2023 (3) TMI 1145 - AT - Income Tax

Validity of Revision u/s 263 - validity of transfer order u/s 127 - Validity of assessment order paased by non jurisdictional AO - as argued assessment order passed by AO is void, illegal and non-est - As per assessee initial notice of assessment was issued by the ITO Ward-4 Palanpur and without completing the procedure as laid out u/s 127 for transfer of jurisdiction without any prior intimation to the assessee, the case file of the assessee was transferred to ITO Ward 3(3)(2) Ahmedabad and therefore the assessment order itself was bad in law - HELD THAT - DR has not been able to bring forth any material on record to substantiate that the procedure as envisaged under section 127 of the Act for transfer of files was fulfilled in the instant set of facts. It is a well-settled principle of law that power of transfer is a quasi-judicial function and was be exercised in a fair and reasonable manner and not in an arbitrary or mechanical way. The opportunity of being heard must be given to the assessee not only when the case is to be transferred despite the objection of the assessee, but also when it is not to be transferred despite his request. Needless to say, the objections raised by the assessee must be appropriately dealt with by the Commissioner and an order that does not consider the objections is liable to be quashed. As decided in case of Melco India (P.) Ltd. 2002 (1) TMI 11 - DELHI HIGH COURT held that since no notice u/s 127 of the Act was issued to petitioners giving them an opportunity of being heard, impugned order passed by Commissioner was invalid and liable to be set aside - we are of the considered view that since the necessary procedure for transfer of case was not followed in the instant set of facts, the assessment order in the instant set of facts is null and void. Also no fresh notice of assessment was issued by ITO Ward 3(3)(2) and for this reason also, the assessment order passed by ITO Ward 3(3)(2) is null and void since there is a legal requirement to issue a separate notice of assessment to the assessee. Once it is held that the assessment order itself is null and void, can such assessment order be the subject matter of revision u/s 263? - It is a well-settled principle of law that once the assessment order passed itself is null and void, the same cannot be the subject matter revision under section 263 of the Act. In the case of Inder Kumar Bachani (HUF) 2005 (12) TMI 240 - ITAT LUCKNOW-A ITAT held that as the order of the Assessing Officer passed under section 147 / 143(3) was itself void, the order of PCIT passed under section 263 for quashing this order was without jurisdiction. Thus we are of the considered view that since the assessment order passed by ITO Ward 3(3)(2), Ahmedabad itself was null and void, the same could not be the subject matter of revision under section 263 of the Act. Appeal of the assessee is allowed.

Issues involved:
The appeal filed against the order of the Principal Commissioner of Income Tax, Ahmedabad-3 under section 263 for the assessment year 2015-16.

Grounds of appeal:
1. The order of the Principal Commissioner is alleged to be in violation of the principle of natural justice.
2. The original assessment order is challenged as invalid and without jurisdiction, questioning the subsequent assumption of valid jurisdiction by the Principal Commissioner.
3. Jurisdictional issues are raised, contending that the Principal Commissioner had no authority over the appellant.
4. Allegation of error in law and fact by the Principal Commissioner in deeming the Assessing Officer's order as erroneous and prejudicial to revenue, seeking to set aside the assessment order.
5. Request for liberty to amend or modify grounds of appeal before final hearing.

Additional ground of appeal:
1. Challenging the assumption of jurisdiction by the Principal Commissioner under section 263 as illegal due to the alleged void and illegal nature of the assessment order passed by the Assessing Officer.

Jurisdictional challenge:
The counsel for the assessee argued that the assessment order by the Assessing Officer was void, illegal, and non-est due to a procedural flaw in jurisdiction transfer. The failure to follow the necessary procedures under section 127 of the Act for transferring jurisdiction rendered the assessment order illegal and void. The absence of a valid order under section 127 led to the assertion that both the assessment order and the subsequent revisional order under section 263 were null and void.

Legal principles on jurisdiction transfer:
It is established that the power of transfer is quasi-judicial and must be exercised fairly and reasonably, with proper notice and reasons provided to the assessee. Courts have emphasized the need for effective representation by the assessee in cases of transfer, and failure to adhere to these principles can render the transfer order invalid. Various court decisions highlight the importance of following due process in transferring assessment files to maintain the validity of subsequent orders.

Effect of void assessment order on revision under section 263:
When the assessment order itself is null and void, it cannot be subject to revision under section 263 of the Act. Precedents indicate that revisionary jurisdiction cannot be exercised against a void order, as it would not stand in the eyes of the law. The principle applies even when the Assessing Officer's order is illegal, preventing the invocation of revisionary powers. Therefore, since the assessment order in this case was deemed null and void, the revision under section 263 was held to be without jurisdiction, resulting in the allowance of the appeal based on the jurisdictional issue.

Conclusion:
The appeal of the assessee was allowed on the grounds of jurisdiction, with the assessment order being declared null and void, thereby precluding revision under section 263. The decision was pronounced in open court on 21-03-2023.

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