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Facts
The assessee's case was initially selected for scrutiny, and a Section 143(2) notice was issued by ACIT Circle-31. The case was subsequently transferred to ACIT Circle 11(2), who completed the assessment under Section 143(3) without issuing a fresh Section 143(2) notice. The assessee challenges the assessment's validity due to the absence of a mandatory 143(2) notice from the jurisdictional AO and the transfer of the file without a proper Section 127(3) order from the PCIT.
Held
The Tribunal held that the assessment order was bad in law and a nullity because the jurisdictional AO (ACIT Circle 11(2)) failed to issue a mandatory Section 143(2) notice after the case transfer, and the transfer of the assessment file itself was irregular, lacking an administrative order from the PCIT under Section 127(3). The Tribunal relied on the Calcutta High Court's decision in Kusum Goyal Vs. ITO.
Key Issues
The key legal issues were the validity of an assessment framed without a fresh Section 143(2) notice by the jurisdictional AO after a case transfer, and whether a file transfer between AOs without a PCIT order under Section 127(3) renders the assessment void ab-initio.
Sections Cited
143(2), 143(3), 142(1), 10(38), 127(3), 127(1), 127(2), 158BD, 271(1)(c), Chapter VIA
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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 13.09.2023 for the AY 2015-16.
The only legal issue pressed at the time of hearing by the ld. Counsel for the assessee is against the order of ld. CIT (A) upholding the assessment order passed by the ld. AO i.e. ACIT, Circle 11(2), Kolkata without issuing any notice u/s 143(2) of the Act and therefore, the assessment framed is bad and ab-initio and ex-facie nullity in law.
The facts in brief are that the assessee filed return of income on 29.08.2015, declaring total income at ₹83,28,070/- after claiming
In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by holding that the burden of proof was not discharged by the assessee by proving the purchase and sales of the shares of the said script.
The ld. AR vehemently submitted before us that the order passed by the ld. ACIT Circle-11(2), Kolkata, is invalid and nullity in the eyes of the law as the ld. ACIT has not issued the mandatory notice u/s 143(2) of the Act, after the case of the assessee was transferred to him. In this case, the ld. AR submitted that the notice u/s 143(2) of the Act was issued by ACIT Circle-31, Kolkata, who is a non- jurisdictional AO of the assessee and that correct jurisdictional AO was ACIT, Circle 11(2), Kolkata. The ld. AR assailed the order passed by the ld. AO on two counts; firstly, that notice u/s 143(2) of the Act, which is mandatory/ statutory requirement under the Act, was not issued; secondly, that the file was transferred from one AO to another
The ld. DR vehemently supported the order of the lower authorities. The ld. DR argued that if the assessee has any objection to the jurisdiction of the AO who framed the assessment, then the assessee should have objected to it within 30 days of the issue of notice. In defense of the argument of the ld. Counsel for the assessee relied on the decision of Hon'ble Apex Court in case of Deputy Commissioner of Income (Exemption) Vs Kalinga Institute of Industrial Technology Vs. DCIT (2023) 151 taxmann.com 434 (SC).The ld. DR submitted that since the assessee has not filed any objections to issuance of notice by non-jurisdictional AO, therefore he should not be allowed to rake up this issue at this stage and the ground raised may be dismissed.
The ld AR in the rebuttal submitted the decision of the Hon’ble Apex Court is not applicable to the present facts as in the present case the notice was issued by non-jurisdictional AO who was not having any jurisdiction and thereafter transferred to another AO who was having the jurisdiction over the assessee but the notice u/s 143(2) was not
We have heard the rival contentions and perused the materials available on record. We note that the assessment order was passed by the ld. ACIT Circle-11(2), Kolkata, without issuing the mandatory notice u/s 143(2) of the Act after the case records of the assessee was transferred to him by ACIT Circle-31, Kolkata, who issued the notice u/s 143(2) of the Act because he was not having any jurisdiction over the assessee. We note that the case file was transferred from one ACIT circle-31 to another AO i.e. ACIT Circle - 11(2) without any administrative order passed by the PCIT having the administrative control over both the AOs. Therefore, on this count also the assessment framed cannot be sustained. After considering the facts of the assessee case in the light of the above decisions , we are inclined to hold that the assessment framed by the ACIT, Circle- 11(2), Kolkata is bad in law and nullity in the eyes of the law on the ground that the case has been transferred from ACIT, Circle-31 to ACIT 11(2) of the Act without order u/s 127(3) of the Act. We have also called for the assessment records from the SR DR who produced the assessments records and examined thoroughly however he could not produce any order of the jurisdictional PCIT u/s 127 of the Act transferring the assessment file from one to another as stated above. The case of the assessee is squarely covered by the decision of the “10. It is evident that respondent No. 2 had sought to justify his action by stating that the jurisdiction automatically gets vested with the jurisdictional officer and no order under section 127 is required to be passed. In my view, the letter/notice dated October 21, 2009 is patently illegal since it has been held in this judgment that in case of transfer within the same city, locality or place although the opportunity of hearing as postulated in section 127(1) and (2) has been dispensed with, other statutory formalities which includes issuing an order are required to be complied with. Similarly transfer of files for the assessment years 2007-08, 2008-09 and the earlier years as intimated in the letter/notice dated July 30, 2009 issued by respondent No. 1 is also bad in law. The argument of the respondents that in case of intra city transfer no order is required to be passed, cannot be accepted in view of the settled position of law in Kashiram Aggarwalla [1965] 56 ITR 14 (SC) and in S.L. Singhania [1992] 193 ITR 275 (Delhi) wherein the validity of the orders were under challenge, meaning thereby an order recording transfer has to be on the records. The judgment in Subhas Chandra Bhaniramka [2010] 320 ITR 349 (Cal) where it has been held that in case of transfer of file under section 158BD resort has to be made to section 127 also applies in the instant case. The judgment in M. A. E. K. K. Varma [1981] 129 ITR 31 (AP) relied on by the Revenue is not applicable as it dealt with the question whether in case of intra city transfer notice is required to be served and whether separate orders of transfer are required under the Wealth-tax Act, 1957 and the Gift-tax Act, 1958. Therefore, since it has been held in this judgment that it is imperative on part of the respondents to issue order under section 127(3), the letters/notices under challenge are set aside and quashed. The writ petition is allowed. Consequential proceedings are also set aside and quashed. Accordingly, the notice dated 6th January, 2010 regarding the penalty proceedings under section 271(1)(c) for the assessment year 2006-07 is also set aside and quashed. The application being G. A. No. 81 of 2010 is also allowed.”
Therefore, considering the facts of the instant case in the light of the ratio laid down in the above decision , we hereby quash the assessment framed by the AO.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 02.05.2024.