Article on NOTICE U/S 143(2)- Circumstances when notice U/s 143(2) hold as non ‎service- resulting that assessment framed is invalid and accordingly quashed.‎

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Article on NOTICE U/S 143(2)- Circumstances when notice U/s 143(2) hold as non service- resulting that assessment framed is invalid and accordingly quashed.

This article tries to solve following questions :-

When there is non service of notice U/S 143(2) within prescribed period.

Answer is assessment framed is invalid and accordingly quashed. Kindly see details after these points.

Whether curing this defect by having resort to section 292BB is possible.

Answer is No as it suffers from an inherent lacuna affecting his / its jurisdiction. Kindly see details after these points.

When the service of notice issued by Income tax Officer having no Jurisdiction at the time of issue of notice u/s 143(2).

Answer is No as it suffers from an inherent lacuna affecting his / its jurisdiction. Kindly see details after these points.and therefore there is no valid Service of Notice.

When the assessee had participated in the proceedings. In that case answer is different for different circumstances:-
1. When there is service of notice by AO having jurisdiction but there is having certain infirmities but the assessee had participated.

Answer in these type of cases: there is proper and valid Service of Notice. Kindly see details after these points.

When the notice u/s 143(2) is issued by the AO holding no valid jurisdiction on the date of issue of notice.

Answer in these cases: assessment framed is invalid and accordingly quashed. Kindly see details after these points.

TRANSFER OF JURISDICTION BY VIRTUE OF AN ORDER PASSED U/S. 127(2) and notice u/s 143(2)
When the notice u/s 143(2) is issued by the AO holding valid jurisdiction on the date of issue of notice. In this circumstance the Current AO had no obligation to issue a fresh notice u/s 143(2) when because he could have continued with the assessment proceedings from the stage at which his predecessor would have left.

Answer: There is valid notice. Kindly see details after these points.

When the notice u/s 143(2) is issued by the AO holding no valid jurisdiction on the date of issue of notice.

Answer: There is no valid notice. Kindly see details after these points.

Answer assessment framed is quashed even though the assessee participated in the proceedings. Kindly see details after these points.

Whether jurisdiction is an administrative issue and not a ‘subject matter’ open for judicial intervention. In that case answer is different for different circumstances:-
1. Whether jurisdiction is an administrative issue and not a ‘subject matter’ open for judicial intervention,

Answer No. The ‘subject matter- jurisdiction ‘ is open for judicial intervention. Kindly see details after these points.

When the assessee is estopped from raising an objection to the jurisdiction.

Answer: When the assessee did not question the territorial jurisdiction of the AO after it received statutory notice within time period prescribed under sub-section (3) of sec. 124 of the Act. Kindly see details after these points.

When the notice u/s 143(2) is issued by the AO holding no valid jurisdiction on the date of issue of notice. Then it is not the issue that the assessee is estopped from raising an objection to the jurisdiction inspite of participation in proceedings or to say provision of section 124(3) does not come into play. Kindly see details after these points.
Decisions:- Kindly see details after these points.
EVEN A RIGHT ORDER BY A WRONG FORUM IS A NULLITY. Kindly see details after these points.
When the jurisdiction is validly removed by a competent authority under the provisions of a statute, the original court or any Tribunal or authority in such event will be incompetent, as having ceased to have jurisdiction, to proceed further with the pending proceeding or proceeding which may be instituted after such removal of jurisdiction. Kindly see details after these points.
When the power to impound only exists when an instrument is produced before judicial officers or other officers performing judicial functions as evidence of any fact to be proved, or before other public officers who have to perform any function in regard to those instruments as, for example, registration. A case where the question arose whether the Collector has any power to impound an instrument sent to him for adjudication under section 31 of the Stamp Act. The Supreme Court held that under that section the Collector had no such power, as the provision gave him the power only to give his opinion as regards the duty with which in his judgment the instrument was chargeable and when that function was performed by the Collector he became functus officio. The Supreme Court in of Uttar Pradesh v. Mohammad Amir Ahmad Khan, AIR1961SC787. . Kindly see details after these points.
When the jurisdiction is validly removed by a competent authority under the provisions of a statute, the original court or any Tribunal or authority in such event will be incompetent, as having ceased to have jurisdiction, to proceed further with the pending proceeding or proceeding which may be instituted after such removal of jurisdiction. Kindly see details after these points.
When the power to impound only exists when an instrument is produced before judicial officers or other officers performing judicial functions as evidence of any fact to be proved, or before other public officers who have to perform any function in regard to those instruments as, for example, registration. A case where the question arose whether the Collector has any power to impound an instrument sent to him for adjudication under section 31 of the Stamp Act. The Supreme Court held that under that section the Collector had no such power, as the provision gave him the power only to give his opinion as regards the duty with which in his judgment the instrument was chargeable and when that function was performed by the Collector he became functus officio. The Supreme Court in of Uttar Pradesh v. Mohammad Amir Ahmad Khan, AIR1961SC787. Kindly see details after these points.
Once an authority exercising quasi-judicial power takes a final decision, it cannot review its decision unless the relevant statute or rules permit such review. Kindly see details after these points.
Once the order is pronounced or published or notified or communicated, the authority will become functus officio. Kindly see details after these points.
Notice issued u/s. 148 of the Act after transfer of case on the ground that record is yet not transferred is bad and therefore notice is quashed. Kindly see details after these points.

PROVISIONS OF SECTION 120, 124, 127AND 129 OF THE ACT

For understanding the legal position with regard to the jurisdiction of Income tax authorities, it is pertinent to make reference to provisions of Section 120, 124, 127 and 129 of the Act. Kindly see details after these points.

Now in Details:

NOW QUESTION AND ANSWER

WHEN THERE IS NON SERVICE OF NOTICE U/S 143(2) WITHIN PRESCRIBED PERIOD: ASSESSMENT FRAMED IS INVALID AND ACCORDINGLY QUASHED

Non Service of Notice U/s 143(2) within 6 months from the end of the Financial Year in which the return was furnished is suffers from an inherent lacuna affecting his / its jurisdiction, the same cannot be cured by having resort to section 292B.
For example when the assessee filed the return on 14/09/2015 and the Financial Year ended on 31/03/2016. Therefore the time available to issue the notice under section 143(2)was upto 30/09/2016 but the A.O. who was having the jurisdiction issued the notice under section 143(2) alongwith the questionnaire under section 142(1) of the Act to the assessee on 22/05/2017.
On a similar issue, the Hon’ble Supreme Court in the case of ACIT And Another Vs. Hotel Blue Moon (2010) 321 ITR 362 (supra) held as under:

” If the Assessing Officer, for any reason, repudiates the return filed by an assessee in response to notice under section 158BC(a) of the Income Tax Act, 1961 relating to a block assessment, the Assessing Officer must necessarily issue notice under section 143(2) of the Act within the time prescribed in the proviso to section 143(2).”

It has further been held as under:

“Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable. Therefore, the requirement of notice under section 143(2) cannot be dispensed with.”

Whether curing this defect by having resort to section 292BB is possible. No as it suffers from an inherent lacuna affecting his / its jurisdiction.

As regards to curing the defect under section 292B of the Act the Hon’ble Jurisdictional High Court in the case of CIT Vs. Norton Motors (supra) held as under:

“A reading of section 292B of the Income-tax Act, 1961, makes it clear that mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding in substance and effect is in conformity with or according to the provisions of the Act. To put it differently, section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his / its jurisdiction, the same cannot be cured by having resort to section 292B.”

WHEN THE SERVICE OF NOTICE ISSUED BY INCOME TAX OFFICER HAVING NO JURISDICTION AT THE TIME OF ISSUE OF NOTICE U/S 143(2).

When the notice issued by the AO having no jurisdiction then it suffered from an inherent lacuna affecting his jurisdiction so the same could not be cured by having resort to the provisions of section 292B of the Act. Therefore, the assessment framed under section 143(3) of the Act, by the A.O. without issuing the notice u/s 143(2) of the Act within the time limit prescribed in the proviso to section 143(2) of the Act was invalid and accordingly quashed.”

WHEN THE ASSESSEE HAD PARTICIPATED IN THE PROCEEDINGS. IN THAT CASE ANSWER IS DIFFERENT FOR DIFFERENT CIRCUMSTANCES

WHEN THERE IS SERVICE OF NOTICE ISSUED BY AO HAVING VALID JURISDICTION BUT THERE IS HAVING CERTAIN INFIRMITIES AND THE ASSESSEE HAD PARTICIPATED.

According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee.

WHEN THE NOTICE U/S 143(2) IS ISSUED BY THE AO HOLDING NO VALID JURISDICTION ON THE DATE OF ISSUE OF NOTICE.

ANSWER ASSESSMENT FRAMED IS QUASHED EVEN THOUGH THE ASSESSEE PARTICIPATED IN THE PROCEEDINGS.

It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. Being so, section 292BB of the Act cannot be applied in the present circumstances.

Decisions:-

Before framing any assessment, there should be valid notice u/s 143(2) of the Act, as has been held by the Hon’ble Supreme Court in the case of ACIT And Another Vs. Hotel Blue Moon (2010) 321 ITR 362 (SC).

TRANSFER OF JURISDICTION BY VIRTUE OF AN ORDER PASSED U/S. 127(2) and notice u/s 143(2)

When the notice u/s 143(2) is issued by the AO holding valid jurisdiction on the date of issue of notice. In this circumstance the Current AO had no obligation to issue a fresh notice u/s 143(2) when because he could have continued with the assessment proceedings from the stage at which his predecessor would have left.

Answer: There is valid notice.

When the notice u/s 143(2) is issued by the AO holding no valid jurisdiction on the date of issue of notice.

Answer: There is no valid notice. If a notice u/s 143(2) is issued by AO, ceased to be AO of assessee after the date of transfer and the assessment is based on this notice then the assessment framed is invalid. Quashed. ITAT Kolkata Benches in the case of M/s.Rungta Irrigation Limited v. ACIT in ITA No.1224/Kol/ 2019. The Tribunal vide its order dated 06.09.2019, held as under:-

“19. In this regard we find that by virtue of the transfer order passed by the ld. CITV, Delhi u/s. 127 dated 08.10.2008, the ‘case’ of the assessee was transferred with immediate effect. Pursuant to such an order, the DCIT, Central Circle Ranchi became the AO who alone had valid jurisdiction over the appellant’s ‘case’ till even he was divested of such jurisdiction by virtue of an order passed u/s. 127(2)by the Pr.CIT, Central, Patna dated 03.11.2017 as per which the jurisdiction stood transferred to the ACIT, Central Circle 3(1) Kolkata. We are therefore of the firm opinion that in June 2016 when the notice u/s 143(2) was issued, it was the ACIT, Central Circle 1, Ranchi alone enjoyed sole jurisdiction over the appellant’s ‘case’ and in that view of the matter it was only this AO who could have issued a valid notice u/s 143(2) for the relevant AY 2015-16. We therefore have no quarrel with the proposition put forth by the ld. CIT, DR that when the ACIT, Central Circle 3(1), Kolkata received the ‘case’ records in terms of the order u/s 127(2) dated 03.11.2017, he had no obligation to issue a fresh notice u/s 143(2) because he could have continued with the assessment proceedings from the stage at which his predecessor would have left. However this legal proposition pre-supposes that the original notice u/s 143(2) was issued by an officer who held valid jurisdiction over the ‘case’ of the assessee. We however find that although in June 2016, the jurisdiction over the assessee’s case was vested in ACIT, Central Circle 1, Ranchi, he never issued notice u/s 143(2). On the contrary the notice was issued by the ACIT, Circle 21(1), Delhi who, as held earlier, ceased to have jurisdiction over the appellant’s case after 08.10.2008. Since no notice u/s. 143(2) was issued by the AO, Ranchi within the stipulated time, sub-section (4) of sec. 127 of the Act does not come to the rescue of the department. As noted earlier, the AO, Delhi ceased to be AO of assessee after the transfer order was passed by CIT-V, Delhi on 08.10.2008, so after such order by the competent authority (which fact is not disputed before us), then the CIT, Delhi became functus officio and by virtue of it even his subordinate authority i.e. AO, Delhi was also divested of the jurisdiction. For the reasons as discussed in the foregoing therefore we hold that in the given facts of the case, the appellant’s case was not saved by the provisions of Section 124(5) as also by Section 127(4) 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.”

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“29. Coming back to the case in hand, and having taken note of the ratio laid down by the Hon’ble jurisdictional High Court (supra), we note that in the present case, after the order of the CIT-V, New Delhi dated 08.10.2008 transferring the jurisdiction of the assessee’s case to DCIT, Central Circle, Ranchi, the CIT, Delhi became functus officio and thereby his subordinate officers viz., ACIT, Circle 21(1), New Delhi, could not have issued notice u/s. 143(2) dated 28.07.2016 and in that view of the matter the notice issued by the ACIT, Circle-21(1), New Delhi u/s 143(2)was without jurisdiction and, therefore, non-est in the eyes of law.”

Whether jurisdiction is an administrative issue and not a ‘subject matter’ open for judicial intervention. In that case answer is different for different circumstances:-

Answer No. The ‘subject matter- jurisdiction ‘ is open for judicial intervention.

Whether jurisdiction is an administrative issue and not a ‘subject matter’ open for judicial intervention, The Hon’ble Calcutta High Court in M/s. Ramshila Enterprises Pvt. Ltd. (infra) clearly held that,

“The jurisdiction over the subject-matter has to be conferred by law. The jurisdiction in this case had been transferred by the order dated 3rd September, 2012 by no other than the CIT Kolkata- II, Kolkata himself. Once that was done CIT Kolkata – II, Kolkata lost the seisin over the matter. He became ‘functus officio’.” [Emphasis given by us]

Thus, the contention that the jurisdiction is an administrative issue and not a subject matter stands negated in the light of Hon’ble Calcutta High Court ‘s specific observations (supra).

When the assessee is estopped from raising an objection to the jurisdiction. Provision of section 124(3)come into play.

Answer: When the assessee did not question the territorial jurisdiction of the AO after it received statutory notice within time period prescribed under sub-section (3) of sec. 124 of the Act.

SNo	Assessee did not question the territorial jurisdiction of the AO after it received statutory notice	Circumstance
1	After the expiry of one month from the date on which he was served with a notice u/s 142(1) or 143(2) or after the completion of the assessment, whichever is earlier	Where he has made a return under 139(1)
2	After the expiry of the time allowed by the notice u/s 142(1) or 148 for the Making of the return or by the notice under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier.	Where he has made no such return
3	After the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier	Where an action has been taken under section 132 or section 132A

It is true that when a question of jurisdiction arises in the event an AO assumes jurisdiction u/s. 124 of the Act by virtue of the jurisdiction vested by direction or order issued by CBDT and/or other authorities under sub-section (1) or (2) of sec. 120 of the Act respectively, then assessee is estopped from raising an objection to the jurisdiction, after the time period prescribed under sub-section (3) of sec. 124 of the Act lapses.

When the notice u/s 143(2) is issued by the AO holding no valid jurisdiction on the date of issue of notice. Then it is not the issue that the assessee is estopped from raising an objection to the jurisdiction inspite of participation in proceedings or to say provision of section 124(3) does not come into play.

DECISIONS:

ITAT Kolkata Benches in the case of M/s.Rungta Irrigation Limited v. ACITin ITA No.1224/Kol/ 2019

Since there is no valid notice as the notice u/s 143(2) is issued by AO, ceased to be AO of assessee after the date of transfer and the assessment is based on this notice then the assessment framed is invalid. Quashed. ITAT Kolkata Benches in the case of M/s.Rungta Irrigation Limited v. ACIT in ITA No.1224/Kol/ 2019. The Tribunal vide its order dated 06.09.2019, held as under:-

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“22. During the course of hearing before us, the Ld. CIT, DR took pains to convince us that there are overlapping/concurrent jurisdiction in respect to the territorial and pecuniary jurisdiction of the AO and, therefore, the AO having territorial jurisdiction over the assessee’s principal office at Rajendra Place, New Delhi having issued the notice u/s. 143(2) of the Act was empowered to do so since the ACIT, Circle-21(1), Delhi enjoyed the concurrent jurisdiction conferred u/s. 120/124 of the Act and, therefore on subsequent transfer of the case by the Pr. CIT, Central Patna by order dated 24.10.2017 to ACIT, Central Circle-3(1), Kolkata, there was no need to re- issue the notice u/s. 143(2) of the Act in terms of Sec. 127(4) of the Act. For this he relied on various judicial decisions. We however note that the case laws relied on by the Ld. CIT, DR were factually distinguishable. In these decisions the Courts were called upon to examine the implications arising from the provisions of Section 120 and 124 of the Act and the facts of these cases did not involve orders under Section 127 of the Act in terms of which the AO holding territorial jurisdiction in terms of Section 124 read with Section 120(1) & (2) was specifically divested of his jurisdiction by the competent authority and the jurisdiction was conferred on some other officer after complying with the procedure prescribed in Section 127 of the Act………”

…….

Hon’ble jurisdictional High Court in M/s. Ramshila Enterprises Pvt. Ltd. (infra) held that 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 at Delhi (DCIT. Circle – 15, New Delhi) ceased to be Assessing Officer after the date of transfer i.e. 08.10.2008 and therefore he (i.e. AO at New Delhi) 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 AO, Ranchi to AO, Delhi), which is not the case of the Revenue. In the circumstances therefore, the AO at Delhi (ACIT, Circle-21 (1), New Delhi) could not have usurped the jurisdiction when his predecessor i.e. DCIT, Circle-15(1), New Delhi was divested of it, by order dated 23 ITA No. 1224/Kol/2019 M/s. Rungta Irrigation Limited, AY- 2015-16 08.10.2008 by CIT-V, New Delhi u/s. 127 of the Act. Subsequent to the order u/s. 127 of the Act i.e., w.e.f. from 08.10.2008, the DCIT, Central Circle-1, Ranchi succeeded to the jurisdiction of the assessee and the jurisdiction continued to vest in him (AO Ranchi) till it was legally taken away by order u/s. 127 dated 03.11.2017 by Pr. CIT, Central Patna and transferred to ACIT, Central Circle-3(l), Kolkata.

The aforesaid order of CIT-II, Kolkata was challenged M/s Ramshila objecting to the jurisdiction of CIT-II, Kolkata who had issued Show Cause Notice u/s. 263 and thereafter passed order u/s. 263 dated 26th March, 2013 for AY 2008- 09. The validity of the said revision order was upheld by this Tribunal in favour of the department, by observing as under:

“The definition of ‘case’ for the purpose of sec.127 of the Act as given in the Explanation below sec.127 does not debar the Commissioner from transferring only a particular case, more so when the request for transfer was made in specific circumstances, such as proper co-ordination of search cases. The Commissioner transferring jurisdiction has power to transfer all proceedings under the Act, which are pending, completed or which may be commenced after the date of transfer, but that does not mean that he does not have powers to restrict his order of transfer only to a particular case for which request was made, thereby, leaving the jurisdiction in respect of other cases pertaining to an assessee to be exercised by the AO/CIT who already had it. The power to do a particular act also includes a power to restrict the exercise of power partly. It cannot be said that the power should be exercised either as a whole or not at all. Such an argument is fallacious and defeats the very purpose of conferring a larger power. As the actual transfer of the files from the incumbent AO to the new AO had taken place only on 29.7.2013 and further the order sought to be revised by the ld.CIT u/s 263 was passed much prior to the even making of request for transfer of jurisdiction in respect of search matters, we have absolutely no doubt in our mind that only the CIT Kolkata II, Kolkata had the jurisdiction to revise the assessment order passed u/s147 as has been done in this case. The contention of the learned AR in this regard is held to be without substance and not unacceptable.”

“24. Aggrieved by the aforesaid order of the Tribunal, the assessee M/s.Ramshila Enterprises Pvt. Ltd. preferred an appeal before the Hon’ble jurisdictional High Court, Calcutta wherein the following question of law raising the jurisdictional issue similar to that raised by the assessee before us, was framed as under:- “Whether the Tribunal was justified in holding that the Commissioner of Income Tax, Kolkata-II, had jurisdiction over the appellant at the time of issue of the Show Cause notice on 18th March, 2013 and passing of the order on 26th March, 2013 under section 263 of the Income Tax Act, 1961 in spite of transfer of jurisdiction to the Commissioner of Income Tax, Central Circle, Kolkata vide an order dated 3rd September, 2012 under section 127 (2)(a) of the said Act and its purported findings in that behalf are arbitrary, unreasonable and perverse?.”

EVEN A RIGHT ORDER BY A WRONG FORUM IS A NULLITY

Judgment of the Apex Court in the case of Pandurang and Others versus State of Maharashtra reported in (1986) 4 SCC436for the proposition that even a right order by a wrong forum is a nullity. In the aforesaid judgment their Lordship held as follows:

“4.When a matter required to be decided by a Division Bench of the High Court is decided by a learned Single Judge, the judgment would be a nullity, the matter having been heard by a court which had no competence to hear the matter, it being a matter of total lack of jurisdiction. The accused was entitled to be heard by at least two learned Judges constituting a Division Bench and had a right to claim a verdict as regards his guilt or innocence at the hands of the two learned Judges. This right cannot be taken away except by amending the rules.So long as the rules are in operation it would be arbitrary and discriminatory to deny him this right regardless of whether it is done by reason of negligence or otherwise. Deliberately, it cannot be done. Negligence can neither be invoked as an alibi, nor can cure the infirmity or illegality, so as to rob the accused of his right under the rules. What can be done only by at least two learned Judges cannot be done by one learned Judge. Even if the decision is right on merits, it is by a forum which is lacking in competence with regard to the subject matter. Even a ‘right’ decision by a ‘wrong’ forum is no decision.It is non-existent in the eye of law. And hence a nullity. The judgment under appeal is therefore no judgment in the eye of law. This Court in State of Madhya Pradsh v. Dewadas (1982) 1 SCC 552 has taken a view which reinforces our view. We, therefore, allow the appeal, set aside the order passed by the learned Single Judge, and send the matter back to the High Court for being placed before a Division Bench of the High Court, which will afford reasonable opportunity of hearing to both the sides and dispose it of in accordance with law, expeditiously.”

When the jurisdiction is validly removed by a competent authority under the provisions of a statute, the original court or any Tribunal or authority in such event will be incompetent, as having ceased to have jurisdiction, to proceed further with the pending proceeding or proceeding which may be instituted after such removal of jurisdiction

A Division Bench judgement of this Court in the case of ITO Vs/. Ashoke Glass Works reported in (1980) 125 ITR491(Cal) wherein the following view was expressed (page 505):

“So when the jurisdiction is validly removed by a competent authority under the provisions of a statute, the original court or any Tribunal or authority in such event will be incompetent, as having ceased to have jurisdiction, to proceed further with the pending proceeding or proceeding which may be instituted after such removal of jurisdiction.”

When the power to impound only exists when an instrument is produced before judicial officers or other officers performing judicial functions as evidence of any fact to be proved, or before other public officers who have to perform any function in regard to those instruments as, for example, registration. A case where the question arose whether the Collector has any power to impound an instrument sent to him for adjudication under section 31 of the Stamp Act. The Supreme Court held that under that section the Collector had no such power, as the provision gave him the power only to give his opinion as regards the duty with which in his judgment the instrument was chargeable and when that function was performed by the Collector he became functus officio. The Supreme Court in of Uttar Pradesh v. Mohammad Amir Ahmad Khan, AIR1961SC787.

That was a case where the question arose whether the Collector has any power to impound an instrument sent to him for adjudication under section 31 of the Stamp Act. The Supreme Court held that under that section the Collector had no such power, as the provision gave him the power only to give his opinion as regards the duty with which in his judgment the instrument was chargeable and when that function was performed by the Collector he became functus officio.

It was observed by the Supreme Court that the power to impound only exists when an instrument is produced before judicial officers or other officers performing judicial functions as evidence of any fact to be proved, or before other public officers who have to perform any function in regard to those instruments as, for example, registration.

The Supreme Court also approved the decisions in Collector, Ahmednagar v. Rambhau, AIR 1930 Bom 392 (FB). Paiku v. Gaya, ILR (1948) Nag 950 : (AIR1949Nag 214) and Panakala Rao v. Kumaraswami, AIR 1937Mad 763 where the doctrine of functus officio was applied and it was held that the Court had no power to recall and impound a certificate of sale after executing it and delivering it to the purchaser, or to reopen a case and impound documents proved after signing the decree, or to impound an instrument admitted in evidence after delivery of judgment.

In the present case, the Sub-Registrar purported to act under paragraph 232 of the Registration Manual when he made a report to the Collector that the ‘Takseemnama’ was not duly stamped. But on reading paragraphs 231 and 232 it is clear that they do not say that after a document is admitted to registration, the registering officer can make a report to the Collector that it was not sufficiently stamped on the other hand, paragraph 231 expressly lays down a direction that before taking any further action, that is to say, in the matter of registration, the registering officer must see that the document is duly stamped. The words “after registering the document” occurring in paragraph 232 obviously refer to the entry of the document in the Register maintained of documents presented for registration. They do not mean that the registering officer can make a report about insufficiency of stamp after the document has been admitted to registration.”

ONCE AN AUTHORITY EXERCISING QUASI-JUDICIAL POWER TAKES A FINAL DECISION, IT CANNOT REVIEW ITS DECISION UNLESS THE RELEVANT STATUTE OR RULES PERMIT SUCH REVIEW

In the case of SBI -versus S.N.Goyal reported in 2009 (8) SCC92the following views were expressed:

“It is true that once an authority exercising quasi-judicial power takes a final decision, it cannot review its decision unless the relevant statute or rules permit such review.But the question is as to at what stage an authority becomes functus officio in regard to an order made by him.P.Ramanatha Aiyar’s Advanced Law LexiCo.(3rd Edn., Vol.2, pp.1946-47) gives the following illustrative definition of the term “functus officio”:

Thus a judge, when he has decided a question brought before him, is functus officio, and cannot review his own decision.”

Black’s Law Dictionary (6th Edn., p.673) gives its meaning as follows:

“Having fulfilled the function, discharged the office, or accomplished the purpose, and therefore of no further force or authority.”

ONCE THE ORDER IS PRONOUNCED OR PUBLISHED OR NOTIFIED OR COMMUNICATED, THE AUTHORITY WILL BECOME FUNCTUS OFFICIO.

With reference to civil courts. Order 20 of the Code of Civil Procedure deals with judgment and decree. Rule 1 explains when a judgment is pronounced.

Sub-rule (1) provides that the court, after the case has been heard, shall pronounce judgment in an open court either at once, or as soon thereafter as may be practicable, and when the judgment is to be pronounced on some future day, the court shall fix a day for that purpose of which due notice shall be given to the parties or their pleaders. Subrule (3) provides that the judgment may be pronounced by dictation in an open court to a shorthand writer [if the Judge is specially empowered (sic by the High Court) in this behalf].The proviso thereto provides that where the judgment is pronounced by dictation in open court, the transcript of the judgment so pronounced shall, after making such corrections as may be necessary, be signed by the Judge, bear the date on which it was pronounced and form a part of the record. Rule 3 provides that the judgment shall be dated and signed by the Judge in open court at the time of pronouncing it and when once signed, shall not afterwards be altered or added to save as provided by Section 152 or on review. Thus, where a judgment is reserved, mere dictation does not amount to pronouncement, but where the judgment is dictated in open court, that itself amounts to pronouncement. But even after such pronouncement by open court dictation, the Judge can make corrections before signing and dating the judgment. Therefore, a Judge becomes functus officio when he pronounces, signs and dates the judgment (subject to Section 152 and power of review). The position is different with reference to quasi-judicial authorities. While some quasi- judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi-judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned. A quasi-judicial authority will become functus officio only when its order is pronounced, or published/notified or communicated (put in the course of transmission) to the party concerned. When an order is made in an office noting in a file but is not pronounced, published or communicated, nothing prevents the authority from correcting it or altering it for valid reasons. But once the order is pronounced or published or notified or communicated, the authority will become functus officio. The order dated 18-1-1995 made on an office note, was neither pronounced, nor published/notified nor communicated. Therefore, it cannot be said that the appointing authority became functus officio when it signed the note dated 18-1-1995.”

Notice issued u/s. 148 of the Act after transfer of case on the ground that record is yet not transferred is bad and quashed

Decision of Tribunal in the case of Chankya Finvest Pvt Ltd Vs ITO (34 taxmann.com 206).

“8. In view of the above principle regarding jurisdiction and facts of the present case, the order passed by CIT-1, Delhi, transferring jurisdiction from ITO, Ward-3(3), New Delhi on 04-01-2010, subsequent action of the AO i.e. ITO, Ward-3(3), New Delhi issuing notice u/s. 148 of the Act dated 25-03-2010 is invalid because the jurisdiction from ITO, Ward-3(3), New Delhi by CIT-1, Delhi to ITO, Ward-6(1), Kolkata. At the time of passing of order by CIT-1, Delhi transferring jurisdiction from ITO, Ward3(3), New Delhi dated 04-01-2010 to ITO, Ward-6(1), Kolkata, there is no proceedings pending before the ITO, Delhi and the transfer order for jurisdiction was passed on that date. The CIT, Delhi-1 passed order u/s. 127 of the Act on 01-01-2010 transferring the jurisdiction of the assessee to ITO, Wd-6(1), Kolkata and the jurisdiction in respect to every action for all assessment years lies with the ITO, Wd-6(1), Kolkata and only he is competent to issue notice u/s. 148 of the Act. In such circumstances, the notice issued u/s. 148 of the Act by the ITO, Ward-3(3), New Delhi is bad and illegal in view of the clear provisions of the Act because an order for transfer of case was validly made by CIT and the purpose for transfer was simply that all future proceedings are to be taken by ITO, Ward-6(1), Kolkata w.e.f. 04-01-2010. Hence, the notice issued u/s. 148 of the Act dated 25.03.2010 is quashed.”

Once the jurisdiction to assess the petitioner was transferred by the CIT-10 Mumbai from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune by order dated 22.11.2011 it was totally improper on the part of ACIT-10(1) Mumbai to request the CIT- 10, Mumbai to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making such a request on the part of ACIT-10(1) Mumbai to the CIT-10 Mumbai in our opinion, was in gross abuse of the process of law. If there was any time barring issue, the ACIT-10(1) Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit ACIT-10(1) Mumbai to indulge in circumventing the provisions of law and we strongly condemn the conduct of ACIT-10(1) Mumbai in that behalf. Instead of bringing to book the persons who circumvent the provisions of law, the ACIT-10(1) Mumbai has himself indulged in circumventing the provisions of law which is totally disgraceful

The Hon’ble Bombay High Court in the case of Fiat India Automobiles Ltd Vs Vijender Singh (211 Taxman 570) support the legal ground canvassed by the appellant before us. The relevant facts and findings of the said case were as follows:

“3. The basic argument of the Petitioner is that once the CIT-10 Mumbai in exercise of the powers vested in him under Section 127(2) of the Act has transferred the power to assess the Petitioner on 22.11.2011 from ACIT-10(1) Mumbai to DCIT, Circle-1(2) Pune, then the ACIT-10(1) would have no jurisdiction to issue the impugned notice dated 30.03.2012 and therefore, the said notice dated 30.03.2012 is liable to be quashed and set aside.

The relevant facts are that on shifting the registered office of the Petitioner from Mumbai to Pune, the Petitioner in June-July, 2009 had applied for transfer of assessment records from Mumbai to Pune. After, exchange of several letters, the CIT-10 Mumbai by his order dated 22.11.2011 transferred the powers to assess the petitioner from ACIT- 10(1) Mumbai to DCIT, Circle-1(2) Pune. Thus, from 22.11.2011 ACIT-10(1) Mumbai did not have any power to assess or reassess the petitioner.

It is not in dispute that on transfer of the jurisdiction from Mumbai to Pune, the Additional CIT, (TP) Pune has assumed jurisdiction and accordingly issued a notice dated 29.03.2012 to the Petitioner under Section 92CAof the Act relating to Assessment year 2009-2010.

However, the ACIT-10(1) Mumbai has issued the impugned notice on 30.03.2012 under Section 14 8of the Act with a view to reopen the assessment for A.Y. 2005-06. The assessee by its letter dated 24.04.2012 objected to the impugned notice by specifically stating that pursuant to the order of CIT dated 22.11.2011, the ACIT-10(1) would have no locus standi or jurisdiction to issue the impugned notice dated 30.03.2012. As there was no reply, the present writ petition is filed inter alia on the ground that once the jurisdiction to assess/reassess the petitioner vested in the ACIT-10(1) is divested by the order of the CIT-10 Mumbai dated 22.11.2011, the ACIT-10(1) Mumbai would cease to have power to assess or reassess the petitioner and hence, the impugned notice issued by ACIT-10(1) Mumbai being without jurisdiction is liable to be quashed and set aside.

In the affidavit-in-reply filed by the DCIT-10(1) Mumbai dated 8.10.2012 it is stated that by a corrigendum order dated 27.03.2012, the CIT-10 Mumbai has temporarily withdrawn/cancelled the earlier transfer order dated 22.11.2011 for the sake of administrative convenience and therefore, the notice dated 30.03.2012 would be valid. It is the case of the petitioner that neither any notice to pass a corrigendum order was issued to the petitioner nor the alleged corrigendum order dated 27.03.2012 has been served upon the petitioner till date.

Mr. Pinto, learned Counsel for the Revenue on instruction from CIT-10 Mumbai informs us that there is no proof of serving the corrigendum order dated 27.03.2012 upon the petitioner. It is neither the case of the revenue that before passing the corrigendum any notice was issued to the petitioner nor it is the case of the revenue that the corrigendum order was passed after hearing the petitioner.

Although in the affidavit in reply the revenue claims to have annexed a copy of the corrigendum order dated 27.03.2012 no such order was in fact annexed to the affidavit- in-reply. It is only during the course of hearing the Counsel for the revenue admitted the lapse and tendered a copy of the letter dated 20.03.2012 addressed by ACIT-10(1) Mumbai to CIT-10 Mumbai as well as the corrigendum order dated 27.03.2012 to the Court as also to the Counsel for the Petitioner.

…..

The corrigendum order dated 27/3/2012 passed by CIT-10 Mumbai reads thus:-

……

The question therefore to be considered is, when the CIT-10 Mumbai has transferred the jurisdiction to assess/reassess the petitioner from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune under Section 127of the Act after hearing the petitioner on 22.11.2011, whether the CIT-10 Mumbai at the instance of ACIT-10(1) Mumbai is justified in issuing a corrigendum order on 27.03.2012 behind the back of the petitioner & whether the ACIT-10(1) Mumbai is justified in issuing the impugned notice under Section 148of the Act dated 30.03.2012 on the basis of the said corrigendum order dated 27.03.2012 which is passed without issuing a notice to the petitioner, without hearing the petitioner and which is uncommunicated to the petitioner.

Mr. Pinto, learned Counsel for the Revenue does not dispute that the corrigendum order was passed without issuing notice and without hearing the petitioner and further admits that the said corrigendum order was not served upon the petitioner till date and that he has tendered a copy of the said corrigendum order upon the counsel for the petitioner today in Court. However, he submits that once the corrigendum order was passed by the CIT-10 Mumbai on 27.03.2012 the ACIT-10(1) Mumbai was justified in issuing the impugned notice dated 30.03.2012.

In our opinion, the conduct of ACIT-10(1) Mumbai as well as CIT-10 Mumbai is highly deplorable. Once the jurisdiction to assess the petitioner was transferred by the CIT-10 Mumbai from ACIT-10(1) Mumbai to DCIT Circle-1(2) Pune by order dated 22.11.2011 it was totally improper on the part of ACIT-10(1) Mumbai to request the CIT- 10, Mumbai to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making such a request on the part of ACIT-10(1) Mumbai to the CIT-10 Mumbai in our opinion, was in gross abuse of the process of law. If there was any time barring issue, the ACIT-10(1) Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit ACIT-10(1) Mumbai to indulge in circumventing the provisions of law and we strongly condemn the conduct of ACIT-10(1) Mumbai in that behalf. Instead of bringing to book the persons who circumvent the provisions of law, the ACIT-10(1) Mumbai has himself indulged in circumventing the provisions of law which is totally disgraceful.

In any event, the CIT-10 Mumbai ought not to have succumbed to the unjust demands of ACIT10(1) and instead ought to have admonished the ACIT-10(1) for making such unjust request. The CIT10 Mumbai ought to have known that there is no provision under the Act which empowers the CIT to temporarily withdraw the order passed by him under Section 127(2)of the Act for the sake of administrative convenience or otherwise. If the CIT-10 Mumbai was honestly of the opinion that the order passed under Section 127(2)of the Act was required to be recalled for any valid reasons, then, the CIT-10 Mumbai ought to have issued notice to that effect to the petitioner and after hearing the petitioner ought to have passed any order as he deemed fit and serve the same to the petitioner.

In the present case, admittedly, the CIT-10 Mumbai has not issued any notice and has not heard the petitioner before passing the Corrigendum order and in fact the said corrigendum order has not been communicated to the petitioner before issuing the impugned notice dated 30.03.2012 and admittedly the alleged corrigendum order is served upon the petitioner for the first time today in Court.

In these circumstances, we quash and set aside the impugned notice dated 30.03.2012 issued by the ACIT-10(1) Mumbai based on the corrigendum order dated 27.03.2012 passed allegedly by the CIT-10 Mumbai at the behest of ACIT-10(1) Mumbai and in gross abuse of the process of law. Apart from the fact that the CIT-10 Mumbai had no jurisdiction to temporarily suspend an order passed under Section 127(2)of the Act, in the fact of the preent case, the impugned corrigendum order passed behind the back of the petitioner without issuing any notice to the petitioner, without hearing the petitioner and admittedly uncommunicated to the petitioner till date, would have no legal existence and therefore the impugned notice dated 30.03.2012 based on the legally non-existent corrigendum order dated 27.03.2012 cannot be sustained.”

The AO at Noida had issued notice u/s 148 on the basis of cash deposits made in ICICI Bank, Noida. In that case the fact that the assessee was regularly assessed in Delhi was not intimated to the AO at Noida nor did the assessee mention his PAN with the ICICI Bank. Even the assessee’s address available with the bank was that of Noida. In this case it was not brought on record, within the limitation period, by the assessee that his case was transferred to Delhi by virtue of an order u/s 127 passed by the competent authority under whom the AO at Noida was functioning. The Hon’ble High Court held that assessee was debarred from raising the objection to AO’s jurisdiction in terms of section 124(3)(b). The relevant portion is as under:-

In the case of Abhishek Jain (supra), the AO at Noida had issued notice u/s 148 on the basis of cash deposits made in ICICI Bank, Noida. In that case the fact that the assessee was regularly assessed in Delhi was not intimated to the AO at Noida nor did the assessee mention his PAN with the ICICI Bank. Even the assessee’s address available with the bank was that of Noida. In this case it was not brought on record by the assessee that his case was transferred to Delhi by virtue of an order u/s 127 passed by the competent authority under whom the AO at Noida was functioning. The Court further found that it was only after the period of limitation prescribed in Section 149 expired on 31st March, 2016, that the assessee intimated the AO at Noida that he had been regularly assessed in Delhi. On these facts, the Hon’ble Delhi High Court held that it was mala fide on the part of the assessee not to intimate the AO at Noida prior to 31.03.2016 and that the assessee waited for the period of limitation to expire before raising this objection. In absence of any order u/s 127 and having noted that with reference to address made available by the assessee to ICICI Bank in which cash deposits were found, the Hon’ble High Court held that assessee was debarred from raising the objection to AO’s jurisdiction in terms of section 124(3)(b).

The Hon’ble Supreme Court in the case of CIT Vs Sun Engineering Works (P) Ltd (198 ITR 297) has observed as follows:

“It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Court, divorced from the context of the question under consideration and treat it to be the complete ‘law’ declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of the Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of the Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by the Court, to support their proceedings.”

Income Tax Officer Ward-6(2)(3), … vs Mr.P N Krishnamurthy , Bangalore on 27 April, 2020. ITA No.1590/Bang/2018: Asst.Year 2013-2014

“35. Coming back to the admitted facts in the present case, we hold that the ACIT, Central Circle-3(1), Kolkata framed the assessment order dated 29.12.2017 pursuant to transfer of case ordered by PCIT, Central Patna dated 03.11.2017 u/s. 127 of the Act, without there being valid issuance of notice u/s 143(2) of the Act. In our opinion such an order is bad in law as held by the Hon’ble Supreme Court in CIT V Hotel Blue Moon (2010) 321 ITR 362 (S.C) wherein the Hon’ble Supreme Court has held that issue of a legally valid notice u/s. 143(2) is mandatory for usurping jurisdiction to frame scrutiny assessment u/s. 143(3) of the Act and absence of a valid notice u/s 143(2) is not a curable defect. This view was reiterated by the Hon’ble Apex Court in the case of CIT Vs Laxman Das Khandelwal(108 taxmann.com 183). The relevant observations are as follows:

“5. At the outset, it must be stated that out of two questions of law that arose for consideration in Hotel Blue Moon’s case2 the first question was whether notice under Section 143(2) would be mandatory for the purpose of making the assessment under Section 143(3) of the Act. It was observed:-

“3. The Appellate Tribunal held, while affirming the decision of CIT (A) that non-issue of notice under Section 143(2) is only a procedural irregularity and the same is curable. In the appeal filed by the assessee before the Gauhati High Court, the following two questions of law were raised for consideration and decision of the High Court, they were:

“(1) Whether on the facts and in circumstances of the case the issuance of notice under Section 143(3) of the Income Tax Act, 1961 within the prescribed time-limit for the purpose of making the assessment under Section 143(3) of the Income Tax Act, 1961 is mandatory? And (2) Whether, on the facts and in the circumstances of the case and in view of the undisputed findings arrived at by the Commissioner of Income Tax (Appeals), the additions made under Section 68 of the Income Tax Act, 1961 should be deleted or set aside?”

The High Court, disagreeing with the Tribunal, held, that the provisions of Section 142and sub-sections (2) and (3) of Section 143will have mandatory application in a case where the assessing officer in repudiation of return filed in response to a notice issued under Section 158-BC(a) proceeds to make an inquiry. Accordingly, the High Court answered the question of law framed in affirmative and in favour of the appellant and against the Revenue. The Revenue thereafter applied to this Court for special leave under Article 136, and the same was granted, and hence this appeal.

The only question that arises for our consideration in this batch of appeals is: whether service of notice on the assessee under Section 143(2)within the prescribed period of time is a prerequisite for framing the block assessment under Chapter XIV-B of the Income Tax Act, 1961?

The case of the Revenue is that the expression “so far as may be, apply” indicates that it is not expected to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143strictly for the purpose of block assessments. We do not agree with the submissions of the learned counsel for the Revenue, since we do not see any reason to restrict the scope and meaning of the expression “so far as may be, apply”. In our view, where the assessing officer in repudiation of the return filed under Section 158-BC(a)proceeds to make an enquiry, he has necessarily to follow the provisions of Section 142, sub-sections (2) and (3) of Section 143.”

The question, however, remains whether Section 292BBwhich came into effect on and from 01.04.2008 has effected any change. Said Section 292BBis to the following effect:-

“292BB. Notice deemed to be valid in certain circumstances.–Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was –

(a) Not served upon him; or

(b) Not served upon him in time; or

(c) Served upon him in an improper manner:

Provided that nothing contained in this section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.”

A closer look at Section 292BBshows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. According to Mr. Mahabir Singh, learned Senior Advocate, since the Respondent had participated in the proceedings, the provisions of Section 292BBwould be a complete answer.

On the other hand, Mr. Ankit Vijaywargia, learned Advocate, appearing for the Respondent submitted that the notice under Section 143(2) of the Act was never issued which was evident from the orders passed on record as well as the stand taken by the Appellant in the memo of appeal. It was further submitted that issuance of notice under Section 143(2) of the Act being prerequisite, in the absence of such notice, the entire proceedings would be invalid.

The law on the point as regards applicability of the requirement of notice under Section 143(2)of the Act is quite clear from the decision in Blue Moon’s case2. The issue that however needs to be considered is the impact of Section 292BBof the Act.

According to Section 292BBof the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BBto apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.

Since the facts on record are clear that no notice under Section 143(2)of the Act was ever issued by the Department, the findings rendered. by the High Court and the Tribunal and the conclusion arrived at were correct. We, therefore, see no reason to take a different view in the matter.”

For the reasons set out above therefore, we uphold the objections raised by the appellant against the validity of the impugned order u/s 143(3) for AY 2015-16. We accordingly hold that since in the present case no valid notice u/s 143(2) was issued by the AO who held jurisdiction over the case of the appellant, the consequent order passed u/s 143(3) dated 29.12.2017 was legally unsustainable and therefore is null in the eyes of law and therefore quashed. The assessee accordingly succeeds on the preliminary legal issue raised before us.

In the result, appeal of assessee is allowed.”

PROVISIONS OF SECTION 120, 124, 127AND 129 OF THE ACT

Section 120. Jurisdiction of income- tax authorities

(1) Income- tax authorities shall exercise all or any of the powers and perform all or any of the functions Conferred on, or, as the case may be, assigned to such authorities by or under this Act in accordance with such directions as the Board may issue for the exercise of the powers and performance of the functions by all or any of those authorities.

(2) The directions of the Board under sub- section (1) may authorise any other income- tax authority to issue orders in writing for the exercise of the powers and performance of the functions by all or any of the other income- tax authorities who are subordinate to it.

(3) In issuing the directions or orders referred to in sub- sections (1) and (2), the Board or other income- tax authority authorized by it may have regard to any one or more of the following criteria, namely: –

(a) territorial area;

(b) persons or classes of persons;

(d) cases or classes of cases.

(4) Without prejudice to the provisions of sub- sections (1) and (2), the Board may, by general or special order, and subject to such conditions, restrictions or limitations as may be specified therein, –

(a) authorize any Director General or Director to perform such functions of any other income- tax authority as may be assigned to him by the Board;

(b) empower the Director General or Chief Commissioner or Commissioner to issue orders in writing that the powers and functions conferred on, or as the case may be, assigned to, the Assessing Officer by or under this Act in respect of any specified area or persons or classes of persons or incomes or classes of

(5) The directions and orders referred to in sub- sections (1) and (2) may, wherever considered necessary or appropriate for the proper management of the work, require two or more Assessing Officers (whether or not of the same class) to exercise and perform, concurrently, the powers and functions in respect of any area or persons or classes of persons or incomes or classes of income or cases or classes of cases; and, where such powers and functions are exercised and performed concurrently by the Assessing Officers of different classes, any authority lower in rank amongst them shall exercise the powers and perform the functions as any higher authority amongst them may direct, and, further, references in any other provision of this Act or in any rule made thereunder to the Assessing Officer shall be deemed to be references to such higher authority and any provision of this Act requiring approval or sanction of any such authority shall not apply.

(6) Notwithstanding anything contained in any direction or order issued under this section, or in section 124, the Board may, by notification in the Official Gazette,, direct that for the purpose of furnishing of the return of income or the doing of any other act or thing under this Act or any rule made thereunder by any person or class of persons, the income- tax authority exercising and performing the powers and functions in relation to the said person or class of persons shall be such authority as may be specified in the notification.

Section 124. Jurisdiction of Assessing Officers

(1) Where by virtue of any direction or order issued under sub- section (1) or sub- section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction-

(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and

(b) in respect of any other person residing within the area.

(2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Director General or the Chief Commissioner or the Commissioner; or where the question is one relating to areas within the jurisdiction of different Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned or, if they are not in agreement, by the Board or by such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, specify.

(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer-

(a) where he has made a return under sub- section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub- section (1) of section 142 or subsection (2) of section 143 or after the completion of the assessment, whichever is earlier;

(b) where he has made no such return, after the expiry of the time allowed by the notice under sub- section (1) of section 142 or under section 148 for the Making of the return or by the notice under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier.

(c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier.)

(4) Subject to the provisions of sub- section (3), where an assessee calls in question the jurisdiction of an- Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub- section (2) before the assessment is made.

(5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub- section (1) or sub- section (2) of section 120.]

Section 127. Power to transfer cases

(1) The Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.

(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner,–

(a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;

(b) where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.

(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.

(4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.

Explanation:

In section 120 and this section, the word “case”, in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.

Section 129. Change of incumbent of an office

Whenever in respect of any proceeding under this Act an income- tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income- tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor:

Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.”

General discussion:-

A bare reading of the foregoing provisions reveal that an Assessing Officer (AO) has been vested with the jurisdiction by virtue of the directions or orders issued by the Board under sub-section (1) or sub-section (2) of section 120of the Act.
The direction u/s. 120(1) is given by the Board, for the exercise of the powers and performance of the functions by all or any of the Income Tax Authorities, as specified u/s. 116 of the Act.
As per sub-section (2) of Section 120of the Act, the Board may delegate its powers to Income tax authorities as specified in Section 116, for issuing the orders in writing, for the exercise of the powers and performance of the functions by all or any of the other Income Tax Authorities who are subordinate to that authority. We can also note that the concurrent jurisdiction can be vested in more than one AO, which is discernible by a conjoint reading of Section 120(5) with Section 120(2) of the Act.
Section 124(1)of the Act confers jurisdiction on an AO, by virtue of jurisdiction vested by any direction or order issued by CBDT under sub-section (1) and / or (2) of section 120 of the Act.
The AO is vested with the jurisdiction u/s. 124 of the Act, over any area within the limits of such area, he shall have jurisdiction over any person (assessee) carrying on a business or profession and if the place at which he (assessee) carries on his business or profession is situated within the area ear-marked for him (AO); or if that person’s (assessee’s) business or profession is carried on in more places than one, then if the principal place of his business or profession is situated within the jurisdictional territorial area, the AO gets jurisdiction. Other than the assessees who are not in Business or Profession, in their cases, the AO will be vested with the jurisdiction if the person (assessee) is residing within the territorial area ear-marked by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120of the Act speaks about.
However, when there is a question to be determined as to whether an AO has jurisdiction to assess any person then it would be decided by the authorities as stipulated in sub-section (2) of section 124of the Act by Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners concerned, as the case may be).
In case, if the question is one relating to areas within the jurisdiction of different Income tax authorities(Directors General or Chief Commissioners or Commissioners, by the Directors General or Chief Commissioners or Commissioners as stipulated therein) then if the other Income-tax authority also agrees then the question will be resolved mutually or else it will be referred to the CBDT.
So, once the AO of an assessee is vested with the jurisdiction u/s. 124 read with sec. 120(1) & (2) of the Act and issues statutory notices against an assessee, no person (assessee) shall be entitled to call in question the jurisdiction of an AO within the period prescribed under clauses (a), (b) and (c) of section 124(3)of the Act.
We also note that sec. 124(5) saves the action of the AO who has territorial jurisdiction over the assessee in respect of the income earned by the assessee from the territorial jurisdiction vested in him by virtue of any directions or orders issued u/s. 120(1) or (2) of the Act. So, this saving provision which saves the action of an AO is limited to the income accruing or arising or received within the limits of his territorial area as conferred to him (AO) by order under sub-sec. (1) or (2) of sec. 120 of the Act and not otherwise. So, this saving provision will come into play only in the first place the AO is vested with the jurisdiction by an order/direction issued under sub-sec. (1) or (2) of sec. 120 of the Act.
Thus, as per the scheme of the Act, it can be seen that sections 120and 124 vest jurisdiction on Income Tax Authorities and on AO respectively and, therefore, both sections i.e. sections 120 and 124 of the Act must be read in conjunction and harmoniously to decide the territorial jurisdiction which is prescribed by the direction or orders by the CBDT under sub-sec. (1) or (2) of sec. 120 of the Act.
Having taken note of the provisions of Section 120& 124, we however find that Section 127 is a separate code of its own. Section 127(1) empowers, the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, to transfer any case from one or more AO subordinate to him. In other words, under Section 127(1) the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, as stipulated therein, can transfer the case records of an assessee from one AO to another functioning under his own charge.
On the contrary, Section 127(2)empowers the foregoing authorities to transfer of cases from the AOs from his jurisdiction to the AOs who are not functioning under his jurisdiction and therefore who are not subordinate to such authority. In the cases covered u/s 127(2) therefore,
1. if the Pr. Director General or Director General or Pr. Chief Commissioner or Chief Commissioner or Pr. Commissioner or Commissioner, of the AO to whom the case of an assessee is proposed to be transferred, agrees for the transfer, then the transfer can made u/s. 127(2)(a) of the Act.
2. In case however there is any disagreement between such stipulated authorities, the matter is required to be referred to the Board which in turn decides the issue of transfer or the Board can then authorize an Income Tax authority by a notification as stipulated in clause (b) of sub-sec.(2) of section 127of the Act.
Sub-section(4) of Section 127of the Act provides that upon the transfer of case by the authorities specified in sub-section (1) or (2) of section 127 of the Act, any stage of the proceedings shall not render the re-issue of any notice already issued by the AO or AOs from whom the case is transferred.
In other words, Section 127(4)saves the actions of the AO from whom the case is transferred and allows the AO to whom the case of an assessee is transferred to take forward the proceedings from the point where the earlier jurisdictional AO had left.
Here, it would be important to note the Explanation to section 127defines the expression ‘case’. A reading of the said Explanation shows that the expression ‘case’ in relation to any person, whose name is specified in the transfer order passed u/s. 127 of the Act, means all proceedings under the Act in respect of any year which may be pending on the date of such order or direction or it may have been completed on or before such date, and includes also all proceedings under the Income-tax Act which may be commenced after the date of such order or direction of any year.
This definition of the expression ‘case’ implies that, once a transfer is made by the authority specified in subsection (1) or (2) of section 127of the Act who had the jurisdiction over an AO who in turn had jurisdiction over the assessee/person/entity, by virtue of direction/order issued under section 120(1) or (2) of the Act, then the entire assessment of the person i.e. pre-transfer and post-transfer as on date of transfer will stand transferred and thereafter for all purposes of the Income Tax Act, the AO of the assessee to whom the case is transferred, will be the Assessing Officer in respect of the said the assessee for pre and post proceedings from the date of transfer.
In other words, once transfer order of a case of an assessee is issued u/s. 127 of the Act the effect will be that
1. all the proceedings of the assessee under the Act in respect of any year which may be pending on the date of such order will stand transferred,
2. all the completed assessment order of the assessee on or before the date of transfer will stand transferred and

all proceedings under the Act in respect of the assessee which may be commenced after the date of such transfer order have to be undertaken by the transferred new AO.

P. Mundra

F.C.A.

Author is a practicing CA Jaipur based

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B.P.MUNDRA

Article on NOTICE U/S 143(2)- Circumstances when notice U/s 143(2) hold as non ‎service- resulting that assessment framed is invalid and accordingly quashed.‎

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