transfer of income tax officer

Change of Assessing Officer and Jurisdiction for Income Tax

Mar 22, 2016 | 31 comments

With the advent of online tax filing it is much easier task to file your returns. But sometime there may be situations where you need to interact with income tax department to clarify their doubts or to raise the issues related to your tax filing. At that time you must first know about your tax ward and circle or about your assessing officer. This article gives an overview of Assessing Officer, lists the situation in which one needs to contact Assessing Officer and how to change Assessing Officer and Jurisdiction.

Table of Contents

Overview of Assessing Officer

Who is Assessing Officer?

An  Assessing Officer  is a person who has jurisdiction(means: official power to make tax decisions and judgments for that assessee) to make assessment of an assessee, who is liable to tax under the Act. The designation may vary according to the volume of income/nature of trade as assigned by the C entral Board of Direct Taxes ( CBDT Board ), the department which deals with income tax. He may be an Income-tax Officer, Assistant Commissioner, Deputy Commissioner, Joint Commissioner or an Additional Commissioner. To know more about Assessing Officer one can read incometaxindia.gov.in:Central Board of Direct Taxes  .  To know your Assessing Officer , ( which is an optional field to fill in our ITR forms also) Go to incometaxindiaefiling.gov.in/e-Filing/Services/KnowYourJurisdictionLink.html  and enter your PAN number. Our article  How to find Jurisdictional Assessing Officer : Income Tax explains it in detail.

Your Income Tax Jurisidiction

How is an Assessing Officer assigned?

To assess the returns, there are various officers across India who are designated to assess records of a particular set of tax-payers in that geographical area only. The address mentioned by the tax-payer in his PAN( Permanent Account Number) is used to determine the jurisdiction of the income tax officer.

E.g. Hetal lives in Mumbai. She provided the address of her residential house in Mumbai while applying for PAN. Hence, the jurisdiction of Miss. Hetal shall be Income-tax office, Mumbai.

When does one need to contact Assessing Officer?

Typically processing of Income Tax Return is done by Central Processing Cell (CPC) Bangalore. But there are cases where you may need to contact your Assesing officer. Examples of Mail from Income Tax

For Income Tax Refund

Dear Mr./Mrs./Ms. SO ,

We are pleased to advise that your Income Tax Refund , as determined by ITD had been processed.

Please find attached payment advice for details. The advice is password protected. Please use your PAN number in capital letters to open the attachment.

For more details please contact CPC Bengaluru at 1800-425-2229 (Toll Free) or 080-22546500 if the Return was filed online.

If other cases,you need to visit local Income Tax Ward and contact your Assessing Officer .

In response to outstanding Tax Demand

Response for Outstanding Tax Demand is submitted for the User ID ACXXXXXX8D and the Transaction ID is 1010101011 .

Disclaimer: Your response has been registered. However, it is subject to the verification and confirmation by your Jurisdictional Assessing Officer.

For Challan 280 Correction

While filling Challan 280 for self assessment tax, advance tax one may make mistake such as mention wrong Assessment year or Incorrect PAN or TAN etc. It is necessary to correct such mistakes otherwise tax would not be credited to you in correct year and you might get notice from Income tax department for tax due.  If you have paid Challan 280 online then only your Assessing Officer can correct the details . You can correct the details in the challan 280 by Our article  How to Correct Challan 280 discusses it in detail.

Notice for Processing of Income Tax Return to meet the Assessing Officer

You might get notice regarding Processing of ITR. Thanks to Our reader Soniya for sharing the letter with us. Our article  Income Tax Notice :Sections,What to check,How to reply  discusses it in detail. Click on image to Enlarge

Changing PAN address doesn’t change Assessing Officer

Changing address details in PAN database does not automatically change your jurisdiction . You have to write to your current assessing officer regarding your change of place and request him to transfer your case records and jurisdiction to appropriate AO. Once both the officers are satisfied about proposed transfer, the old Assessing Officer will initiate transfer process and migrate your PAN to the new AO.

Change in Assessing Officer

When should assessing officer be changed.

Change of address/Jurisdiction

It is common that people shift to new places for work or other reasons. Due to change in address there are many aspects that need to be updated and modified for  filing of tax returns. Now say for example, you shifted to Bangalore from Mumbai due to your new job. Your old jurisdiction was Mumbai. However for future correspondence with the Income-tax department, you are required to change your jurisdiction as Bangalore. In such cases, the taxpayer is required to inform the existing jurisdictional Income-tax officer about such change by way of written application. Many times your Jurisdiction will be changed automatically,

Unsatisfied by the present Assessing Officer:

If a tax-payer feels that the assessing officer assigned to him doesn’t perform his duties in an ethical manner, or is unsatisfied with his work he can request to change the officer or can get his file transferred from one ward to another.  Unethical practices include:

• Delay in the payment of refunds beyond the specified time limit.
• If the income tax officials behave rudely with the assessee
• If transparency is not maintained while identifying the cases for non communication and scrutiny
• If there is a delay in the allotment of the permanent account number (PAN)
• In case of non performance of duties by AO
• If the AO has wrongly assessed the return of the assessee say for example AO has made a mistake in treating the expenses of repairs of Rs 100000 as a capital expenditure. The aggrieved party need not submit any documents or application for this case. Rather, he has the right to appeal directly against it within 30days from receiving the order. Then the commissioner decides a date and time for the hearing from both the aggrieved party and AO.

How to change the assessing officer?

For any genuine reason like change of address, or ill-mannered assessing officer you can apply to the income tax authority for the change in assessing officer. Please note that

• Six (6) copies of Application should be filed with competent authority.
• Copy of application should be sent to concerned AO, CIT and Addl./Jt.CIT.
• As per section 127(4) of the Income Tax Act, 1961 income file can be transferred at any stage of proceedings even if  Assessment is Pending.
• When a file is transferred then Demand or Refund of Tax can be collected/refunded by new assessing officer. Now a days Demand or Refund is processed by Central Processing Centre, Bangalore.

Once all the procedures are duly followed the jurisdiction will be changed.  

Change of Assessing Officer when there is change in address:

• Go to NSDL site and apply for change the address on PAN Card by paying requisite fees.
• Thereafter you apply to the present jurisdictional assessing officer for transfer of your assessment records to the new A.O having jurisdiction over your case. For example , I am residing in Thane, and my jurisdiction is Ward 1(3), Thane. Due to some reason I shift to Delhi and intend to change my ward. So I have to submit a written application to my assessment officer in Thane asking for transfer of all legal documents to the officer in Delhi and also submit the said acknowledged copy of the letter to my NEW jurisdictional officer and inform him about the update that he will receive.
• Your Name & PAN
• A.O. Circle/Ward under whom you are being assessed currently
• A.O. Circle/Ward under whom you seek the transfer.
• The reason or ground on which you seek transfer.

Please remember the Commissioner is supposed to hear you first in order to pass a jurisdiction transfer of your case without your application. Copy of the letter must be sent to the respective Commissioner of Income Tax and should be with supporting evidence of address proof.

Change of Assessing Officer  in  case of ill-mannered officer

Anyone with the problems or other related grievances can file a complaint against the income tax department personally or through his representative by

• Writing and submitting to the Ombudsman.
• The complaint has to be duly signed by the complainant and his authorized representative.
• It should contain complainant’s name, address, and the office/officer against whom he wants to make the complaint giving the exact nature for filing complaint.
• The complaint should be supported with relevant documents.
• An electronic complaint is also acceptable and the Ombudsman would sign it.
• This date on which the print out is taken and signed will be considered the date of filing the complaint.

Application for Change in Assessing Officer to be made to whom

If the Assessing Officers from whom file is to be transferred to and the Assessing Officers where file is to be transferred are under the jurisdiction of same Director General(DGIT), or Chief Commissioner of Income Tax(CCIT) and /or Commissioner of Income Tax (CIT), in that case  application has to be made to the concerned CIT with copy to Assessing Officer (AO) where file need to be transferred. 

Upon receipt of such application concerned Director General(DGIT), or Chief Commissioner of Income Tax(CCIT) and /or Commissioner of Income Tax (CIT) after going through facts will give directions mentioning the reasons. For this Chief Commissioner of Income Tax (CCIT)and /or Commissioner of Income Tax (CIT) may give an opportunity of being heard to assesee.

If Assessing Officers Who is having the present jurisdiction and Assessing Officers to whom the file is Proposed to be transferred are not under jurisdiction of same Director General(DGIT), or Chief Commissioner of Income Tax(CCIT) and /or Commissioner of Income Tax (CIT) then the Director General(DGIT), or Chief Commissioner of Income. Tax(CCIT) and /or Commissioner of Income Tax (CIT) under whose jurisdiction file need to be transferred will issue directions. But if they are not agreeable then CBDT (Central Board of Direct Tax) may issue directions.

Format of letter for Change in Assessing Officer

Format of letter for change in Assessing Officer is shown below. It can be downloaded from here  (Word format). Click on image to Enlarge

Letter for Change in Assessing Officer

How to track change in Jurisdiction or Assessing Officer?

You will generally receive mails on the registered e-mail, or updates on the correspondence address from the department informing the change in address and jurisdiction officer. Also, once the officer is changed, it will duly reflect on the KNOW YOUR JURISDICTION section. incometaxindiaefiling.gov.in/e-Filing/Services/KnowYourJurisdictionLink.html 

• Income Tax for Beginner ,  Income Tax For Beginner – Part II
• Paying Income Tax Online: Challan 280, Paying Income Tax Offline: Challan 280
• How to Pay or Reject Outstanding Income Tax Demand under Section 143(1)
• U nderstanding Income Tax Notice under section 143(1)
• Request for Intimation for Income Tax

31 Comments

Your article was very apt for my need. The only catch is I am lost as to how to find jurisdictional AO for current location. Many have posed a similar question. I know it is difficult for you to give a more precise answer. But some clarification on following lines will help. 1 They have some classifications such as non corporate and corporate; then they have categories such as individual, business, government, PSU etc; I am not sure if pensioner is a category. I also know salary circle is different from non salary circle. This means, I should known if I am a company, individual, salaried person or not. 2 For individuals the income level is often categorized as below 15 lakhs and above 15 lakhs. 3 The pin code of the area where one resides is also a basis for assignment. In Chennai they mention the last two digits of the PIN code. 4 Last, but not the least, they base it on the first letter of the name. Here points to note may be name as in PAN master. Some times they say starting letter P to R; some times other than letter S; some times starting with RAM, meaning within names starting with R, this officer is assigned only if first three characters are R, A and M. It looks like the website does not make it easy to search based on such keys. May be there is no standard way, Having moved to Chennai, I am struggling to find the officer reference. I found a pdf document online that was a scanned copy and hence not searchable. Income tax e-filing website had a link for AO, which led to a searchable xml table, but still quite confusing. They provide no guide or clue as to how they are organized. Even the terminologies are not clear. I guess if you can give a brief overview of techniques they use, and the terminologies they use, it would help. For example: While in Bangalore, as an employee of a corporate company, the officer assigned was based on the first letter of the name of the corporate company under salary circle. My wife who was not a regular employee anywhere, but had some sporadic business income, had the officer assigned based on the PIn of residence, and starting letter of her name.

After logging in E-portal for Income Tax Check the left side the menu shows KNOW YOUR A.O Click that and enter the details

Now registered to PAN efilling on 11th July, 2019. And show that F.Y – 2008-09 & 2016 -17, TDS Unclaimed What can I do ? For return my TDS amount refund

I have applied for pan card but I have done one mistake while entering the Ao code no by mistake I have entered ward no132 instead of 134 is this necessary to resolve the matter

Hello Sir, My client’s original jurisdiction according to PAN address was Gurgoan. My client never filed his IT returns due to which the AO had issued compliance notices. Meanwhile, my client shifted to Chennai. Finally, he filed his return for AY 2016-17 and AY 2017-18. He has salary as well as business income. The compliance notices date back to 2012-13 to 2015-16. Now, I am unable to file his ITR for AY 2012-13 to 2015-16 due to the end date being over. I am based in Chennai. How to I file his ITR for the above-mentioned years. Is manual filing allowed for ITR 4 for previous years. If yes, can I send the return via post? Please advise if there are any other way of do this. Thank you

Hi, “A.O./ Circle/Ward under whom you seek the transfer.” How do i know this? I know my current AO from the IT Portal, how will i know whom to transfer to and what is their Circle/Ward? Example say i moved from Jalandhar to Ghaziabad , i know my AO details of Jalandhar but how will i know AO details of Ghaziabad? Please suggest on priority. Thanks & Regards

The Assessing Officer is based on your PAN. When you apply for PAN you have to find your Assessing Officer You can find the assessing officer by using TIN NSDL site AO Code search for PAN If you know someone in that area who has PAN for that area you can also get AO code etc from his PAN You can also call 18001801961 : Area Code, AO Type, Range, AO No From PAN. nsdl website helpline nsdl customer care 020 2721 8080

Please note The one-nation, one-tax principle that underlines the goods and services tax (GST), rolled out on July 1 2017, could be adopted in a much more broader sense by the income tax department through a path-breaking initiative on jurisdiction-free assessment.

This would mean that a taxpayer in Mumbai could be assessed by an income tax officer located in Patna,

I have approached AO officer in Bangalore to transfer the jurisdiction​ from Srikakulam to Bangalore.He raised a request through online and the request was approved by the AO officer of Srikakulam.Can you guess how much time will it take to transfer the jurisdiction from Srikakulam to Bangalore? And also please tell if I have to do any additional things or requests . Thank you

You don’t have to do anything else. If the request has been approved it should take a week to 2 weeks.

sir plz tell me where or which website to apply to change jurisdiction online , how you made .plz tell me i have the same problem

People need to change their addresses and move from one city to another in India. Jurisdiction is the geographical area for which an Assessing Officer can assess requests. It is usually connected with the Permanent Account Number (PAN). However, if there is any change in address or city, there might be change in the Assessing Officer. The tax payer People need to change their addresses and move from one city to another in India. Jurisdiction is the geographical area for which an Assessing Officer can assess requests. It is usually connected with the Permanent Account Number (PAN). However, if there is any change in address or city, there might be change in the Assessing Officer. The tax payer or PAN holder must inform these changes by filling up a form to the nearest IT PAN Service Centre or TIN Facilitation Centre in the existing jurisdiction to make the required correction in PAN databases kept by the Income Tax department.

However, updating the PAN databases with the detail of the newly changed address does not change the jurisdiction automatically. One has to give an application to the existing Assessing Officer informing the change of place and request for transferring the case records and the jurisdiction to the new Assessing Officer. Once approved by both officers, the existing officer will initiate the transfer of jurisdiction to the new Assessing Officer.

What is the address for Bangalore AO officer . Even i want to transfer .

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I have two queries 1) On the existing demands (for 2 years) due to some mistake, my auditor disagreed the demand has sent the response twice in the taxfilingsite ,Its been more than a year there is no action, What should i do?

2) I have not received my refund for AY 2013-2014 ,2014-2015 ,2016-2017 . I am not sure what is the way to check the status? or is there any way I can raise a service request?

I have already posted a query above to change the jurisdiction due the aforesaid points.

Request your reply

APPLICATION FOR TRANSFER OF AN INCOME TAX FILE

To, The Chief Commissioner of Income Tax/ Commissioner of Income Tax, Ward 2(4), Erode, Tamilnadu.

Hon’ble Sir,

Ref. : Name of Tax Payer : CHUKKALA VENKATA KRISHNAIAH PAN : AERPV0987N Sub : Transfer of file from WARD 2(4), ERODE to WARD 10(1), CHENNAI.

I would like to inform you that I have permanently shifted from Erode to Chennai My present address is as under:-

CHUKKALA VENKATA KRISHNAIAH, FLAT NO.9, SENTHIL NAGAR, 14TH CROSS STREET, CHENNAI, TAMILNADU.

My present jurisdiction lies with the A.O. Circle/Ward 2(4), ERODE which falls under the Commissioner of Income Tax, Erode.

Under the circumstances Your Honour is requested to kindly issue necessary orders for transfer of my assessment records from the present A.O. Circle/Ward 2(4) ERODE to the A.O. Circle/Ward 10(1), CHENNAI who is now having correct jurisdiction over my new address as stated above.

An early action in the matter will be greatly appreciated as I have been filing my returns regularly and it would be proper if my past records were available with the current Assessing Officer.

Yours sincerely,

(Signature of the Tax payer)

Copy also sent to:- 1. Commissioner of Income Tax (having jurisdiction over
new address). 2. Addl. /Jt. CIT (Transferor/Transferee) Range-I 3. A.O. Circle/Ward 2(4), ERODE (Who is having the present jurisdiction). 4. A.O. Circle/Ward 10(1), CHENNAI (to whom the file is Proposed to be transferred).

(Signature of the Taxpayer) Old Address: Flat No 7, Indra Nagar, Srinivasa Nagar, Kalingarayan Palayam, Erode, Tamilnadu – 638316. New Address: Flat No 9, Senthil Nagar, 14th Cross Street, kollathuru, Chennai, Tamilnadu – 600099

Change my assging offers jurisdiction Silchar tanasfar dhubri

Please follow the process mentioned in article we cannot do on your behalf.

I need to change the jurisdiction from bangalore to chennai ,Should we sent the letter to the AO in post or can we send the letter in email, if so can you please send me the email id?

Change my assging offers jurisdiction

Hello, I had filled my income tax return in Kolkata later I moved to Delhi and got changed my PAN address as well. When checked my return status, I got to know that my refund got stuck due to address change and status is ‘contact your AO officer’. When I approached local AO office in Delhi they asked me to go back to your Kolkata AO office! Could you pls help and let me know that in this case which AO office has responsibility and where should I approach ? Should local AO do and completed internally with Kolkata AO

Request for refund reissue with the current assessing oficer.

“A.O. Circle/Ward under whom you seek the transfer.” How do i know this? I know my current AO from the website, how will i know whom to tarnsfer to and what is their Circle/Ward? Example say i moved from Chennai to Bangalore , i know my AO details of Chennai but how will i know AO details of Bangalore?

I am an NRI out of India most of my life. I got my PAN card, 5 years ago when PAN card applications weren’t online and instructions were hard to find. So an agent applied for me, all I did was put my name and sign the form. Now I’d like to rectify & regularize my PAN status. My PAN AO details are:- Area Code: MUM AO Type: W Range Code: 212 AO Number: 4 Jurisdiction: WARD 26(1)(4), MUMBAI Building Name: C11-BANDRA,MUMBAI Email ID: [email protected]

The above is for Mumbai based Resident Indian, now because I am a Mumbai (permanent address) NRI i have to choose from the AO Codes for International Taxation:- Area Code: DLC AO Type: W Range Code: 521 AO Number: 1 Jurisdiction: INTL.TAX. WARD 1(1)(1), MUMBAI Additional Description: NON RESIDENT INDIVIDUALS CASES OF MUMBAI,THANE,RAIGAD LASTNAME/SURNAME STARTING WITH ALPHABETS ‘A’ City: MUMBAI

Kindly advise how and to whom should apply for the AO change. Thanks

i want to change my ao code for my pan.please tell me process how we can change the ao code for my pan

I want to change ward number/AO from Mumbai to Pune as i have shifted to Pune – .The Mumbai Ward No etc details i can get from the “KNOW YOUR JURISDICTION” on the Tax website . But what about the New Ward Number where i need to transfer my ward to ? How easy is it to get the new Ward Number / AO details without actually going to the income tax office ..is there any website where in the information is easily available and understandable in a layman’s language

I have never changed my address on my PAN or while filling the income tax return, but some how my jurisdiction got changed from Mumbai to Hyderabad. What would be be process to get the AO assigned back to Mumbai in this case. as this does not qualify under change of address.

Also how does one find out following details required for application.

1. Commissioner of Income Tax (having jurisdiction over
new address). 2. Addl. /Jt. CIT (Transferor/Transferee) Range……………….. 3. A.O. Circle/Ward…………………….. (Who is having the present jurisdiction). 4. A.O. Circle/Ward…………….. …… (to whom the file is Proposed to be transferred).

Sir we want want signed DGT 1 FOR certificate but the AO is ready to sign the documents so give me a remedy….

My Accessing officer information is currently showing as Pune and now I have moved to Chennai therefore it should now be updated to Chennai Accessing officer ward details.

Hence I have approached my Chennai AO officer and she has written a letter to Pune to update the AO officer info from Pune to Chennai. This had happened before 3 months and no steps have been taken till now.

Kindly let me now the escalation route so that my information gets updated without any further delay.

I have a doubt regarding a issue, one of my client is a NRI and his PAN is lying in C.R. building, ITO, Delhi. But he is not a director in any company. How should i proceed further in this regard as the concerned Assessing officer and his staff when seen on “incometaxindiaefiling.gov.in” in is not ready to cooperate?

What is the problem? You want PAN of your NRI client?

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1. Who is an Assessing Officer (AO)? An Assessing Officer (AO) is an officer of the Income Tax Department who is responsible for ensuring correctness of Income Tax Returns filed by the taxpayers in his/her jurisdiction.

2. When do I need to contact my AO? If you don't have any issues with your filing, you don't need to contact your AO. As a general rule, the ITD endeavours to provide all taxpayer services in a faceless manner, online. However, in certain exceptional situations, the ITD may request you to approach your jurisdictional AO.

3. Do I need to use my mobile number registered with the e-Filing Portal to avail the Know Your AO service? You can use any valid mobile number for availing this service.

4. I have moved to a different city/state, do I need to change my AO? Yes. When you shift your permanent address or residential address from one state to another, it is necessary to get your PAN migrated to the new AO. Although the Income Tax Department endeavours to provide taxpayers with all necessary services online, on rare occasions you may need to contact your AO. Thus, it is in your interest to get your PAN migrated to the proper jurisdictional AO, so you can easily reach him/her when the need arises.

5. What is income tax ward/circle? For effective administration of income tax related services/work, a number of wards/circles have been carved out across the country based on the defined jurisdiction. Each ward/circle has a jurisdictional AO, being a DCIT/ACIT, or an ITO.

6. What should I do to migrate my PAN to a new AO? You need to file an application for migrating your PAN to your current jurisdictional AO. The process involves:

• Write an application to your current AO stating the reason for change as address change.
• Write an application to the new AO, requesting him/her to apply to the existing AO for the change.
• The current AO has to accept this application.
• Once approved, the application is forwarded to the Income Tax Commissioner.
• After approval from the Commissioner, the AO is changed.

You are required to make a written request to your existing AO for migrating your PAN to the new AO based on your new address.

7. How will I come to know that my PAN has been migrated to the new AO? The current status of the jurisdictional AO for your PAN can be verified on the e-Filing portal > Know Your AO . You do not need to register or log in to use this service.

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CBDT notifies procedure for handling assessment if case is transferred by NFAC to Jurisdictional AO

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Notification F. No. 225/97/2021/ITA-II, dated 06-09-2021

Section 144B(8) empowers the Principal Chief Commissioner or the Principal Director General in charge of the National Faceless Assessment Centre (NFAC) to transfer the case to the Assessing Officer (AO) having jurisdiction over such case, with the prior approval of the CBDT. Similarly, Clause 5(2) of the Faceless Penalty Scheme, 2021, has empowered the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Penalty Centre, to transfer penalty proceedings to the income-tax authority or the National Faceless Assessment Centre having jurisdiction over the assessee or any other person, in whose case the penalty proceedings are initiated, with the prior approval of the CBDT.

Now, the CBDT has prescribed the following procedure for handling of assessment by Jurisdictional AO in respect of such transferred cases:

(a) All processes in transferred cases may be conducted electronically to the extent technically feasible, except in those cases where the assessee does not have an e-filing account/registered e-mail to communicate electronically with Jurisdictional AO. For cases without digital footprint, the Jurisdictional AO shall endeavour to get the e-filing account of the assessee registered and then electronically conduct the proceedings;

(b) The request for personal hearings shall generally be allowed to assessee with the approval of Range Head, mainly after assessee has filed written submission to the show cause notice. The personal hearing may be allowed to assessee preferably through Video Conference. If Video Conference is not technically feasible, personal hearings may be conducted in a designated area in Income Tax Offices. The hearing proceedings may be recorded;

(c) Use of Faceless processes such as Verification Unit for online verification, Technical Unit for Technical inputs, etc. may also be considered for the non-faceless regime to the extent technically feasible;

(d) To have consistency with the unit concept in a faceless regime, the Range Head may compulsorily be involved in the finalization of assessment of such cases transferred to Jurisdictional AO, for which the provisions of Section 144A may suitably be invoked. In penalties, the approval of Range Head is already embedded in Section 274(2), over a specific monetary ceiling of ‘penalty imposable’. The same may be adhered to.

It is also clarified that in respect of such transferred cases, Jurisdictional AO shall consider the proceedings conducted so far under the faceless regime and proceed further as per the provisions of the Act and broad contours of modalities as indicated above.

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Change PAN Jurisdiction–Assessing Officer

PAN or Permanent Account Number is the unique 12 digit alpha-numerical identification number given to all the tax payers by the Income Tax Department / CBDT. If you have income above Rs. 2.5 lakh and more you will have to file income tax return for which PAN is mandatory. Once you have PAN, all your bank accounts will be linked to Aadhaar , enabling the Income Tax Department to identify and ascertain details about volume of your transactions and whether you are filing the income tax return if your income is above the basic income tax limit etc. Each tax payer with unique PAN number will be assigned a Assessing Officer (AO) by the Income Tax Department. For all income  tax related queries pertaining to your PAN, you need to consult your Assessing Officer regularly, respond to any notices sent by the Assessing Officer etc.

The Problem:

The simple solution to this problem is to get your PAN jurisdiction transferred to the place where you have shifted. If it doesn’t have an income tax office, nearby town or city under which jurisdiction your current place of residence falls within. As of now, there is no way to transfer or change PAN jurisdiction of income tax online. The only way to get your PAN or Assessing Officer (AO) jurisdiction transferred to a new place is to write a letter to your present Commissioner of Income Tax (CIT) under whose charge your present Assessing Officer /Ward/Circle is located with a copy to your present jurisdictional Assessing Officer. However, this process first requires that you identify the jurisdictional Assessing Officer to where you PAN needs to be transferred. Often, this is very much tricky as most of us don’t have the jurisdictional breakdown of Income Tax Department. You can locate the jurisdictional Assessing Officer based on your present location by accessing the jurisdiction details of various states/charges of the Income Tax Department across India by clicking here .

Example: Suppose you are an individual salaried employee located in Chennai and assessed for income tax at Chennai. Now Chennai is the place where your original PAN jurisdiction lies. Now assume that you have moved into a new job located in Bangalore. You would want to get your PAN jurisdiction and Assessing Officer migrated to Bangalore. To do this, first note down the jurisdiction details of the present Assessing Officer. You can do this by accessing PAN jurisdiction page . Also, you need to find out the jurisdiction details of the Assessing Officer (ITO Ward / ACIT/DCIT Circle) Karnataka (Bangalore) by clicking here . Scroll down to find your alphabet (of Surname/First name of your name) or by location. If your income returned is less than Rs.20 lakh, your jurisdictional AO will be Income Tax Officer (ITO Ward) else you will be assessed with Assistant or Deputy Commissioner of Income Tax (ACIT/DCIT Circle).

For instance if your name is Anand are an employee of a private company based and you reside in Bangalore, from the above jurisdiction chart, your PAN jurisdiction will have to be transferred to the Assessing Officer: ITO, Ward-5(3)(1), under Principal Commissioner of Income Tax –5 (Pr.CIT-5), Bangalore. Now you need to find the address of the offices of the Principal Commissioner and the ITO. Do a Google search for Pr.CIT-5, Bangalore and you will easily find the directory of the Income Tax Department of Bangalore. From the directory locate the address of the office of the Commissioner of Income Tax-5.

From the above page in the directory, we can easily find the address of the Pr.CIT-5, Bangalore: BMTC Building, 5th Floor 80Ft Road, 6th Block, Koramangala, Bengaluru-5600095.

Again, from the same directory, I could locate the address of the ITO, Ward-5(1)(1): No.59, HMT Bhavan, 4th Floor, Ballari Road, Ganganagar, Bengaluru – 560032.  The same process may be followed for finding out the addresses of the current jurisdictional Assessing Officer and jurisdictional Commissioner of Income Tax.

Now that you have located the addresses of the current jurisdictional Assessing Officer and also that of the AO to where your PAN to be migrated, let’s now see the format of the letter that your need to write and send to the office of the Principal Commissioner where your PAN jurisdiction lies at present with a copies marked to the current jurisdictional AO, to the Commissioner of Income Tax and the Assessing Officer to where the PAN jurisdiction to be transferred.

PAN Transfer of Jurisdiction / Assessing Officer – Letter in Word Format:

In order to make it simple for you, we have prepared a sample letter format in MS-Word which you can use for writing application for transfer of PAN. You can download the letter in Word format from here .

Once you have completed the letter, take a print out, sign on it. Then either send it through post to the office of the Pr.Commissioner or if you have time, you can directly submit the application at the office in person. A copy of the same letter to be submitted to the AO of the Income Tax Ward/Circle where you are currently assessed. Send remaining two copies to the new jurisdictional Commissioner of Income Tax and to the new jurisdictional Assessing Officer. The remaining process will be done by the Assessing Officers and your PAN will be migrated usually within a time of around 2-3 weeks depending on the number of working days. If your PAN hasn’t got transferred even after 1-2 months of submission, you can file a grievance petition with the department which will ensure that your PAN transfer to new jurisdiction is completed within reasonable amount of time. The procedure of filing online grievance petition (known as e-nivaran petition) will be dealt with in a separate post later.

Please let us know, if you have any questions regarding PAN migration or change/transfer of PAN jurisdiction to new Assessing Officer.

Share this:

2 thoughts on “change pan jurisdiction–assessing officer”.

Sir, I was working I Govt.Arts College, Rasipuram. I was transferred o promotion as Principal of Govt.Arts College Chidambaram from 21-06-2011 to 15-10-2012. Then I was transferred to Govt.Arts college, Rasipuram.

I was submitting my IT return from Govt Arts College, Rasipuram.

In Chidambaram college, the quarterly statement of IT was not sent properly and so the IT department is sending me a notice that I have not paid the Income Tax paid for the period in which I worked as a Principal.

I have sent a detailed report of the amount of salary drawn with the monthly IT- deducted and also the final duduction at the year end in February-2012.

But they are not accepting and they now say that a I have to apply for PAN – Migration and and it is my duty. I don’t no what to do.

Please tell me what should I do.

Change My PAN Card Jurisdiction–Assessing Officer Only

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Cbdt procedure on ‘cases transferred out of faceless assessment/ penalty proceedings’.

CBDT prescribes procedure for handling of assessment/ penalties by Jurisdictional Assessing Officers in cases transferred out of Faceless Assessment/ Faceless Penalty proceedings under the Income-tax Act, 1961. Also CBDT prescribes the Scope/ Cases to be handled under or excluded from the Faceless Assessment Scheme.

CBDT Income Tax Order dt. 06/09/2021 : Procedure for handling cases transferred out of Faceless Assessment/ Penalty Proceedings under Income-tax Act, 1961

Procedure for handling of assessment by Jurisdictional Assessing Officers in respect of assessments/ penalties transferred out of Faceless Assessment u/s 144B(8) of the Income-tax Act, 1961/ Faceless Penalty Scheme, 2021 respectively

1. The Central Board of Direct Taxes (CBDT) has accorded approval for transfer of assessments/ penalties to Jurisdictional Assessing Officers (PAN based), as found necessary, on case-to-case basis in terms of Section 144B(8) of the Income-tax Act, 1961 (Act)/ clause 5(2) of Faceless Penalty Scheme, 2021.

2. The Jurisdictional Assessing Officer (JAO) shall complete the assessments/ penalties in such cases as per the following broad contours to the extent technically feasible:-

A) All processes in cases transferred u/s 144B(8) of the Act/ clause 5(2) of Faceless Penalty Scheme, 2021 may be conducted electronically to the extent technically feasible, except in those cases where the assessee does not have e-filing account/ registered e-mail to communicate electronically with JAO. For cases without digital foot print, the JAO shall endeavor to get the e-filing account of the assessee registered and then conduct the proceedings in an electronic manner.

B) The request for personal hearings shall generally be allowed to the assessee with the approval of Range Head, mainly after the assessee has filed written submission to the show cause notice. Personal hearing may be allowed to the assessee preferably through Video Conference. If Video Conference is not technically feasible, personal hearings may be conducted in a designated area in Income Tax Offices. The hearing proceedings may be recorded.

C) Use of Faceless processes such as VU for online verification, TU for Technical inputs etc. may also be considered for non-faceless regime to the extent technically feasible.

D) In order to have consistency with the unit concept in faceless regime, the Range Head may compulsorily be involved in the finalization of assessment of such cases transferred to JAO, for which the provisions of Section 144A of the Act may suitably be invoked. In penalties, the approval of Range Head is already embedded in Section 274(2) of the Act, over a specific monetary ceiling of ‘penalty imposable’. Same may be adhered to.

3. It is also clarified that in respect of such cases transferred, the JAO shall take into account the proceedings conducted so far under the faceless regime and proceed further as per the provisions of the Act and broad contours of modalities as indicated above.

CBDT Income Tax Order dt.  06/09/2021 : Scope/ Cases to be handled under Faceless Assessment Scheme prescribed by CBDT

Order under sub-section (2) of Section 144B of the Income-tax Act, 1961 (the Act) for specifying the scope/ cases to be done under the Act

1. The Faceless Assessment Scheme, 2019 (the Scheme) has been incorporated in the Act vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 144B of the Act pertaining to Faceless Assessment has been inserted by the said amendment w.e.f. 01/04/2021.

2. The Central Board of Direct Taxes vide Order under sub-section (2) of Section 144B of the Act for specifying the scope/ cases to be done under the Act, F. No. 187/3/2020-ITA-I dated 31/03/2021 (the Order) specified that all the assessment proceedings pending as on 31/03/2021 and the assessment proceedings initiated on or after 01/04/2021 (other than those in the Central Charges and International Taxation Charges) which fall under the “class of cases” as defined in the said Order shall be completed under section 144B of the Act.

3. In partial modification of the said Order, the Central Board of Direct Taxes hereby directs that in addition to the cases in the Central Charges and International Taxation Charges, cases where pendency could not be created on ITBA because of technical reasons or cases not having a PAN, as the case may be, shall also be excluded from the purview of section 144B of the Act.

4. This order comes into effect immediately.

CBDT Income Tax Order dt.  06/09/2021 : Cases excluded from Faceless Assessment Scheme

Order under section 119 of the Income-tax Act. 1961 (the Act) providing exclusions to section 144B of the Act

2. The Central Board of Direct Taxes vide Order F. No. 187/3/2020-ITA-I dated 13/08/2020 (the Order) read with order under section 119 of the Act regarding mutatis mutandis application of Orders, Circulars etc. issued in order to implement the Scheme to Faceless Assessment u/s 144B of the Act, F. No. 187/3/2020-ITA-I dated 31/03/2021 directed that all the Assessment Orders shall be passed by the National Faceless Assessment Centre (NaFAC) u/s 144B of the Act except as under:-

i) Assessment orders in cases assigned to Central Charges.

ii) Assessment orders in cases assigned to International Tax Charges.

3. In partial modification of the said Order, the Central Board of Direct Taxes in exercise of powers under section 119 of the Act, hereby directs that in addition to exceptions (i) & (ii) provided in Para 2 of the Order, the following exception is also hereby added as under:-

iii) Assessment Orders in cases where pendency could not be created on ITBA because of technical reasons or cases not having a PAN, as the case may be.

4. Further, the Central Board of Direct Taxes clarifies that assessment in cases transferred by the Principal Chief Commissioner or the Principal Director General in charge of National Faceless Assessment Centre (NaFAC) u/s 144B(8) of the Act shall be handled as per the procedure specified in the letter F. No. 225/97/2021/ITA-II dated 06/09/2021.

5. This order comes into effect immediately.

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• AO Can't Proceed With Assessment In...

AO Can't Proceed With Assessment In Absence Of Section 127 Transfer Order: Delhi High Court

Mariya paliwala.

13 May 2024 2:15 PM GMT

The Delhi High Court has held that the Assessing Officer cannot proceed with assessment in the absence of a transfer order under Section 127 of the Income Tax Act.The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed 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...

The Delhi High Court has held that the Assessing Officer cannot proceed with assessment in the absence of a transfer order under Section 127 of the Income Tax Act.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed 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 Income Tax Act, as contrary to such a position outside the underlying objective that the Act seeks to achieve by virtue of powers enshrined under Section 127.

The appellant/assessee is a private limited company, and pursuant to an order of centralization dated July 16, 2008, the office of Central Circle-16, New Delhi (which is now Central Circle-20, New Delhi since 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. The assessee's case was picked up for scrutiny.

However, on March 21, 2016, a notice under Section 143(2) was issued to the assessee by the office of the Income Tax Officer, pursuant to which the assessee participated in the assessment proceedings, assuming that a valid transfer order was passed in its case.

On December 31, 2017, an assessment order was passed by the ITO in which an addition amounting to Rs. 1,35,11,59,300 was made under Section 56(2)(viia) of the Income Tax Act to the total income of the assessee.

The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), raising the ground of lack of jurisdiction, and CIT (A) rejected the appeal. The assessee preferred an appeal before the ITAT, and the ITAT has partly allowed the appeal by remanding the matter back to the AO to ascertain whether any transfer order under Section 127 was passed. If that were so, further directions were issued to proceed with the assessment, bearing in mind certain aspects.

The assessee filed an application under Section 144A before the ACIT inquired about the transfer order under Section 127. On September 27, 2021, an order under Section 144A was passed holding that a transfer order under Section 127 was passed via transfer order, which was stated to have been issued by the PCIT, and also directed the AO to continue with the assessment proceedings in accordance with the directions passed in the ITAT order.

An assessment order was passed by the ITO, and after following the directions as per the ITAT order, the addition of Rs. 55,55,67,090 under Section 56(2)(viia) was made.

The assessee contended that the orders are liable to be set aside as they suffer from jurisdictional error. 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, the case of the assessee could not have been transferred from the Central Circle-20, New Delhi, to ITO Ward 21(1), New Delhi. The legislative mandate of Section 127 clearly elucidates that the transfer of the case of the assessee can only be done through an order passed under Section 127.

The department contended that the transfer order had duly been passed, which was also reflected on the ITBA portal. They further argued that the ITO Ward 21(1), New Delhi, has inherent jurisdiction as per the CBDT circular dated November 15, 2014, and therefore, the assessment orders do not suffer from any infirmity of jurisdictional error.

The court, while rejecting the contention of the department, stated that, by virtue of an order passed under Section 120 under the pen of ACIT read with CBDT notification dated October 22, 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 would not only have jurisdiction over the assessee but could also proceed with the assessment proceedings simultaneously. Such a situation cannot be countenanced under the law.

The court allowed the writ petition.

Counsel For Appellant: N. P. Sahni, Deepanshu Mehta

Counsel For Respondent: Sanjay Kumar, Easha, Hemlata Rawat

Case Title: Rajsheela Growth Fund (P) Ltd. Versus ITO

Case No.: ITA 124/2020

Click Here To Read The Order

Procedure for Handling of Assessment by Jurisdictional AO on Assessments or Penalties transferred out of Faceless Assessment

The CBDT issued Circular vide F. No.225/97/2021/ITA-II dated September 06, 2021 w.r.t. procedure for handling of assessment by Jurisdictional Assessing Officers in respect of assessments/penalties transferred out of Faceless Assessment under section 144B(8) of the Income-tax Act, 1961/Faceless Penalty Scheme, 2021 respectively.

The Central Board of Direct Taxes ("CBDT") has accorded approval for transfer of assessments/penalties to Jurisdictional Assessing Officers (PAN based), as found necessary, on case-to-case basis in terms of Section 144B(8) of the Income-tax Act,1961 ("the IT Act") / clause 5(2) of Faceless Penalty Scheme, 2021.

The Jurisdictional Assessing Officer ("JAO") shall complete the assessments/penalties in such cases as per the following broad contours to the extent technically feasible:-

A. All processes in cases transferred u/s 144B(8) of the Act/ clause 5(2) of Faceless Penalty Scheme, 2021 may be conducted electronically to the extent technically feasible, except in those cases where the assessee does not have e-filing account/registered e-mail to communicate electronically with JAO. For cases without digital foot print, the JAO shall endeavor to get the e-filing account of the assessee registered and then conduct the proceedings in an electronic manner.

B. The request for personal hearings shall generally be allowed to the assessee with the approval of Range Head, mainly after the assessee has filed written submission to the show cause notice. Personal hearing may be allowed to the assessee preferably through Video Conference. If Video Conference is not technically feasible, personal hearings may be conducted in a designated area in Income Tax Offices. The hearing proceedings may be recorded.

C. Use of Faceless processes such as VU for online verification, TU for Technical inputs etc. may also be considered for non-faceless regime to the extent technically feasible.

D. In order to have consistency with the unit concept in faceless regime, the Range Head may compulsorily be involved in the finalization of assessment of such cases transferred to JAO, for which the provisions of Section 144A of the Act may suitably be invoked. In penalties, the approval of Range Head is already embedded in Section 274(2) of the Act, over a specific monetary ceiling of `penalty imposable’. Same may be adhered to.

It is also clarified that in respect of such cases transferred, the JAO shall take into account the proceedings conducted so far under the faceless regime and proceed further as per the provisions of the Act and broad contours of modalities as indicated above.

The Circular can be accessed at:  http://www.a2ztaxcorp.com/wp-content/uploads/2021/09/CBDT-Circular-dt.-06092021-.pdf

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Income Tax : 174 ACIT (Junior Scale) are, hereby, appointed as DCIT (Senior Time Scale) in Level 11 (Rs.67,700-2,08,700/-) of the Pay matrix (P...

CBDT appoints 145 ACIT as DCIT w.e.f. 01.01.2023

Income Tax : The following Assistant Commissioners of Income Tax (Junior Scale) are, hereby, appointed as Deputy Commissioner of Income Tax (Se...

Transfer/postings of 48 officers in the grade of CIT/DIT

Income Tax : Office Order No. 274 of 2022 - Transfer/postings of 48 officers in the grade of Commissioners of Income Tax/Directors of Income Ta...

Transfer/postings of 62 officers in the grade of PCIT/PDIT

Income Tax : Office Order No. 273 of 2022-Income Tax transfer/postings of 62 officers in the grade of Principal Commissioner of Income Tax/ Pri...

Latest Posts in transfer of Income tax Officers

CBDT President is pleased to extend the ad-hoc appointments of the 161 Assistant Commissioners of Income Tax w.e.f. 12.11.2021 to 31.08.2022

174 ACIT (Junior Scale) are, hereby, appointed as DCIT (Senior Time Scale) in Level 11 (Rs.67,700-2,08,700/-) of the Pay matrix (PB-3 in the pay scale of Rs. 15,600-39,000 (from GP Rs. 5,400 to 6,600) (pre-revised)], w.e.f 01.01.2023

The following Assistant Commissioners of Income Tax (Junior Scale) are, hereby, appointed as Deputy Commissioner of Income Tax (Senior Time Scale) in Level 11 (Rs.67.700-2,08,700/-) of the Pay matrix (PB-3 in the pay scale of Rs. 15,600-39,000 (from GP Rs. 5,400 to 6,600) (pre-revised)], w.e.f. 01.01.2023

Office Order No. 274 of 2022 – Transfer/postings of 48 officers in the grade of Commissioners of Income Tax/Directors of Income Tax

Office Order No. 273 of 2022-Income Tax transfer/postings of 62 officers in the grade of Principal Commissioner of Income Tax/ Principal Director of Income Tax

Transfer/postings (Local changes) of 27 officers in the grade of DCIT/ACIT

Office Order No. 240 of 2022-Income Tax The following transfer/postings (Local changes) of the officers in the grade of Deputy/Assistant Commissioner of Income Tax, are hereby ordered with immediate effect and until further orders:

CBDT promotes 55 officers to the grade of Pr. CIT

Vide Office Order No. 231 of 2022-Income Tax 55 officers are, promoted to the grade of Principal Commissioner of Income Tax (Pr. CIT) (level 15 in the pay matrix Rs. 1,82,200-2,24,100/-) for the panel year 2021 on in-situ basis w.e.f. the date of assumption of charge of the post by them and until further orders. […]

141 transfer/postings of the officers in the grade of DCIT/ACIT

Transfer/postings of 141 officers in the grade of Deputy Commissioner/Assistant Commissioner of Income Tax (DCIT/ACIT) vide Office Order No. 213 of 2022 | Dated: 30th September, 2022. F.No.A.22013/1/2022-Ad.VI Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) North Block, New Delhi -110 001 Office Order No. 213 of 2022 | […]

343 transfer/postings of officers in the grade of CIT/DIT

Office Order No.212 of 2022 Transfer/postings of 343 officers in the grade of Commissioners of Income Tax/Directors of Income Tax (CIT/DIT) F.No. A-22011/5/2022-Ad-VI Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) North Block, New Delhi -110 001 Office Order No. 212 of 2022 | Dated: 30.09.2022 The following transfer/postings […]

Transfer/postings of 155 officers in the grade of Pr. CIT/Pr. DIT

Office Order No. 204 of 2022, Dated: 19.09.2022 transfer/postings of 155 officers in the grade of Principal Commissioner of Income Tax/ Principal Director of Income Tax (Pr. CIT/Pr. DIT). F.No.A.22011/4/2022-Ad.VI Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) North Block, New Delhi -110 001 Office Order No. 204 of […]

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• PERSONAL FINANCIAL PLANNING

Guiding Clients Through the Transfer-for-Value Maze

• Personal Financial Planning
• Risk Management & Insurance Planning

One of the most attractive aspects of life insurance as an estate and financial planning tool is the tax treatment of the death proceeds. Generally, the proceeds of a life insurance policy received by a beneficiary are entirely free from income tax (Sec. 101(a)(1)). However, an often overlooked provision of the tax law, known as the transfer-for-value rule, can result in the loss of this advantageous tax treatment.

CPAs often advise their clients to purchase new life insurance or restructure the ownership of existing policies to serve as a valuable liquidity tool in the estate and business succession planning process. When dealing with life insurance transactions, one of the most important and challenging areas that the tax adviser must properly address is the transfer-for-value rules under Sec. 101(a)(2).

Generally, under the provisions in Sec. 101, life insurance proceeds, payable as a result of the death of the insured, are received income tax free. If properly structured, through third-party ownership of the policy, the proceeds can also be received estate tax free. However, if a life insurance policy, or interest in a policy, is transferred for valuable consideration of any form, such as in a cash transaction or to satisfy mutuality of promises, then the income tax exclusion is not available to the beneficiary and the death proceeds are subject to federal income tax. More specifically, the portion of the death proceeds equal to the consideration paid to acquire the policy or interest in the contract, plus all future premiums paid by the transferee (i.e., the transferee’s basis in the contract), are received income tax free, but the remaining death proceeds are taxed as ordinary income under Regs. Sec. 1.101-1(b)(3)(i).

While beyond the scope of this column, it should be noted that transferring an existing life insurance policy into an irrevocable life insurance trust (ILIT) can shield the entire death benefit from federal estate and generation-skipping transfer tax consequences. However, clients should be advised that, under Sec. 2035, the death proceeds of the policy transferred to an irrevocable trust are fully included in the decedent’s gross estate for transfer tax purposes if ownership of the policy was transferred by the insured to the ILIT within three years of the insured’s date of death.

Fortunately, a number of safe-harbor exceptions to the transfer-for-value rule allow a life insurance policy transfer to be made for valuable consideration without jeopardizing the income tax–free nature of the death benefit. Any one of these exceptions to the rule can effectively serve to insulate a policy’s death proceeds from adverse income tax consequences.

Safe-Harbor Exceptions to the Transfer-for-Value Rule

There are five exceptions to the transfer-for-value rule contained in Sec. 101(a)(2). Life insurance proceeds are received income tax free, even if there has been a transfer for valuable consideration of a policy or an interest in a policy, if the transfer is to:

1. Anyone whose basis is determined by reference to the original transferor’s basis;

2. The insured (or insured’s spouse or ex-spouse, if incident to a divorce under Sec. 1041);

3. A partner of the insured;

4. A partnership in which the insured is a partner; or

5. A corporation in which the insured is a shareholder or officer.

Transfer-for-Value Pitfalls and Opportunities

Gratuitous transfer: When the transferor of a life insurance policy receives consideration and is discharged from a policy loan obligation on the contract, the transfer of a policy subject to a nonrecourse loan is deemed a transfer for value. However, if the transferor’s basis in the policy is greater than the loan balance, a gratuitous transfer of the policy should qualify for the first exception to the transfer-for-value rule noted above, reflected in the basis carryover exception (Rev. Rul. 69-187; Letter Ruling 8951056).

Transfer to a partner or partnership: Since the transfer of a policy to a partner of the insured is one of the exceptions to the rule, the transfer-for-value issue does not occur in the context of a business partnership. Therefore, when restructuring business succession plans, it is possible to change from an entity-purchase or stock-redemption agreement to a cross-purchase agreement and use the same policies to fund the new transaction.

While the transfer of a life insurance policy to a partner of the insured is a protected transaction for transfer-for-value purposes, a policy transfer to a co-shareholder of the insured is not protected and results in a violation of this rule. Therefore, when a corporation owns life insurance policies on the lives of its shareholders, structured in the form of an entity purchase or stock redemption agreement, it is not possible to convert to a cross-purchase agreement and use the same policies to fund the new agreement. The resulting transaction would violate the transfer-for-value rule because a corporation’s transfer of an existing policy on the life of one stockholder to another stockholder is not one of the safe-harbor exceptions to the transfer-for-value rule.

While there does not appear to be any logical reason to exempt transfers of an interest in a life insurance policy to and among partners of the insured and not also afford this same exemption to transfers to and among closely held corporate shareholders, if the insured is a co-shareholder, unless the transferee is the insured, transfers of policies from a corporation to a shareholder and transfers among shareholders can easily violate the rule.

However, if the co-shareholders are all deemed partners in a partnership, the transaction may be exempt from the transfer-for-value rule under the partnership exception. In a private letter ruling, the IRS has approved the creation of a partnership for the purpose of receiving corporate-owned policies (Letter Ruling 199903020). Although a partnership must have a valid business purpose under state law and not be just an entity created to avoid taxes, this ruling appears to approve the creation of a partnership whose sole purpose is to “engage in the purchase and acquisition of life insurance policies on the lives of the partners.”

In Letter Ruling 9701026, three shareholders in a professional corporation were also partners in a partnership that owned and leased an office building to the professional corporation. The parties planned to enter into a cross-purchase agreement to provide the surviving shareholders with funds that might be needed to purchase a deceased shareholder’s shares in the professional corporation from his estate. Each shareholder owned insurance on the lives of the others, and the professional corporation owned a life insurance policy on one shareholder’s life that was subject to a collateral assignment split-dollar plan. The professional corporation proposed to transfer its ownership interest in the split-dollar policy to the other shareholders, who would assume the corporation’s position under the split-dollar plan. The letter ruling held that the transfer qualified for the partnership exception under Sec. 101(a)(2)(B).

Beneficiary designation: The designation of a policy beneficiary in exchange for any kind of valuable consideration constitutes a transfer for value. The consideration could be an exchange of policies or a promise to render future services and does not have to involve the exchange of money. However, the mere pledging or assignment of a life insurance policy as collateral is not deemed to be a transfer for value.

More specifically, a pledge or assignment of a life insurance policy as collateral security for a loan or other obligation owed by the policy owner is not a transfer for valuable consideration. Sec. 101(a)(2) is not applicable to amounts received by the pledgee or assignee that are treated as a repayment of capital and are therefore generally income tax free to the extent of the outstanding debt amount. However, insurance proceeds representing interest on the debt are taxed as ordinary income to the creditor (Regs. Sec. 1.101-1(b)(4)).

Term life insurance: Term life insurance policies, even though such policies do not accumulate cash value, are subject to the transfer-for-value rule (Letter Ruling 7734048). The transfer does not have to be of the policy itself. A transfer of some or all of the underlying interest in the policy (e.g., the death benefit proceeds) is sufficient to invoke the transfer-for-value rule. For example, the creation, for value, of an enforceable contractual right to receive all or part of a life insurance policy’s proceeds may constitute a transfer for valuable consideration. This can occur when an insured shareholder-owner of a corporation, which owns the policy on his life, is contractually bound under the terms of an enforceable buy-sell agreement to designate a co-shareholder as the policy beneficiary in order to fund the transaction.

Reciprocal promise transaction: A reciprocal promise can also constitute valuable consideration. For example, if several insured co-shareholders agree to “gift” their policies to one another in order to fund a cross-purchase arrangement, the reciprocal gifting constitutes valuable consideration. In addition, if the co-shareholders agree to continue paying premiums on the gifted policies (to fund the cross-purchase agreement), this too constitutes valuable consideration (Letter Ruling 199903020).

Intentionally defective grantor trust: A grantor trust that is taxed as if the underlying assets were owned by the insured grantor can purchase or obtain existing policies on the grantor’s life without adverse income tax consequences, since the transfer falls within the transfer-to-the-insured exception to the rule. More specifically, when a client wants to establish a new irrevocable trust in order to purchase an existing policy from another trust, for the purpose of changing the dispositive provisions, a transfer for value can occur. If the trust terms are no longer appropriate, then with the trustee’s consent, the insured may use the transfer-for-value exception to acquire the policy from the insurance trust and transfer the policy to a new trust with acceptable terms. Of course, the three-year rule of Sec. 2035 will begin with the new transfer.

Alternatively, the transfer could be made directly to a new insurance trust that satisfies one of the transfer-for-value safe-harbor exceptions. For example, the transfer to an intentionally defective grantor trust can be used to transfer a policy from one insurance trust to another. In Swanson , 518 F2d 59 (8th Cir. 1975), the insured retained the power to alter or amend a trust but could not vest ownership in himself. The insured was deemed the trust’s owner under Sec. 674; as a result, the sale of an insurance policy to the trust was deemed to be a transfer to the insured within the meaning of Sec. 101(a)(2)(B).

The final transfer: In a series of transfers of the same life insurance policy, if the final transfer is a transfer for value, the transfer-for-value rule will apply, and the exclusion, for income tax purposes, generally will be limited to the consideration paid for the policy by the transferee, plus any subsequent premiums paid by the transferee to keep the policy in force (Regs. Sec. 1.101-1(b)(3)(i)). However, if the final transfer is to the insured, to a partner of the insured, to a partnership in which the insured is a partner, or to a corporation in which the insured is a shareholder or an officer, the entire death proceeds of the policy will be received by the beneficiary income tax free (Regs. Sec. 1.101-1(b)(3)(ii)). If none of the stated exceptions to the transfer-for-value rule applies, but the final transferee carries over the transferor’s basis in whole or in part, the excludible amount is the amount that would have been excludible by the transferor had the transfer not taken place, plus any premiums paid by the final transferee (Regs. Sec. 1.101-1(b)(3)(iii)).

Planning Tips

Transfer-for-value problems can occur in many unexpected circumstances. As noted above, adverse income tax consequences can be triggered by a violation of the rule in both personal and business transactions and can apply far beyond the outright sale of a life insurance policy to a third party.

Without a thorough policy review, a transfer-for-value violation is a ticking time bomb, since the problem often remains undiscovered until after the insured’s death, when it is too late to remedy potentially severe income tax consequences to the beneficiaries.

Life insurance continues to be an excellent financial planning vehicle to provide the infusion of cash—precisely when needed—to generate an instant source of liquidity in order to promptly discharge the final debts, taxes, and administrative expenses arising at a client’s death. However, whenever individuals or business owners own life insurance or are contemplating the transfer of a policy in conjunction with the review or revision of their estate or business succession plan, tax advisers must consider potential transfer-for-value implications for their clients.

Therefore, any proposed transfer of an existing life insurance policy by clients should take into account the transfer-for-value rules under Sec. 101. Failure to carefully address these rules could cause the policy proceeds to be exposed to income taxes when received by a beneficiary as a result of the insured’s death. With proper planning and foresight by the client’s team of tax, legal, and insurance advisers, this is a tax problem that can generally be completely avoided.

While life insurance continues to remain a flexible financial planning tool in the estate planner’s arsenal, both planning opportunities and tax pitfalls do exist. Since the CPA is very often the client’s most trusted adviser, he or she must have a firm grasp of the issues surrounding life insurance and the transfer-for-value rule to help guide clients through the maze of complex, and often inconsistent, tax rules. This knowledge can help the tax adviser  minimize the potential tax burden and maximize the transfer of wealth to the client’s surviving family members.

EditorNotes

Michael David Schulman is the third generation owner of Schulman CPA, An Accountancy Professional Corporation in New York, NY

For further information about this column, contact Mr. Schulman at [email protected] or Mr. Levin at [email protected] .

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PPP fraud investigation sees former Cook County correctional officer charged

Jareli reyes, 32, is accused of fraudulently obtaining $41,666 in loans in 2021 through the federal paycheck protection program that was established to provide relief to businesses hit hard by the covid-19 pandemic. reyes, who resigned last year, is charged with theft, income-tax fraud and wire fraud..

Jareli Reyes, a former Cook County Jail guard, is accused of defrauding the federal Paycheck Protection Program that was created to help struggling businesses during the COVID-19 pandemic.

A former Cook County Jail guard has been charged with defrauding the federal Paycheck Protection Program that was created to help struggling businesses during the COVID-19 pandemic.

Jareli Reyes, who resigned from the sheriff’s office last year, obtained approval for a $20,833 PPP loan in April 2021 and for another loan in the same amount the next month — a total of $41,666, according to records from the federal Small Business Administration, which oversaw the program.

On her application, she said was the sole proprietor of a security guard and patrol business.

Reyes, 32, was indicted in Cook County criminal court earlier this month on charges of theft, income-tax fraud and wire fraud in connection with those loans. She couldn’t be reached for comment.

Months after Reyes was given the PPP money in 2021, the Cook County Board voted to give her more than $32,500 for an unrelated worker’s compensation claim in which she said she’d suffered neck and shoulder injuries while trying to break up a fight between Cook County Jail detainees in 2019, records show.

In May 2022, sheriff’s officials learned about Reyes’ PPP loans from the Cook County’s inspector general’s office, which was investigating possible PPP fraud among county workers.

The sheriff’s office investigated and found no record to show Reyes owned a business or that she’d filed any disclosure with the sheriff’s office of any secondary employment, according to Matthew Walberg, a spokesperson for the agency., who said, “The sheriff’s office’s investigation into other potential cases of PPP abuse is ongoing.”

In April 2023, the sheriff’s office forwarded its findings to Illinois Attorney General Kwame Raoul’s office, which is handling the case. A Raoul spokesperson said he “is committed to holding accountable individuals who viewed the COVID pandemic as an opportunity for personal enrichment.”

Fraud has been found to be rampant in the PPP program created under then-President Donald Trump and continued by President Joe Biden, with at least $200 billion believed to have been scammed in phony loan applications during the pandemic in 2020 and 2021.

• Clusters of pandemic relief loans went to the same Chicago addresses, including homeless shelters, Sun-Times finds

Public officials including cops are among those suspected of defrauding the program. Last fall, Deborah Witzburg, the City Hall inspector generall, said her office found at least 1,000 city workers, including Chicago police officers, got PPP loans , many that she believed were obtained fraudulently.

Last August, two former Chicago cops, Torrey Price and Aaron Price , were charged with bilking the PPP program of more than $2 million. They’re awaiting trial on federal charges.

Two Illinois State Police officers — a master trooper and a special agent, or detective — are suspected of PPP fraud and face disciplinary charges filed against them March 4 with the Illinois State Police Merit Board, the Chicago Sun-Times reported last week. The master trooper was relieved of duty on Feb. 9 and the special agent on Feb. 14. A state police spokesperson said the two are also subjects of an ongoing criminal investigation.

3M’s Treasury Income Rule Challenge Should Fail, Professor Says

By John Woolley

The IRS should prevail in its transfer pricing dispute with 3M Co. because the government followed proper rulemaking procedures to draft the Treasury regulation authorizing an income adjustment, a University of Chicago tax law processor told the Eighth Circuit.

3M sued the government for adjusting its income upward by $23.7 million, then appealed when a lower court sustained the adjustment and consequent $4.8 million tax increase. The IRS says it shifted income from a 3M Brazilian subsidiary to the US parent in order to prevent the conglomerate from reducing its overall tax liability by allocating income to a controlled entity ...

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IRS Tax Tip 2024-45, May 6, 2024

IRS sends notices and letters when it needs to ask a question about a taxpayer’s federal tax return, let them know about a change to their account or request a payment. Don’t panic if something comes in the mail from the IRS – they’re here to help.

When a taxpayer receives mail from the IRS, they should:

Read the letter carefully. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes any steps the taxpayer needs to take. A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return. Taking prompt action could minimize additional interest and penalty charges .

Review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records. Typically, a taxpayer will need to act only if they don't agree with the information, if the IRS asked for more information or if they have a balance due.

Take any requested action, including making a payment . The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account . The IRS offers several opti   ons to help taxpayers struggling to pay a tax bill.

Reply only if instructed to do so . Taxpayers don't need to reply to a notice unless specifically told to do so. There is usually no need to call the IRS. If a taxpayer does need to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If a taxpayer doesn't agree with the IRS, they should follow the instructions in the notice to dispute what the notice says. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records . Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when the IRS takes action on a taxpayer's account. Taxpayers should keep records for three years from the date they filed the tax return.

Watch for scams

The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure whether they owe money to the IRS can view their tax account information on IRS.gov.

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