2020 (12) TMI 559 - AT - Income Tax

Reassessment Order Quashed: Tribunal Rules Lack of Jurisdiction, ITO's Authority Declined Due to Transfer.

OSL Developers Pvt. Ltd. Versus ITO, Ward-5 (3), Kolkata

The Tribunal quashed the reassessment order dated 25.03.2014, ruling it legally unsustainable due to lack of jurisdiction. The ITO, Ward-5(3), Kolkata, ... Validity of reopening of assessment - jurisdiction of ITO, Ward-5(3) to frame re-assessment order - usurping the jurisdiction - whether the ITO, Ward-5(3) was empowered on 25.03.2014 to give effect to the order of Pr. CIT-II dated 28.03.2013 passed u/s. 263 ? - earlier order dated 28.03.2013 passed u/s. 127 of the Act, by the then CIT-II, Kolkata had transferred the jurisdiction over the assessee's case from ITO, Ward-5(3), Kolkata to the charge of DCIT/ACIT, Central Circle-XVII, Kolkata, on the request of CIT-I dated 8/14.12.2011 - HELD THAT:- In this case, we have noted that ITO, Ward-5(3) got back his power only on re-transfer of assessee's case to him when the order u/s. 127 was passed later on 31.05.2016, so the question of ITO, Ward-5(3), Kolkata giving effect to Pr. CIT-II order dated 28.03.2013 does not rise at all on 25.03.2014. Thus we find that in assessee's case the ITO, Ward-5(3) did not enjoy jurisdiction to assess the income of assessee as an AO between 28 December 2012 and 31 May 2016. ITO, Ward-5(3), Kolkata ceased to be AO of assessee after the transfer order was passed by Ld. CIT-II, Kolkata on 28.08.2012, so after such order by the competent authority (which fact is not disputed before us), then the ITO, Ward-5(3), Kolkata became functus officio and was divested of the jurisdiction. We hold that in the given facts of the case, the appellant's case was not saved by the provisions of Section 124(5) of the Act. Accordingly, the contentions of the Ld. CIT, DR are rejected being devoid of any merit in law as well as on facts. In the appellant's case, the provision of section 124(3) does not come into play since the case of the assessee was legally transferred by the competent authority u/s. 127 as far back as in the year 2012. In the circumstances therefore, as discussed above, once transfer of the case of the assessee is ordered u/s. 127 of the Act, the AO ITO, Ward-5(3), Kolkata who was vested with the jurisdiction by virtue of the direction or order issued under sub-section (1) or (2) of sec. 120 and section 124 of the Act stood divested of the same. As held by the Hon'ble jurisdictional High Court in M/s. Ramshila Enterprises Pvt. Ltd. (infra), [2016 (5) TMI 17 - CALCUTTA HIGH COURT] since the jurisdiction was divested of the earlier AO by virtue of transfer order u/s. 127 of the Act, the earlier AO, which in this case is AO i.e. ITO, Ward-5(3), Kolkata ceased to be Assessing Officer after the date of transfer i.e. 28.08.2012 and therefore he (i.e. ITO, Ward-5(3), Kolkata) ought not to have issued statutory notices upon the assessee unless he had been re-empowered or vested by a fresh transfer order u/s. 127 of the Act (i.e. from DCIT, CC-XVII, Kolkata to ITO, Ward-5(3), Kolkata), which is not the case of the Revenue and though it did later happen in this case (Re-transfer as on 31.05.2016). In the circumstances therefore, the ITO, Ward-5(3), Kolkata could not have usurped the jurisdiction when his jurisdiction was divested of it, by order dated 28.08.2012 by Ld. CIT-II, Kolkata u/s. 127 of the Act Section 124(3) of the Act does not come into play in this case and so in no way help the Department to justify the action of ITO, Ward-5(3), Kolkata in issuing statutory notices to the assessee, which action itself was without jurisdiction. So the challenge raised by the Ld CIT, DR fails. Therefore, we do not find any merit in the contention of the Ld. CIT, DR on this score. As the ITO-5(3) Kolkata, did not enjoy jurisdiction over the case of the appellant on 25.03.2014, the re-assessment order passed u/s. 263/143(3) dated 25.03.2014 was legally unsustainable and therefore is null in the eyes of law and therefore quashed - Decided in favour of assessee. Issues Involved:1. Jurisdiction of the Assessing Officer (AO) to pass the reassessment order.2. Applicability of Section 124(3) and Section 124(5) of the Income Tax Act, 1961.3. Validity of the reassessment order dated 25.03.2014.Detailed Analysis:1. Jurisdiction of the Assessing Officer (AO) to Pass the Reassessment Order:The primary issue raised by the assessee was that the Income Tax Officer (ITO), Ward-5(3), Kolkata, did not have the jurisdiction to pass the reassessment order dated 25.03.2014. The jurisdiction was initially with ITO, Ward-5(3), Kolkata, who passed the reassessment order for AY 2008-09 on 29.09.2010. The name of the assessee company changed on 22.03.2011, and a search was conducted on 25/26.08.2011. Subsequently, on 28.08.2012, the jurisdiction was transferred from ITO, Ward-5(3), Kolkata to DCIT/ACIT, Central Circle-XVII, Kolkata under Section 127 of the Act. This transfer was absolute and without reserving any right of concurrent jurisdiction to ITO, Ward-5(3). Therefore, the ITO, Ward-5(3), Kolkata did not have the jurisdiction to frame the reassessment order on 25.03.2014.2. Applicability of Section 124(3) and Section 124(5) of the Income Tax Act, 1961:The Department argued that the assessee was estopped from challenging the jurisdiction of ITO, Ward-5(3) under Section 124(3) since the assessee did not raise the jurisdictional issue within the prescribed time. However, the Tribunal held that Section 124(3) applies only when an AO assumes jurisdiction under Section 124 based on directions/orders issued under Section 120. Since the jurisdiction was transferred under Section 127, Section 124(3) did not apply. Furthermore, Section 124(5) was argued by the Department to save the action of the AO. However, the Tribunal clarified that Section 124(5) overrides only the provisions of Section 124 and orders/directions under Section 120, not an order of transfer under Section 127. Thus, the ITO, Ward-5(3), Kolkata, was divested of jurisdiction after the transfer order dated 28.08.2012.3. Validity of the Reassessment Order Dated 25.03.2014:Given the transfer of jurisdiction to DCIT, Central Circle-XVII, Kolkata, the ITO, Ward-5(3), Kolkata, became functus officio and could not pass the reassessment order dated 25.03.2014. The Tribunal held that the reassessment order was legally unsustainable and null in the eyes of law. The reassessment order was quashed, and the appeal of the assessee was allowed.Conclusion:The Tribunal upheld the objections raised by the assessee regarding the jurisdiction of ITO, Ward-5(3), Kolkata, and quashed the reassessment order dated 25.03.2014 as it was passed without jurisdiction. The appeal of the assessee was allowed.