ORDER
No. 2p 18/68-61-69(11) Dated, the 15th October, 1968.
A new charge of Inspecting Assistant Commissioner of Income-tax tobe known as ' Range XXII, Calcutta ', is hereby created with headquarters at Calcutta.
2. In pursuance of Sub-section (1) of Section 123 of the I.T. Act, 1961 (43 of 1961), and in partial modification of the existing orders on the subject, I, Commissioner of Income-tax, West Bengal III, Calcutta, hereby direct that the Inspecting Assistant Commissioner of Income Tax, Range XXII, Calcutta, shall to the exclusion of all other Inspecting Assistant Commissioners of Income Tax, perform the functions of an Inspecting Assistant Commissioner of Income Tax in respect of persons or classes of persons or of incomes or classes of incomes or of the areas in respect of which the Income-tax Officers of, (a) Dist. Howrah (excluding B, C & F-Wards), and (b) Special Survey Circle IX, Calcutta (excluding D, E & F-Wards), perform their functions as Income-tax Officers.
This order shall take effect from 17th October, 1968,
K. D. Banerjee,
Commissioner of Income Tax,
West Bengal III, Calcutta.
The notice issued by him was accordingly legal and valid and the impugned proceedings are within jurisdiction. '
5. In the affidavit-in-reply affirmed by Birmadutta Jhunjhunwalla on December 22, 1969, it was stated, inter alia, that the notice as also the proceedings thereunder before the IAC, Range XXII, were without jurisdiction as stated in the petition. The respondent-firm was never made aware of the Commissioner's order and there was never any concealment of income. It was, however, admitted that on October 15, 1968, the file of the assessee had been transferred to the ITO, ' G ' Ward, How'rah.
6. The learned judge referred to his earlier decision in similar circumstances in jaswantrai & Brothers v. ITO, in Matter No. 103 of 1969, dated February 18, 1972 (unreported). In this case, a penalty proceeding was referred by the ITO, 'A' Ward, District 111(3), Calcutta, on March 22, 1967, to the IAC, Range IV. In exercise of the powers conferred by Section 127(1) and of all other powers enabling him in that behalf the Commissioner by order dated July 29, 1967, transferred the cases mentioned in col. III of the Schedule (G.I.R. III(l)-a/A Sri Jaswantrai Agarwalla) from the ITO mentioned in col. IV (ITO, A-Wd., District 111(3), Calcutta), to the ITO mentioned in col. V thereof (ITO, ' C ' Wd., Hundi Circle, Calcutta). The ITO, ' C ' Ward, on the.findings of the.former ITO, made a reference to the IAC, Range V, who had jurisdiction over him. The learned judge held that the penalty proceeding was a case under the Explanation to Section 127, and where a case has already been referred, it is to be disposed of in a quasi-judicial manner either by imposition of penalty or by holding that no penalty is to be imposed by the IAC and! the ITO referring the matter becomes Junctus officio on reference by him in respect thereof and a reference already made cannot be recalled.
7. On reading Section 253(1), providing appeal from the order of the IAC under Section 274(2), it was further held that a case referred to him (the IAC) would be a case pending before him and not pending before the ITO. The transfer of cases by the order of the Commissioner of July 29, 1967, from the ITO,' A' Ward, to the ITO, Hundi Circle, under Section 127 must relate to cases pending before the original ITO and there can be no transfer of cases not pending before such officer, which in this case was pending before the IAC who could not be affected by any order under Section 127 applying to the ITO only. The learned judge further held, repelling the contention of the revenue, that after a reference has been made by a referring authority properly, the subsequent loss of jurisdiction by the referring authority does not affect the jurisdiction of the referred authority. Jurisdiction of a court or authority is generally determined with reference to the point of time when the court or authority takes seisin of the matter of the case subject to any contrary provision. The learned judge observed that ifthere was any difficulty and if it was possible it could have been otherwise obviated by a special order under Section 123(1) by conferring jurisdiction on the IAC over pending penalty cases. But there is no authority conferred by the statute under Section 123 or Section 124 similar to the authority under Section 127 to transfer a pending proceeding from one IAC or the ITO to another such authority. Though the court did not express any final opinion in respect of Section 123 or Section 124 as not necessary, hope was expressed that Parliament might consider introducing a section similar to Section 127 for transfer of pending penalty cases referred to one IAC to another. The rule in Jaswantrai's case (Matter No. 103 of 1969--18-2-72) accordingly was made absolute and the notice as also the penalty proceedings were quashed, a result, the court noted, unfortunate in the facts of the case, which could not be avoided due to lacuna in the Act and procedural irregularity.
8. Following his decision in faswantrai's case, the learned judge in the case before us made the rule absolute and quashed the penalty proceedings by order passed on April 19, 1972. This appeal is against this decision.
9. Mr. Balai Lal Pal, learned counsel appearing for the revenue, the appellants before us, contended that the learned judge committed an error in following his decision in Jaswantrai's case as the facts there are distinguishable from the facts of the instant case. In the earlier case, there was a second reference by the ITO unlike the position here while the question about the scope of Section 123(1) was kept open. Reference was made to the decision in Madhusudan Nandy v. Union of India in C.R. No. 2489(W) of 1969 by Chittatosh Mookerjea J., on May 2, 1972 (unreported) in support of the proposition that by an order similar to the one before us, the pending penalty proceedings also could be validly transferred from one IAC to another.
10. It is necessary to examine this decision in some detail since strong reliance has been placed thereon by the revenue. In the course of assessment for the assessment year 1961-62, the ITO, 'B' Ward, District III(I), Calcutta, issued a notice under Section 271 for penalty for concealment of income. The assessment was completed on March 16, 1966, and on April 28, 1966, the said ITO referred the penalty proceeding to the IAC, Range III, as the minimum penalty exceeded Rs. 1,000. On May 16,1967, the Commissioner in exercise of the powers conferred by Sub-section (1) of Section 127 of the I.T. Act, 1961, by his office order transferred the case of the petitioner from the ITO, 'B' Ward, District III(I), to the ITO, Special Circle I, West Bengal-I. The transferee-ITO was subordinate to the IAC, Range V, who on November 16, 1967, issued a notice to the assessee stating that as the ITO, Special Circle I, referred to him under Section 274(2) the penalty proceeding under Section 271(l)(c), the assessee was required to appear before him to show cause why the order imposing penalty should not be made. The assessee challenged the proceeding initiated by the IAC, Range V, as being without jurisdiction, by an application under Article 226 of the Constitution. The ground taken was that on the date of transfer of cases of the assessee from one ITO to another (May 16, 1967) the penalty proceeding was not pending before the original ITO in view of the reference made by him already on April 28, 1966, to the IAC, Range III, who became seized of the proceeding under Section 274(1)(c) read with Seciton 274(2). Further, the pending penalty proceeding was not transferred while the transferee-ITO had no jurisdiction to moke a reference of a case which was not before him on the date of reference.
11. It appears from the judgment that the Commissioner long before, by office order dated September 2, 1963, under Section 123(1) ordered that the IAC mentioned in col. II of the table thereto annexed, was, to the exclusion of all other lACs, to perform the functions as IAC in respect of persons, incomes or classes thereof or areas in respect whereof the ITOs of Districts/Circles mentioned in col. III of the said table would perform his functions. The table indicated that the IAC of Income-tax, Range III, was to perform his functions in respect of area or income or person or classes thereof over which the ITO, District III, would perform his functions as the ITO and similarly the IAC, Range V, was conferred jurisdiction over ITO, District I, renamed Special Circle I. In view of the wide meaning given to the word 'case' in the Explanation to Section 127, the learned judge was of opinion that the order of the Commissioner could not be interpreted to include pending cases only, but thereby the ITO, Special Circle I, became seized of jurisdiction in respect of all proceedings under the Act relating to the assessee which were pending on the date of the transfer order as also all proceedings which might be commenced after the date of the transfer. It was held that along with the transfer of the case to the ITO, Special Circle I, since the lACs have no independent jurisdiction, the IAC, Range V, having jurisdiction over the transferee-ITO, acquired jurisdiction over the assessee's file, while the IAC, Range III, on the said date ceased to have jurisdiction over areas and also incomes or persons or classes thereof under the erstwhile jurisdiction of the ITO, 'B' Ward, District III(I). The IAC, Range V, under the provisions of Section 129 became entitled to exercise such jurisdiction over the proceedings under Section 271(l)(c) as successor-in-office.
12. In both decisions, orders passed by the Commissioner under Section 127(1) of the I.T. Act transferring cases from one ITO to another, was the subject-matter for consideration. According to Sabyasachi Mukharji J., such transfer under Section 127 could only relate to pending cases and not to cases over which the ITO had no jurisdiction on the day the order for transfer of cases becomes effective, Chittatosh Mukherjee J., on the contrary, held that inview of Section 129, by an order of transfer under Section 127, the transferee-ITO becomes seized of jurisdiction not only of pending cases but of all proceedings under the Act in respect of the assessee. With the transfer of the assessee's case to another ITO, the IAC having jurisdiction over such, transferee-officer, acquires jurisdiction over the assessee's file while the erstwhile IAC ceases to have such jurisdiction. Both the learned judges incidentally referred to Section 123(1), Sabyasachi Mukharji J. holding that there is no power under the relevant provisions to transfer a pending case even under the said Section 123(1), while Chittatosh Mookerjee J. noted that the Commissioner could vary, amend or rescind orders of jurisdiction when Section 129 would be attracted in respect of Section 123 as also of Section 127.
13. We are inclined to think that the jurisdiction of the IAC can only be affected by an order under Section 123(1) while Section 127 affects the jurisdiction of the ITO and an order thereunder, by itself cannot affect the jurisdiction of any IAC in respect of cases pending before him. When an IAC is already in seisin of a reference made by one ITO under Section 274(2) pending adjudication before him, transfer of the case to another officer under Section 127(1) by itself cannot take away or affect the jurisdiction of such authority (IAC) except by a subsequent order under Section 123(1) and it is not correct to say that lACs have no independent jurisdiction merely because it is linked with or described with reference to the jurisdiction of ITOs. To that extent the opinion in Jaswantrai's case (Matter No. 103 of 1969--18-2-72) relating to the interpretation of Section 127 appears to us to be correct but its application to the instant case and the observations made therein relating to Section 123(1) with due respect we are unable to accept.
14. The petitioner here was assessed for the assessment year 1962-63 under Section 143(3) of the Act by the ITO, 'A' Ward, Howrah, who obviously was conferred by the Commissioner with the jurisdiction to perform his functions over the assessee under Section 124(1) which provides for the jurisdiction of such officers though the order is not before us. The jurisdiction of the lACs to perform their functions is provided under Section 123(1) which here was linked with the jurisdiction of the ITOs in respect of areas or of persons or incomes or classes thereof.
15. The relevant sections and their substituted provisions under the Finance (No. 2) Act of 1967, Act 20 of 1967, with effect from April 1, 1967, are set out as follows :
Section 123 (unamended).
'(1) Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income as the Commissioner may direct,...'
Section 123 (substituted).
'Jurisdiction of Inspecting Assistant Commissioners.-(1) Inspecting Assistant Commissioners shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classesof income or of such cases or classes of cases as the Commissioner may direct.....'
Section 124 (unamended),
'(1) Income-tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income as the Commissioner may direct......'
Section 124 (substituted).
'Jurisdiction of Income-tax Officers.--(1) Income-tax Officers shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of income or of such cases or classes of cases as the Commissioner may direct......'
Section 127 (unamended).
'(1) The Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one Income-tax Officer subordinate to him to another also subordinate to him, and the Board may similarly transfer any case from one Income-tax Officer to another:
Provided that nothing in this sub-section shall be deemed to require any such opportunity to be given where the transfer is from one Income-tax Officer to another whose offices are situate in the same city, locality or place.
(2) The transfer of a case under Sub-section (1) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer from whom the case is transferred....
Explanation.--In this section and in Sections 121 and 125, the word 'case', in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.' Section 127 (amended).
'Power to transfer cases.--(1) The Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from any Income-tax Officer or Income-tax Officers subordinate to him to any other Income-tax Officer or Income-tax Officersalso subordinate to him and the Board may similarly transfer any case from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers :
Provided that nothing in this sub-section shall be deemed to require any such opportunity to be given where the transfer is from any Income-tax Officer or Income-tax Officers to any other Income-tax Officer or Income-tax Officers and the offices of all such Income-tax Officers are situated in the same city, locality or place......
(2) The transfer of a case under Sub-section (1) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Income-tax Officer or Income-tax Officers from whom the case is transferred.
Explanation.--In this section and in Sections 121, 123, 124 and 125, the word 'case ' in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.' Section 129.
' Whenever in respect of any proceeding under this Act an income-tax authority ceases to exercise j urisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor ;..--'
16. Chapter XIII of the I.T. Act, 1961, provides for income-tax authorities. Part A containing Sections 116 to 119 is concerned with income-tax authorities; Section 116 speaks of income-tax authorities with, (a) the CBDT at the apex, thereafter, (b) the Directors of Inspection, (c) Commissioners of Income-tax, (d) Assistant Commissioners of Income-tax who may be either AACs or lACs of Income-tax, (e) Income-tax Officers, and (f) Inspectors of Income-tax. Under Section 117 the Central Govt. may appoint all authorities mentioned above in Clauses (a) to (e) of class I. Section 118 provides for control of income-tax authorities while Section 119, Sub-section (1), provides for observance of the orders and instructions issued by the Board from time to time while under Sub-section (2) the ITOs are to follow all instructions of the superior authority.
17. Part B relates to jurisdiction, comprising of Sections 120 to 130A. Under Section 120, the Directors of Inspection shall perform such functions of any other income-tax authority as may be assigned to them by the Board. The Commissioner's jurisdiction provided under Section 121 is confined to the performance of functions in respect of areas and of persons, incomes or casesor classes thereof as the Board may direct. The AACs under Section 122 shall perform their functions over areas or of persons or incomes or classes of them as the Board may direct. In respect of jurisdiction of the lACs under Section 123 they shall perform their functions in respect of areas or of persons, incomes or cases or classes thereof as the Commissioner may direct. The jurisdiction in respect of cases or classes of cases has been extended by amendment of Section 123(1) with eflect from April 1, 1967, as noted earlier. The jurisdiction of the ITOs for performance of duties by them has been conferred by Section 124(1) in respect of areas or of persons 0r incomes or cases or classes of them as the Commissioner may direct. The category of cases or classes of cases has been extended by the aforesaid amendment of 1967 in respect of the ITOs.
18. Section 125 provides for additional powers of the Commissioner enabling the commissioner or the lACs to perform the duties of the AAC or the ITO, respectively, in respect of any specified case or person or classes of them and other clauses relate to matters incidental thereto not material for us at present. Section 126 contains the powers of the Board to empower Commissioners, AACs, lACs and ITOs to perform their functions in respect of areas and of persons or income or classes of them as may be specified and thereupon such specified functions shall cease to be performed by other authorities under Sections 121, 122, 123 and 124. Section 127 authorises the Commissioner to transfer any case from any ITO to any other ITO, both being subordinate to him. Similar power has been given to the Board for transfer of any case from one ITO to any other ITO. This power is to be exercised after giving an opportunity to the assessee of being heard and also after recording reasons therefor except where offices of both the ITOs are situated in the same city, locality or place. The transfer of the case shall not render necessary the re-issue of any notice already issued by the original ITO. The Explanation clarifies the word 'case' as meaning, (a) all proceedings pending on the date of the order, (b) all proceedings which may have been completed on or before such date, and (c) all proceedings which may be commenced after the order.
19. Section 128 relates to the functions of an Inspector of Income-tax not material for our purpose. Section 129 provides that whenever in respect of any proceeding under the Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another, who has and exercises jurisdiction, such successor may continue the proceeding from the stage it was left by his predecessor. Under Section 130 the Commissioner competent to perform functions under the provisions of the Act, means the Commissioner having jurisdiction over the assessee and where there are two or more Commissioners having concurrent jurisdiction, the Commissionershall be the Commissioner specially empowered by the Board. Section 130A makes similar provisions in respect of the ITO except, in addition, where there are two or more officers, such ITO to be the one in respect of an assessee to whom such function may be assigned by or on behalf of the Commissioner.
20. Jurisdiction, in law, means the authority to take cognizance and decide matters in respect whereof the court, tribunal or authority is empowered to perform its functions under any statute. The pov/er to confer jurisdiction is imposed by statute and may be delegated to appropriate authority by its provisions. The jurisdiction again may be restricted or ousted partially or entirely by the statute or any authority duly authorised by such statute for the purpose. When the power to confer jurisdiction is conferred on any authority created by the statute, such power, in the absence of any restriction or prohibition, extends to withdrawal, realignment or conferment of jurisdiction by such authority among authorities empowered to perform the functions under the Act. When such realignment, withdrawal or conferment of jurisdiction is made among the authorities empowered to perform the functions conferred on them, the jurisdiction of one authority to decide matters may be conferred on another authority otherwise empowered to perform similar functions, divesting totally the jurisdiction of the original authority in respect of all proceedings pending or as may arise in future, all being dependent on the terms of the order relating to conferment, realignment and divestment of jurisdiction.
21. The plenary powers regarding conferment of jurisdiction have been vested by delegation by statute on the Commissioner having jurisdiction in respect of such matters over which the lACs perform their duties under the Act under Section 123 and the ITOs in similar manner under Section 124. This power, in the absence of any prohibition or restriction, empowers the Commissioner to effect realignment of jurisdiction among lACs or ITOs over areas, persons or incomes and by amendment over cases as may be considered expedient by him as a matter of public policy. The Commissioner by order or direction, while divesting the authorities aforesaid of the power in respect of performance of their duties under the Act conferred earlier, may confer such jurisdiction to other authorities under the Act, either wholly or partially as he may direct. As soon as such order or direction is made completely divesting the jurisdiction of the authorities so long so empowered, all proceedings including those which might arise thereafter, before them as also proceedings pending before them, come within the jurisdiction of the newly conferred authorities unless any specific provision is made in respect of any pending proceeding. Such consequence is inevitable when there is withdrawal or realignment of jurisdiction which means automatic extinction of jurisdiction of one authority with simultaneous conferment of jurisdiction on another appropriate authority under the Act in respect of all pending and future proceedings.
22. The power of withdrawal or conferment of jurisdiction envisaged under Sections 123 and 124 by the Commissioner on appropriate authorities either as an original act or by realignment of jurisdiction is, being a general administrative act of policy and convenience, practically absolute and suffers from no fetters like the power under Section 127. It is thus also open to the Commissioner to divest the jurisdiction of an existing authority either wholly or partially and confer the same on another appropriate authority if it is considered expedient by him for administrative or policy reasons. When such act is done, the cover of jurisdiction is withdrawn from the existing authority while the same cover is spread over to the other authority who thereby acquires jurisdiction over such matters specifically mentioned, which automatically comes before him for appropriate action under the Act from the stage it was before the original authority. This general power of conferment of jurisdiction by the Commissioner to different authorities under the Act under Section 123 or Section 124, which is obviously an administrative act of policy and convenience, is the power of the Government conferred on him as a delegated authority under the provisions of the statute. The power under Section 127 to transfer any case is much limited in scope as being limited to cases and subject to statutory fetters where an assessee has a right to be heard under certain conditions while the reasons for transfer are to be recorded. The incidence of orders under Section 123 with which we are concerned, and of orders under Section 127, are completely different and distinct, one being withdrawal and conferment of jurisdiction while the other is one of transfer of cases though consequences may not have much difference, both being governed by Section 129 where the transferee-authority functions as successor-in-office for continuance of the proceeding from the stage at which it was before the predecessor-in-office.
23. The assessee was under the jurisdiction of the ITO,' A ' Ward, District Howrah, and in the course of assessment for the assessment year 1962-63, he referred the penalty proceeding to IAC, Range XX, on March 23, 1967. There is no dispute that IAC, Range XX, had jurisdiction to perform his statutory functions in respect of persons, incomes or classes of them or areas conferred on him by the Commissioner under Section 123(1) over which the ITO, 'A' Ward, District Howrah, had jurisdiction. The penalty proceeding was pending before the IAC, Range XX, when by the impugned order of the Commissioner dated October 15, 1968, the jurisdiction of the IAC, Range XX, in respect of such matters over which the said ITO, ' A ' Ward, District Howrah, had jurisdiction was completely taken away and simultaneously conferred on the IAC, Range XXIII, exclusively. It is also the admitted position that by an order of the same date, the cases relatingto the assessee were transferred to the ITO, 'G' Ward, Howrah. In view of this complete divesting of jurisdiction of IAC, Range XX, and exclusive conferment of the same on IAC, Range XXII, simultaneously by the order dated October 15, 1968, under Section 123(1), the penalty proceeding of the assessee pending before IAC, Range XX, came automatically before the IAC, Range XXII, from the stage it was before the IAC, Range XX, and the transferee-IAC, Range XXII, as successor-in-office became entitled to proceed with the said penalty proceeding of the assessee and to dispose of the same in accordance with law. At this stage, we have to record an admitted mistake made by IAC, Range XXII, in the impugned orders as reciting that there was a subsequent reference to him by the concerned ITO. There was no such subsequent reference nor it is possible in law in the circumstances of the case.
24. Reference was made to the decision in Chokkalinga Pillai v. Velayudha Mudaliar, AIR 1925 Mad 117, 118, where the court observed:
'The jurisdiction of a court consists in its power to entertain suits, and when once a suit has been properly entertained, it is difficult to understand how that jurisdiction is removed unless it is specifically so done by the order of a competent authority. '
25. The proposition is well settled that a court and so also any Tribunal or authority before whom a proceeding has been validly instituted will continue to have jurisdiction over the proceeding till final adjudication unless and until such jurisdiction is withdrawn or removed by the competent authority under statutory provisions. So when the jurisdiction is validly removed by a competent authority under the provisions of a statute, the original court or any Tribunal or authority in such event will be incompetent, as having ceased to have jurisdiction, to proceed further with the pending proceeding or proceeding which may be instituted after such removal of jurisdiction. There can be no dispute that the Commissioner had such authority to divest one IAC of his jurisdiction and to confer the same on another IAC of another range and which may be created for the purpose. It was submitted that the jurisdiction of the IAC, Range XXII, regarding the pending penalty proceedings could not be conferred with reference to the jurisdiction of the ITO, 'A' Ward, District Howrah, who had already become functus officio by reason of the reference made by him to IAC, Range XX, long before the impugned order of the Commissioner. This contention appears to be misconceived, for the jurisdiction of the IAC is generally linked with the jurisdiction of the ITOs as it appears. In conferring jurisdiction on the new incumbent-IAC, the Commissioner in describing the area also or incomes, persons and cases or classes thereof, over which such incumbent is to have jurisdiction, links it with the jurisdiction of a particular ITO who performs his duties in respect of such categories. The point accordingly that the ITO has become functus officio on the date of the Commissioner's order has no bearing or effect on the impugned order of the Commissioner.
26. It has been further contended that the removal of jurisdiction of one authority is not permissible in law in the absence of any provision for transfer of pending proceedings either expressly or by clear intendment. In this connection, we may conveniently refer to the decision in Colonial Sugar Refining Co. Ltd. v. Irving [1905] AC 369 (PC). The Privy Council was considering an application for dismissal of an appeal to the Privy Council from, the decision of the Supreme Court of Queensland. This right of appeal from the Supreme Courts of the States of Australia to the Privy Council was taken away by the Australian Commonwealth Judiciary Act, 1903, which came into force on August 25, 1903, whereby the appeal lay only to the High Court of Australia established by the said Act, which, however, was not made retrospective.
27. The Privy Council held that if the matter in question was a matter of procedure only then the petition for dismissal of the appeal against the judgment of September 4, 1903, as not being maintainable was well founded. On the other hand, if it was more than a matter of procedure, if it touched a right in existence at the passing of the Act, it was conceded that, in accordance with a long line of authorities extending from the time of Lord Coke to the present day, the appellants would be entitled to succeed. It was held that the Judiciary Act was not retrospective by express enactment or by necessary intendment. The only question was, therefore, was the appeal to the Privy Council a right vested in the appellants at the date of the passing of the Act, or was it a mere matter of procedure It seemed to their Lordships that the question did not admit of doubt. To deprive a suitor in a pending action of an appeal to a superior Tribunal which belonged to him as of right, is a very different thing from regulating procedure. In principle, the court found no difference between abolishing an appeal altogether and transferring the appeal to a new Tribunal. In either case, there is an interference with existing rights contrary to the well known general principle that statutes are not to be held to act retrospectively unless a clear intention to that effect is manifested. It was held that the right being also of a substantive nature and not of mere procedure could not be taken away in the absence of a provision in respect thereof.
28. The procedure for imposing penalty under Chap. XXI is laid down in Section 274 which provides that where the penalty exceeds Rs. 1,000 the ITO shall refer the case to the IAC, who shall have all the powers conferredunder the Chapter for imposition of penalty. The assessee had the right to be heard and assessed before an ITO or the IAC in respect of penalty proceedings under the Act and such right cannot be the right to be heard by any particular officer but by such officer who may have jurisdiction over he matter for the time being. By the impugned order no accrued right of the assessee to be heard and the case decided by the IAC is at all affected and such right is merely a procedural right over which there can be no vested right. On the authority of the above decision, the impugned order affects all pending proceedings as it does not affect any vested right of the assessee and on its terms the-existing authority, IAC, Range XX, is completely divested of his jurisdiction with the relevant order coming into force, so that with the order coming into force he ceases altogether to have the jurisdiction over the pending penalty proceeding which is simultaneously conferred on IAC, Range XXII.
29. It has been further contended on behalf of the assessee that the impugned order suffers from a fatal infirmity. While it takes away the jurisdiction of the IAC, Range XX, in respect of proceedings under the Act relating to areas, incomes or persons, the order does not mention 'cases' so that the jurisdiction in respect thereof has been still retained with the IAC, Range XX. Section 123 was substituted by new provisions by the Finance (No. 2) Act, 1967, with effect from April 1,1967, whereby the words 'cases or classes of cases ' were imported in Sub-section (1) of Sections 123 and 124 as we have noted earlier and the support for this contention is sought to be made on account of absence of the word 'cases or classes of cases' in the impugned order.
30. The original order whereby the jurisdiction of IAC, Range XX, was created has not been produced. Even so we may presume that since the relevant assessment was made on March 30, 1967, and reference of penalty proceeding to IAC, Range XX, was made on March 23, 1967, these were obviously done by the ITO, 'B' Ward, on the basis of the jurisdiction conferred on the appropriate authorities under order of the Commissioner passed under the unamended provisions of Sections 123(1) and 124(1) which were in force till March 31, 1967. At that time, the word ' cases or classes of cases ' were not in Section 123(1) or Section 124(1) which were imported by the amendment which came into force with effect from April 1,1967. There is no dispute that the ITO, 'B' Ward, Howrah, or the IAC, Range XX, had jurisdiction over the assessment and penalty proceedings respectively even though the words ' cases or classes of cases ' were not in Section 123 or Section 124 as being obviously in respect of persons and by the impugned order such jurisdiction was withdrawn and conferred on IAC, Range XXII.
31. The jurisdiction of the authorities under the Act is concerned with area, incomes, persons and by amendment ' cases ' have been introduced. The reason for the amendment of Sections 123(1) and 124(1) can be found according to Mr. B. L, Pal in the speech of the Finance Minister in 1967-68 (vide [1967] 64 ITR 101. It was said:
' In this connection, we have been experimenting for some time with a new system of distribution of work in the income-tax department Under this system, particular functions such as those of assessment, collection, refunds, etc., are performed by the Income-tax Officers specifically entrusted with these functions. '
32. The Note of the Ministry of Finance states (p. 107) :
'The main feature of the ' functional' system of working adopted in the pilot project ranges is that instead of one Income-tax Officer being responsible for various functions in relation to a group of assessees, such as, issue of notices to them, assessment to tax, issue of demand notices and finally the actual collection of taxes, these functions, and if necessary, further sub-divisions of them, are allotted to different groups of officers. The advantage of this ' functional' distribution of work lies mainly in the fact that it enables an officer or a group of officers to specialise in certain specified functions, and thus to attain greater proficiency in these.... Such items of work can be performed more economically by junior officers.'
33. The Notes on clauses in the statement of objects and reasons states as follows (pp. 172 & 173):
Clause 27, Sub-clause (2):
'Under Section 123 as substituted, it will be open to the Commissioner, by general or special order in writing, to distribute and allocate the work on functional basis among two or more Inspecting Assistant Commissioners having concurrent jurisdiction over the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases.'
Clause 27, Sub-clause (3)(i):
'Under Sub-sections (1) and (2) (of section 124), as substituted, it will be open to the Commissioner or the Inspecting Assistant Commissioner authorised by him in this behalf, by general or special order in writing, to distribute and allocate the work on functional basis amongst two or more Income-tax Officers having concurrent jurisdiction over the same area or the same persons or classes of persons or the same incomes or classes of income or the same cases or classes of cases.'
34. We have given the extracts in some detail for the purpose of appreciating the reasons for the amendment of the relevant provisions which have a material bearing to decide the controversy between the parties.
35. According to Mr. B. L. Pal, since in this case, there is only one ITO over the assessee to perform all the functions, it is sufficient compliance of Section 123(1) if the order thereunder directs that the new IAC shall performand the other IAC shall not perform the functions of an IAC in respect of persons in respect of whom a particular ITO or ITOs perform their functions as ITOs and it was not necessary to refer cases to the IAC, Range XXII, in these circumstances. It was contended that the ITO, 'G' Ward, Howrah, to whom the cases relating to the assessee were transferred on the same date as admitted in the affidavit-in-reply on behalf of the assessee in para. 3 had the jurisdiction over the assessee to perform his functions under the Act over whom the IAC, Range XXII, alone was conferred the jurisdiction to perform his functions under the Act,
36. The contention is contested by Mr. P. Pal on the ground that the functional system has been in the statute all through and if 'person' includes cases, the words would be redundant and it will be an absurdity that in respect of one assessee, one ITO will deal with the assessment and another with the penalty and ' cases ' cannot be equated with functions.
37. It appears to us that under the substituted provisions by the amendment of the Act, different functions relating to the same assessee may be assigned to different ITOs which will be cases under the Explanation to Section 127. In such event, the necessity arose for importation of the word 'cases' in the relevant sections for assignment of performance of distinct functions regarding the same assessee to different ITOs and lACs. But since, in this case, there is one ITO for the discharge of all functions under the Act relating to the assessee it was not necessary that the cases should also be assigned to the IAC when the reference to the functions to be performed by such ITO also included ail proceedings concerning the assessee under the Act. The situation in this case is the same when the reference was made to the IAC, Range XX, whose jurisdiction was linked with the jurisdiction of the ITO, 'A' Ward, Howrah, in respect of the assessee which did not include ' cases '.
38. In view of the above discussion, we are unable to sustain the order under appeal and hold that the proceeding commenced by the IAC, Range XXII, is legal and valid in law and within jurisdiction. The appeal accordingly succeeds and is allowed and the judgment and order under appeal are set aside. The application under Article 226 is dismissed and the rule is discharged. All interim orders are vacated. There will be no order for costs in the circumstances.
Sankar Prasad Mitra, C.J.
39. I agree.