2022 (8) TMI 1332 - AT - Income Tax

Transfer of case u/s 127 - Income tax return having the residential address of Jaipur, was e-filed by the assessee but Notice u/s 143(2) was served by Asst. Director of Income Tax, International Taxation, New Delhi - whether u/s 127 AO on his own can transfer an income-tax file to another officer and whether an order is required to be passed? - HELD THAT - From a reading of the language of section 127(3) it is evident that when a file is transferred from one AO to another whose offices are located in the same city, locality or place, though other statutory formalities are required to be complied with, the opportunity of hearing as postulated in section 127(1) and (2) in case of intercity transfer, is not required. Scheme of the Income-Tax provides that when an officer has jurisdiction over the assessee, the same cannot be transferred and assumed by the another officer, unless there is an appropriate order passed by the competent authority transferring the jurisdiction. In this case, assessee himself has requested for transfer of his case from Delhi to Jaipur, which can be deemed to be no-objection from the side of assessee. However, the necessity of passing order u/s 127 cannot be dispensed with. It is undisputed fact that the AO at New Delhi had transferred the file to the AO at Jaipur and, therefore, even if they are both under the jurisdiction of the same Director-General or the Pr. CIT, the notice u/s 127(1) was to be given to the assessee and order u/s 127(3) was to be passed by Director-General or Pr. CIT who can transfer the case u/s 127 - No such procedure has been followed by the revenue. Therefore, we are of the opinion that the notice u/s 143(2) by DDIT, Jaipur is without jurisdiction and authority, and consequently the order passed u/s 143(3) is held to be void ab-initio. Appeal of assessee allowed.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) to issue notice and pass the assessment order.
2. Addition of Rs. 7,00,000/- under Section 69C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The primary issue raised by the assessee was that the Dy. Commissioner of Income Tax, International Taxation, Jaipur, lacked the valid jurisdiction to issue notice, conduct proceedings, and pass the assessment order. The assessee contended that no order under Section 127 was passed by the competent authority to transfer jurisdiction from the Dy. Director of Income Tax, Circle-1(1), New Delhi, to Jaipur. The assessee argued that even if both the Assessing Officers were under the jurisdiction of the same Principal Commissioner/Director General, the legal necessity of passing the transfer order under Section 127 could not be foregone.

The Tribunal noted that the assessee had filed his return of income for the assessment year 2012-13 with a residential address in Jaipur, and the initial notice under Section 143(2) was issued by the ADIT, International Taxation, New Delhi. The assessee objected to the jurisdiction, and a fresh notice under Section 143(2) was issued by the DDIT, International Taxation, Jaipur. However, no communication was made regarding the transfer of jurisdiction from Delhi to Jaipur. The AO informed the assessee that no order under Section 127 was passed because the Additional Director International Taxation, Circle 1(1), New Delhi, was holding charge of Additional Director International Taxation, Jaipur.

The Tribunal emphasized that under Section 127, an order is required to be passed by the competent authority (Principal Director General, Director General, Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner) to transfer a case from one Assessing Officer to another, even if they are subordinate to the same senior officer. The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Ajanta Industries vs. CBDT, which held that recording and communicating reasons for the transfer of a case is mandatory.

The Tribunal concluded that the transfer of the assessee's case from New Delhi to Jaipur without an order under Section 127 was invalid. Consequently, the notice under Section 143(2) issued by the DDIT, Jaipur, was without jurisdiction, and the assessment order passed under Section 143(3) was void ab initio.

2. Addition of Rs. 7,00,000/- under Section 69C:
The second issue involved the addition of Rs. 7,00,000/- under Section 69C of the Income Tax Act, 1961. The AO had made the addition on the grounds that the assessee had made an undisclosed payment of Rs. 7,00,000/- in cash for the purchase of a plot of land. The assessee explained that the cash payment was made to settle a dispute with the seller, Smt. Choti Devi, who was not ready to hand over the physical possession of the plot. The AO, however, concluded that the payment was made out of undisclosed income and added the same.

The Tribunal noted that the assessee had disclosed the payment of Rs. 7,00,000/- in his reply to the AO and had provided a cash flow statement showing the source of the payment. The Tribunal observed that the AO had not issued any show-cause notice or sought an explanation from the assessee before making the addition under Section 69C. The Tribunal emphasized that Section 69C requires the AO to be satisfied that the assessee has incurred an expenditure and has not satisfactorily explained the source of such expenditure.

The Tribunal found that the assessee had satisfactorily explained the source of the expenditure, and the recipient, Smt. Choti Devi, had confirmed the receipt of the payment in her statement recorded under Section 131. The Tribunal held that the AO's addition under Section 69C was based on assumptions and presumptions and was not justified.

However, since the Tribunal had already decided the appeal on the jurisdictional issue, the ground raised by the assessee on merits became infructuous and did not require any adjudication.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the notice under Section 143(2) issued by the DDIT, Jaipur, was without jurisdiction, and the assessment order passed under Section 143(3) was void ab initio. The addition of Rs. 7,00,000/- under Section 69C was also found to be unjustified, but the Tribunal did not adjudicate this ground as the appeal was allowed on the jurisdictional issue.