The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed the assessment framed against Glen Appliances Private Limited for AY 2017-18, holding that the transfer of jurisdiction under Section 127(2) of the Income Tax Act, 1961, was invalid as no opportunity of hearing was provided to the assessee before passing the transfer order. A Bench comprising Judicial Member Anubhav Sharma and Accountant Member Naveen Chandra held that the consequent notices issued by non-jurisdictional Assessing Officers and the assessment order passed thereafter were void in law.

The dispute arose after the Principal Commissioner of Income Tax (PCIT), Gurgaon transferred the assessee’s jurisdiction from DCIT, Central Circle-1, Faridabad to DCIT, Circle-12(1), Delhi through an order passed under Section 127(2). Subsequently, a corrigendum was issued transferring the case to ACIT, Circle-10(1), Delhi. Notices under Section 143(2) were thereafter issued by the Delhi officers.

The assessee challenged the transfer, contending that the jurisdictional transfer order was passed without granting any opportunity of hearing as mandated under Section 127(2) of the Act. It was further submitted that the PCIT later cancelled the transfer order and restored jurisdiction to the original Assessing Officer at Faridabad.

Before the Tribunal, the assessee argued that once the transfer order itself was invalid, the notices issued by the Delhi officers were without jurisdiction. It was also contended that after restoration of jurisdiction to Faridabad, the Assessing Officer who eventually completed the assessment had not issued any notice under Section 143(2), thereby rendering the entire assessment proceedings invalid.

“The order u/s 127(2) for transferring the case from Faridabad to Delhi is invalid on account of the PCIT’s failure to afford any opportunity to the assessee before transferring the case.”

The Tribunal noted that Section 127(2) specifically requires the competent authority to provide a reasonable opportunity of being heard before transferring a case from one jurisdiction to another. It observed that it was an admitted fact that no such opportunity had been granted to the assessee prior to passing the transfer order dated 17.05.2017.

Relying on the decision of the jurisdictional High Court in Melco India Pvt. Ltd. and the Supreme Court ruling in Ajanta Industries v. CBDT, the Bench held that failure to comply with the mandatory requirement of granting a hearing rendered the transfer order legally unsustainable.

“The notices issued by DCIT Circle 12(1), Delhi and ACIT Circle 10(1), Delhi will be treated as if no notice u/s 143(2) was issued for the impugned assessment year.”

The Bench also noted that after the transfer order was cancelled on 14.03.2019, jurisdiction stood restored to DCIT, Central Circle-1, Faridabad. However, the Faridabad Assessing Officer proceeded to complete the assessment without issuing a fresh notice under Section 143(2), a mandatory jurisdictional requirement for assuming authority to frame the assessment.

Holding that the assessment suffered from a fundamental jurisdictional defect, the Tribunal quashed the assessment order itself without examining the merits of the transfer pricing and deduction-related additions. Accordingly, the appeal filed by the assessee was allowed.