Income Tax 2025

Appearance

Jurisdiction ofAssessing Officers. ​

242(1) ​

Where an Assessing Officer has been vested with jurisdiction over any area by virtue of any direction or order issued under section 241(1) or (2) or (3), he shall have jurisdiction within the limits of such area,—

  • (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situated within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situated within the area; and
  • (b) in respect of any other person residing within the area.

242(2) Where a question arises under this section as to whether an Assessing ​

Officer has jurisdiction to assess any person, the question shall be determined by the specified income-tax authority.

242(3) Where under this section, a question arises relating to areas within the ​

jurisdiction of different specified income-tax authorities, the question shall be determined––

  • (a) by the concerned specified income-tax authority concerned; or
  • (b) if they are not in agreement, by the Board or by such specified income-tax authority as the Board may, by notification, specify.

242(4) ​

No person shall call in question the jurisdiction of an Assessing Officer,––

  • (a) where he has made a return under section 263(1), after the expiry of one month from the date on which he was served with a notice under section 268(1) or 270(8) or after the completion of the assessment, whichever is earlier;
  • (b) where he has made no such return, after the expiry of the time allowed by the notice under section 268(1) or 280(2) for the making of the return or by the notice under section 271(2) to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier;
  • (c) where an action has been taken under section 247 or 248, after the expiry of one month from the date on which he was served with a notice under section 153C(2) of the Income-tax Act, 1961 or section 294(1)(a) or after the completion of the assessment, whichever is earlier.

242(5) ​

Subject to the provisions of sub-section (4), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) or (3) before the assessment is made.

242(6) ​

Irrespective of anything contained in this section or in any direction or order issued under section 241, every Assessing Officer shall have all the powers conferred under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under section 241(1) or. (2) or (3) or section (4).

Explanation

Section Summary: ​

Section 242 of the Income Tax Act outlines the jurisdiction of Assessing Officers (AOs) in India. It specifies the geographical and functional limits within which an AO can exercise authority over taxpayers, including businesses, professionals, and individuals. The section also provides a mechanism to resolve disputes regarding jurisdiction and clarifies the powers of AOs within their assigned areas.

Key Changes: ​

  1. Clarification of Jurisdiction: The section explicitly defines the jurisdiction of AOs based on the location of a taxpayer's business, profession, or residence. This is a continuation of existing principles but provides more structured guidance.
  2. Dispute Resolution Mechanism: Introduces a formal process for resolving disputes about jurisdiction, involving specified income-tax authorities or the Central Board of Direct Taxes (CBDT) if necessary.
  3. Time Limits for Challenging Jurisdiction: Establishes specific timeframes within which a taxpayer can challenge the jurisdiction of an AO, failing which the AO's jurisdiction cannot be questioned.
  4. Powers of AOs: Reinforces that AOs retain all powers conferred under the Income Tax Act, regardless of jurisdictional disputes or directions issued under Section 241.

Practical Implications: ​

  1. For Businesses and Professionals: Taxpayers must ensure that their principal place of business or profession is correctly reported, as this determines the AO's jurisdiction. If a business operates in multiple locations, the principal place will dictate which AO has authority.
  2. For Individuals: Residency within a specific area determines the AO's jurisdiction. Taxpayers must ensure their residential address is accurately updated with the tax authorities.
  3. Dispute Resolution: If a taxpayer disagrees with the AO's jurisdiction, they must raise the issue promptly. Delays beyond the specified time limits will result in the AO's jurisdiction being unchallengeable.
  4. Compliance Burden: Taxpayers must be vigilant about jurisdictional issues, especially when filing returns or responding to notices, to avoid complications during assessments.

Critical Concepts: ​

  1. Assessing Officer (AO): A tax official responsible for assessing and verifying tax returns and ensuring compliance with tax laws.
  2. Specified Income-Tax Authority: A higher authority designated to resolve disputes about jurisdiction. This could include Commissioners or the CBDT.
  3. Principal Place of Business: The primary location where a business or profession is conducted. This is crucial for determining jurisdiction if operations span multiple areas.
  4. Time Limits for Challenging Jurisdiction: Taxpayers must act within one month of receiving a notice or before the completion of the assessment, whichever is earlier, to challenge an AO's jurisdiction.

Compliance Steps: ​

  1. Verify Jurisdiction: Ensure that the AO assigned to your case has jurisdiction based on your principal place of business, profession, or residence.
  2. Update Records: Keep your business and residential addresses updated with the tax authorities to avoid jurisdictional disputes.
  3. Respond Promptly: If you receive a notice from an AO and believe they lack jurisdiction, raise the issue within the specified time limits (one month or before assessment completion).
  4. Maintain Documentation: Keep records of all communications with tax authorities, including notices and responses, to support your case in case of disputes.

Examples: ​

  1. Business with Multiple Locations: A company operates its head office in Mumbai and a branch in Delhi. The principal place of business is Mumbai, so the AO in Mumbai will have jurisdiction over the company's tax matters.
  2. Individual Taxpayer: An individual resides in Bangalore but receives rental income from a property in Chennai. The AO in Bangalore will have jurisdiction because the individual resides there, even though the income arises in Chennai.
  3. Jurisdictional Dispute: A taxpayer in Pune receives a notice from an AO in Mumbai. The taxpayer believes the AO in Pune should handle their case. They must raise this issue within one month of receiving the notice or before the assessment is completed, whichever comes first.

This section ensures clarity in the jurisdictional authority of AOs and provides a structured process for resolving disputes, reducing ambiguity for taxpayers and tax authorities alike.