2025 (8) TMI 1513 - AT - Income Tax

Set aside appellate legal finding for lack of objection under s.124; appeal remanded for merits hearing and fresh decision

ITAT set aside the appellate authority's legal finding in favour of the assessee because no objection under s.124 had been raised; the CIT(A) is directed ... Change of jurisdiction in an inter-city transfer - DR contended that Section 127(3) of the Act, empowers the revenue to effect an inter-city transfer without issuing a formal order, and that the CIT can proceed within the framework of concurrent jurisdiction - internal reallocation OR change of jurisdiction necessitating prior notice u/s 127(1) or 127(2) - applicability of Section 124 HELD THAT:- Assessee did not raise any objection in terms of the provisions of Section 124 of the Act. Accordingly, the legal ground decided by the Ld. CIT(A) in favour of the assessee is set aside. The Ld. CIT(A) is directed to adjudicate the appeal on merits, considering the submissions and material placed by the assessee. Needless to say, the assessee shall be afforded a reasonable opportunity of hearing, and is expected to remain diligent and co-operative to ensure the expeditious disposal of the appeal. CIT(A) has taken cognizance on the basis of the remand report before passing the order. As a result, grounds 2-7 of the revenue are dismissed and ground 1 is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessment framed by an Assessing Officer who assumed jurisdiction following an administrative transfer of the case file within the same Range/charge (inter-city/intra-range transfer) is valid in the absence of a formal order under section 127 of the Income-tax Act. 2. Whether an assessee who participated in assessment proceedings before the Assessing Officer without raising an objection to jurisdiction is precluded from challenging jurisdiction at the appellate stage under section 124(3) of the Income-tax Act. 3. Whether additional evidence filed before the Commissioner of Income-tax (Appeals) could be admitted under Rule 46A of the Income-tax Rules where the conditions in sub-rule (1) of Rule 46A were not satisfied and whether the appellant was afforded reasonable opportunity under Rule 46A. 4. Ancillary: The legal effect of administrative/jurisdictional orders (e.g., Section 120/CBDT/PCIT directions) or allocation practice (including PAN-based reallocation) on the necessity for a Section 127 transfer order. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of assessment where no formal Section 127 order was passed for intra-range transfer Legal framework: Section 127 empowers the Commissioner to transfer matters between Assessing Officers; section 127(3) contemplates transfers without the formalities of (1) and (2) in certain circumstances (e.g., transfers within the same city/range). Section 120 (and administrative notifications/instructions) governs assignment/allocation of jurisdiction to Assessing Officers. Precedent treatment: The Tribunal considered and referenced decisions including a coordinate Tribunal (Raipur) decision holding that absence of any order under section 127 rendered the assessment void where the officer had no jurisdiction; the Bombay High Court decision was noted for the principle that waiver/participation does not confer jurisdiction, and Delhi High Court/Supreme Court authorities were relied upon by the revenue for the contrary proposition of estoppel by participation. Interpretation and reasoning: The Tribunal examined the transfer history on record, office remand report and jurisdictional allocation from official sources. It accepted that administrative reallocations within a Range/charge may be effected pursuant to jurisdictional orders or internal allocation and that section 127(3) contemplates a relaxed procedure in intra-range situations. The Tribunal found that the CIT(A) had quashed the assessment solely on absence of a Section 127 order without examining whether allocation/assumption of jurisdiction was supported by other valid administrative authority (e.g., jurisdictional order under section 120 or charge creation/assignment). The Tribunal held that where a transfer/assumption is an internal reallocation within the same Range/charge and supported by a jurisdictional allocation, a formal Section 127 order may not be mandatory; quashing for absence of formal Section 127 order alone was therefore erroneous when concurrent jurisdiction/administrative allocation existed. Ratio vs. Obiter: Ratio - where transfer is intra-range/within the same charge and supported by jurisdictional allocation, absence of a formal section 127 order does not automatically invalidate assumption of jurisdiction. Obiter - observations on administrative practice and PAN-based allocation (not recognised by statute) were discussed but not laid down as binding precedent beyond the facts. Conclusion: The Tribunal set aside the CIT(A)'s order quashing the assessment on the sole ground of absence of a Section 127 order and held that an intra-range administrative reallocation supported by jurisdictional allocation suffices; ground 1 of the revenue appeal was allowed (CIT(A)'s legal conclusion set aside) and matter remitted to adjudicate merits. Issue 2 - Effect of participation/waiver and requirement to object under Section 124(3) Legal framework: Section 124(3) contemplates that objections to jurisdiction must be raised at the earliest opportunity (within one month of service of notice) before the Assessing Officer; failure to do so may preclude later objection. Precedent treatment: The Tribunal considered and relied on the Delhi High Court authority (Abhishek Jain) and a recent Supreme Court authority cited by the revenue holding that failure to object during proceedings can preclude later challenge; it also noted the Bombay High Court authority (Lalitkumar Bardia) which emphasises that mere participation/waiver does not confer jurisdiction upon an otherwise non-jurisdictional officer. Interpretation and reasoning: The Tribunal reconciled these authorities by focusing on factual matrix: whether the assessee had actual or constructive knowledge of the jurisdictional defect and whether records disclosed any jurisdictional allocation to the Assessing Officer. Where the assessing officer legitimately acted pursuant to jurisdictional allocation or intra-range reallocation, participation without objection can constitute waiver under section 124(3). Conversely, if the officer had no indicia of jurisdiction (no section 127 order and no supporting allocation/notification), the assessee may be under no obligation to raise the objection at the assessment stage (citing the Raipur-Tribunal view in that factual context). On the facts before it, the Tribunal found that no objection was raised before the AO and that administrative allocation supported the AO's authority; accordingly the assessee was precluded from raising jurisdictional objection belatedly. Ratio vs. Obiter: Ratio - where administrative allocation or intra-range reallocation confers jurisdictional competence, absence of contemporaneous objection under section 124(3) operates to preclude later challenge. Obiter - distinctions drawn with prior coordinate decisions where no allocation existed. Conclusion: The Tribunal held that the assessee's failure to object under section 124 precluded raising jurisdiction at the appellate stage in the present facts; the CIT(A)'s quashing on jurisdictional ground was therefore inappropriate and was set aside. Issue 3 - Admission of additional evidence under Rule 46A (Rule 46A of the Income-tax Rules) Legal framework: Rule 46A prescribes conditions under which appellate authorities may admit additional evidence, including satisfaction of prescribed conditions and that a remand report/from AO be obtained where required; the assessee must show sufficient cause for failure to produce evidence earlier; the appellate authority must ensure procedural fairness and reasonable opportunity. Precedent treatment: The Tribunal recorded that the CIT(A) had relied on remand report and had admitted additional evidence filed by the assessee; the revenue argued non-fulfilment of the four conditions in Rule 46A sub-rule (1) and absence of sufficient cause and absence of allegation that AO denied opportunity. Interpretation and reasoning: The Tribunal noted that the CIT(A) took cognisance of the remand report and the material placed before him, and that the AO had been given opportunity to file a remand report which was done and served upon the assessee for comments. The Tribunal observed that grounds 2-7 (challenging admission under Rule 46A) were considered and dismissed on the basis that remand report was procured and opportunity given, and that the CIT(A) acted within the discretion conferred by Rule 46A. The Tribunal emphasized that admission of evidence is discretionary and that appellate authority must ensure conditions and fairness; on the record, the requirements of remand and opportunity had been complied with. Ratio vs. Obiter: Ratio - where a remand report is called, served and the parties given opportunity to comment, admission of additional evidence by the appellate authority under Rule 46A is permissible and not vitiated for absence of a formalistic fulfilment of every condition if the core requirements of fairness and remand are satisfied. Obiter - detailed analysis of the four specific conditions in Rule 46A was not exhaustively recast; findings were fact-specific. Conclusion: The Tribunal dismissed revenue's grounds challenging admission of additional evidence under Rule 46A (grounds 2-7 dismissed) finding that remand procedures and opportunity were afforded and that CIT(A) acted within discretion. Issue 4 - PAN-based allocation, administrative orders and interplay with statutory jurisdiction Legal framework: Statute recognises territorial, persons/classes, pecuniary and case/class jurisdiction (section 120(3)); PAN-based jurisdiction is not statutorily recognised. Precedent treatment: The Tribunal noted observations in the Raipur-Tribunal decision rejecting PAN jurisdiction as a basis for vesting jurisdiction; the revenue's reliance on administrative allocation/jurisdictional order (section 120 type) was accepted where documentary allocation existed. Interpretation and reasoning: The Tribunal reiterated that jurisdiction must trace to statutory or duly authorised administrative allocation; informal PAN allocation cannot substitute for lawful vesting of jurisdiction. Where records demonstrate legitimate intra-range allocation or charge creation, that administrative allocation can validate assumption of jurisdiction absent a formal section 127 order. Ratio vs. Obiter: Ratio - statutory categories of jurisdiction govern; PAN alone is not a statutory basis. Obiter - administrative practices noted but limited to factual applicability. Conclusion: Administrative allocation/charge creation documented on record can validate assumption of jurisdiction; PAN-only claims are inadequate to confer jurisdiction. Overall Disposition The Tribunal set aside the CIT(A)'s quashing of the assessment on jurisdictional grounds (ground 1 allowed), directed the CIT(A) to decide the appeal on merits afresh, and dismissed the revenue's challenges to admission of additional evidence under Rule 46A (grounds 2-7 dismissed). The Tribunal emphasised that the assessee must be afforded reasonable opportunity on remand and that statutory/administrative vesting of jurisdiction, where shown, renders a formal section 127 order unnecessary for intra-range/internal reallocations.