Facts of the Case

The principal issue before the Delhi High Court was whether a non-jurisdictional Assessing Officer could proceed with assessment proceedings in the absence of a transfer order under Section 127 of the Income Tax Act, 1961.

The assessee, a private limited company, had its case centralized pursuant to an order dated 16 July 2008, placing jurisdiction with the Central Circle-16 (later Central Circle-20), New Delhi. For Assessment Year 2015-16, the assessee filed its return before Central Circle-20 declaring nominal income.

However, a notice under Section 143(2) was issued on 21 March 2016 by the Income Tax Officer, Ward-21(1), New Delhi. The assessee participated in the proceedings assuming that a valid transfer had been made. Subsequently, an assessment order dated 31 December 2017 was passed by the said officer making substantial additions under Section 56(2)(viia). 

Issues Involved

  1. Whether an Assessing Officer lacking jurisdiction can validly complete assessment proceedings.
  2. Whether a centralized case can be transferred to another officer without an order under Section 127.
  3. Whether notifications issued under Section 120 confer inherent jurisdiction overriding Section 127.

Petitioner’s (Assessee’s) Arguments

The assessee contended that since Assessment Years 2008-09 onward, all assessments had been conducted by the Central Circle. Therefore, jurisdiction could not shift to another officer without a valid transfer or decentralization order under Section 127.

It was argued that Section 127 mandates a formal transfer order to move a case from one Assessing Officer to another. Absence of such order rendered the proceedings void ab initio.

Respondent’s (Revenue’s) Arguments

The Revenue argued that jurisdiction of the ITO Ward-21(1) arose from CBDT notifications and orders issued under Section 120, which allocated cases based on territorial and other criteria. It contended that a transfer order existed in the Income Tax Business Application (ITBA) system and that the officer possessed inherent jurisdiction.

 Court Order / Findings

  • The assessee’s case had been centralized since 2008 with the Central Circle.
  • No valid transfer or decentralization order under Section 127 was produced before the Court.
  • Notifications under Section 120 cannot override the statutory requirement of a transfer order under Section 127.
  • Allowing multiple officers to assume jurisdiction simultaneously would create administrative chaos and conflicting proceedings.
  • Once a case is centralized, transfer to another officer without compliance with Section 127 is impermissible.

Important Clarification

  • Section 127 is a mandatory mechanism for transfer of cases between Assessing Officers.
  • Administrative notifications cannot substitute statutory transfer procedures.
  • Centralization orders continue to govern jurisdiction unless formally altered.
  • Assessment by a non-jurisdictional officer constitutes a jurisdictional error that vitiates the entire proceedings.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1772178368_RAJSHEELAGROWTHFUNDPLTD.VsINCOMETAXOFFICERWARD211DELHI.pdf  

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.