Court rules lack of jurisdiction in tax notice appeal under Section 263, orders nullification.

The court held that the Commissioner of Income Tax, Kolkata-II, lacked jurisdiction to issue the notice and pass the order under Section 263 after the transfer of jurisdiction to the Central Circle. The court also found that the order under Section 263 was passed without granting a genuine opportunity to the appellant and without following the proper procedure for service of notice. As a result, the court allowed the appeal, declaring the order under Section 263 null and void, and directed each party to bear their own costs.

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Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax (CIT) at the time of issuing the Show Cause notice and passing the order under Section 263 of the Income Tax Act.
2. Validity of the order under Section 263 due to alleged lack of opportunity to the appellant and the service of notice.

Detailed Analysis:

1. Jurisdiction of the Commissioner of Income Tax (CIT):

The appellant contended that the CIT, Kolkata-II, lacked jurisdiction to issue the show cause notice on 18th March 2013 and pass the order on 26th March 2013 under Section 263 of the Income Tax Act. This was because the jurisdiction had been transferred to the Commissioner of Income Tax, Central Circle, Kolkata, via an order dated 3rd September 2012 under Section 127(2)(a) of the Act. The Tribunal's findings were challenged as arbitrary, unreasonable, and perverse.

The court examined the order dated 3rd September 2012, which transferred the jurisdiction over the appellant to ACIT/DCIT, Central Circle XIX, Kolkata, for better coordination, effective investigation, and meaningful assessment following a search conducted on 17th November 2011. The appellant argued that the CIT, Kolkata-II, became 'functus officio' after the transfer, losing the authority to pass orders.

The court referred to the explanation appended to Section 127 of the Income Tax Act, which defines 'case' to include all proceedings under the Act in respect of any year, whether pending or completed, and future proceedings. The court concluded that the transfer order was not restricted to any particular year or years and applied to all pending and future proceedings. The court held that the CIT, Kolkata-II, had no jurisdiction to issue the notice or pass the order under Section 263 after the transfer of jurisdiction, rendering the actions null and void.

2. Validity of the Order under Section 263 and Service of Notice:

The appellant argued that the order under Section 263 was passed without granting any opportunity to the appellant and that the findings regarding the service of notice and the grant of opportunity were arbitrary, unreasonable, and perverse. The appellant had changed its address, and the notice dated 18th March 2013 was sent to the old address.

The court considered the provisions of Section 282 of the Income Tax Act, which outlines the modes of service of notice. The appellant contended that the CIT did not follow the procedure for service of notices, as the notice was not sent by post or courier and was served at the wrong address. The court referred to the judgment in Rameshwar Sirkar v. Income Tax Officer, which emphasized that a notice by affixture without reasonable attempts to find the assessee is not proper.

The court noted that the appellant had received a notice under Section 143(2) at the new address on 18th March 2013, indicating that the CIT was aware of the correct address. The court found that the service of notice by affixation at the old address was not in accordance with the law and that the appellant was not given a genuine opportunity of being heard.

The court held that the Tribunal's finding that the service of notice was proper was erroneous and that the appellant was not given any opportunity, let alone a genuine one. The court concluded that the order under Section 263 was passed without jurisdiction and without following the due process of law, making it a nullity.

Conclusion:

The court answered the questions of law in favor of the appellant, holding that the CIT, Kolkata-II, lacked jurisdiction to issue the notice and pass the order under Section 263 after the transfer of jurisdiction. The court also found that the order under Section 263 was passed without granting a genuine opportunity to the appellant and without following the proper procedure for service of notice. The appeal was allowed, and the parties were directed to bear their own costs.

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