2025 (7) TMI 1293 - AT - Income Tax

Jurisdiction of the AO - Transfer u/s. 127 - notice u/s. 143(2) has been issued by the ITO-1(1) Raipur whereas the assessment has been framed u/s.143(3) of the Act by the ITO-2(1) Raipur - HELD THAT - As in the present case as demonstrated in the record it is not that of compliance and rather it is ambiguity in issuance of notice and denying an opportunity to the assessee as to whether he should respond to the ITO Ward-1(1) Raipur or ITO Ward- 2(1) Raipur. There are plethora of judicial pronouncements wherein it had been held that the tax payer should be provided opportunity to prepare for his defence in timely and appropriate manner and if there is any ambiguity/confusion arising in the said hearing notice which prevents the assessee to defend himself then such hearing notices and subsequent proceedings have to be struck down holding them to be arbitrary bad in law. Reverting to the facts of the present case it is noted that notice u/s. 143(2) of the Act has been issued by the ITO-1(1) Raipur and thereafter assessment was completed by the ITO-2(1) Raipur without any order of transfer as mandated u/s.127 of the Act by the competent authority. Therefore such framing of assessment by the ITO-2(1) Raipur in absence of valid order of transfer u/s. 127 of the Act is held to be without inherent valid jurisdiction. Thus hold that the assessment framed by ITO-2(1) Raipur vide his order passed u/s. 143(3) of the Act dated 28.12.2019 in absence of an order of transfer u/s. 127 of the Act and without any issuance of notice by him u/s. 143(2) of the Act to the assessee is held to be without valid jurisdiction bad in law hence quashed. Appeal of the assessee is allowed.

Summary

ISSUES:

Whether an assessment framed by an Assessing Officer different from the one who issued the notice under section 143(2) of the Income Tax Act, 1961, without a valid order of transfer under section 127, is valid.Whether the absence of an order of transfer under section 127 of the Income Tax Act renders the assessment order void ab initio.Whether the assessee's failure to object to jurisdiction within 30 days of receipt of notice under section 142(1) precludes raising jurisdictional objections at a later stage.The adequacy and clarity required in notices issued under the Income Tax Act to satisfy principles of natural justice.The legal effect of assessment orders passed without jurisdiction and the consequences on subsequent proceedings.

RULINGS / HOLDINGS:

The assessment framed by an Assessing Officer other than the one who issued the notice under section 143(2), without a valid order of transfer under section 127, is held to be "without inherent valid jurisdiction" and thus "void ab initio" and liable to be quashed.The absence of a mandatory order of transfer under section 127 by the competent authority is a jurisdictional defect that cannot be waived and goes to the root of the jurisdiction of assessment.The principle established in the Supreme Court decision in DCIT (Exemption) & Ors. Vs. Kalinga Institute of Industrial Technology (2023) does not prevent the assessee from challenging jurisdiction for the first time before the Tribunal, especially where the issue involves ambiguity in notice issuance and denial of opportunity to defend.Notices under the Income Tax Act must be "specific and unambiguous" to enable the assessee to prepare an effective defense, fulfilling the "very edifice of the principle of natural justice". Ambiguous or contradictory notices denying clear knowledge of the authority conducting proceedings render the proceedings arbitrary and bad in law.An order passed without jurisdiction is a "nullity" and all consequential orders or actions are invalid and non-est in the eyes of law.

RATIONALE:

The Court applied statutory provisions of the Income Tax Act, 1961, particularly sections 127, 142(1), 143(2), and 143(3), emphasizing the mandatory nature of an order of transfer under section 127 to validly transfer jurisdiction between Assessing Officers.The Court relied on authoritative Supreme Court precedents, including DCIT (Exemption) & Ors. Vs. Kalinga Institute of Industrial Technology (2023), National Thermal Power Company Ltd. Vs. CIT (1998), Umanath Pandey v. State of UP (2009), Biecco Lawrie Ltd v. State of West Bengal (2009), and Union of India Vs. Rajeev Bansal (2024), to underscore the principles of jurisdiction, natural justice, and validity of statutory actions.The Court distinguished between procedural compliance and substantive jurisdiction, holding that ambiguity in notice issuance affecting the assessee's ability to defend cannot be cured by mere participation in proceedings.The Court reaffirmed that statutory powers must be exercised strictly in accordance with the statute, and any exercise inconsistent with statutory prescriptions is invalid.The judgment reflects a doctrinal emphasis on protecting the assessee's right to clear and lawful notice and valid jurisdictional authority before assessment proceedings can be sustained.