ITAT Quashes Assessment After Holding PCIT Lacked Power to Transfer Corporate Case

Kunshan Q Tech Microelectronics (India) Pvt. Ltd. was subjected to a final assessment for AY 2021-22, determining total income of over Rs. 353 crore, as against a returned loss of about Rs. 98.71 crore. During appellate proceedings before the Tribunal, the assessee raised an additional ground challenging the very jurisdiction of the Assessing Officer who framed the assessment.

The challenge stemmed from an order dated 27.05.2022 passed under Section 127 of the Income Tax Act, whereby the assessee’s case was transferred from Ward-31, New Delhi to Central Circle-30, Delhi. The assessee contended that the transfer order was passed by the Principal Commissioner of Income Tax, Delhi-10, who did not have jurisdiction over corporate assessees, as the said charge was notified for “Non-Corporate” cases. Based on this, it was argued that the transfer itself was void and all proceedings flowing from it were without authority of law.

Issue Raised: Whether the Principal Commissioner of Income Tax, had the legal jurisdiction to pass the transfer order under Section 127 in respect of a corporate assessee, and if not, whether the assessment framed by the transferee Assessing Officer could survive.

ITAT Held: The Tribunal accepted the additional ground raised by the assessee and quashed the final assessment order. It held that jurisdiction under the Income Tax Act is not a matter of assumption but flows strictly from CBDT notifications issued under Section 120.

Applying the settled principle of sublato fundamento cadit opus, that once the foundation is removed, the superstructure must fall, the Tribunal held that the Section 127 transfer order was void ab initio. Therefore, all proceedings initiated by the transferee Assessing Officer, including the final assessment order were held to be without jurisdiction and a nullity in the eyes of law.

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