2024 (4) TMI 1151 - AT - Income Tax

Validity of jurisdiction assumed by the A.O, i.e. ITO-2(1), Bhilai launching re-assessment proceedings - HELD THAT - As no order of transfer u/s. 127(1) of the Act had been shown to have been passed, and in fact, the case of the assessee had been transferred simplicitor on the basis of a letter dated 11.04.2018 addressed by ITO1(4), Bhilai to ITO-2(1), Bhilai; therefore, it is a clear case of invalid assumption of jurisdiction on the part of the ITO-2(1), Bhilai who in absence of any valid assumption of jurisdiction had framed the assessment vide his order u/s. 147 r.w.s. 144 - Thus, quash the assessment framed by the ITO-2(1), Bhilai u/s. 147 r.w.s. 144 of the Act dated 30.11.2018 for want of valid assumption of jurisdiction on his part. Appeal of assessee allowed.

Issues Involved:
1. Validity of jurisdiction assumed by the A.O. for initiating proceedings under Section 147 r.w.s. 144 of the Income-tax Act, 1961.
2. Confirmation of addition of Rs. 30,70,500/- being cash deposit.
3. Confirmation of addition of Rs. 19,865/- being interest income.
4. Legality of the assessment order passed by Income-tax Officer-2(1), Bhilai based on jurisdictional notice issued by Income-tax Officer 1(4), Bhilai without an order under Section 127 of the Income-tax Act, 1961.

Detailed Analysis:

1. Validity of Jurisdiction Assumed by the A.O. for Initiating Proceedings under Section 147 r.w.s. 144 of the Income-tax Act, 1961:
The primary issue in the appeals was the validity of the jurisdiction assumed by the Assessing Officer (A.O.) for initiating proceedings under Section 147 read with Section 144 of the Income-tax Act, 1961. The assessee challenged the jurisdiction on the grounds that the notice under Section 148 was issued by ITO-1(4), Bhilai, but the assessment was framed by ITO-2(1), Bhilai without a valid transfer order under Section 127 of the Act. The Tribunal found that the transfer of the case was done merely based on a letter dated 11.04.2018, without any formal order under Section 127, which mandates recording of reasons and, where possible, providing an opportunity of hearing to the assessee. The Tribunal relied on the Supreme Court judgment in Ajanta Industries Vs. Central Board of Direct Tax (1976) and the Calcutta High Court judgment in Kusum Goyal Vs. ITO and Ors, which emphasized the mandatory requirement of recording reasons for the transfer of jurisdiction under Section 127. Consequently, the Tribunal quashed the assessment framed by ITO-2(1), Bhilai, for lack of valid jurisdiction.

2. Confirmation of Addition of Rs. 30,70,500/- Being Cash Deposit:
The Tribunal did not delve into the merits of the addition of Rs. 30,70,500/- since the assessment itself was quashed due to the invalid assumption of jurisdiction by the A.O. Therefore, this issue was left open and not adjudicated upon.

3. Confirmation of Addition of Rs. 19,865/- Being Interest Income:
Similar to the issue of cash deposit, the Tribunal refrained from addressing the merits of the addition of Rs. 19,865/- as interest income due to the quashing of the assessment order on jurisdictional grounds. This issue was also left open.

4. Legality of the Assessment Order Passed by Income-tax Officer-2(1), Bhilai Based on Jurisdictional Notice Issued by Income-tax Officer 1(4), Bhilai Without an Order under Section 127 of the Income-tax Act, 1961:
The assessee raised an additional ground challenging the legality of the assessment order on the basis that it was passed by ITO-2(1), Bhilai, without a valid transfer order under Section 127 from ITO-1(4), Bhilai. The Tribunal admitted this additional ground, citing the Supreme Court judgment in National Thermal Power Company Ltd. Vs. CIT, which allows raising a purely legal issue for the first time before the Tribunal. The Tribunal found that the transfer of jurisdiction was not supported by any formal order under Section 127, and thus, the assessment order was illegal and without jurisdiction.

Conclusion:
The Tribunal quashed the assessment orders for both assessment years 2011-12 and 2012-13 due to the invalid assumption of jurisdiction by ITO-2(1), Bhilai, as there was no valid transfer order under Section 127 of the Income-tax Act, 1961. Consequently, the issues regarding the additions of cash deposit and interest income were not adjudicated upon and were left open. Both appeals filed by the assessee were allowed on the grounds of invalid jurisdiction.

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