Assessment proceedings quashed as transfer between ITO wards lacked mandatory order under section 127, jurisdiction absent.

ITAT (DELHI - AT) held the assessment proceedings invalid and quashed them because the case was transferred between ITO wards without a mandatory order under section 127, so the Assessing Officer at Ward 36(6) did not acquire jurisdiction. The transfer from Ward 39(4) to 36(4) lacked a valid s.127 order and subsequent assignment did not cure jurisdictional defect. Relying on precedent that s.127 is mandatory, the tribunal allowed the assessee's grounds.

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ISSUES PRESENTED AND CONSIDERED

1. Whether an Assessing Officer to whom an assessment file is transferred acquires valid jurisdiction to pass assessment orders in absence of a transfer order under Section 127(1) of the Income-tax Act, when the transfer is effected only by an order/direction under Section 120(5) (or by intra-Range assignment) and notice(s) under Section 143(2)/142(1) were issued earlier by a different Ward.

2. Whether the requirement under Section 124(3) to raise objection to jurisdiction within thirty days operates to bar challenge to jurisdiction where the assessee did not participate in proceedings and notices were sent to the assessee's former/prior tax representative.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Jurisdictional validity of transfer without Section 127(1) order

Legal framework: The statutory scheme distinguishes (a) conferment/assignment of jurisdiction by formal transfer under Section 127(1) and (b) administrative directions/assignments under Section 120 and Section 124; Section 127 is the statutory mechanism to transfer jurisdiction of an Assessing Officer over an assessee.

Precedent Treatment: The Tribunal relied on the decision of the jurisdictional High Court (referred to in the judgment) holding that transfer of a case from one Assessing Officer who has jurisdiction to another who otherwise does not have jurisdiction requires a transfer order under Section 127; absent such transfer the receiving AO does not acquire power to make assessment. The judgment follows that line of authority and cites other Tribunal/High Court authorities to support the proposition that administrative directions under Section 120(5) are not a substitute for a statutory transfer under Section 127 when jurisdictional transfer is involved.

Interpretation and reasoning: The Court examined the factual chronology: assessment proceedings were initiated by ITO Ward 39(4) (jurisdictional AO), the file was subsequently shown as transferred to ITO Ward 36(4) and then to Ward 36(6). The assessment order records assignment by JCIT under Section 120(5) dated 23.10.2019. The Tribunal observed that the transfer from Ward 39(4) to Ward 36(4) was effected without any order under Section 127(1). The Tribunal reasoned that conferral of jurisdiction is a legislative function and cannot be accomplished merely by administrative assignment; therefore, where an AO without statutory jurisdiction acts in assessment proceedings in place of a statutory AO, the proceedings are without jurisdiction.

Ratio vs. Obiter: Ratio - Where transfer of proceedings from the AO having statutory jurisdiction to another AO occurs, a valid transfer pursuant to Section 127(1) is mandatory to confer jurisdiction on the transferee; absent such transfer, any assessment order passed by the transferee is void for want of jurisdiction. The reliance upon administrative orders under Section 120(5) cannot cure the lack of a statutory transfer under Section 127 when what is effected is a change of jurisdiction between AOs.

Conclusions: The Tribunal held that the Assessing Officer (ITO Ward 36(6)) did not acquire valid jurisdiction because the file had been transferred from Ward 39(4) to Ward 36(4) without any order under Section 127(1), and assignment under Section 120(5) was not a substitute for Section 127 transfer. Accordingly, the entire proceedings were quashed and the grounds on jurisdiction allowed.

Issue 2 - Application of Section 124(3) time-limit to challenge jurisdiction where assessee did not participate and notices sent to prior tax representative

Legal framework: Section 124(3) requires that an objection to jurisdiction of an authority issuing any notice be raised within thirty days of receipt of the notice; the statutory provision contemplates a procedural limitation on challenges to jurisdiction in certain circumstances.

Precedent Treatment: The Tribunal referred to authorities holding that Section 124(3) applies where the assessee has received a notice from an authority and wishes to question that authority's jurisdiction within the statutory period; however, when notices are issued by an authority not vested with jurisdiction and the assessee did not participate (and the notices were sent to a former tax representative), different considerations apply. The Tribunal cited decisions indicating that no duty is cast upon an assessee to invoke Section 124(3) in such circumstances.

Interpretation and reasoning: The Tribunal noted the factual feature that notices were sent to the email of the old Chartered Accountant who failed to participate, and the assessee did not engage in the proceedings. The Tribunal observed that the restriction in Section 124(3) does not operate to preclude a jurisdictional challenge in a situation where an authority that genuinely lacks statutory jurisdiction issues notices; in those circumstances the assessee is not obliged to question jurisdiction under Section 124(3) within thirty days. The Tribunal distinguished scenarios where Section 124(3) is applicable (i.e., disputes about the authority issuing a notice within its competence) from the present case where the authority issuing the notice was not vested with jurisdiction due to lack of Section 127 transfer.

Ratio vs. Obiter: Ratio - Section 124(3)'s time-limit does not bar a jurisdictional challenge where the notices were issued by an authority that did not have statutory jurisdiction (because no valid Section 127 transfer occurred) and the assessee did not participate in proceedings; in such circumstances there is no duty on the assessee to raise the objection within the thirty-day window. This principle was applied (and followed) to allow the jurisdictional challenge despite non-participation.

Conclusions: The Tribunal accepted the assessee's submission that the contention based on Section 124(3) did not preclude its challenge to jurisdiction. The Tribunal therefore proceeded to quash the proceedings on jurisdictional grounds without requiring strict compliance with the 30-day objection rule given the absence of a valid statutory transfer and non-participation.

Cross-references and Limitation of Decision

The Tribunal restricted its adjudication to jurisdictional issues and did not decide merits of the other grounds raised. The holding is confined to the facts where (i) an assessment file initiated by one Ward was transferred to another Ward without a statutory Section 127(1) transfer, (ii) assignment was recorded under Section 120(5), and (iii) notices were sent to a prior tax practitioner and the assessee did not participate.

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