2018 (9) TMI 1538 - AT - Income Tax

Scrutiny assessment - validity of notice issued u/s.143(2) - Jurisdiction of AO to pass order - Transfer of case u/s 127 - whether the Additional Commissioner of Income Tax is empowered to transfer the cases to any other the Assessing Officers? - Held that - Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, can transfer any case from one or more Assessing Officers subordinate to him. In the instant case the Additional Commissioner of Income Tax vide order dated 25th November, 2008 has passed an order and reassigned the case of the assessee to the ACIT(OSD) and forwarded the copies to the Chief Commissioner of Income Tax and Commissioner of Income Tax accordingly. In this case, although the office of the Chief Commissioner of Income Tax, vide order No.50/2008-09, dated 19th November, 2008 has transferred/posted the Assistant Commissioner of Income Tax (A.K.Bandopadhyay, who is the Assessing Officer in the present appeal) to the office of the Commissioner of Income Tax, Bhubaneswar, copy of which is placed on record by the Department along with written submission filed on 15.06.2017), however, the office of the Additional Commissioner of Income Tax, has assigned the cases to the ACIT(OSD) vide order dated 25.11.2008. Before us, ld. DR could not place any authorization or order issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act by the Commissioner authorizing an Additional Commissioner of Income Tax to assign or reassign the cases to the Assessing Officers, neither any CBDT Circular supports the Additional Commissioner of Income Tax on record to transfer or reassign the cases to any other Assessing Officer. In view of the decision Valvoline Cumins Limited Vs. Deputy Commissioner of Income-Tax and others 2008 (5) TMI 20 - HIGH COURT OF DELHI , the ACIT(OSD), Range-2, Bhubaneswar could not have jurisdiction to pass the assessment order in case of the assessee as the ACIT, Circle-2(1), Bhubaneswar had already exercised the jurisdiction by issuing notice u/s.143(2) of the Act when admittedly no order u/s.127 of the Act was passed by the competent authority under that section. The order passed by the Additional Commissioner of Income Tax, dated 25th November, 2008 re-assigning the cases to the ACIT(OSD), who is the Assessing Officer in the present case, is not maintainable and consequently, the orders passed by the AO and confirmed by the CIT(A) in the case of present assessee are hereby quashed. - Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of the assessment order due to non-compliance with Section 143(1) before issuing notice under Section 143(2).
2. Assessment order being barred by limitation.
3. Jurisdiction of the Assistant Commissioner of Income-Tax (OSD), Bhubaneswar.
4. Opportunity of being heard regarding the jurisdiction issue.
5. Principles of natural justice.
6. Consideration of merits without resolving the jurisdiction issue.
7. Interpretation of Section 40(a)(ia) regarding certain payments.

Detailed Analysis:

1. Validity of the Assessment Order:
The assessee argued that the assessment order and demand notice should be annulled as processing under Section 143(1) was not made before issuing notice under Section 143(2). The Tribunal did not specifically address this issue in the judgment, focusing instead on jurisdictional matters.

2. Assessment Order Barred by Limitation:
The assessee contended that the assessment order was served late, on 19.01.2009, and thus was barred by limitation. This argument was not the primary focus of the Tribunal's decision.

3. Jurisdiction of the Assistant Commissioner of Income-Tax (OSD), Bhubaneswar:
The primary issue revolved around whether the ACIT (OSD), Bhubaneswar had jurisdiction to pass the assessment order. The Tribunal noted that the jurisdiction was vested with the Additional CIT/Jt. CIT of the concerned Range, and all officers posted in that Range had concurrent jurisdiction. However, the Tribunal found that the reassignment of the case to the ACIT (OSD) was not supported by an order under Section 127 of the Act, which is necessary for transferring cases between officers. The Tribunal cited the decision of the Hon'ble Delhi High Court in Valvoline Cumins Limited Vs. Deputy Commissioner of Income-Tax, which held that once an authority exercises jurisdiction, it must conclude it without transferring the case to another authority with concurrent jurisdiction.

4. Opportunity of Being Heard Regarding Jurisdiction:
The assessee claimed that the CIT(A) did not provide an opportunity to resolve the jurisdiction issue before addressing the merits. The Tribunal agreed that the jurisdictional issue should have been resolved first, as it is fundamental to the validity of the assessment order.

5. Principles of Natural Justice:
The assessee argued that the CIT(A) violated principles of natural justice by not addressing the jurisdiction issue before proceeding on merits. The Tribunal concurred, emphasizing the importance of resolving jurisdictional questions before delving into substantive issues.

6. Consideration of Merits Without Resolving Jurisdiction:
The Tribunal found that the CIT(A) erred by addressing the merits of the case without first resolving the jurisdictional issue. This procedural misstep warranted quashing the assessment order.

7. Interpretation of Section 40(a)(ia):
The assessee challenged the CIT(A)'s interpretation of Section 40(a)(ia) regarding payments made to Pattnaik Minerals Pvt. Ltd and truck drivers. The Tribunal did not delve into this issue, as the jurisdictional question rendered the assessment order invalid.

Conclusion:
The Tribunal concluded that the reassignment of the case to the ACIT (OSD) was not valid without an order under Section 127. Consequently, the assessment order and subsequent proceedings were quashed. The appeal was allowed in favor of the assessee, emphasizing the necessity of proper jurisdictional authority in tax assessments. The Tribunal's decision underscored the importance of adhering to statutory provisions and procedural fairness in tax administration.