2025 (7) TMI 1583 - AT - Income Tax

Revision u/s 263 - Validity of order passed u/s. 143(3) for want of valid jurisdiction - CIT cancelling the order passed u/s. 143(3) by the ITO Ward 2(3) Delhi and directing the Ld. AO for a proposed addition u/s.56(2)(viia) - jurisdiction of the AO was changed without passing a proper order u/s 127 HELD THAT - In absence of order u/s 127 of the Act for transfer of jurisdiction to another AO is against the provisions of section 127 of the Act and the whole proceedings initiated u/s 143(3) becomes bad in law deserves to the quashed. When the main assessment order u/s 143(3) is quashed on the basis of wrong jurisdiction which is bad in law by initiating any proceedings against the above said order also becomes bad in law deserves to be quashed. Accordingly revision proceedings initiated u/s 263 and order passed u/s 263 is also bad in law and the same is quashed. Assessee appeal allowed.

Summary

ISSUES:

Whether the assessment order passed by an Assessing Officer (AO) without a valid transfer order under section 127 of the Income-tax Act, 1961 is void for want of jurisdiction.Whether the Principal Commissioner of Income-tax (PCIT) could validly invoke revisionary jurisdiction under section 263 of the Act when the assessment order challenged was passed without valid jurisdiction.Whether the provisions of sections 124(3)(a) and 292B of the Income-tax Act can cure the defect of lack of jurisdiction due to absence of a transfer order under section 127.Whether the AO or PCIT can expand the scope of limited scrutiny beyond the notice issued, particularly regarding applicability of section 56(2)(viia) for unlisted securities.Whether an objection to jurisdiction can be waived or barred if not raised within the statutory time limits prescribed under the Act.

RULINGS / HOLDINGS:

The assessment order passed by the AO without a valid transfer order under section 127 of the Act is "void ab initio due to want of jurisdiction" and thus invalid.The revisionary order passed by the PCIT under section 263, which assumes jurisdiction over an AO lacking valid jurisdiction, is also "bad in law and liable to be quashed."The provisions of section 124(3)(a) and section 292B of the Act "will not come to rescue" in cases where jurisdiction is transferred without a valid order under section 127, as these sections do not validate jurisdictional defects arising from absence of such transfer orders.The PCIT erred in expanding the scope of limited scrutiny to issues not contemplated in the notice, specifically regarding the applicability of section 56(2)(viia), thereby exceeding jurisdiction under section 263.The objection to jurisdiction is not barred by limitation where the jurisdiction itself is fundamentally lacking due to absence of statutory transfer under section 127, as held by binding judicial precedents.

RATIONALE:

The Court applied the statutory framework under sections 127, 124(3)(a), 263, and 292B of the Income-tax Act, 1961, emphasizing the mandatory nature of jurisdictional transfer under section 127 before an AO can validly assume jurisdiction over an assessee's case.Binding precedent from the Hon'ble Delhi High Court was followed, which held that decentralization or transfer of jurisdiction without a valid order under section 127 is impermissible and renders subsequent proceedings void.The Court distinguished the applicability of sections 124(3)(a) and 292B, noting these provisions do not cure jurisdictional defects arising from absence of a valid transfer order under section 127, as these sections primarily address procedural irregularities and not fundamental jurisdictional authority.The Court relied on the principle that "once the case of the assessee is centralized, then the transfer of the case of the assessee to another AO would not be permissible without a decentralization order or transfer order under Section 127 of the Act," reinforcing the legislative intent behind section 127.The Court noted that the principle of submission to jurisdiction does not apply where jurisdiction is "void ab initio" and that objections to jurisdiction can be raised at any stage when jurisdiction is fundamentally lacking.The Court declined to address merits of the assessment or revisionary order on substantive grounds, as the jurisdictional defect rendered the entire proceedings void.