The Telangana High Court has ruled that when an income tax case is transferred between Assessing Officers located within the same city, the Income Tax Department is not required to issue a prior notice or provide an opportunity of hearing to the assessee under Section 127(3) of the Income Tax Act, 1961. 

The bench of Justice P. Sam Koshy and Justice Suddala Chalapathi Rao upheld the validity of the transfer orders and the assessment order passed by the transferee authority.

The petitioner challenged two transfer orders issued under Section 127 of the Income Tax Act by which its assessment file was successively transferred from one Assessing Officer to another. It also sought to quash the notice issued under Section 143(2) and the final assessment order passed under Section 143(3) for Assessment Year 2024-25.

According to the petitioner, the transfer orders were illegal because no prior notice or opportunity of hearing had been granted before shifting the jurisdiction. On that basis, it was argued that the Assessing Officer who eventually completed the assessment lacked jurisdiction, rendering the assessment order void.

The principal question before the High Court was whether the transfer of an assessee’s case between Assessing Officers situated within the same city required compliance with the hearing requirement contemplated under Section 127 of the Income Tax Act.

The petitioner contended that the absence of prior notice vitiated the transfer itself and, consequently, invalidated the assessment proceedings conducted by the transferee officer.

The High Court examined the scheme of Section 127, which governs the transfer of income tax cases between Assessing Officers.

The Bench observed that while Sections 127(1) and 127(2) generally require a reasonable opportunity of hearing before transferring a case, Section 127(3) creates a specific exception. The provision expressly states that no such opportunity is required where the transfer takes place between Assessing Officers situated in the same city, locality or place.

The Court found that the transfers in the present case were admittedly between officers functioning within the same city. Therefore, the statutory exemption under Section 127(3) squarely applied, eliminating any requirement to issue a separate notice before effecting the transfer.

The Bench further observed that once the assessee had already been issued notices during the assessment proceedings, there was no legal requirement to provide another notice merely because the jurisdiction had shifted to another officer within the same city.

The Court also referred to Section 127(4), which permits transfer of a case at any stage of the proceedings and clarifies that such transfer does not require re-issuance of notices already issued by the previous Assessing Officer.

The Bench noted that after the transfer, the petitioner was issued further statutory notices, including notices under Sections 142(1) and 143, to which replies were submitted before the assessment order was ultimately passed. Accordingly, the Court found no procedural irregularity or violation of the principles of natural justice.

Holding that the transfer orders were fully compliant with Section 127 of the Income Tax Act, the High Court rejected the petitioner’s jurisdictional challenge.

The Court concluded that once the transfers were valid, the assessment order passed by the transferee Assessing Officer could not be challenged merely on the ground of lack of jurisdiction. Consequently, the writ petition was dismissed.

However, the Bench clarified that the dismissal would not prevent the petitioner from challenging the assessment order before the appropriate appellate forum on any other legally permissible grounds.

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