Transfer of assessment cases between officers requires mandatory Section 127 compliance, subsequent transfers without proper orders invalid

Delhi HC held that transfer of assessment cases between Assessing Officers requires mandatory compliance with Section 127 of the Income Tax Act. The court ruled that after centralization of assessee's case to DCIT Central Circle through proper order in 2008, subsequent transfer to ITO Ward without any decentralization or transfer order under Section 127 was invalid. Revenue's contention that ITO had inherent jurisdiction through Section 120 notification was rejected, as accepting this would create chaos with multiple AOs having simultaneous jurisdiction. The court emphasized Section 127 as mandatory machinery provision to avoid administrative confusion and ensure coordinated investigation. Writ petition was allowed, setting aside the impugned assessment orders.

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Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in absence of a transfer order u/s 127 of the Income Tax Act.
2. Validity of assessment orders passed by a non-jurisdictional AO.
3. Applicability of CBDT notifications and orders u/s 120 of the Income Tax Act.

Summary:

1. Jurisdiction of the Assessing Officer (AO) in absence of a transfer order u/s 127 of the Income Tax Act:
The principal issue is whether, in the absence of any order of transfer u/s 127 of the Act, the non-jurisdictional AO can proceed with the assessment. The assessee, a private limited company, had been assessed by Central Circle-16/20, New Delhi since AY 2008-09. However, for AY 2015-16, the ITO Ward 21(1), New Delhi issued a notice u/s 143(2) and subsequently passed an assessment order adding INR 1,35,11,59,300 to the assessee's income. The assessee challenged the jurisdiction of ITO Ward 21(1), claiming no valid transfer order u/s 127 was passed.

2. Validity of assessment orders passed by a non-jurisdictional AO:
The assessee appealed to CIT(A) and ITAT, both of which addressed the jurisdiction issue. ITAT remanded the matter to the AO to ascertain the existence of a transfer order u/s 127. Subsequent proceedings confirmed a transfer order was allegedly issued but not traceable. The High Court scrutinized the legislative mandate of Section 127, emphasizing that transfer orders must be based on public interest and administrative convenience. The court noted that without a valid transfer order, the jurisdiction of the AO cannot be conferred to pass any assessment order.

3. Applicability of CBDT notifications and orders u/s 120 of the Income Tax Act:
The Revenue contended that CBDT notifications dated 22.10.2014 and 15.11.2014 conferred inherent jurisdiction to ITO Ward 21(1) over the assessee. However, the court held that such notifications cannot override the legislative mandate of Section 127, which requires a transfer order for jurisdictional changes. The court highlighted the necessity of a decentralization order or transfer order u/s 127 to avoid chaos and ensure administrative convenience.

Conclusion:
The High Court set aside the impugned assessment orders dated 31.12.2017 and 30.09.2021 on the ground of jurisdictional error, as no valid transfer order u/s 127 was produced. Consequently, the ITAT order dated 09.08.2019 was also set aside. The court clarified that the Revenue could take fresh steps through jurisdictional authorities if permissible by law.

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