Actions of the AO without proper transfer under Section 127 are void ab initio due to jurisdictional error - Delhi High Court Quashes Tax Assessment Orders

In a significant ruling, the Delhi High Court today quashed multiple assessment orders issued by the Income Tax Officer, Ward – 21(1), Delhi, against Raj Sheela Growth Fund Pvt Ltd., stating that these were void ab initio due to a fundamental jurisdictional error.

The court addressed the pivotal legal issue of whether a non-jurisdictional Assessing Officer (AO) can proceed with tax assessments in the absence of a valid transfer order under Section 127 of the Income Tax Act, 1961. The court held that actions taken without such an order are inherently flawed and cannot be sustained legally.

Raj Sheela Growth Fund Pvt Ltd. was initially under the jurisdiction of Central Circle-16/20, New Delhi since the Assessment Year (AY) 2008-09. Despite filing its returns accordingly, it received notices from ITO Ward 21(1) for AY 2015-16, leading to subsequent assessments and additions to its income, which it challenged on grounds of jurisdiction.

Jurisdictional Validity: The court emphatically noted that without a valid order under Section 127 transferring the jurisdiction from Central Circle-20 to ITO Ward 21(1), all assessments made were without legal backing.

Administrative Procedures: The court criticized the administrative oversight, underscoring the necessity for adherence to statutory requirements when transferring cases between different AOs to prevent jurisdictional errors.

Legal Precedents: Referencing landmark judgments, the court reinforced that the jurisdiction of an AO is not just a procedural detail but a fundamental aspect that affects the validity of tax assessments.

The court quashed the assessment orders dated December 31, 2017, and September 30, 2021, along with setting aside the ITAT order dated August 9, 2019, which had remanded the matter back to the AO. It declared that all actions taken by ITO Ward 21(1) were void due to the absence of a transfer order under Section 127.

Date of Decision: May 8, 2024

Raj Sheela Growth Fund Pvt Ltd. vs. Income Tax Officer, Ward – 21(1), Delhi