing of 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. The Central Board of Direct Taxes (CBDT) had also notified a scheme on 4-1-2012 in exercise of the powers conferred by sub-section 1(A) of section 143 of the Act.

6. We agree with Mr. Ginde that the Centralized Processing Center only acts as a facilitator to the jurisdictional assessing officer (JAO) who holds jurisdiction over assessee under section 120 of the Act. Merely because the return is processed by Centralized Processing Center, the regular jurisdiction of the jurisdictional assessing officer is not curtailed and he continues to hold the same jurisdiction. This is evident from the fact that a demand resulting from the processing of a return under section 143(1) of the Act by Centralized Processing Center is also enforced by the jurisdictional assessing officer. It is jurisdictional assessing officer who issues a notice under section 143 (2) of the Act if the return is to be selected for scrutiny and frames the assessment. We would also add that even under the faceless regime, once the assessment has been framed by the Faceless assessing officer (FAO), all records are transferred to the jurisdictional assessing officer for recovery of demand and other incidental matters. In fact in many matters before us Principal Commissioner have exercised jurisdiction in identical situation.

7. Therefore, for Respondent No. 1 to say that he will have no jurisdiction to entertain petitioner's application under section 264 of the Act because the Deputy Commissioner, Centralized Processing Center is not reporting to him is not correct.

8. An affidavit has been filed by one Mr. Devinder Kumar Gupta who is the present Principal Commissioner-5 affirmed on 22-3-2024 justifying the stand taken by Principal Commissioner-1 Mr. Naresh Kumar Balodia in the impugned order. Our repeated queries to Mr. Sharma, then which will be the Principal Commissioner who will have jurisdiction according to Mr. Gupta was met with total silence. Of course, Mr. Sharma informed the court that Mr. Gupta has sought opinion on 22-3-2024 of the CBDT to advise him as to which Principal Commissioner will have jurisdiction. In fact, it is rather strange that only when a counter affidavit is directed to file when the concerned Principal Commissioner thinks it is necessary to seek the opinion of CBDT when the petition itself has been served on or about 7-7-2022. It reflects the sorry state of affairs and how much the officers are serious about attending to the issues pertaining to assessees. We also hope CBDT would sensitize its officers and educate them as to how they should deal with assessees.

Moreover, the CBDT has issued directions on 18-9-2020 (F No. 187/3/2020-ITA-1) in which it is noted that the power under section 263 and 264 of the Act will be exercised by the Jurisdictional Principal Commissioners concerned. Therefore, certainly if the powers can be exercised by the Jurisdictional Principal Commissioners and the faceless regime, certainly it only confirms our view expressed above that Centralized Processing Center only acts as a facilitator to the jurisdictional assessing officer and merely because the return is processed by Centralized Processing Center the regular jurisdiction of the jurisdictional assessing officer is not curtailed and he continues to hold the jurisdiction.

9. At this stage, Mr. Sharma on instructions from Mr. Devinder Kumar Gupta, Principal Commissioner-5, who was present in the court, states that it was uncertain whether he could exercise jurisdiction but if the court directs he shall certainly exercise jurisdiction. His reluctance should not be construed as a reluctance to exercise jurisdiction.

10. Since we have already expressed our view that the jurisdictional assessing officer will have jurisdiction, we hereby quash and set aside the impugned Order dated 25-3-2022. Respondent No. 1 Principal Commissioner-5 is directed to dispose petitioner's application under section 264 of the Act in accordance with law. Before passing order on merits petitioner shall be given personal hearing, notice whereof shall be communicated at least five working days in advance. The issue of jurisdiction shall not be raised by Respondent No. 1.

11. Mr. Sharma on instructions states that in view of the explanation given in ground (a) for delay if any, the issue of delay also will not be raised and the matter will be decided on merits. Section 264 application shall be disposed on merits by 31-5-2024.

12. Petition disposed.