The power of quasi-judicial authorities is not self empowered it has to be conferred upon them in a manner known to law. In a decision by the Delhi High Court in the case of Mega Corporation, the Court with due respect has left the window open for tax authorities to deal with assessments without they being expressly authorised to do.

In the facts of the case before the Delhi High Court in the case of Prin. CIT vs. Mega Corporation Ltd. [TS-5635-HC-2017(DELHI)-O], the assessee challenged the jurisdiction of the Assessing Officer on basis that the incumbent officer who passed the assessment order had no jurisdiction to do so as he was not conferred with necessary powers to do so. This plea was raised before the Tribunal for the first time. The Tribunal remanded this issue to be adjudicated by the CIT(A). The CIT(A) rejected the ground and confirmed the assessment. Before the Tribunal, the assessee successfully sailed through and got the assessment quashed on the ground of jurisdiction. The Tribunal has discussed various facets on which the Assessing Officer did not have the jurisdiction. However, in appeal by the Revenue before the High Court all questions were not raised and the High Court also has not dealt with the order of the Tribunal on issue of jurisdiction in entirety. The High Court allowed the appeal of the Revenue and sent the matter back to file of the Tribunal for adjudication of merits. With respect, the High Court should have carefully examined the order of the Tribunal which brought out various substantial questions on law on issue of jurisdiction which were multi facet.

In the aforesaid case, the assessment order for AY 2006-07 was made by Addl CIT on 29.12.2008. However, the notice of assessment under section 143(2) was issued by DCIT on 15.10.2007. Thereafter, a notice under 142(1) was issued by Addl CIT on 25.8.2008. [At this juncture one should bear in mind that notice u/s 143(2) cannot be issued after 6 months from the end of the FY in which return was furnished, in the present case, even that time limit expired when notice u/s 143(2) was issued].

The plea of the assessee was that the AO, i.e. Addl CIT, was not an AO in terms of section 120(4)(b), assuming he was, then for him to take charge as AO, there is necessary of an order u/s 127 for transfer of jurisdiction from DCIT to Addl CIT. [This is under the premise that the 143(2) was issued by one officer (DCIT) and assessment completed by another (Addl.CIT), for that to happen there is necessity of transfer from one officer to another u/s 127].

The findings of fact from the order of CIT(A) and Tribunal, reveals that there was no order u/s 120(4)(b), but there is order u/s 120(2) dated 1.8.2007 wherein Addl. CIT has been conferred jurisdiction. [If the order was on 1.8.2007, then the notice issued by DCIT on 15.10.2007 is without jurisdiction].

The Tribunal after accepting the multi facet arguments of the assessee ruled as follows:

(i) Addl CIT can be an AO only if he is directed u/s 120(4)(b), otherwise he lacks jurisdiction to exercise such powers and functions [para 5.4]. This finding of the Tribunal was supported by precedents cited therein. Therefore, assessment framed was without jurisdiction.

(ii) Section 120(2) does not authorise CIT to appoint Addl CIT to perform functions and powers of an AO [para 6.4].

(iii) The fact that there were orders u/s 120(2) dated 1.8.2007 did not confer any power to Addl. CIT with powers of an AO [para 7]. The notification referred to in the order dated 1.8.2007 is only conferring power to JCIT/JD and not Addl. CIT.

(iv) Provisions of section 124 will not be applicable when the AO lacks jurisdiction [para 8.5].

(v) Additionally, Addl. CIT does not have jurisdiction as no transfer order u/s 127 was issued conferring power from DCIT to Addl. CIT. There is no concept of concurrent jurisdiction under Income-tax Act [para 9.1].

In appeal by the Revenue before the High Court, the High Court reversed the order of the Tribunal. The High Court held that quoting of incorrect section 120(2) instead of 120(4)(b) cannot invalidate proceedings. With due respect, on appreciation of the order of the Tribunal and facts recorded therein, this does not seem to be a case of quoting incorrect provisions. The order u/s 120(2) refers to a notification which only authorises conferring jurisdiction to JCIT/JD. The presumption is that it is not a case of quoting incorrect provision, but a case of exercising powers without application of mind. Thus, such exercise of powers by the authorities is contrary to the procedure established under the Act and will also be contrary to Article 265. [A. 265. Taxes not to be imposed save by authority of law. No tax shall be levied or collected except by authority of law]. When, there is no power conferred to the CIT to appoint Addl CIT as an AO and the procedure set out in section 120(4)(b) was not followed, the same is without authority of law, therefore, illegal and lacks jurisdiction. Even if it were, there was no record brought before the High Court which led the High Court to come to conclusion that it is a case of quoting incorrect provision.

The High Court, also held that assessee should have objected to jurisdiction in view of specific provision and procedure set out in section 124(3)(a), having not done so, the assessee is precluded from raising issue of jurisdiction in appellate stage. This in my view would be correct only if the jurisdiction is conferred correctly, however, in cases where there is no authority to delegate the power of an assessment and procedure established by law was not followed, procedural limitations should not hinder the objections to jurisdiction, such as in the present case, which goes to the germane of the very initiation of assessment.

The High Court did not go into the question of section 127 at all as it assumed that, the jurisdiction not questioned at the earlier stage will apply to situation of section 127 also. With due respect, the High Court failed to appreciate that section 127 operates independently of sections 120 and 124. In cases of transfer u/s 127, a notice and opportunity of hearing is mandatory to the assessee. This has been lost sight of by the High Court. The High Court should have appreciated that the Tribunal’s finding of section 127 was independent to that of jurisdiction under section 120. The Tribunal went into the issue of concurrent jurisdiction and relied on the decision of the jurisdictional High Court. In this background, the High Court was bound by its earlier judgment in Valvoline Cummins Ltd. [TS-125-HC-2008(DEL)-O] and should have adjudicated the issue u/s 127. Recently, the Bombay High Court in CIT vs Lalitkumar Bardia [TS-5661-HC-2017(Bombay)-O] quashed the assessment on the ground that the transfer of jurisdiction u/s. 127 cannot be retrospective.

With due respect, the High Court should have looked into all the aspects which were dealt by the Tribunal in a fine manner. A perusal of the Tribunal orders reveals that it is a well reasoned order with support from judicial precedents.

In conclusion, one could only hope and advice that, “one who stays vigilant, will win”.