2020 (5) TMI 307 - AT - Income Tax

Validity of notice u/s 143(2) - Jurisdiction of AO New Delhi on the assessee within the meaning of Sec. 120 - transfer of jurisdiction - ITO Ward 23(4) New Delhi claimed jurisdiction on the ground that PAN was still lying with the said ward and on the said basis, the assessment has to be made by him for AY 2008-09 - HELD THAT - In the present case, there is gross violation of the procedure laid down in the Act. For seeking transfer of jurisdiction, there is a prescribed procedure in Sec. 127 and the CIT-8 had to refer the issue to CIT-13 explaining the reasons as to why he wants to get the case transferred to him. A regular order u/s 127 had to be passed by Pr.CIT-13 and only then the jurisdiction could be transferred from Ward 39(4) to Ward 23(4). On receipt of notice dated 20.07.2010 from ITO Ward-23(4), the assessee filed his objection on 05.08.2010. Even on receipt of this objection, the AO did not act on it and no effort was made to comply with the statutory provisions for acquisition of proper jurisdiction in accordance with law. Thus, the AO without deciding the issue of jurisdiction passed the Assessment Order u/s 144 which is not as per the mandate of the Income Tax Act, 1961. Assessee has intimated the change of address within the prescribed time and the assessee has taken all the necessary steps to object the jurisdiction which was not at all considered by the Assessing Officer at the relevant time. In fact, the said AO does not have any jurisdiction. Thus, the Assessment Order itself becomes null and void ab initio. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO)
2. Validity of the ex-parte order passed by the AO
3. Additions made by the AO on various accounts
4. Charging of interest under sections 234A, 234B, 234C, and 234D

Detailed Analysis:

1. Jurisdiction of the Assessing Officer:
The primary contention of the assessee was that the Assessing Officer (AO) Ward 23(4) did not have the proper jurisdiction to issue notices and pass the assessment order. The assessee had filed the return of income with ITO Ward 39(4) at the address of his principal place of business, which falls under the territorial jurisdiction of Ward 39(4). The AO Ward 23(4) claimed jurisdiction based on the PAN, which was incorrect as the proper procedure for transfer of jurisdiction under Section 127 was not followed. The AO Ward 23(4) did not act on the objection filed by the assessee regarding jurisdiction and proceeded to pass the assessment order. The Tribunal found that the AO Ward 23(4) usurped jurisdiction in a dictatorial manner, contrary to law, making the assessment order null and void ab initio.

2. Validity of the Ex-parte Order:
The AO Ward 23(4) issued notices by affixture at an old address, which was not as per the rules. The only notice served on the assessee was dated 20.07.2010, which was barred by time and could not provide jurisdiction for making an assessment under Section 143(3). The Tribunal noted that the AO did not comply with the statutory provisions for acquiring proper jurisdiction and passed the assessment order under Section 144 without deciding the jurisdiction issue, rendering the order invalid.

3. Additions Made by the AO:
The AO made several additions on an ad hoc basis, including:
- ?25,00,000 as unexplained investment in purchases made outside books.
- ?10,81,512 estimating net profit on estimated undisclosed sales.
- ?2,00,000 on account of short-term capital gain.
- ?86,506 as estimated interest income.
- ?1,15,000 on account of disallowance of claim under Chapter VI-A.

The Tribunal did not delve into the merits of these additions as the jurisdictional issue itself rendered the assessment order null and void.

4. Charging of Interest:
The AO ordered to charge interest under sections 234A, 234B, 234C, and 234D, which the CIT(A) did not adjudicate, stating these are mandatory and consequential. However, since the assessment order was found to be null and void due to jurisdictional issues, the Tribunal did not need to address this matter separately.

Conclusion:
The Tribunal allowed the appeal of the assessee, declaring the assessment order null and void ab initio due to improper jurisdiction by the AO Ward 23(4). The appeal was allowed on the grounds of jurisdiction, and thus, the Tribunal did not address the merits of the additions made by the AO. The order was pronounced on May 8, 2020.