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* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ Judgment reserved on: 03 April 2024
Judgment pronounced on: 08 May 2024
ITA 124/2020
RAJ SHEELA GROWTH FUND (P) LTD. ..... Appellant
Through: Mr. N. P. Sahni & Mr.
Deepanshu Mehta, Advs.

versus

INCOME TAX OFFICER, WARD –

21(1), DELHI ..... Respondent
Through: Mr. Sanjay Kumar, Ms. Easha
& Ms. Hemlata Rawat, Advs.

+ ITA 8/2021
PR COMMISSIONER OF INCOME TAX – 7 ..... Appellant
Through: Mr. Sanjay Kumar, Ms. Easha
& Ms. Hemlata Rawat, Advs.

versus

RAJ SHEELA GROWTH FUND PVT. LTD ..... Respondent

Through: Mr. N. P. Sahni & Mr.
Deepanshu Mehta, Advs.

+ W.P.(C) 3777/2022 & CM APPL. 11224/2022 (Stay)

RAJSHEELA GROWTH FUND PVT LTD ..... Petitioner
Through: Mr. N. P. Sahni & Mr.
Deepanshu Mehta, Advs.

versus

ITO WARD 21(1) NEW DELHI ..... Respondent

Through: Mr. Ruchir Bhatia, SSC with
Ms. Deeksha Gupta, Adv.
Signature Not Verified
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By:MAANAS JAJORIA
Signing Date:08.05.2024
15:45:04
 CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV

% JUDGMENT

PURUSHAINDRA KUMAR KAURAV, J.

1. The principal issue in the present batch of cases is whether, in

the absence of any order of transfer under Section 127 of the Act, the
non-jurisdictional Assessing Officer [―AO‖] can proceed with the
assessment?
2. The brief facts that are pertinent to decide the controversy at
hand would reveal that the assessee is a private limited company and
pursuant to an order of centralization dated 16.07.2008, the office of
Central Circle-16, New Delhi (which is now Central Circle-20, New
Delhi since Assessment Year [―AY‖] 2014-15) had jurisdiction over
the case of the assessee. For the AY 2015-16, the assessee filed its
Income Tax Return [―ITR‖] before Central Circle-20, New Delhi
declaring a total income of INR 7,920. Thereafter, the assessee‘s case
was picked up for scrutiny.
3. However, on 21.03.2016 a notice under Section 143(2) of the
Act was issued to the assessee by the office of Income Tax Officer
[―ITO‖] Ward 21(1), New Delhi, pursuant to which, the assessee
participated in the assessment proceedings, assuming that a valid
transfer order was passed in its case. Thereafter, on 31.12.2017, an
assessment order was passed by ITO Ward 21(1), New Delhi,
whereby, an addition amounting to INR 1,35,11,59,300 was made
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 under Section 56(2)(viia) of the Act to the total income of the
assessee.
4. Aggrieved by the assessment order, the assessee preferred an
appeal before the Commissioner of Income Tax (Appeals) [―CIT(A)‖]
raising the ground of lack of jurisdiction and CIT(A) vide order dated
26.12.2018 rejected the appeal. Thereafter, the assessee preferred an
appeal before the ITAT and the ITAT vide order dated 09.08.2019 has
partly allowed the appeal, inter alia, remanded the matter back to the
AO to ascertain whether any transfer order under Section 127 of the
Act was passed. If that be so, further directions were issued to proceed
with the assessment bearing in mind certain aspects.
5. Subsequently, on 22.09.2021, the assessee filed an application
under Section 144A of the Act before the Assistant Commissioner of
Income Tax [“ACIT‖] enquiring about the transfer order under
Section 127 of the Act. Pursuant thereto, on 27.09.2021 an order
under Section 144A of the Act was passed holding that a transfer
order under Section 127 of the Act was passed vide transfer order no.
200000047799 which was stated to have been issued by the Principal
Commissioner of Income Tax [“PCIT‖] (Central), Delhi-2 and also
directed the AO to continue with the assessment proceedings in
accordance with the directions passed in the ITAT order dated
09.08.2019.
6. Consequently, on 30.09.2021, an assessment order was passed
by ITO Ward 21(1), New Delhi, whereby, after following the
directions as per the ITAT order dated 09.08.2019, the addition of
INR 55,55,67,090/- under Section 56(2)(viia) of the Act was made.
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 On the question of jurisdiction the AO has held that the order under
Section 127 of the Act was made in the Income Tax Business
Application [―ITBA‖] system on 18.02.2016 and pursuant to this
order, the PAN of the assessee was migrated to the ITO Ward 21(1),
New Delhi on 19.02.2016.
7. The assessee, therefore, in W.P.(C) 3777/2022, assails the
orders dated 31.12.2017 and 30.09.2021, on the ground of lack of
jurisdiction. Whereas, in ITA 124/2020 and ITA 8/2021 which are the
cross-appeals at the instance of the assessee and Revenue respectively,
the order dated 09.08.2019 passed by the Income Tax Appellate
Tribunal [―ITAT‖] is under challenge.
8. Mr. N. P. Sahni, learned counsel appearing on behalf of the
assessee submitted that the impugned orders are liable to be set aside
as they suffer from jurisdictional error. He submitted that since AY
2008-09, the assessee had been regularly assessed by the Central
Circle-16/20, New Delhi and therefore, without any decentralization
order or any transfer order made under Section 127 of the Act, the
case of the assessee could not have been transferred from Central
Circle-20, New Delhi to ITO Ward 21(1), New Delhi. He further
submitted that the legislative mandate of Section 127 of the Act
clearly elucidates that the transfer of the case of the assessee can only
be done through an order passed under Section 127 of the Act.
9. Mr. Ruchir Bhatia and Mr. Sanjay Kumar, learned counsels
appearing on behalf of the Revenue, vehemently opposed the
submissions advanced. They submitted that the transfer order had duly
been passed, which was also reflected on the ITBA portal. They
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 further argued that the ITO Ward 21(1), New Delhi has inherent
jurisdiction as per the CBDT circular dated 15 November 2014 and
therefore, the assessment orders do not suffer from any infirmity of
jurisdictional error.
10. We have heard the learned counsel appearing on behalf of the
parties and perused the record.
11. In our order dated 21.03.2024, we have succinctly captured the
nature of the controversy involved in the current lis. For the sake of
convenience, the order dated 21.03.2024 is reproduced herein:-

"1. Mr. Bhatia, learned counsel appearing for the respondent has
placed for our perusal a copy of the counter affidavit in W.P(C)
3777/2022, which has been duly circulated. Let the same be
included on our digital record.

2. Presently and upon going through the counter affidavit which

has been tendered, we note that the respondents essentially rely
upon the Central Board of Direct Taxes notification dated 22
October 2014 and the subsequent notification promulgated under
the pen of the Additional Commissioner of Income Tax dated 15
November 2014.

3. According to Mr. Bhatia, the case of the petitioner would clearly

fall within the jurisdiction of the prescribed Deputy Commissioner
of Income Tax as per the extracts of the notification appearing at
page 26 of the counter affidavit.

4. We are, however, faced with a case where the petitioner‘s

assessment is stated to have been centralized and pursuant to
which assessments right from Assessment Years 2008-09 to 2015-
16 were being made by the Assessing Officer [―AO‖] posted in the
Central Circle-16. This is evident from paragraph 3 of the writ
petition itself which is extracted hereinbelow: -

―3. That in the present case, the Petitioner/assessee‘s

income was regularly being assessed to tax by the Central
Circle-16 which is now Central Circle-20, New Delhi since
AY 2008-09. A Chart evidencing the jurisdictional
Assessing Officer of the assessee is set out below for ready
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 reference:

A.Y. PAN Filed Assessing

Ward/Circle Officer
2008-09 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2009-10 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2010-11 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2011-12 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2012-13 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2013-14 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2014-15 AAACR0024N CENTRAL CENTRAL
CIRCLE-16 CIRCLE-16
2015-16 AAACR0024N CENTRAL Ward 21(1)-
CIRCLE-20 under challenge

5. The question which therefore arises is whether the notification

dated 15 November 2014 would have the effect of reversing
centralization. This aspect would also have to be examined,
bearing in mind the Explanation appended to Section 127 of the
Income Tax Act, 1961 [‗Act‘] as well as the Note set out in the
notification of 22 October 2014 and which read as follows:-

―Note:
The Income-tax authorities referred to in column (2) of the
schedule annexed to this notification shall not exercise
powers and perform functions, which have specifically been
assigned through separate notification(s), to an Income-tax
authority having designation other than those mentioned in
column (2) below.‖

6. Let the matters be called again on 03.04.2024."

12. It is thus evident that the short controversy which is sought to

be canvassed before us is whether, in the absence of any
decentralization order or transfer order made under Section 127 of the
Act, the case of the assessee can be transferred from the board of one
AO to another?
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 13. The Revenue draws sustenance to the impugned action on the
strength of the order dated 15.11.2014. At this juncture, it is relevant
to point out that vide order dated 15.11.2014 passed under Section 120
of the Act under the pen of ACIT, the jurisdiction of certain income
tax authorities was outlined. As per this order, the ITO Ward 21(1),
New Delhi shall have jurisdiction over the companies registered under
the Companies Act, 2013, having its registered office or principal
place of business in NCT, Delhi. Furthermore, as per the postulates of
such an order, the ITO Ward 21(1), New Delhi shall have jurisdiction
over the companies with names starting with the alphabets ―Rai to
Real‖ and have an income or loss less than or equal to INR 30 Lakhs.
The relevant extracts of the said notification are reproduced herein for
reference:-
―ORDER UNDER SECTION 120 OF THF INCOME-TAX
ACT, 1961
In exercise of the powers conferred by sub-sections (1) and (2) of
section 120 of the Income Tax Act, 1961 (43 of 1961) and in
accordance with Notification Number S.O. No. 2752(E) dated the
22nd October, 2014 of Government of India, Central Board of
Direct Taxes, published in the Gazette of India, Extra-Ordinary,
Part-II, Section 3 (ii), dated the 22nd October, 2014, [Notification
No. 50 /2014/F. No. 187/38/2014 (ITA:I)] and Order dated
15.11.2014 under Section 120 of the Act issued by the
Commissioner of income Tax, Delhi-7, New Delhi vide No. Pr.
CIT/ClT-7./Juris/2014-15/2 and in supersession of all the earlier
orders in this regard passed by this office, assigning jurisdiction
over any case(s) to any Assessing Officer, I, the Addl.
Commissioner of Income-tax, Range 21, New Delhi hereby direct
that the Deputy/Assistant Commissioners of income Tax and
Income Tax Officers mentioned in Column No. 2 of the Schedule
attached herewith shall exercise the powers and perform the
functions of Assessing Officer, in respect of such cases or classes
of cases specified in the corresponding entries in column (6) of the
Schedule attached herewith, of such persons or classes of persons
specified in the corresponding entries in column (5) of the said
Schedule, in such territorial areas specified in the corresponding
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 entries in column (4) of the said Schedule, having their
headquarters specified in the corresponding entries in column (3)
of the said schedule, in respect of all incomes or classes of income
thereof;
***

Designation Head- Territorial Persons or Cases and classes

of Income quarters Area classes of of cases
Tax persons
Authorities

… Income Tax Delhi National (a) Persons (a)All cases of

Officer Capital being persons referred
Ward 21 Territory of companies to in
(1), Delhi Delhi registered corresponding
under the entry in item (a)
Companies of column (5)
Act, 2013 or whose names
under the begin with the
Companies alphabet “Rai to
Act, 1956 and Real” and
having its having income
registered or loss less than
office or or equal to Rs.
having its 30 Lakhs or as
principal place prescribed by
of business in the competent
the area authority from
mentioned in time to time.
column (4);
(b)persons (b) all cases of
being individuals being
individuals managing
referred to in director or
item (b) of director or
column (6). manager or
secretary in the
companies
referred to in
corresponding
entry in item (a)
of column (6).

14. Furthermore, the aforenoted order also highlights the Central

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 Board of Direct Taxes [―CBDT‖] notification dated 22.10.2014 which
delineates the jurisdiction of the AO and also puts the embargo that
the income tax authorities mentioned in the notification shall not
exercise the powers which have been specifically assigned to other
authorities vide the provisions of separate notifications. For the sake of
convenience, the relevant extracts of the said notification are
reproduced herein below:-
―S.O. 27S2(E).—In exercise of the powers conferred by sub-
sections (1) and (2) of section 120 of the Income Tax Act, 1961
(43 of 1961), and in supersession of Government of India, Central
Board of Direct Taxes, notification number S.O. 732(E) dated the
31st July, 2001, published in the Gazette of India, Extra-Ordinary,
Part-II, Section 3, Sub-section (ii), dated the 31st July, 2001 except
as respects things done or omitted to be done before such
supersession, the Central Board of Direct Taxes, hereby,-

***

Note:

The Income-tax authorities referred to in column (2) of the

schedule annexed to this notification shall not exercise powers and
perform functions, which have specifically been assigned through
separate notification(s), to an Income-tax authority having
designation other than those mentioned in column (2) below.
2. This notification shall come into force with effect from 15th day
of November, 2014.

***

S. Designation of Head- Territo Persons or classes Cases and classes

No Income Tax quarters rial of persons of cases
. Authorities Area

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 94 Principal Delhi Nation (a) Persons being a)All cases of
Commissioner/ al companies persons referred to
Commissioner of Capital registered under in corresponding
Income-tax, Territo the Companies entry in item (a) of
Delhi-7 ry of Act, 2013 or under column (5) whose
Delhi the Companies names begin with
Act, 1956 and the alphabet ―O‖ or
having its ―P‖ or ―Q‖ or ―R‖ ;
registered office or (b) all cases of
having its individuals being
principal place of managing director
business in the or director or
area mentioned in manager or
column (4); secretary in the
(b)persons being companies referred
individuals to in corresponding
referred to in item entry in item (a) of
(b) of column (6). column (6).

15. It is the contention of the Revenue that the conjoint reading of

the order dated 15.11.2014 passed under Section 120 of the Act under
the pen of ACIT and the CBDT notification dated 22.10.2014 would
establish that the ITO Ward 21(1), New Delhi shall have inherent
jurisdiction over the assessee and, therefore, an order of transfer made
under Section 127 of the Act was not required.
16. Before advancing to the merits of the aforesaid contentions, it is
to be noted that the purported order of transfer passed under Section
127 of the Act vide transfer order no. 200000047799, which was
stated to have been uploaded on the ITBA system on 18.02.2016 is not
traceable and has also not been produced before us for our
consideration.
17. In light of such undisputed position of facts, we now proceed to
examine the contention of the Revenue, which tries to give the colour
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 of inherent jurisdiction to ITO Ward 21(1), New Delhi over the case
of the assessee, on the purported anvil of a conjoint reading of the
order dated 15.11.2014 passed under Section 120 of the Act under the
pen of ACIT and the CBDT notification dated 22.10.2014.
18. We notice the underlying legislative mandate of Section 127 of
the Act, whereby, it is clear that the transfer of cases under Section
127 of the Act is based on the objective of public interest and
administrative convenience. The Constitution Bench of the Supreme
Court in the case of Kashiram Aggarwalla v. Union of India,1
discussed the scope and ambit of Section 127 of the Act while
emphasizing upon the administrative character of the order. The
relevant paragraphs of the said decision are reproduced herein below:-
“6. There is another consideration which is also relevant. Section
124 of the Act deals with the jurisdiction of Income Tax Officers.
Section 124(3) provides that within the limits of the area assigned
to him the Income Tax Officer shall have jurisdiction—

(a) in respect of any person carrying on a business or

profession, if the place at which he carries on his business
or profession is situate within the area, or where his
business or profession is carried on in more places than
one, if the principal place of his business or profession is
situate within the area, and
(b) in respect of any other person residing within the area.

This provision clearly indicates that where a transfer is made under

the proviso to Section 127(1) from one Income Tax Officer to
another in the same locality, it merely means that instead of one
Income Tax Officer who is competent to deal with the case,
another Income Tax Officer has been asked to deal with it. Such an
order is purely in the nature of an administrative order passed for
considerations of convenience of the department and no possible
prejudice can be involved in such a transfer. Where, as in the
present proceedings, assessment cases pending against the
appellant before an officer in one ward are transferred to an officer

1
1964 SCC OnLine SC 26.
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 in another ward in the same place, there is hardly any occasion for
mentioning any reasons as such, because such transfers are
invariably made on grounds of administrative convenience, and
that shows that on principle in such cases neither can the notice be
said to be necessary, nor would it be necessary to record any
reasons for the transfer. The provisions contained in Section
124(3) of the Act deal with the same topic which was the subject-
matter of Section 64(1) and (2) of the earlier Income Tax Act,
1922 (11 of 1922). There is, however this difference between these
two provisions that whereas Section 124 fixes jurisdiction,
territorial or otherwise, of the Income Tax Officers, Section 64
fixed the place where an assessee was to be assessed.

7. In this connection, it is also necessary to take into account the

background of the provision contained in Section 127. In Pannalal
Binjraj v. Union of India [(1957) SCR 233] the validity of Section
5(7-A) of the earlier Act of 1922 was challenged before this Court.
The said Section had provided that the Commissioner of Income
Tax may transfer any case from one Income Tax Officer
subordinate to him to another, and the Central Board of Revenue
may transfer any case from any one Income Tax Officer to
another. Such transfer may be made at any stage of the
proceedings, and shall not render necessary the reissue of any
notice already issued by the Income Tax Officer from whom the
case is transferred. The argument which was urged before this
Court in challenging the validity of this provision was that it
infringed the citizens' fundamental rights conferred by Articles 14
and 19(1)(g) of the Constitution. In support of this argument,
reliance was placed on the fact that Section 64(1) and (2) conferred
a right on the assessee to have his tax matter adjudicated upon by
the respective officers mentioned in the said provisions; and since
Section 5(7-A) authorised the transfer of the assessee's case from
one Income Tax Officer to another, that involved infringement of
his fundamental rights guaranteed by Articles 14 and 19(1)(g) read
with Section 64(1) and (2). It is necessary to emphasise that
Section 5(7-A) authorised transfer of income tax cases from one
officer to another not necessarily within the same place. In other
words, the transfer authorised by Section 5(7-A) would take the
case from the jurisdiction of an officer entitled to try it under
Section 64(1) and (2) to another officer who may not have
jurisdiction to try the case under the said provision. That, indeed,
was the basis on which the validity of Section 5(7-A) was
challenged. This Court, however, repelled the plea raised against
the validity of the said section on the ground that the right
conferred on the assessee by Sections 64(1) and (2) was not an
absolute right and must be subject to the primary object of the Act
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 itself, namely, the assessment and collection of the income tax; and
it was also held that where the exigencies of tax collection so
required, the Commissioner of Income Tax or the Central Board of
Revenue had the power to transfer his case under Section 5(7-A) to
some other officer outside the area where the assessee resided or
carried on business. That is how Section 5(7-A) was sustained.

9. It is in the light of these considerations that we have to construe

the proviso to Section 127(1). As we have already indicated, the
construction for which Mr Jain contends is a reasonably possible
construction. In fact, if the words used in the proviso are literally
read, Mr Jain would be justified in contending that the requirement
that reasons must be recorded applies even to cases falling under it.
On the other hand, if the obvious object of the proviso is taken into
account and the relevant previous background is borne in mind, it
would also seem reasonable to hold that in regard to cases falling
under the proviso, an opportunity need not be given to the
assessee, and the consequential need to record reasons for the
transfer is also unnecessary, and this view is plainly consistent
with the scheme of the provision and the true intent of its
requirements. We would according hold that the impugned orders
cannot be challenged on the ground that the Board has not
recorded reasons in directing the transfer of the cases pending
against the assessee from one Income Tax Officer to another in the
same locality.‖
[Emphasis supplied]

19. The Division Bench of this Court in the case of ATS

Infrastructure Ltd. v. Commissioner of Income-tax,2 after following
the dictum of the Supreme Court in the case of Pannalal Binjraj v.
Union of India,3 has held that when powers are invoked under Section
127 of the Act, territorial nexus becomes irrelevant and what becomes
more prominent are the interests of adjudication and collection of
taxes. The Court in the said decision held as follows:-
―9. In Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC)
the Constitution Bench had repulsed a siege laid to the vires of
section 5 of the Indian Income-tax Act, 1922. The assessee had
one of its branches in Calcutta where the karta of the Hindu

2
2009 SCC OnLine Del 1627.
3
(1957) SCR 233.
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 undivided family resided and carried on business. The Hindu
undivided family, however, was being assessed at Patna but the
cases were transferred to Calcutta and subsequently to Circle-VI,
New Delhi. Their Lordships observed thus (pages 580 and 587) :

―Prima facie it would appear that an assessee is entitled

under those provisions to be assessed by the Income-tax
Officer of the particular area where he resides or carries on
business. Even where a question arises as to the place of
assessment such question is under section 64(3) to be
determined by the Commissioner or the Commissioners
concerned if the question is between places in more States
than one or by the Central Board of Revenue if the latter are
not in agreement and the assessee is given an opportunity of
representing his views before any such question is
determined. This provision also goes to show that the
convenience of the assessee is the main consideration in
determining the place of assessment. Even so the exigencies
of tax collection have got to be considered and the primary
object of the Act, viz., the assessment of Income-tax, has
got to be achieved. The hierarchy of Income-tax authorities
which is set up under Chapter II of the Act has been so set
up with a view to assess the proper Income-tax payable by
the assessee and whether the one or the other of the
authorities will proceed to assess a particular assessee has
got to be determined not only having regard to the
convenience of the assessee but also the exigencies of tax
collection. In order to assess the tax payable by an assessee
more conveniently and efficiently it may be necessary to
have him assessed by an Income-tax Officer of an area
other than the one in which he resides or carries on
business. It may be that the nature and volume of his
business operations are such as require investigation into
his affairs in a place other than the one where he resides or
carries on business or that he is so connected with various
other individuals or organisations in the way of his earning
his income as to render such extra territorial investigation
necessary before he may be properly assessed. .. There is no
fundamental right in an assessee to be assessed in a
particular area or locality. Even considered in the context of
section 64(1) and (2) of the Act this right which is
conferred upon the assessee to be assessed in a particular
area or locality is not an absolute right but a subject to the
exigencies of tax collection.‖

10. The Division Bench of this court in Sameer Leasing Co. Ltd. v.
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 Chairman, CBDT [1990] 185 ITR 129 gave its imprimatur to
assessment previously being carried out at Delhi, being transferred
to Meerut, keeping in view the fact that the business activities of
the assessee were located in Muzaffarnagar and also keeping in
perspective the fact that other cases of the assessee pertaining to
the same group were also transferred to Meerut. Another Division
Bench of this court in K. K. Loomba v. CIT [2000] 241 ITR152
applied Bidi Supply Co. v. Union of India [1956] 29 ITR 717 (SC)
and Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC) to
reject the challenge to the transfer of cases from Amritsar to Delhi.
In K. P. Mohammed Salim v. CIT [2008] 300 ITR 302 (SC) their
Lordships have clarified that: ―The power of transfer is in effect
provides for a machinery provision. It must be given full effect. It
must be construed in a manner so as to make it workable. Even
section 127 of the Act is the machinery provision. It should be
construed to effectuate a charging section so as to allow the
authorities concerned to do so in a manner wherefor the statute
was enacted.

11. In this conspectus and analysis of the law it will be relevant to

note that, firstly, there is no fundamental right of an assessee to be
assessed at a particular place. Under section 124, the assessment
must be carried out at the principal place of business but when
powers under section 127 are invoked, territorial nexus becomes
irrelevant. Secondly, the determination of the venue of the
assessment would be governed by the greatest exigencies for the
collection of taxes. Thirdly, the decision to transfer cases cannot be
capricious or mala fide. If the venue is changed from year to year,
or periodically for no apparent reason, it would not manifest an
instance of the exercise of power which is not available, but an
example of an abuse of power in the manner in which it is
exercised. Fourthly, whilst the convenience of the assessee should
be kept in mind, it would always be subservient to the interests of
adjudication and collection of taxes.‖
[Emphasis supplied]

20. Furthermore, in the case of W.P.C. 4054/2024 titled Dollar

Gulati v. PCIT, we have also considered the ambit of Section 127 of
the Act and made the following pertinent observations :-
―25. Therefore, it is evident from the legislative mandate and
dictum laid down by the abovementioned judicial pronouncements
on the scope and ambit of Section 127 of the Act, that it is a
machinery provision which is aimed at larger public interest. On
the touchstone of public interest, the powers under Section 127 of
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 the Act can be exercised. Furthermore, the legislative mandate
advises that the order of transfer under Section 127 of the Act
ought to be passed after providing a reasonable opportunity of
hearing to the assessee.

26. In addition to that, the order passed under Section 127 of

the Act should duly reflect the application of mind while disposing
of the objections filed by the assessee. Moreover, the convenience
of parties shall be considered by the Revenue while exercising the
powers under Section 127 of the Act, however, in view of the
administrative nature of such an order, the administrative
convenience of the Revenue and the need for ‗coordinated
investigation‘ would take precedence over the logistical difficulties
faced by the assessee. It is also fundamental to point out that
despite being a machinery provision, the reasons recorded in the
order of transfer should not be capricious or mala fide and such
order shall not run contrary to the bona fide objectives of the Act.‖

[Emphasis supplied]

21. At this juncture, it is also pertinent to rely on the decision of this

Court in the case of Abhishek Jain v. Income Tax Officer (supra),
wherein, the Court discussed the interplay between Sections 120, 124
and 127 of the Act and ultimately held as follows:-
―16. Section 120 of the Act which relates to jurisdiction of the
Income-tax authorities stipulates that the Income-tax authorities
shall exercise any of the powers and perform all or any of the
functions conferred or assigned to such authority by or under this
Act as per the directions of the Board, i.e., the Central Board of
Direct Taxes. As per Explanation to sub-section(1), the power can
also be exercised, if directed by the Board, by authorities higher in
rank. Under sub-section (2), the Board can issue orders in writing
for exercise of power and performance of functions by the Income-
tax authorities and while doing so in terms of sub-section (3), the
Board can take into consideration and have regard to the four-fold
criteria, namely, territorial area ; persons or classes of persons ;
incomes or classes of income ; and cases or classes of cases. Thus,
the Act does not authoritatively confer exclusive jurisdiction to
specific Income-tax authority. It is left to the Board to issue
directions for exercise of power and functions taking into
consideration territorial area, class/types of persons, income and
case, and Board have been given wide power and latitude. The said
section by necessary implication postulates and acknowledges that
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 multiple or more than one Assessing Officer could exercise
jurisdiction over the particular assessee. Concurrent jurisdictions
are therefore not an anathema but an accepted position under the
Act. The term "jurisdiction" in section 120 of the Act has been
used loosely and not in strict sense to confer jurisdiction
exclusively to a specified and single Assessing Officer, to the
exclusion of others with concurrent jurisdiction. It would refer to
"place of assessment", a term used in the Indian Income-tax Act,
1922. Sub-section (5) of section 120 of the Act again affirms and
accepts that there can be concurrent jurisdiction of two or more
Assessing Officers who would exercise jurisdiction over a
particular assessee in terms of the four-fold criteria stated in sub-
section (3) of section 120. Second part of sub-section (5) states
that where powers and functions are exercised concurrently by the
Assessing Officers of different classes, then the higher authority
can direct the lower authority in rank amongst them to exercise the
powers and functions.
***
18. S. S. Ahluwalia (supra), examines several decisions which
were relied upon by the assessee in the said case and were held to
be not germane and applicable. This decision also explains the
provisions of section 127 of the Act and scope and ambit of the
said power, to observe that the section does not speak of the
transfer of jurisdiction but transfer of case as defined in section
127. The expression "concurrent jurisdiction" is mentioned in sub-
section (3) to section 127 of the Act. Elucidating the legal effect of
sections 120, 124 and 127 of the Act, it was observed in S. S.
Ahluwalia (supra):

"(13) The provisions indicate that sections 120, 124 and

127 of the Act recognizes flexibility and choice, both with
the assessee and the authorities, i.e., the Assessing Officer
before whom return of income could be filed and
assessment could be made. The Assessing Officer within
whose area an assessee was carrying on business, resided or
otherwise income had accrued or arisen (in the last case,
subject to the limitation noticed above) has jurisdiction.
Similarly, the Assessing Officer also has authority due to
class of income or nature and type of business. The Act,
therefore, recognized multiple or concurrent jurisdictions.
The provisions of section 124 ensure and prevent two
assessments by different Assessing Officers, having or
enforcing concurrent jurisdiction. There cannot be and the
Act does not envisage two assessments for the same year by
different officers. (Reassessment order can be by a different
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 officer)."

20. Sub-section (5) of section 124, though limited in scope, would

also be applicable in the facts and circumstances of the present
case as the Income-tax Officer, Ward-1(1), Noida had the power to
assess income accruing or arising within the area as it is not the
case of the petitioner- assessee that the said officer did not have
jurisdiction in view of location of the bank account and/or the
petitioner's place of work. Section 124(5) of the Act saves
assessment made by an Assessing Officer provided that the
assessment does not bring to tax anything other than income
accruing, arising or received in that area over which the Assessing
Officer exercises jurisdiction. However, notwithstanding section
124(5), the Act does not postulate multiple assessments by
different Assessing Officers, or assessment of part or portion of an
income (see Kanji Mal and Sons v. CIT (1982) 138 ITR 391
(Delhi)). Thus, the Assessing Officers having concurrent
jurisdiction must ensure that only one of them proceeds and
adjudicates. This is the purport and objective behind sub-section
(2) of section 124 of the Act.‖
[Emphasis supplied]

22. Therefore, in light of the legislative mandate enshrined under

Sections 120, 124 and 127 of the Act and the judicial pronouncements
mentioned above, it is clear that Section 124 of the Act deals with the
jurisdiction of the assessing officers, whereby, the AO has been vested
with the jurisdiction over any person carrying on business or
profession over any prescribed territorial limit or where the principal
place of business of persons is within such area and any person
residing within such prescribed territorial limits. However, in cases
where the case was transferred from one AO having jurisdiction over
the assessee to another AO who otherwise did not have jurisdiction in
terms of the direction of the Board under Section 120 and 124 of the
Act, then transfer order under Section 127 is mandatory, without
which the jurisdiction of the AO cannot be conferred to pass any
assessment order.
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 23. It is imperative to point out that the underlying objective of
such a statutory procedure is to avoid chaos and to ease the
administrative convenience on the part of the Revenue for coordinated
investigation.
24. Furthermore, the Explanation appended to Section 127 of the
Act, evidently explains the aforesaid position, which reads as under:-
―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.‖

25. As is apparent from the bare reading of the abovenoted

Explanation, the word ‗case‘ includes the umbrella or class of all cases
related to the assessee, wherein, the order has been passed under
Sections 120 and 127 of the Act. Section 127 of the Act is a
machinery provision and it must be construed in a manner to finally
effectuate a charging section and for the purpose of effective
collection of tax. The Supreme Court in the case of K.P. Mohammed
Salim v. CIT,4 wherein, the transfer of block assessment was
concerned, laid impetus on the machinery nature of Section 127 of the
Act and also discussed the germane effect which is sought to have
been canvassed by virtue of the said Explanation appended to Section
127 of the Act and held as follows:-
―13. An order of transfer is passed for the purpose of assessment of
income. It serves a larger purpose. Such an order has to be passed
in public interest. Only because in the said provision the words

4
(2008) 11 SCC 573.
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 ―any case‖ has been mentioned, the same, in our opinion, would
not mean that an order of transfer cannot be passed in respect of
cases involving more than one assessment year.

14. It would not be correct to contend that only because

Explanation appended to Section 127 refers to the word ―case‖ for
the purpose of the said section as also Section 120, the source of
power for transfer of the case involving block assessment is
relatable only to Section 120 of the Act. It is a well-settled
principle of interpretation of statute that a provision must be
construed in such a manner so as to make it workable. When the
Income Tax Act was originally enacted, Chapter XIV-B was not in
the statute book. It was brought in the statute book only in the year
1996.

The power of transfer in effect provides for a machinery provision.

It must be given its full effect. It must be construed in a manner so
as to make it workable. Even Section 127 of the Act is a machinery
provision. It should be construed to effectuate a charging section
so as to allow the authorities concerned to do so in a manner
wherefore the statute was enacted.‖
[Emphasis supplied]

26. Considering the case in hand, vide order of centralization dated

16.07.2008, the case of the assessee was transferred from the
jurisdictional AO to the DCIT, Central Circle-16, New Delhi. It be
noted that since AY 2008-09 to AY 2015-16, the assessee was being
assessed by the office of DCIT, Central Circle-16/20, New Delhi.
Furthermore, as the record would reflect that the case of the assessee
was transferred to ITO Ward 21(1), New Delhi without any transfer
order passed under Section 127 of the Act, which is a pre-requisite
before transferring the case.
27. It be noted that till date no decentralization order has been
placed before us which may evidence a legitimate transfer of the
assessee‘s case from DCIT, Central Circle-16/20, New Delhi to ITO
Ward 21(1), New Delhi. Furthermore, we find no merit in the
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 contention of the Revenue that by virtue of an order dated 15.11.2014
passed under Section 120 of the Act under the pen of ACIT read with
CBDT notification dated 22.10.2014, the office of ITO Ward 21(1),
New Delhi has inherent jurisdiction over the assessee. Such a position
if accepted would lead to confusion and chaos as it would lead to a
position where at one point, one or more assessing officers not only
will have jurisdiction over the assessee but also can proceed with the
assessment proceedings simultaneously. Such a situation cannot be
countenanced in the law.
28. In addition to that, a bare perusal of the order dated 15.11.2014
passed under Section 120 of the Act under the pen of ACIT read with
CBDT notification dated 22.10.2014, would reveal that these
notifications cannot run contrary to the legislative mandate of Section
127 of the Act. Moreover, the jurisdiction of the DCIT, Central Circle-
16, New Delhi over the case of the assessee is assigned vide a separate
order of centralization dated 16.07.2008. Thus, it is discernible that
once the case of the assessee is centralized, then the transfer of the
case of the assessee to another AO would not be permissible without a
decentralization order or transfer order under Section 127 of the Act as
contrary to such a position dehors the underlying objective which the
Act seeks to achieve by virtue of powers enshrined under Section 127
of the Act. We accordingly set aside the impugned orders dated
31.12.2017 and 30.09.2021.
29. In view of the aforesaid, the writ petition is allowed and
disposed of accordingly, alongwith pending applications, if any.
30. Moreover, it is pertinent to point out that since the impugned
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 orders 31.12.2017 and 30.09.2021 are hereby quashed and set aside on
the ground of jurisdictional error, therefore, in view of the aforesaid,
the ITAT order dated 09.08.2019 which is impugned in ITA 124/2020
and ITA 8/2021 is also set aside.
31. In light of the foregoing, ITA 124/2020 and ITA 8/2021 are
disposed of, alongwith pending applications, if any.
32. Additionally, it is apposite to point out that these observations
made hereinabove are limited to the extent for the purpose of the
challenge which stands posited before us i.e., whether in the absence
of any order of transfer under Section 127 of the Act, the non-
jurisdictional AO can proceed with the assessment and we seek to
answer that question in negative. The Revenue, however is at liberty
to take fresh steps through jurisdictional authorities, if otherwise
permissible, in accordance with law.

PURUSHAINDRA KUMAR KAURAV, J.

YASHWANT VARMA, J.

MAY 08, 2024/MJ

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