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Facts
The assessees are challenging orders of the Ld.CIT(A) related to Assessment Years 2016-17 and 2015-16. A key ground is the alleged lack of jurisdiction in the transfer order dated 03/07/2018, which moved the case from Kalaburagi to Belagavi without proper notice or opportunity for objection.
Held
The Tribunal held that the transfer order dated 03/07/2018, which transferred the assessee's case jurisdiction from Kalaburagi to Belagavi, was illegal and passed without jurisdiction. This was due to the non-compliance with the mandatory procedures under Section 127 of the Act, specifically the failure to issue notice and record reasons. Consequently, the consequential notice under Section 153A and subsequent assessment proceedings were also deemed unsustainable.
Key Issues
Whether the transfer order passed by the Ld.CIT under Section 127 of the Income Tax Act was legally valid, considering the alleged lack of proper notice and reasons communicated to the assessee?
Sections Cited
132, 153A, 143(2), 142(1), 153B, 127, 143(3)
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
These are the appeals filed by the assessees challenging the orders of the Ld.CIT(A) – 2, Panaji dated 28/03/2024 and 02/05/2024 in respect of the A.Ys. 2016-17 and 2015-16 respectively and raised several grounds including the legal grounds attacking the transfer order dated 03/07/2018 passed by the Ld.CIT(A) – Kalaburagi (Gulbarga) to Belagavi (Belgaum) as without jurisdiction.
& 1178/Bang/2024 2. We will consider the facts in respect of the assessee in ITA No. 1176/Bang/2024. The assessee is in the real estate business and there was a search u/s. 132 on 06/09/2017 and based on the search, a notice u/s. 153A was issued on 14/01/2019 by the DCIT, Central, Belagavi. In response to the said notice, the assessee also filed his return of income. Thereafter a notice u/s. 143(2) was issued and notice u/s. 142(1) were also issued along with the questionnaire. The assessee also filed the response to the said notices. The assessee after receipt of the notice u/s. 153A had disclosed an additional income of Rs. 15,17,078/- consequent to the search action. The assessee disputed the reference made to the valuation officer about the ware house building constructed during the period 2014-15 and 2015-16 on the ground that no incriminating materials were found. The assessee’s case is that the AO in order to get an additional time for making the assessment had referred the matter to the valuation officer. The assessee also objected that the assessment order was barred by limitation as per section 153B of the Act. The AO had also estimated the sale value of plot sold to Dr. Prashant Dharepgol based on the agreement found and seized by the authorities. The assessee filed an affidavit from the said doctor and also explained the value found in the sale deed is correct which was not accepted by the AO and therefore there was an assessment made. The assessee also objected the profit estimated by the AO on the sale of goods. The assessee disputed the additions on the ground that the entire additions are made based on presumption and surmise.
At the time of hearing, the Ld.AR argued mainly on the legal ground that the transfer order passed by the Ld.CIT(A), Kalaburagi (Gulbarga) is bad in law and therefore in the eye of law there is no transfer of the case from the Kalaburagi (Gulbarga) to Belagavi (Belgaum) since the Ld.CIT(A) while passing the order on 03/07/2018, proper opportunity was not granted to the assessee. The Ld.AR further submitted that no notice has been issued before passing the order u/s. 127 and also reasons recorded by the Ld.CIT(A), Kalaburagi (Gulbarga) for transferring the jurisdiction from Kalaburagi (Gulbarga) to Belagavi (Belgaum) was not communicated to the & 1178/Bang/2024 assessee, for filing the objections to the same and therefore the said order is non-est in law and based on that, the proceedings could not be initiated by the AO. The Ld.AR further submitted that only from the order of the Ld.CIT(A), the assessee came to know that there was an order dated 03/07/2018 passed by the Ld.CIT, Kalaburagi (Gulbarga) which was not communicated to the assessee till date and therefore sent representation on 25/06/2024 to the CIT(A) for providing the notice and the order passed u/s. 127 of the Act. Subsequently, the assessee also sent a representation to the AO, Central Circle, Bellary on 09/07/2024 seeking the copy of the said notice and order passed u/s. 127 of the Act. The Ld.AR submitted that the AO as well as the Ld.CIT(A) had not furnished the said details till date. The Ld.AR further submitted that the Ld.DR may be directed to give a report about the service of the notice and the reasons recorded by the Ld.CIT for transferring the case from Kalaburagi (Gulbarga) to Belagavi (Belgaum) before passing the order u/s. 127 of the Act on 03/07/2018 and also to furnish the copy of the said order.
The Ld.AR further submitted that on going through the records submitted by the Ld.DR, it came to light that the Ld.CIT, Bangalore (Central) had also passed an order u/s. 127 of the Act on 22/10/2019 transferring the assessee’s case from Belagavi (Belgaum) to Bellary. The Ld.AR further submitted that even before passing this order, the Ld.CIT had not issued any notice and no reasons were communicated and the said order was also not served on the assessee and therefore the said transfer order is also not a valid order in the eye of law. The Ld.AR further submitted that in both the orders, a common order was passed by the respective CITs and no reasons were communicated to the assessee. The Ld.AR further submitted that when the jurisdiction was already transferred from Kalaburagi (Gulbarga) to Belagavi (Belgaum), the Ld.PCIT, Kalaburagi (Gulbarga) need not issue a notice transferring the case from Kalaburagi (Gulbarga) to Bellary on 02/12/2019. The Ld.AR submitted that before issuing this order, notices were issued and order has been passed u/s. 127 of the Act. The Ld.AR submitted that before coming to this Tribunal, the assessee was under the & 1178/Bang/2024 impression that there was only one transfer order dated 02/12/2019 but later on he came to know that already two transfer orders were passed by the respective CITs. The Ld.AR therefore submitted that the notice issued u/s. 153A by the DCIT, Central Circle, Belagavi (Belgaum) on 14/01/2019 pursuant to the transfer order passed by the Ld.CIT(A), Kalaburagi (Gulbarga) on 03/07/2018 is without jurisdiction for the simple reasons that the transfer order has been passed u/s. 127 of the Act, without issuing notice to the assessee and without recording the reasons for transferring the jurisdiction from Kalaburagi (Gulbarga) to Belagavi (Belgaum) and also without inviting any objections from the assessee and finally without communicating the said order to the assessee. The Ld.AR further submitted that the subsequent transfer order dated 22/10/2019 from Belagavi (Belgaum) to Bellary is also an illegal one and therefore the subsequent proceedings could not be sustained. Finally, the Ld.AR submitted that when the respective CITs had already transferred the jurisdiction from Kalaburagi (Gulbarga) to Belagavi (Belgaum) and from Belagavi (Belgaum) to Bellary, the subsequent transfer order passed on 02/12/2019 by the PCIT, Kalaburagi (Gulbarga) is also not in accordance with law and therefore prayed that the entire assessment should be set aside. The Ld.AR also made his submissions in respect of the limitation as well as on merits and prayed to allow the appeal. The Ld.AR further submitted that in the assessee’s own case for the A.Y. 2012-13, this Tribunal had heard the appeal on 02/06/2025 and the orders are awaited.
The Ld.AR also filed three paper books and also enclosed the orders of the Hon’ble High Courts and Hon’ble Supreme Court. The Ld.AR also filed a statement showing the datewise sequence of events.
The Ld.DR relied on the order of the Ld.CIT(A) and submitted that the notice u/s. 153A was issued by the DCIT, Belagavi (Belgaum) on 14/01/2019 after the CIT, Kalaburagi (Gulbarga) has transferred the case of the assessee from Kalaburagi (Gulbarga) to Belagavi (Belgaum) on 03/07/2018. The Ld.DR also filed a small note about the order passed u/s. & 1178/Bang/2024 127 of the Act and furnished the order dated 08/06/2018 in which the Centralised order was passed by the PCIT, Central Circle, Bangalore. The Ld.DR also furnished the copy of the transfer order dated 03/07/2018 and 22/10/2019 in which the assessee’s name was found. The Ld.DR therefore submitted that the notice issued u/s. 153A by the DCIT, Belagavi (Belgaum) is in order and therefore the subsequent proceedings are also in order.
We have heard the arguments of both sides and perused the materials available on record.
We have considered the submissions made by the assessee that in similar circumstances, this Tribunal in had heard the matter on 02/06/2025. We have also verified the said fact and this Tribunal had pronounced the order in the above said appeal on 29/08/2025 in which this Tribunal had considered the plea raised by the assessee that the order passed u/s. 127 of the Act is bad in law and therefore the consequential notice and assessment order passed by the AO is also bad in law. This Tribunal in vide order dated 29/08/2025 had given the following finding. “15. We also drew our support from the judgment of the Hon’ble Supreme Court reported in 1976 AIR 437 (SC) in the case of Ajantha Industries And Ors vs. Central Board of Direct Taxes, New Delhi wherein the Hon’ble Supreme Court had dealt with the procedures to be followed u/s. 127 of the Act and also spelled out the effect of the non-compliance with the said procedures. “This judgment was rendered by this Court on December 21, 1956, and we find that in the 1961 Act section 127 replaced section 5(7A) where the legislature has introduced, inter alia, the requirement of recording reasons in making the order of transfer. It is manifest that once an order is passed transferring the case file of an assessee to another area the order has to be communicated. Communication of the order is an absolutely essential requirement since the assessee is then immediately made are of the reasons which impelled the authorities to pass the order transfer. It is apparent that if a case file is transferred from the usual place of & 1178/Bang/2024 residence or office where ordinarily assessments are made to a distant area, a great deal of inconvenience and even monetary loss is involved, That is the reason why before making an order of transfer the legislature has ordinarily imposed the requirement of a show-cause notice and also recording of reasons. The question then arises whether the reasons are at all required to be communicated to the assessee. It is submitted, on behalf of the Revenue, that the very fact that reasons are recorded in the file, although these are not communicated to the assessee, fully meets the requirement section 127(1). We are unable to accept this submission. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is based on irrelevant and extraneous condonations Whether such a writ or special leave application ultimately fails is not relevant for a decision of the question We are clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non- communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. Mr. Sharma drew our attention to a decision of the Delhi High Court in Sunanda Rani Jain vs Union of India and others, where the learned single Judge has taken a contrary view. For the reasons, which we have given above, we have to hold that the said decision is not correct. The appellant drew our attention to a decision of this Court in Shri Pragdas Umar Vaishya vs.Union of India and Other where rule 55 of the Mineral Concession Rules, 1960, providing for exercise of reversional power by the Central Government was noticed. It was held that under rule 55 the Central Government in disposing of the revision application must record its reasons and communicate these reasons to the parties affected thereby. It was further held that the reasons could not be gathered from the nothings & 1178/Bang/2024 in the files of the Central Government. Recording of reasons and disclosure thereof is not a mere formality. Mr. Sharma drew our attention to a decision of this Court in Kashiran Aggarwalalla vs. Union of India and other. It is submitted that this Court took the view that orders under section 127(1) are held in that decision to be purely administrative in nature" passed for consideration of convenience and no possible prejudice could be involved in the transfer. It was also held therein that under the proviso to section 127(1) it was not necessary to give the appellant an opportunity to be heard and there was consequently no need to record reasons for the transfer. This decision is not of any assistance to the Revenue in the present case since that was a transfer from one Income- tax Officer to another Income-tax Officer in the same city, or, as stated in the judgment itself, in the same locality" and the proviso to section 127(1), therefore, applied. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated Mr. Sharma also drew our attention to a decision of this Court in S Narayanappa and Others vs. Commissioner of Income-tax, Bangalore where this Court was dealing with section 34 of the old Act. It is clear that there is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under section 34 must also be communicated to the assessee. The Income-tax Officer need not communicate to the assessee the reasons which led him to initiate the proceedings under section 34. The case under section 34 is clearly distinguishable from that of a transfer order under section 127(1) of the Act. When an order under section 34 is made the aggrieved assessee can agitate the matter in appeal against the assessment order, but an assessee against whom an order of & 1178/Bang/2024 transfer is made has no such remedy under the Act to question the order of transfer. Besides, the aggrieved assessee on receipt of the notice under section 34 may even satisfy the Income- tax Officer that there were no reasons for reopening the assessment. Such an opportunity is not available to an assesse under section 127(1) of the Act. The above decision is, therefore, clearly distinguishable. We are, therefore, clearly of opinion that non- communication of the reasons in the order passed under section 127(1) is a serious infirmity in the order for which the same is invalid. The judgment of the High Court is set aside. The appeal is allowed and the orders of transfer are quashed. No costs.”
We have also considered the judgment of the Hon’ble Allahabad High Court reported in [1996] 221 ITR 568 in the case of Vinay Kumar Jaiswal And Ors. vs. CIT And Ors wherein similar issue came up for consideration and the Hon’ble High Court has given the following findings “9. That apart the petitioners have alleged in paragraphs 11 and 13 to the writ petition that the transfer order has not been communicated to them. It has been held by the Supreme Court in the case of Ajantha Industries v. CBDT [1976] 102 ITR 281 that non-communication of the transfer order is a serious infirmity and hence the order was invalid. The same view was also taken by the Andhra Pradesh High Court in the case of V.K. Steel Industries Pvt. Ltd. [1991] 187 ITR 403.”
The above said judgments of the Hon’ble Supreme Court and the Hon’ble High Court supports the view taken by us. We, therefore, have no hesitation to conclude that the transfer order dated 03/07/2018 passed by the Ld.CIT, Kalaburagi (Gulbarga) transferring the case from the jurisdiction of the assessing officer, Kalaburagi (Gulbarga) to Belagavi (Belgaum) is illegal and therefore the consequential notice issued u/s. 153A of the Act by the DCIT, Central, Belagavi (Belgaum) is without jurisdiction. When we have held that the transfer order dated 03/07/2018 is bad in law and the consequential notice issued by the DCIT, Belagavi (Belgaum) u/s. 153A dated 14/01/2019 is also not sustainable, the subsequent proceedings dated 21/06/2021 passed by the DCIT, & 1178/Bang/2024 Central Circle, Bellary u/s. 143(3) r.w.s. 153A of the Act could not be sustained.
In view of the decision taken by us in respect of the legal plea raised by the assessee, we are not adjudicating the other issues raised by the assessee including the grounds raised
on merits. We leave it open to the assessee to raise it at appropriate time as and when required.”
9. These appeals are also relate to the very same search and seizure carried out by the authorities and also based on the transfer order passed by the Ld.CIT(A), Kalaburagi (Gulbarga) on 03/07/2018. We, therefore find that the present argument made by the assessee that the transfer order dated 03/07/2018 is not a valid one and therefore the consequential notice and assessment orders passed by the AO on the very same set of facts is bad in law. In view of the above order passed by the Coordinate Bench of this Tribunal in dated 29/08/2025, we have no hesitation to follow the order passed in the above said appeal in ITA No. 1175/Bang/2024 and thereby we set aside the transfer order dated 03/07/2018 and therefore the consequential notice issued u/s. 153A by the DCIT, Belagavi (Belgaum) on 14/01/2019 is not sustainable. When the initiation of notice u/s. 153A was held as not sustainable, the proceedings of the AO u/s. 143(3) r.w.s. 153A of the Act is also bad in law and not sustainable.
In the result, both the appeals filed by the assessees are allowed.
Order pronounced in the open court on 25th September, 2025.