2024 (4) TMI 800 - AT - Income Tax

Validity of notice issued u/s 143(2) by the Non-Jurisdictional AO - No objection were filed within one month u/s 124 - Unexplained credits addition u/s 68 r.w.s. 115BBE as amount received on sale of shares unexplained - HELD THAT - It is nowhere disputed by the Revenue that the notices issued in this regard were from non-jurisdiction AO. Only defence made out by the Revenue is that there was no objection within one month as per section 124 made by the assessee during assessment proceedings, thus section 292BB supports the case of the Revenue. We are in agreement with the submissions of assessee wherein by placing reliance upon the case of ITO vs. Almak Finance P. Ltd. 2020 (10) TMI 795 - ITAT DELHI it was held that when authorities have no jurisdiction over the assessee, the act done by such authority is bad in law and void ab initio. Thus, it is the claim of the assessee that by not disputing jurisdiction u/s 124 (3) of the Act, right to challenge the jurisdiction will not be lost forever, thus the defect is not curable u/s 292B 292BB. Thus we hold that AO did not have jurisdiction and accordingly, the assessment order is liable to be quashed as such. Therefore, by holding that notices were issued from non-jurisdictional AO, the assessment order is hereby quashed. Appeal of the assessee is allowed.

Summary

Issues involved:
The issues involved in this case include challenges to the order of the ld. CIT (Appeals)-1, Gurgaon for the assessment year 2015-16. The primary issues raised by the assessee in the appeal are related to the treatment of amount received on the sale of shares, the genuineness of Long Term Capital gain, the confirmation of additions despite providing evidence, misinterpretation of financials, and lack of direct evidence against the assessee. Additionally, challenges were made regarding the disallowance of exemption claimed u/s 10(38) and the contention that the AO passed the order without affording adequate opportunity of being heard to the assessee.

Treatment of Amount Received on Sale of Shares:
The learned CIT(A) confirmed the addition made by the AO on account of the amount received on the sale of shares, treating it as unexplained credits u/s 68 read with section 115BBE of the Income Tax Act. The assessee contended that the addition was not genuine and brought forth all evidences and materials to prove the genuineness of the transaction. It was argued that the sale and purchase transactions were conducted through proper banking channels and in accordance with Stock Exchange regulations. The CIT(A) was accused of misinterpreting the financials of the companies whose shares were sold, and making additions based on surmises without direct evidence.

Jurisdictional Issues and Assessment Order:
The assessee raised additional grounds challenging the jurisdiction of the AO who issued notices u/s 143(2) without valid jurisdiction. The assessment order was passed without service within the limitation period of any valid notice u/s 143(2) of the Act. The Tribunal admitted these grounds as they raised legal issues going to the root of the matter. The AR of the appellant argued that the act done by an authority without jurisdiction is void ab initio, citing relevant legal precedents. The Tribunal agreed with the assessee, holding that the AO did not have jurisdiction, and consequently, the assessment order was quashed.

Conclusion:
The Tribunal quashed the assessment order due to jurisdictional issues, rendering the adjudication of merits of the case as of academic interest. As the assessment order was deemed invalid, the appeal of the assessee was allowed. The decision was based on the lack of jurisdiction by the AO, emphasizing the importance of proper authority in conducting assessments.