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TMI Blog2024 (5) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, in cases where the case was transferred from one AO having jurisdiction over the assessee to another AO who otherwise did not have jurisdiction in terms of the direction of the Board under Section 120 and 124 of the Act, then transfer order under Section 127 is mandatory, without which the jurisdiction of the AO cannot be conferred to pass any assessment order. It is imperative to point out that the underlying objective of such a statutory procedure is to avoid chaos and to ease the administrative convenience on the part of the Revenue for coordinated investigation. The word case includes the umbrella or class of all cases related to the assessee, wherein, the order has been passed under Sections 120 and 127 of the Act. Section 127 of the Act is a machinery provision and it must be construed in a manner to finally effectuate a charging section and for the purpose of effective collection of tax. Considering the case in hand, vide order of centralization dated 16.07.2008, the case of the assessee was transferred from the jurisdictional AO to the DCIT, Central Circle-16, New Delhi. It be noted that since AY 2008-09 to AY 2015-16, the assessee was being assessed by the office of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-15) had jurisdiction over the case of the assessee. For the AY 2015-16, the assessee filed its Income Tax Return [ ITR ] before Central Circle-20, New Delhi declaring a total income of INR 7,920. Thereafter, the assessee s case was picked up for scrutiny. 3. However, on 21.03.2016 a notice under Section 143 (2) of the Act was issued to the assessee by the office of Income Tax Officer [ ITO ] Ward 21(1), New Delhi, pursuant to which, the assessee participated in the assessment proceedings, assuming that a valid transfer order was passed in its case. Thereafter, on 31.12.2017, an assessment order was passed by ITO Ward 21(1), New Delhi, whereby, an addition amounting to INR 1,35,11,59,300 was made under Section 56 (2) (viia) of the Act to the total income of the assessee. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [ CIT(A) ] raising the ground of lack of jurisdiction and CIT(A) vide order dated 26.12.2018 rejected the appeal. Thereafter, the assessee preferred an appeal before the ITAT and the ITAT vide order dated 09.08.2019 has partly allowed the appeal, inter alia, remanded the matter back to the AO to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee can only be done through an order passed under Section 127 of the Act. 9. Mr. Ruchir Bhatia and Mr. Sanjay Kumar, learned counsels appearing on behalf of the Revenue, vehemently opposed the submissions advanced. They submitted that the transfer order had duly been passed, which was also reflected on the ITBA portal. They further argued that the ITO Ward 21(1), New Delhi has inherent jurisdiction as per the CBDT circular dated 15 November 2014 and therefore, the assessment orders do not suffer from any infirmity of jurisdictional error. 10. We have heard the learned counsel appearing on behalf of the parties and perused the record. 11. In our order dated 21.03.2024, we have succinctly captured the nature of the controversy involved in the current lis. For the sake of convenience, the order dated 21.03.2024 is reproduced herein:- 1. Mr. Bhatia, learned counsel appearing for the respondent has placed for our perusal a copy of the counter affidavit in W.P. (C) 3777/2022, which has been duly circulated. Let the same be included on our digital record. 2. Presently and upon going through the counter affidavit which has been tendered, we note that the respondents essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be canvassed before us is whether, in the absence of any decentralization order or transfer order made under Section 127 of the Act, the case of the assessee can be transferred from the board of one AO to another? 13. The Revenue draws sustenance to the impugned action on the strength of the order dated 15.11.2014. At this juncture, it is relevant to point out that vide order dated 15.11.2014 passed under Section 120 of the Act under the pen of ACIT, the jurisdiction of certain income tax authorities was outlined. As per this order, the ITO Ward 21(1), New Delhi shall have jurisdiction over the companies registered under the Companies Act, 2013, having its registered office or principal place of business in NCT, Delhi. Furthermore, as per the postulates of such an order, the ITO Ward 21(1), New Delhi shall have jurisdiction over the companies with names starting with the alphabets Rai to Real and have an income or loss less than or equal to INR 30 Lakhs. The relevant extracts of the said notification are reproduced herein for reference:- ORDER UNDER SECTION 120 OF THE INCOME-TAX ACT, 1961 In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hlights the Central Board of Direct Taxes [ CBDT ] notification dated 22.10.2014 which delineates the jurisdiction of the AO and also puts the embargo that the income tax authorities mentioned in the notification shall not exercise the powers which have been specifically assigned to other authorities vide the provisions of separate notifications. For the sake of convenience, the relevant extracts of the said notification are reproduced herein below:- S.O. 27S2(E). In exercise of the powers conferred by sub-sections (1) and (2) of section 120 of the Income Tax Act, 1961 (43 of 1961), and in supersession of Government of India, Central Board of Direct Taxes, notification number S.O. 732(E) dated the 31st July, 2001, published in the Gazette of India, Extra-Ordinary, Part-II, Section 3, Sub-section (ii), dated the 31st July, 2001 except as respects things done or omitted to be done before such supersession, the Central Board of Direct Taxes, hereby,- *** Note: The Income-tax authorities referred to in column (2) of the schedule annexed to this notification shall not exercise powers and perform functions, which have specifically been assigned through separate notification(s), to an Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of Kashiram Aggarwalla v. Union of India 1964 SCC OnLine SC 26., discussed the scope and ambit of Section 127 of the Act while emphasizing upon the administrative character of the order. The relevant paragraphs of the said decision are reproduced herein below:- 6. There is another consideration which is also relevant. Section 124 of the Act deals with the jurisdiction of Income Tax Officers. Section 124 (3) provides that within the limits of the area assigned to him the Income Tax Officer shall have jurisdiction (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 situate 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 situate within the area, and (b) in respect of any other person residing within the area. This provision clearly indicates that where a transfer is made under the proviso to Section 127 (1) from one Income Tax Officer to another in the same locality, it merely means that instead of one Income Tax Officer who is competent to deal with the case, another Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved infringement of his fundamental rights guaranteed by Articles 14 and 19 (1) (g) read with Section 64 (1) and (2). It is necessary to emphasise that Section 5 (7-A) authorised transfer of income tax cases from one officer to another not necessarily within the same place. In other words, the transfer authorised by Section 5 (7-A) would take the case from the jurisdiction of an officer entitled to try it under Section 64 (1) and (2) to another officer who may not have jurisdiction to try the case under the said provision. That, indeed, was the basis on which the validity of Section 5 (7-A) was challenged. This Court, however, repelled the plea raised against the validity of the said section on the ground that the right conferred on the assessee by Sections 64 (1) and (2) was not an absolute right and must be subject to the primary object of the Act itself, namely, the assessment and collection of the income tax; and it was also held that where the exigencies of tax collection so required, the Commissioner of Income Tax or the Central Board of Revenue had the power to transfer his case under Section 5 (7-A) to some other officer outside the area where the assessee resided or carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a question arises as to the place of assessment such question is under section 64 (3) to be determined by the Commissioner or the Commissioners concerned if the question is between places in more States than one or by the Central Board of Revenue if the latter are not in agreement and the assessee is given an opportunity of representing his views before any such question is determined. This provision also goes to show that the convenience of the assessee is the main consideration in determining the place of assessment. Even so the exigencies of tax collection have got to be considered and the primary object of the Act, viz., the assessment of Income-tax, has got to be achieved. The hierarchy of Income-tax authorities which is set up under Chapter II of the Act has been so set up with a view to assessing the proper Income-tax payable by the assessee and whether the one or the other of the authorities will proceed to assess a particular assessee has got to be determined not only having regard to the convenience of the assessee but also the exigencies of tax collection. In order to assess the tax payable by an assessee more conveniently and efficiently it may be necessary to have him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessment would be governed by the greatest exigencies for the collection of taxes. Thirdly, the decision to transfer cases cannot be capricious or mala fide. If the venue is changed from year to year, or periodically for no apparent reason, it would not manifest an instance of the exercise of power which is not available, but an example of an abuse of power in the manner in which it is exercised. Fourthly, whilst the convenience of the assessee should be kept in mind, it would always be subservient to the interests of adjudication and collection of taxes. [Emphasis supplied] 20. Furthermore, in the case of W.P.C. 4054/2024 titled Dollar Gulati v. PCIT, we have also considered the ambit of Section 127 of the Act and made the following pertinent observations :- 25. Therefore, it is evident from the legislative mandate and dictum laid down by the abovementioned judicial pronouncements on the scope and ambit of Section 127 of the Act, that it is a machinery provision which is aimed at larger public interest. On the touchstone of public interest, the powers under Section 127 of the Act can be exercised. Furthermore, the legislative mandate advises that the order of transfer u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates and acknowledges that multiple or more than one Assessing Officer could exercise jurisdiction over the particular assessee. Concurrent jurisdictions are therefore not an anathema but an accepted position under the Act. The term jurisdiction in section 120 of the Act has been used loosely and not in strict sense to confer jurisdiction exclusively to a specified and single Assessing Officer, to the exclusion of others with concurrent jurisdiction. It would refer to place of assessment , a term used in the Indian Income-tax Act, 1922. Sub-section (5) of section 120 of the Act again affirms and accepts that there can be concurrent jurisdiction of two or more Assessing Officers who would exercise jurisdiction over a particular assessee in terms of the four-fold criteria stated in sub-section (3) of section 120. Second part of sub-section (5) states that where powers and functions are exercised concurrently by the Assessing Officers of different classes, then the higher authority can direct the lower authority in rank amongst them to exercise the powers and functions. *** 18. S. S. Ahluwalia (supra), examines several decisions which were relied upon by the assessee in the said case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure that only one of them proceeds and adjudicates. This is the purport and objective behind sub-section (2) of section 124 of the Act. [Emphasis supplied] 22. Therefore, in light of the legislative mandate enshrined under Sections 120, 124 and 127 of the Act and the judicial pronouncements mentioned above, it is clear that Section 124 of the Act deals with the jurisdiction of the assessing officers, whereby, the AO has been vested with the jurisdiction over any person carrying on business or profession over any prescribed territorial limit or where the principal place of business of persons is within such area and any person residing within such prescribed territorial limits. However, in cases where the case was transferred from one AO having jurisdiction over the assessee to another AO who otherwise did not have jurisdiction in terms of the direction of the Board under Section 120 and 124 of the Act, then transfer order under Section 127 is mandatory, without which the jurisdiction of the AO cannot be conferred to pass any assessment order. 23. It is imperative to point out that the underlying objective of such a statutory procedure is to avoid chaos and to ease the administrativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1996. The power of transfer in effect provides for a machinery provision. It must be given its full effect. It must be construed in a manner so as to make it workable. Even Section 127 of the Act is a machinery provision. It should be construed to effectuate a charging section so as to allow the authorities concerned to do so in a manner wherefore the statute was enacted. [Emphasis supplied] 26. Considering the case in hand, vide order of centralization dated 16.07.2008, the case of the assessee was transferred from the jurisdictional AO to the DCIT, Central Circle-16, New Delhi. It be noted that since AY 2008-09 to AY 2015-16, the assessee was being assessed by the office of DCIT, Central Circle-16/20, New Delhi. Furthermore, as the record would reflect that the case of the assessee was transferred to ITO Ward 21(1), New Delhi without any transfer order passed under Section 127 of the Act, which is a pre-requisite before transferring the case. 27. It be noted that till date no decentralization order has been placed before us which may evidence a legitimate transfer of the assessee s case from DCIT, Central Circle-16/20, New Delhi to ITO Ward 21(1), New Delhi. Furthermore, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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