Invalidation of Assessment Due to Lack of Inherent Jurisdiction in Section 127 Transfer
1. The Core Dispute: Corporate vs. Non-Corporate Jurisdiction
The assessee-company, with its principal place of business in Greater Noida (UP), had its case transferred from its original jurisdiction to the Central Circle-30, Delhi, by an order passed under Section 127 by the Principal Commissioner of Income Tax (PCIT), Delhi-10.
The Conflict: The transfer order was passed by PCIT, Delhi-10. However, the assessee discovered that PCIT, Delhi-10 was a non-corporate charge (responsible for individuals/firms).
The Jurisdiction Mismatch: Since the assessee was a corporate entity (a company) with a name starting with the alphabet ‘K’, the inherent jurisdiction over such corporate assessees in that region lay with PCIT, Delhi-5.
Assessee’s Stand: The transfer order was passed by an authority that never had jurisdiction over the company in the first place. Therefore, the transfer was a nullity, making all subsequent assessment proceedings illegal.
2. Legal Analysis: Inherent Lack of Jurisdiction
The ruling emphasizes the distinction between a “procedural irregularity” and an “inherent lack of jurisdiction.”
I. Void Ab Initio Order
The Tribunal held that a PCIT holding a non-corporate charge has no power to deal with a corporate file.
The Ruling: An order passed by an authority lacking inherent jurisdiction is void ab initio (invalid from the start).
Sublato Fundamento Cadit Opus: The court applied this legal maxim, which means “once the foundation is removed, the superstructure falls.” Since the transfer order (the foundation) was void, the final assessment order passed by the new AO (the superstructure) automatically collapsed.
II. Section 124(3) Does Not Cure Inherent Defects
The Revenue argued that the assessee was barred from challenging jurisdiction under Section 124(3) because they did not object within the prescribed one-month period.
The Rebuttal: The Tribunal clarified that the time-limit bar in Section 124(3) applies only to challenges regarding territorial jurisdiction or the “place of assessment.”
The Exception: It does not apply to cases where there is an inherent lack of jurisdiction. If the officer was never the “Proper Officer” for that class of assessee (corporate vs. non-corporate), the defect is fundamental and can be challenged at any stage, including before the Tribunal.
3. Final Ruling: Nullity in the Eyes of Law
The Tribunal quashed the final assessment order and the entire proceedings, including the Transfer Pricing (TP) additions, on jurisdictional grounds alone.
Failure of Communication: The Court also noted that the Revenue failed to communicate the Section 127 transfer order to the assessee until the matter reached the Tribunal stage. This lack of transparency further supported the quashing of the order.
Outcome: The assessment was declared a nullity in the eyes of law.
Key Takeaways for Corporate Assessees
Verify the Charge: Always verify if the PCIT who signed your transfer order actually holds the “Corporate Charge” for your specific alphabet/category.
Section 127 is Substantive: A transfer under Section 127 is not just an “administrative convenience.” It is a jurisdictional act that requires the authority to be legally empowered over that specific class of assessee.
Additional Grounds: You can raise a challenge to “inherent lack of jurisdiction” even if you missed the initial one-month window under Section 124(3), as fundamental legal errors “go to the root of the matter.”