2024 (10) TMI 302 - AT - Income Tax

Reopening of assessment u/s 147 beyond period of limitation - Addition of cash deposit in savings bank account of assessee as unexplained investment u/s 69 - HELD THAT - On perusal of report and supporting documents submitted by the Ld. AO in the present case which are extracted hereinabove, it is apparent that the Ld. AO had attempted to serve the notice of the assessee dated 26.03.2018 though registered post at the address of the appellant, available on the record of the department i.e., Pankojani Walter, Adarsh Chowk, Kusumkasa, Durg, Chhattisgarh, however, the post sent was returned back to the AO with a remark that the assessee has refused to take the same on 05.04.2018, it shows that the notice was issued within the stipulated time frame of Six years from the end of the assessment year having information about escapement of income, for which assessment was to be reopened. Therefore, the first legal contention raised by the assessee is not found to be tenable in light of the evidences submitted by the department. Order of transfer u/s 127 was not issued for change of incumbent by the Ld. PCIT - We find force in the contentions of the Ld. AR that the jurisdiction vested with ITO,W-1(3) could not be validly transferred to ACIT-1(1) by way of a proper order of transfer us 127. Also, nothing is brought to our notice that a valid reopening notice was issued by the Ld. ACIT-1(1) within stipulated time as mandated by the Law, therefore, he was devoid of valid assumption of jurisdiction to frame the assessment in the present case u/s 144 r.w.s. 147 thus, in terms of aforesaid observations, the assessment framed by ACIT, Circle- 1(1), dehors valid assumption of jurisdiction is liable to be quashed, thus, we direct to do so. As we have quashed the assessment framed by the ACIT, Circle-1(1) framed u/s 144 r.w.s. 147 dated 10.12.2018 for want of valid assumption of jurisdiction, therefore, we refrain from adverting to and to dealing with the other grounds of appeal raised before us by the assessee, challenging the additions / disallowances made by Ld. AO and to the extent sustained by the Ld. CIT(A), which therefore are left open.

Summary

Issues Involved:

1. Validity of reassessment notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) in reassessment proceedings.
3. Justification for additions made by the AO regarding unexplained investments.
4. Correctness of CIT(A)'s direction to recompute total income at a specified rate.

Detailed Analysis:

1. Validity of Reassessment Notice:

The primary issue was whether the reassessment notice under Section 148 was validly issued. The assessee argued that the notice was issued merely to verify information, lacking a "reason to believe" that income had escaped assessment, as required by law. The tribunal found that the AO had attempted to serve the notice within the stipulated time frame, but it was returned as "refused to accept." Thus, the tribunal held that the notice was issued within the permissible period, and the first legal contention of the assessee was not tenable.

2. Jurisdiction of the Assessing Officer:

The tribunal examined whether the ACIT-1(1), Bhilai had the proper jurisdiction to complete the reassessment. The assessee contended that there was no valid transfer order under Section 127 from ITO-1(3), Raipur to ACIT-1(1), Bhilai. The tribunal noted that the transfer order referenced a different ITO (ITO-1(2), Bhilai), and there was no evidence of a transfer from ITO-1(3) to ITO-1(2). Consequently, the tribunal found that the ACIT-1(1), Bhilai lacked valid jurisdiction, as the reassessment proceedings were initiated without a proper transfer of jurisdiction. The tribunal relied on the principle that reassessment must be completed by the authority who initiated the proceedings or after a valid transfer order, citing the Tata Sons case.

3. Justification for Additions:

The tribunal did not address the merits of the additions made by the AO regarding unexplained investments, as the assessment was quashed due to jurisdictional issues. The AO had added amounts related to cash deposits and interest on securities as unexplained investments under Section 69. However, since the assessment itself was deemed invalid, the tribunal refrained from examining these additions.

4. Correctness of CIT(A)'s Direction:

The CIT(A) had directed the AO to recompute the business income at 5% of the total sales, based on a precedent from the Andhra Pradesh High Court. The assessee argued that local precedents should be applied, suggesting a lower percentage based on comparable cases in the same locality. However, the tribunal did not address this issue, as the reassessment order was quashed on jurisdictional grounds.

Conclusion:

The tribunal quashed the reassessment order due to the lack of valid jurisdiction by the ACIT-1(1), Bhilai, as there was no proper transfer of jurisdiction from the original AO. Consequently, the tribunal did not address other grounds related to the additions and the recomputation of income. The department's appeal was dismissed, and the assessee's cross-objection was allowed.