2025 (2) TMI 284 - AT - Income Tax

Jurisdiction from ITO-1 Ambikapur to ITO-3 Korba under Section 127 - Validity of reassessment proceedings - non serving Notice u/s.148 and without allowing opportunity to the appellant opportunity to the Appellant to explain the case - order passed by the Pr. CIT Bilaspur u/s. 127 transferring the case of the assessee from ITO-1 Ambikapur to ITO-3 Korba Whether or not the CIT(Appeals) is justified in refraining from adjudicating the specific grievance of the assessee that the ITO-3 Korba had wrongly assumed jurisdiction and framed the assessment vide his order passed u/s. 144 r.w.s. 147 in absence of a valid order of transfer having been passed by the Pr. CIT Bilaspur u/s. 127 ? - HELD THAT - Assessee had assailed the validity of the jurisdiction that was assumed by the A.O for framing the impugned assessment u/s. 144 r.w.s. 147 on the ground that the order of transfer passed by the Pr. CIT Bilaspur u/s. 127 of the Act was not as per the mandate of law. We unable to concur with the CIT(Appeals) that he was not vested with any jurisdiction to deal with the specific challenge raised by the assessee as regards the validity of the assessment order that was framed by the A.O de-hors a valid assumption of jurisdiction on his part in absence of an order of transfer u/s. 127 of the Act as required per the mandate of law. CIT(Appeals) ought to have taken call and adjudicated the aforesaid specific issue instead of refraining from dealing with the same which thus had resulted to multiplicity of litigation and pushed the assessee into further litigation on the said issue. Accordingly not being able to persuade to concur with the view taken by the CIT(Appeals) restore the matter to his file with a direction to adjudicate the challenge thrown by the assessee as regards the validity of the jurisdiction that was assumed by the A.O for framing of the assessment vide his order passed u/s. 144 r.w.s. 147 of the Act dated 16.12.2018 de-hors an order of transfer u/s. 127 of the Act passed by the Pr. CIT Bilaspur as per the mandate of law. Thus the Ground of appeal No.2 raised by the assessee is allowed for statistical purposes

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the assessment order was void ab initio due to lack of proper notice under Section 148 of the Income-tax Act, 1961, and failure to provide the appellant an opportunity to be heard.
• Whether the transfer of jurisdiction from ITO-1, Ambikapur to ITO-3, Korba under Section 127 of the Act was valid, given the alleged failure to provide the appellant an opportunity to be heard.
• Whether the addition of Rs. 17,05,824/- as unexplained money under Section 69A of the Act was justified.
• Whether the CIT(Appeals) was correct in dismissing the appellant's challenges regarding jurisdiction and the merits of the assessment.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the Assessment Order Due to Lack of Notice

• Legal Framework: Section 148 of the Income-tax Act requires that notice be served to the assessee before proceeding with reassessment under Section 147.
• Court's Interpretation: The Tribunal noted that notices were issued to the address available in the PAN database, which the appellant failed to update. The Supreme Court's precedent in PCIT Vs. Iven Interactive Limited was cited, emphasizing the responsibility of the assessee to update their address.
• Conclusion: The Tribunal upheld the validity of the notices issued, dismissing the appellant's claim of not receiving them.

2. Jurisdictional Transfer Under Section 127

• Legal Framework: Section 127 mandates a reasonable opportunity of being heard before transferring jurisdiction if the offices are not in the same city.
• Court's Interpretation: The Tribunal found that the Principal CIT did not provide the appellant an opportunity to be heard, which is a statutory requirement when transferring cases between cities.
• Conclusion: The Tribunal directed the CIT(Appeals) to adjudicate the issue of jurisdiction validity, as it was not properly addressed previously.

3. Addition of Rs. 17,05,824/- as Unexplained Money

• Legal Framework: Section 69A allows for the addition of unexplained money found in the possession of the assessee.
• Court's Interpretation: The appellant failed to provide sufficient evidence to substantiate the source of cash deposits. The Tribunal noted the absence of documentary evidence supporting the appellant's claim of business transactions with Vodafone Essar.
• Conclusion: The Tribunal upheld the addition made by the AO due to the appellant's failure to discharge the burden of proof.

4. CIT(Appeals) Dismissal of Challenges

• Legal Framework: The CIT(Appeals) is responsible for addressing grievances related to jurisdiction and merits of the assessment.
• Court's Interpretation: The Tribunal criticized the CIT(Appeals) for not addressing the jurisdictional issue, which led to unnecessary litigation.
• Conclusion: The Tribunal remanded the matter to the CIT(Appeals) for a fresh adjudication on jurisdictional validity.

SIGNIFICANT HOLDINGS

Core Principles Established:

• The assessee bears the responsibility to update their address in the PAN database to ensure proper service of notices.
• The transfer of jurisdiction requires a hearing opportunity if the offices involved are in different cities, as per Section 127.
• The burden of proof lies with the assessee to substantiate the source of cash deposits when challenged under Section 69A.
• The CIT(Appeals) must address jurisdictional challenges to prevent unnecessary litigation.

Final Determinations:

• The Tribunal allowed the appeal for statistical purposes, remanding the jurisdiction issue back to the CIT(Appeals) for proper adjudication.
• The Tribunal upheld the validity of the notices and the addition of unexplained money due to the appellant's failure to provide evidence.