2022 (3) TMI 958 - AT - Income Tax

Jurisdiction of income tax authorities - Transfer of case u/s 127 - Transfer of jurisdiction from the ITO to the ACIT/DCIT - A.R. has contended that in this case notice u/s 143(2) issued by ITO, Ward- 26(2) had no valid sanction of law, because he had no pecuniary jurisdiction over the case and that no notice u/s 143(2) was issued by the ACIT, Circle-26(1), Kolkata to assume jurisdiction to frame assessment u/s 1434(3) - HELD THAT - Jurisdiction to transfer case from one AO to other Officer lies with the Officers as mentioned in section 127(1) who are of the rank of Commissioner or above. No document has been produced on the file by the Department to show that the case was transferred by the competent authority from Income Tax Officer to ACIT. The notice u/s 143(2) has been issued by ITO which was beyond his jurisdiction and the same was therefore, void ab initio. Under the circumstances, the assessment framed by ACIT, is bad in law as he did not issue any notice u/s 143(2) of the Act to assume jurisdiction to frame the assessment. CIT(A), this respect has placed reliance on the decision in the case of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT wherever the Hon ble Supreme Court has held that issue of notice u/s 143(2) is sine-qua-non to assume jurisdiction to frame assessment - The decision of Hon ble Calcutta High Court in the case of Kusum Goyal 2010 (4) TMI 655 - CALCUTTA HIGH COURT to hold that a valid order u/s 127 of the I.T.Act is required to be passed to transfer the case from one Assessing Officer to other AO. Appeal of the revenue stands dismissed.

Summary

Issues:
1. Validity of jurisdiction in assessment order by ACIT without proper notice issuance.
2. Interpretation of Section 127 of the Income Tax Act regarding transfer of jurisdiction.
3. Applicability of CBDT instructions on jurisdictional matters.

Issue 1: Validity of jurisdiction in assessment order by ACIT without proper notice issuance:
The Revenue appealed against the deletion of additions made by the AO on grounds of bogus expenditure and unexplained expenditure by the Ld. CIT(A). The Department contested the Ld. CIT(A)'s acceptance of the argument that the assessment order by ACIT lacked jurisdiction. The ITO issued a notice under section 143(2), but the case was transferred to ACIT due to exceeding income threshold. The contention was that the ACIT did not issue a valid notice under section 143(2) to assume jurisdiction, rendering the assessment order invalid. The ACIT's jurisdiction was challenged as no order under section 127 was passed to transfer jurisdiction from ITO to ACIT.

Issue 2: Interpretation of Section 127 of the Income Tax Act regarding transfer of jurisdiction:
The statutory provision of section 127(1) was analyzed, indicating that only authorities of the rank of Commissioner or above can transfer cases between Assessing Officers. The absence of evidence showing a valid transfer from ITO to ACIT raised doubts on the jurisdiction of the ACIT. The Ld. CIT(A) referenced the Supreme Court's decision in Hotel Blue Moon and the Calcutta High Court's ruling in Kusum Goyal vs. ITO to emphasize the necessity of a valid order under section 127 for jurisdictional transfers. The absence of a section 143(2) notice from ACIT further undermined the validity of the assessment.

Issue 3: Applicability of CBDT instructions on jurisdictional matters:
The CBDT Instruction No.1/2011 was cited to highlight the revision of monetary limits for assigning cases to ITOs and DCs/ACs, aiming to reduce compliance costs for taxpayers. However, in this case, the assessment initiated by ITO but conducted by ACIT raised concerns about jurisdictional validity. The absence of a documented transfer under section 127 and the failure to issue a notice under section 143(2) by ACIT further reinforced the argument of jurisdictional inadequacy.

In conclusion, the appeal of the Revenue was dismissed, upholding the decision of the Ld. CIT(A) regarding the jurisdictional issues raised in the assessment order by ACIT without proper notice issuance and transfer of jurisdiction from ITO to ACIT. The judgment emphasized the importance of complying with statutory provisions and legal precedents in maintaining the validity of assessment orders.