Case Transfer to another AO not Permissible without Decentralization order u/s 127 of Income Tax Act on Centralization of Case: Delhi HC [Read Order]

In a recent decision the Delhi High Court observed that case transfer to another Assessing Officer (AO) not permissible without decentralization order under Section 127 of the Income Tax Act, 1961 on centralization of the case.

An order under Section 144A of the Income Tax Act was passed holding that a transfer order under Section 127 of the Income Tax Act was passed which was stated to have been issued by the Principal Commissioner of Income Tax [“PCIT‖] (Central), and also directed the AO to continue with the assessment proceedings in accordance with the directions passed in the Income Tax Appellate Tribunal (ITAT) order.

The principal issue in the present batch of cases is whether, in the absence of any order of transfer under Section 127 of the Income Tax Act, the non-jurisdictional Assessing Officer [AO] can proceed with the assessment.

N. P. Sahni, counsel appearing on behalf of the assessee submitted that the impugned orders are liable to be set aside as they suffer from jurisdictional error and that since AY 2008-09, the assessee had been regularly assessed by the Central Circle, New Delhi and therefore, without any decentralization order or any transfer order made under Section 127 of the Income Tax Act, the case of the assessee could not have been transferred from Central Circle-20, New Delhi to ITO Ward 21(1), New Delhi.

It was further submitted that the legislative mandate of Section 127 of the Income Tax Act clearly elucidates that the transfer of the case of the assessee can only be done through an order passed under Section 127 of the Income Tax Act.

The counsel appearing on behalf of the respondents submitted that the transfer order had duly been passed, which was also reflected on the ITBA portal. They further argued that the ITO Ward 21(1), New Delhi has inherent jurisdiction as per the CBDT circular dated 15 November 2014 and therefore, the assessment orders do not suffer from any infirmity of jurisdictional error.

A Division Bench of Justices Purushaindra Kumar Kaurav and Yashwant Varma observed that “It is discernible that once the case of the assessee is centralized, then the transfer of the case of the assessee to another AO would not be permissible without a decentralization order or transfer order under Section 127 of the Act as contrary to such a position dehors the underlying objective which the Act seeks to achieve by virtue of powers enshrined under Section 127 of the Income Tax Act. We accordingly set aside the impugned orders dated 31.12.2017 and 30.09.2021.”

“We find no merit and in connected matters contention of the Revenue that by virtue of an order dated 15.11.2014 passed under Section 120 of the Income Tax Act under the pen of ACIT read with CBDT notification dated 22.10.2014, the office of ITO Ward 21(1), New Delhi has inherent jurisdiction over the assessee. Such a position if accepted would lead to confusion and chaos as it would lead to a position where at one point, one or more assessing officers not only will have jurisdiction over the assessee but also can proceed with the assessment proceedings simultaneously. Such a situation cannot be countenanced in the law” the Court noted.

To Read the full text of the Order CLICK HERE

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