2017 (7) TMI 71 - AT - Income Tax

Jurisdiction assumed by the ITO, Solan - appellant firm was regularly being assessed at New Delhi till last year - Held that - The letters do not mention as to how the ITO, Delhi has jurisdiction over the assessee and not the ITO, Solan. The letters are, therefore, mere information being imparted to the AO and cannot be termed as objection. The Assessing Officer, we find had also clarified to the assessee as to how the jurisdiction lies with him which argument was not countered or controverted by the assessee before the Assessing Officer. There was no valid objection filed by the assessee before the Assessing Officer and in the absence of the same, the assessee cannot now challenge the jurisdiction in appellate proceedings,in view of the clear provisions of section 124 (3)which prescribed objection to be filed within the stipulated time of 30 days of receipt of notice. Territorial jurisdiction lies with the ITO, Solan only and no question, therefore, arises whether he had jurisdiction to assess the assessee and, therefore, also the provisions of section 124(2) and (3) or sub-section (4),which prescribe the procedure for dealing with question relating to jurisdiction of AO s, do not become applicable at all since they are applicable only when a question relating to jurisdiction arises. No merit in the argument of the assessee that the issue related to transfer of jurisdiction and hence required order to be passed by the requisite authority as per the provisions of section 127 of the Act. As stated above, in the present case the jurisdiction has been established categorically as lying with the ITO,Solan and the issue is definitely not of transfer of case from Delhi to Solan,since that could be the case only if the ITO at Delhi had valid jurisdiction which for some reason was being transferred to ITO,Solan. That being not the case, the provisions of section 127 we find do not apply in the present case - Decided against assessee. Addition on account of estimation of net profit - Held that - If the assessee had some material or some basis to dislodge this belief or this rate adopted by the Assessing Officer, it could have produced the same atleast before us, which has not been done. The assessee cannot adopt the attitude of non-cooperation all along when the onus lies on the assessee to prove that the profit returned by it is correct. The assessee cannot shift the onus on the Revenue after not cooperating throughout the proceedings and then stating that there has to be some basis with the Assessing Officer to adopt a net profit rate. It is a highly unreasonable and illogical argument given by the assessee which cannot be accepted and the addition made on account of net profit rate amounting to ₹ 44,97,725/- is, therefore, upheld.- Decided against assessee. Addition made on account of introduction of capital of the partners - AO treated the difference between the opening and closing balance of capital account as unexplained and made addition of the same to the income of the assessee firm - Held that - During appellate proceedings the assessee furnished copy of Income Tax return of one of the partners,Sh, Vikas Bhalla and a copy of his Bank account showing two entries transferring ₹ 68 lacs and ₹ 1,90,000/- to the assessee firm.Since the capital introduced is adequately explained by the aforestated documents as having been introduced by one of the partners himself from his bank account, we see no reason for making any addition on account of unexplained credit in the hands of the assessee. Therefore we delete the addition made - Decided against revenue.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) to assess the appellant.
2. Validity of the ex-parte order passed by the AO.
3. Addition to the income of the appellant on estimation/assumption basis.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) to assess the appellant:
The appellant challenged the jurisdiction of the AO from Solan, asserting that it had been regularly assessed in New Delhi. The appellant filed its return for the assessment year 2009-10 declaring a loss and subsequently received a notice under section 143(2) of the Income Tax Act, 1961 from the ITO, Ward-1, Solan. The appellant contended that the ITO, Solan had no jurisdiction as the appellant was assessed in New Delhi. However, the CIT (Appeals) found that the principal place of business, as per the partnership deed and PAN, was in Solan. The CIT (Appeals) held that the jurisdiction lay with the ITO, Solan, and the appellant's strategy of filing returns in Delhi was to avoid scrutiny. The Tribunal upheld this finding, noting that the appellant failed to provide any valid reason or evidence for being assessed in Delhi. The Tribunal emphasized that jurisdiction is determined by the principal place of business, which in this case was Solan.

2. Validity of the ex-parte order passed by the AO:
The appellant argued that the ex-parte order was passed without affording an opportunity of being heard. The Tribunal found that multiple notices were issued to the appellant, which went unresponded. The AO issued a detailed show cause notice before passing the ex-parte order under section 144 of the Act. The CIT (Appeals) noted that even during appellate proceedings, the appellant did not comply with notices or participate in remand proceedings. The Tribunal agreed with the CIT (Appeals) that the appellant squandered opportunities and was not interested in pursuing the proceedings. Therefore, the ex-parte order was justified.

3. Addition to the income of the appellant on estimation/assumption basis:
The AO made an addition to the appellant's income by estimating net profit at 5% of the total turnover due to non-cooperation from the appellant. Additionally, the AO added the capital introduced in the partners' accounts as unexplained. During appellate proceedings, the appellant provided some evidence, including bank statements and income tax returns of one partner. The Tribunal upheld the addition made on account of net profit estimation, noting the appellant's non-cooperation and failure to provide any reasonable basis for a different estimation. However, the Tribunal deleted the addition made on account of unexplained capital introduction, as the appellant adequately explained the source of the capital introduced by one partner from his bank account.

Conclusion:
The Tribunal dismissed the appellant's challenge to the jurisdiction of the ITO, Solan, and upheld the validity of the ex-parte order. The Tribunal partly allowed the appeal by upholding the net profit estimation but deleting the addition on account of unexplained capital introduction. The appeal was thus partly allowed.