ITO Vs M/s Arti Securities & Services Ltd. (ITAT Lucknow)
Issue of scrutiny notice by non jurisdictional officer makes entire assessment invalid as per CBDT instruction no 1 of 2011 holds ITAT
Learned counsel for the assessee, at the outset, submitted that the second ground taken by the assessee is a jurisdictional issue therefore, he will be taking up the same first and invited our attention to the fact that the assessee had e-filed return of income on 26/09/2014 declaring income of Rs.11,11,750/- and the case was selected for scrutiny u/s 143(2) vide notice issued by DCIT, Circle-4, Kanpur and DCIT-6, Kanpur on the same date i.e. 03/09/2015 and in this respect our attention was invited to pages 40 to 42 of the paper book where the fact of having filed the return for Rs.11,11,750/- along with the two notices issued by DCIT, Circle-4, Kanpur and DCIT-6, Kanpur were placed. Learned counsel for the assessee submitted that as per assessment order dated 29/12/2016 read with transfer memo dated 16/05/2016, the present case was transferred from DCIT-6, Kanpur to Income Tax Officer -6(1), Kanpur on the ground of monetary limit vide Pr. CIT-2, Kanpur order dated 28/04/2016 and in this respect our attention was invited to pages 31 to 32 of the paper book. It was submitted that when the first notice u/s 143(2) was issued on 03/09/2015, Revenue was aware of the fact that as per monetary limit for ITR of Rs.11,11,750/- only concerned and competent Assessing Officer to issue notice u/s 143(2) of the Act was Income Tax Officer-6(1), Kanpur only. The jurisdictional Income Tax Officer, Kanpur did not issue any notice u/s 143(2) of the Act and completed the assessment without issuing any notice u/s 143(2). Learned counsel for the assessee invited our attention to copy of order sheet placed at paper book pages 27 to 30 and our specific attention was invited to the fact that the jurisdictional Assessing Officer started the proceedings from 18/05/2016 by mentioning that case records were received from DCIT-6, Kanpur because of change of monetary limit. Learned counsel for the assessee submitted that on this copy of order sheet there is no mention of issue of notice u/s 143(2) of the Act and neither there is any mention of any order passed by Commissioner u/s 127 of the Act. Learned counsel for the assessee further took us to paper book page 31 where a copy of transfer memo dated 16/05/2016 transferring the record from DCIT-6 to Income Tax Officer, Ward-6(1) was placed. Our specific attention was invited to reason for transferring the case which was as modified monetary limits upto Rs.20 lacs vide CIT order dated 28/04/2016. The Learned counsel for the assessee submitted that firstly this is not an order by Pr. CIT and moreover, there was no change in the monetary limit as the CBDT Instruction No. 1/2011 itself mentions the monetary limit of Rs.20 lacs for which the assessment was to be completed by Assessing Officer. Learned counsel for the assessee therefore, submitted that the Department was aware from the beginning itself that the assessment of the assessee was to be completed by Income Tax Officer-6 only and therefore Income Tax Officer-6 was required to issue notice u/s 143(2) and which he has not done as the notices were issued only by DCIT-4 and DCIT-6 and therefore, it was argued that such assessment order is bad in law in view of the various decisions by I.T.A.T. Benches of Kolkata and also was bad in view of the judgment of jurisdictional High Court of Allahabad in the case of Mohd. Rizwan and also in view of the judgment of Hon’ble Gujarat High Court in the case of Pankaj Bhai Shah 425 ITR 70 .
In view of these provisions of section 119 only, the CBDT issued instructions No.1/2011 for completion of assessment by Income Tax Officers and ACITs and DCITs. This instruction is binding on the Department and therefore, in view of section 119 & in view of CBDT instructions, the assessment of the assessee was to be completed by Assessing Officer-6(1), Kanpur and all statutory notices were to be issued by him only. In fact the reliance placed by Learned D. R. on section 119 goes in favour of the assessee.
In the present case we have already held that statutory notice u/s 143(2) was not issued by the jurisdictional Assessing Officer and therefore, the reliance placed by Learned D. R. on 292BB is of no help to Revenue.
Keeping in view the above facts and circumstances and legal precedents, we allow the jurisdictional ground taken by the assessee that the notice u/s 143(2) was not issued by an officer having jurisdiction on the assessee and who had passed the assessment order and therefore, we hold that in view of non issue of statutory notice u/s 143(2), the assessment order is bad in law and void ab in initio.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the Revenue against the order of learned CIT(A)-I, Kanpur dated 09/04/2018 pertaining to assessment year 20142015.
2. The assessee has filed an application under Rule 27 of the I.T.A.T. Rules raising therein two issues; one relating to jurisdiction and the other relating to issue of limited scrutiny. Learned counsel for the assessee, at the outset, submitted that though the appeal has been filed by the Revenue but against the appeal filed by the Revenue, the assessee has preferred to file application under Rule 27 of the I.T.A.T., Rules raising therein preliminary issues which go to the root of the matter and which are coming out of records and material already available on record. Learned counsel for the assessee, in view of the judgment of Hon’ble I.T.A.T. in the case of AAA Paper Marketing Ltd. vide order dated 27/04/2018, prayed that the issues raised by the assessee in its application under Rule 27 of the I.T.A.T. Rules may be admitted and adjudicated first before taking up the appeal filed by the Revenue. Learned counsel for the assessee, in support of his arguments that the said application under Rule 27 can be admitted and adjudicated at I.T.A.T. level also, relied on a number of case laws besides its reliance on the case laws of Lucknow Bench of the Tribunal in the case of AAA Paper Marketing Ltd. Our specific attention was invited to the cases listed in the paper book at pages 7 and 8. Therefore, in view of the judicial precedents, Learned counsel for the assessee argued that the application, moved by the assessee under Rule 27 of the I.T.A.T. Rules, may be admitted and adjudicated.
3. Learned D. R., on the other hand, vehemently argued against acceptance of application under Rule 27 of the I.T.A.T. Rules and submitted that the issues raised in application do not arise either from the order of the Assessing Officer or learned CIT(A) and none of the authorities below have decided the issue against the assessee and therefore, there is no occasion available to the assessee to raise these issue at this point of time. It was argued that the application filed by the assessee may be dismissed.
4. In response Learned counsel for the assessee submitted that this aspect has been examined in various decisions of various authorities cited by him and stated that even the Hon’ble Lucknow Bench of the Tribunal in the case of AAA Paper Marketing Ltd. has considered this aspect and has passed a detailed order in this respect. It was submitted that Hon’ble Tribunal has taken note of such arguments of the Revenue and after relying on the case law of DCIT vs. Jubiliant Enpro Pvt. Ltd. decided by Delhi ‘D’ Bench, has decided this issue in favour of the assessee.
5. We have heard the rival parties and have gone through the material placed on record. We find that the assessee has invoked the provisions of Rule 27 of the I.T.A.T. Rules to challenge the order of CIT(A) on the following grounds:
(i) That the Department has initiated the assessment for limited scrutiny which has been converted into fill scrutiny without taking the approval of concerned Pr. CIT, which was mandatory in view of CBDT Instruction No.20/2015 and 5/2016.
(ii) The other ground taken in the application is that notice u/s 143(2) dated 03/09/2015 is issued by DCIT, Circle-6, Kanpur and later on assessment is framed by Income Tax Officer, Ward-6(1), Kanpur without valid issue of mandatory notice u/s 143(2) of the Act and therefore, the assessment is bad in law and void ab initio.
We find that these issues have not been decided by the Assessing Officer or by learned CIT(A) in their respective orders. However, these issues go to the root of the assessment itself and are forming part of the material already available on record. Learned counsel for the assessee had invited our attention to the following case laws where under similar facts and circumstances, the various Benches of the Tribunal have decided the issue in favour of the assessee:
(i) SIS Live, Delhi Benches:I-2, New Delhi. I.T.A. No.1313/Del/2015 dated 02/12/2015
(ii) Jubiliant Enpro Pvt. Ltd., I.T.A. No.560/Del/2010, dated 19/05/2014
(ii) Raj Kumar Jalan, IT(SS)A. No.28/Del/2012, dated 08/07/2015
(iv) M/s Tata Petrodyne Ltd., I.T.A. No.7679/Mum/2010, dated 16/09/2015
(v) M/s Cerner Healthcare Solutions Pvt. Ltd., I.T.A. No.675/Bang/2012, dated 08/01/2016
(vii) Great Wall Marketing (P) Ltd., I.T.A. No.660/Kol/2011, dated 03/02/2016
(viii) CIT vs. Edward Deventer (successors) Pvt. Ltd. 123 ITR 200 (Del)
(ix) Deep Chand Kothari vs. CIT 171 ITR 381 (Raj)
(x) R. B. Construction, I.T.A. No.1537/Ahd/2011, datedl 10/04/2015
(xi) IME International Pvt. Ltd., I.T.A. No.1873/Deol/2012, dated 08/01/2016
(xii) Thandi Ram Jai Narain, I.T.A. No.1289/Del/2013, dated 27/06/2017
(xiii) Jolly Fantasy World Ltd. 373 ITR 530
Besides the above noted cases, Learned counsel for the assessee has also invited our attention to an order passed by Lucknow Bench of the Tribunal vide order dated 28/04/2017 in the case of AAA Paper Marketing Ltd. We find that in this order the Tribunal has considered the arguments raised by Learned D. R. and after considering the arguments and after relying on the case law of Jubiliant Enpro Pvt. Ltd. (supra), has decided the issue in favour of the assessee by holding as under:
“2. We have heard argument of both the sides and carefully considered the relevant material available on record of the Tribunal. Ld. counsel of the assessee-respondent submitted that the assessee want to invoke the provision of ITAT Rules 27 to challenge the order of the CIT(A) on following grounds:
“The Ld. CIT(A) has erred in law and on facts in affirming the jurisdiction of the Assessing Officer under section 153A, ignoring that the Additional Commissioner has granted the approval in a mechanical manner, the CIT(A) has further erred in not appreciating that no proceedings were pending on the date of search and the entire assessment has been framed without any reference to incriminating material found as a result of search.”
3. The Ld. counsel further submitted that under Rule 27 of the ITAT Rules, a legal plea, which was not raised by the assessee before the lower authorities, can be raised at any stage by the assessee before the Tribunal as per proposition laid down by various decision and orders including order of the ITAT ‘ID’ Bench Delhi dated 19.05.2014 in the case of DCIT Vs. Jubiliant Enpro Pvt. Ltd. in ITA No. 560/Del/2010 Assessment Year 1998-99.
4. In reply to the above, Ld. DR strongly opposed to admission of the above noted ground and submitted that the legal plea which was not raised before the Assessing Officer and CIT(A) cannot raised before the Tribunal at the appellate stage under any provision including Rule 27 of ITAT Rules.
5. On careful consideration of rival submission, we are of the view that in the similar situation ITAT Delhi ‘D’ Bench in the case of Jubiliant Enpro Pvt. Ltd. (Supra) held as follows :
“13. Thus, it can be seen from the above discussion that we have reversed the order of the Ld. CIT(A) by restoring the penalty u/s 271(1)(c) of the Act in respect of three items, viz., Interest of Rs. 2,996/- earned but not declared as income; amount of Income-tax paid at Rs.71,432/- claimed as deduction by clubbing with Interest expenditure ; and interest on late deposit of wealth-tax amounting to Rs.19,084/- claimed as deduction by clubbing with Interest expenditure.
14.1. The assessee has filed an application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 requesting for the deletion of entire penalty on a legal issue, being the final determination of total income of the assessee u/s 115]A of the Act and the additions sustained pertaining only to the income computed under the normal provisions of the Act. The Id. AR relied on the judgment of the Hon’ble jurisdictional High Court in CIT Vs Nalwa Sons Investment Ltd. (2010) 327 ITR 543 (Del) to propel this submission.
14.2. Before proceeding with the matter on merit, it would be apposite to first decide about the maintainability or otherwise of such application. Rule 27 of ITAT Rules, 1963 with its marginal note reads as under-
‘Respondent may support order on grounds decided against him.
The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.’
14.3. The effect of this rule is that a respondent has been entitled to support the order on the ground which has been decided against him. The underlying idea and the spirit of Rule 27 is to arm a respondent, in an appeal filed by the plaintiff, with an option to contest unfavorable decision of the CIT(A) on the aspect(s) of an issue, the final decision on which Issue has been delivered in his favor. Take an instance of first appellate authority deciding the legal issue of reopening of an assessment against the assessee but deleting the addition on merits in favor of the assessee. When the Revenue files appeal against this order before the tribunal, it will naturally assail the finding of the CIT(A) qua the deletion of addition on merits. Notwithstanding the fact that the respondent assessee did not file any appeal against the order passed by the CIT(A), he shall still be entitled under Rule 27 of the ITAT Rules, 1963, to support the conclusion of the order of the first appellate authority, being the deletion of addition, by challenging the finding of the. CIT(A) which was delivered against him on the legal issue of reopening of assessment.
14.4. The mandate of Rule 27 is to be seen in contradistinction to the provisions of section 253(4) of the Act, which empower the respondent, on an appeal filed by the plaintiff, to file cross objection against any part of the order. At this stage, it may be fruitful to take note of the prescription of sec. 253(4), which provides that: The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) or the Assessing Officer in pursuance of the directions of the Dispute Resolution Panel has been preferred under subsection (1) or sub-section (2) or sub-section (2A) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Assessing Officer (in pursuance of the directions of the Dispute Resolution Panel) or Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time, specified in sub-section (3) or sub-section (3A).’ When we consider Rule 27 of the ITA T rules in juxtaposition to sec. 253(4) of the Act, the position which emerges is that whereas rule 27 is a remedy to the respondent to support the ultimate favourable conclusion of the CIT(A) by challenging such aspects of the issue which were decided against him, a cross objection u/s 253(4) of the Act is a remedy to the respondent to challenge’ the ultimate unfavorable conclusion of the CTT(A).
14.5. A cursory look at the language of rule 27 transpires that a respondent has been empowered to support the order appealed against on any of the grounds decided against him. In other words, the challenge can be made by a respondent only in respect of a ground decided against him’In such circumstances, a question arises that if there is no decision at all of the CIT(A) on a particular aspect, which is otherwise germane to the overall issue decided in favor of the respondent, can the respondent espouse such aspect under rule 27 in an appeal filed by the plaintiff. If we go by the literal interpretation of the Rule, then the answer is in negative that unless the ground is not decided against’ the respondent, he cannot take recourse to this provision. However, it is of paramount importance to keep in mind the fundamental object of enshrining rule 27, being giving an opportunity to the respondent to support the impugned order in an appeal filed by the plaintiff A pragmatic approach on consideration of the object of such Rule, in our considered opinion, necessitates the adoption of liberal interpretation that when a particular issue is decided in favor of the respondent and the plaintiff has come up in appeal against such decision on the issue, then all the relevant aspects having bearing on the overall issue, even though not specifically decided against the plaintiff, should be open for challenge by the respondent under the rule. If the respondent is debarred from raising that aspect of the issue, which was not taken up before the first appellate authority or taken up but remained undecided, and the appeal of the plaintiff is allowed, the respondent would be rendered without remedy. It has been noticed above that a respondent is not entitled to file cross objection on such aspects of the issue u/s 253(4) of the Act, the scope of which provision is circumscribed to challenging the ultimate unfavorable conclusion drawn by the CIT(A). In common parlance, when an issue is decided in favor of one party whether on one aspect or the other, it is not expected of such a party to challenge the order by asserting that the decision should have been given in his favor on that issue on all the aspects and not on that particular aspect on which it was given. When an appeal is filed against such favorable decision on the issue by the other party, and suppose the impugned order is not sustainable on that aspect of the issue on which it was decided, but on some other aspect which was not decided by the first appellate authority and the respondent is restrained from taking up such aspect on the reasoning that Rule 27 is not applicable on such aspect, the respondent would stand nowhere. In view of the foregoing discussion, it is clear that hyper technicalities of rule 27 cannot come in the way of the deciding such aspects of the issue taken up by the respondent before the tribunal which were germane to the main issue but were not contested or decided provided no fresh investigation of facts is required for rendering decision on such aspects.”
6. In view of above, legal ground raised by the assessee by invoking Rule 27 of the ITAT Rules in all three appeals is admitted for consideration on adjudication. Consequently, applications of the assessee in all three appeals of the Revenue are allowed.
Keeping in view the facts and circumstances of the case and the legal precedents cited by Learned counsel for the assessee, we admit the application under Rule 27 of the I.T.A.T. Rules and Learned counsel for the assessee was asked to proceed with his arguments on merits of the grounds taken by him in the application.
6. Learned counsel for the assessee, at the outset, submitted that the second ground taken by the assessee is a jurisdictional issue therefore, he will be taking up the same first and invited our attention to the fact that the assessee had e-filed return of income on 26/09/2014 declaring income of Rs.11,11,750/- and the case was selected for scrutiny u/s 143(2) vide notice issued by DCIT, Circle-4, Kanpur and DCIT-6, Kanpur on the same date i.e. 03/09/2015 and in this respect our attention was invited to pages 40 to 42 of the paper book where the fact of having filed the return for Rs.11,11,750/- along with the two notices issued by DCIT, Circle-4, Kanpur and DCIT-6, Kanpur were placed. Learned counsel for the assessee submitted that as per assessment order dated 29/12/2016 read with transfer memo dated 16/05/2016, the present case was transferred from DCIT-6, Kanpur to Income Tax Officer -6(1), Kanpur on the ground of monetary limit vide Pr. CIT-2, Kanpur order dated 28/04/2016 and in this respect our attention was invited to pages 31 to 32 of the paper book. It was submitted that when the first notice u/s 143(2) was issued on 03/09/2015, Revenue was aware of the fact that as per monetary limit for ITR of Rs.11,11,750/- only concerned and competent Assessing Officer to issue notice u/s 143(2) of the Act was Income Tax Officer-6(1), Kanpur only. The jurisdictional Income Tax Officer, Kanpur did not issue any notice u/s 143(2) of the Act and completed the assessment without issuing any notice u/s 143(2). Learned counsel for the assessee invited our attention to copy of order sheet placed at paper book pages 27 to 30 and our specific attention was invited to the fact that the jurisdictional Assessing Officer started the proceedings from 18/05/2016 by mentioning that case records were received from DCIT-6, Kanpur because of change of monetary limit. Learned counsel for the assessee submitted that on this copy of order sheet there is no mention of issue of notice u/s 143(2) of the Act and neither there is any mention of any order passed by Commissioner u/s 127 of the Act. Learned counsel for the assessee further took us to paper book page 31 where a copy of transfer memo dated 16/05/2016 transferring the record from DCIT-6 to Income Tax Officer, Ward-6(1) was placed. Our specific attention was invited to reason for transferring the case which was as modified monetary limits upto Rs.20 lacs vide CIT order dated 28/04/2016. The Learned counsel for the assessee submitted that firstly this is not an order by Pr. CIT and moreover, there was no change in the monetary limit as the CBDT Instruction No. 1/2011 itself mentions the monetary limit of Rs.20 lacs for which the assessment was to be completed by Assessing Officer. Learned counsel for the assessee therefore, submitted that the Department was aware from the beginning itself that the assessment of the assessee was to be completed by Income Tax Officer-6 only and therefore Income Tax Officer-6 was required to issue notice u/s 143(2) and which he has not done as the notices were issued only by DCIT-4 and DCIT-6 and therefore, it was argued that such assessment order is bad in law in view of the various decisions by I.T.A.T. Benches of Kolkata and also was bad in view of the judgment of jurisdictional High Court of Allahabad in the case of Mohd. Rizwan and also in view of the judgment of Hon’ble Gujarat High Court in the case of Pankaj Bhai Shah 425 ITR 70. Learned counsel for the assessee in this respect invited our attention to the short write up at page 3 where the orders favouring the assessee were placed. Inviting our attention to CBDT Instruction No. 1/2011 dated 31/01/2011 of CBDT, Learned counsel for the assessee argued that the competent person to issue notice u/s 143(2) was Income Tax Officer-6, Kanpur who had passed the assessment order as the income of the assessee was less than Rs.20 lacs whereas the notice u/s 143(2) has been issued by DCIT and that too by two DCITs from Circle-4 & 6 and, therefore, it was argued that the assessment in this case is bad in law and is void ab initio and the appeal filed by the Revenue needs to be dismissed. At the asking of Bench regarding judgment of Hon’ble Supreme Court in the case of I-Ven Interactive Ltd, the Learned counsel for the assessee stated that in that judgment Hon’ble Supreme Court has held that notice issued to assessee u/s 143(2) at the address mentioned in the PAN database is a valid notice. Learned counsel for the assessee submitted that this judgment is not applicable in the case of the assessee as in this case the Hon’ble Supreme Court has decided the issue of service of notice u/s 143(2) at the address mentioned in PAN database of the assessee whereas in the present case the issue is not of the service of notice but the issue of notice issued by the Assessing Officer not having jurisdiction over the assessee. Therefore, it was stated that even this judgment of Hon’ble Supreme Court cannot come to the rescue of the Department.
7. Learned D. R., on the other hand, submitted that the PAN at that time was lying with DCIT-4, Kanpur and therefore, he issued notice u/s 143(2) on 03/09/2015 and since the natural jurisdiction over the assessee was with DCIT-6, Kanpur, he also issued the notice u/s 143(2) on 03/09/2015 and the notices were duly served upon the assessee within the time limit as prescribed under the Act. Learned D. R. submitted that subsequently the Pr. CIT-2, Kanpur, vide order dated 28/04/2016, modified the monetary limits and ordered that jurisdiction over the cases having returned income below Rs.20 lacs shall lie with the Income Tax Officer and jurisdiction over the cases with returned income above Rs.20 lacs shall lie with ACIT and DCIT and accordingly, in view of the revised monetary limits, DCIT-6, Kanpur vide letter dated 16/05/2016 transferred the case record to the Income Tax Officer-6, Kanpur as the jurisdiction over the case lied with him and therefore, it was argued that the technical ground of jurisdiction with respect to issue of notice by the jurisdictional Assessing Officer is not sustainable in the eyes of law. It was further argued that if the assessee had any objection with regard to jurisdiction, it should have been challenged by the assessee during the course of assessment proceedings but no such objection was raised by the assessee during the assessment proceedings and therefore, the provisions of section 292BB are applicable in this case. It was further argued that if the arguments of the assessee are accepted then section 119, 120 and 127 of the Act, which deal with the income tax authorities and deal with the transfer of cases, have no meaning and therefore, it was prayed that the ground taken by the assessee be dismissed.
8. Learned counsel for the assessee, in the rejoinder, submitted that it is an admitted fact that notice u/s 143(2) was not issued by the Assessing Officer who had completed the assessment and submitted that Instruction No. 1 of 2011 are the instructions issued by the CBDT which are binding on the Department and which says that the assessment of the assessees with income less than Rs.20 lacs has to be completed by Income Tax Officer and since the assessee had filed return of income declaring income of Rs.11,11,750/- which is less than Rs.20 lacs, the jurisdictional Assessing Officer was Income Tax Officer-6, Kanpur who was mandatorily required to issue notice u/s 143(2) and which he did not do. Therefore, it was prayed that since the statutory notice u/s 143(2) was not issued by jurisdictional Income Tax Officer, the assessment order is bad in law. As regards the reliance placed by Learned D. R. on sections 119, 120 and 127 are concerned, Learned counsel for the assessee submitted that section 119 in fact goes in favour of assessee which empowers the CBDT to issue instructions/orders etc. to income tax authorities and which are binding on Department therefore, Instruction No. 1/2011 issued by CBDT are binding instructions. Regarding section 120, the Learned counsel for the assessee submitted that this section deals with jurisdiction of income tax authorities which again says that income tax authorities will perform all the functions as may be assigned to them by CBDT. As regards section 127, Learned counsel for the assessee submitted that this section does not apply to the assessee as there is no order passed under that section.
9. We have heard the rival parties and have gone through the material placed on record. We find that it is an admitted fact that two notices u/s 143(2) were issued by DCIT-4, Kanpur and DCIT-6, Kanpur on the same date i.e. 03/09/2015. The copies of these notices are placed at pages 41 and 42 of the paper book. Page 41 is the copy of notice issued by DCIT-4, Kanpur whereas page 42 is the copy of notice issued by DCIT-6, Kanpur. This is also an admitted fact that assessment was completed by the Assessing Officer, Ward-6(1), Kanpur. The Assessing Officer while framing the assessment himself has noted that statutory notice u/s 143(2) dated 03/09/2015 was issued by DCIT-4, Kanpur and DCIT-6, Kanpur and were duly served upon the assessee. The Assessing Officer has not mentioned about any fact of having issued notice u/s 143(2) by him. Learned D. R. had argued that the Pr. CIT-2, Kanpur, vide order dated 28/04/2016, had modified monetary limit and had ordered that the jurisdiction over the cases having returned income below Rs.20 lacs shall lie with the Income Tax Officer and therefore, the case of the assessee was transferred from DCIT to Income Tax Officer. Learned D. R. has further placed reliance on section 127 which authorizes the continuation of assessment proceedings even if the records are transferred from one Assessing Officer to another. In this respect it is important to visit the provisions of sections 119, 120 & 127 relating to income tax authorities and transfer of cases respectively.
9.1 As regards section 119 of the Act, we find that this section relates to instructions to subordinate authorities and which reads as under:
[SECTION 119.
Instructions to subordinate authorities.
(1) The Board may from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board:
Provided that no such orders, instructions or directions shall be issued-
(a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or
(b) so as to interfere with the discretion of the [Commissioner (Appeals)] in the exercise of his appellate functions.
(2) Without prejudice to the generality of the foregoing power,-
(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of [sections [115P, 115S], [115WD, 115WE, 115WF, 115WG, 115WH, 115WJ, 115WK]] [139,] 143, 144, 147, 148, 154, 155, [158BFA] [sub-section (1A) of section 201, sections 210, 211, 234A, 234B, 234C, [234E],] [270A,] 271 [,271C, 271CA] and 273 or otherwise), general or special orders in respect of [any class of incomes or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;
(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise [any income-tax authority, not being a Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.
[(c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class or cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:-
(i) the default in complying with such requirement was due to circumstances beyond the control of the assessee; and
(ii) the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed:
Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament.]
9.1.2 The above provisions clearly empower the CBDT to issue such orders, instructions and directions to income tax authorities as it may deem fit for the proper administration of the Act.
9.1.3 In view of these provisions of section 119 only, the CBDT issued instructions No.1/2011 for completion of assessment by Income Tax Officers and ACITs and DCITs. This instruction is binding on the Department and therefore, in view of section 119 & in view of CBDT instructions, the assessment of the assessee was to be completed by Assessing Officer-6(1), Kanpur and all statutory notices were to be issued by him only. In fact the reliance placed by Learned D. R. on section 119 goes in favour of the assessee.
9.2 Similarly section 120 deals with jurisdiction of income tax authorities wherein it has been mentioned that income tax authorities shall exercise all powers and perform all functions conferred on or as the case may be as assigned to such authorities under this Act in accordance with such directions as the Board may issue for exercise of powers and performance of the functions by all or any of these authorities. The reliance placed by Learned D. R. on this section is also not helpful to Revenue as this section only binds the authorities to act in accordance with directions of CBDT and therefore, only the jurisdictional Assessing Officer as per instruction No.1/2011 should have issued the notice u/s 143(2) of the Act whereas the notices have been issued by non jurisdictional Assessing Officers.
9.3 Now coming to provisions of section 127 relating to transfer of cases.
This is an important section and for the sake of completeness, the provisions of section 127 are reproduced below:
“[SECTION 127.
Power to transfer cases.
(1) The [Principal Director General or Director General] or [Principal Chief Commissioner, Chief Commissioner or Principal 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 [Principal Director General or Director General] or [Principal Chief Commissioner, Chief Commissioner or Principal Commissioner or Commissioner],-
(a) where the [Principal Director General or Director General] or [Principal Chief Commissioner, Chief Commissioner or Principal Commissioner or Commissioner] to whom such Assessing Officers are subordinate are in agreement, then the 3774[Principal Director General or Director General] or 3775[Principal Chief Commissioner, Chief Commissioner or Principal 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 [Principal Director General or Director General] or [Principal Chief Commissioner, Chief Commissioner or Principal Commissioner or Commissioner] aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such [Principal Director General or Director General] or [Principal Chief Commissioner, Chief Commissioner or Principal 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.]”
The analysis of above provisions clearly demonstrate that Principal Commissioner or Chief Commissioner can pass an order u/s 127 of the Act for transfer of assessment records from one Assessing Officer to another Assessing Officer and earlier assessment proceedings undertaken by earlier Assessing Officer will be deemed to be part of assessment proceedings continued by new Assessing Officer but the requirement of section is the passing of order u/s 127 of the Act which in this case has not been done. In the present case instead of order having been passed by Commissioner, the transfer memo has been prepared by DCIT-6 and records have been transferred to jurisdictional Assessing Officer. A copy of transfer memo is placed in paper book at page 31. The transfer memo does not talk about any order u/s 127 of the Act and instead talks about the reason for transferring the case which reads out as under:
TRANSFER MEMO
OFFICE OF THE
DY. COMMISSIONER OF INCOME TAX-6
KANPUR
Dated:16/05/2016
1. Name and address of the assessee : M/s Arti Securities & Services Ltd. Shalimar, Ghaziabad-201005
