2024 (7) TMI 1209 - AT - Income Tax

Validity of assessment u/s. 143(3) - jurisdiction assumed by the A.O., ITO-4(2), Raipur - HELD THAT - No order of transfer u/s.127(1) of the Act had been shown to have been passed, therefore, it is a clear case of invalid assumption of jurisdiction by the ITO-4(2), Raipur who in absence of any valid assumption of jurisdiction had framed the assessment vide his order u/s. 143(3) dated 27.12.2017. As the facts and issues involved in the present appeal remain the same as were involved in the aforesaid cases, therefore, following the same parity of reasoning, quash the assessment framed by the ITO-4(2), Raipur u/s. 143(3) dated 27.12.2017 for want of valid assumption of jurisdiction on his part. As have quashed the assessment framed by the AO, i.e ITO-4(2), Raipur u/s. 143(3) for want of valid assumption of jurisdiction, therefore, refrain from adverting to and dealing with the grounds of appeal raised by the assessee, based on which, the additions made by the AO have been assailed before me, which, thus, are left open. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of the addition of Rs. 40,08,521 under Section 68 of the Income-tax Act, 1961.
2. Jurisdictional validity of the assessment order passed by ITO-4(2), Raipur.

Issue-wise Detailed Analysis:

1. Validity of the Addition of Rs. 40,08,521 under Section 68:

The assessee contested the addition of Rs. 40,08,521 made under Section 68 of the Income-tax Act, 1961, on the grounds that the assessee was not obligated to maintain books of account under Section 44AA, which is a prerequisite for making an addition under Section 68. The assessee argued that the amount was utilized for the purchase of property and included sums received from third parties and cash-in-hand. The Assessing Officer (A.O.) did not accept the explanation, citing the inability of the assessee and the creditors/donors to substantiate their financial capability to provide such amounts. Consequently, the A.O. treated the entire investment as unexplained income and added it to the assessee's income. The Commissioner of Income-Tax (Appeals) upheld this addition.

2. Jurisdictional Validity of the Assessment Order:

The primary contention was the jurisdictional validity of the assessment order passed by ITO-4(2), Raipur. The assessee argued that the notice under Section 143(2) was issued by ITO-2(1), Raipur, but the assessment was framed by ITO-4(2), Raipur without a proper transfer order under Section 127 of the Income-tax Act, 1961. The assessee claimed that the transfer of jurisdiction was not supported by any order from the competent authority, which is a mandatory requirement under Section 127. The Department contended that no transfer order was necessary as the jurisdiction remained within the same city.

Upon examination, it was found that the case was transferred from ITO-2(1) to ITO-4(2) without any formal order of transfer as required by Section 127. The Tribunal referred to the judgments of the Hon'ble Supreme Court and various High Courts, which mandate that a transfer order is required even for intra-city transfers, and the absence of such an order renders the assessment invalid. The Tribunal concluded that the assessment framed by ITO-4(2) was invalid due to the lack of a proper jurisdictional transfer order.

Conclusion:

The Tribunal quashed the assessment order passed by ITO-4(2), Raipur, due to the invalid assumption of jurisdiction. Consequently, the Tribunal did not address the other grounds of appeal related to the addition under Section 68, as the assessment itself was invalidated. The appeal of the assessee was allowed based on the jurisdictional issue.

Order Pronouncement:

The order was pronounced in open court on the 24th day of June, 2024.