2025 (3) TMI 1088 - AT - Income Tax

Validity of the notice issued u/s 148 - notice issued by non-jurisdictional officer - as argued notice was issued by the one A.O i.e. ITO Ward-1(3) Raipur who was not having valid jurisdiction over the assessee to issue such notice at the relevant point of time HELD THAT - As notice u/s 148 of the Act dated 30.03.2019 which had been issued by the ITO Ward-1(3) Raipur who had no valid jurisdiction over the assessee at the relevant point of time therefore it is held invalid bad in law and all subsequent proceedings thereafter are accordingly held as void ab initio non-est in law. The re-assessment framed by the ITO-2(1) Raipur passed u/s. 147 r.w.s.143(3) in absence of an order of transfer u/s. 127 of the Act having been passed by the Ld. Pr.CIT and without issuance of notice u/s. 148 of the Act is held to be without any jurisdiction and thus held as bad in law and the same is quashed. Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

1. Whether the Ld. CIT(A) was justified in deleting the addition of Rs. 6,98,345/- out of the total addition of Rs. 7,75,938/- made by the Assessing Officer on account of bogus purchase, treating the same as unexplained expenditure under Section 69C of the Income Tax Act.

2. The validity of the notice issued under Section 148 of the Income Tax Act by ITO-1(3), Raipur, and the subsequent assessment made under Section 147 read with Section 143(3) by ITO-2(1), Raipur, in the absence of a valid jurisdictional transfer order under Section 127.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Deletion of Addition by Ld. CIT(A)

- Relevant Legal Framework and Precedents: The addition was made under Section 69C of the Income Tax Act, which pertains to unexplained expenditure. The Ld. CIT(A) relied on precedents from the Hon'ble High Courts of Gujarat and Bombay, which held that only the profit element embedded in alleged bogus purchases should be taxed.

- Court's Interpretation and Reasoning: The Tribunal noted that the Ld. CIT(A) applied the principle that only the profit element in the alleged bogus purchases should be taxed, as established in previous judgments.

- Key Evidence and Findings: The Assessing Officer found that the assessee had taken accommodation entries in the form of bogus purchase bills, which the assessee failed to substantiate.

- Application of Law to Facts: The Tribunal upheld the Ld. CIT(A)'s decision to tax only the profit element, as the approach was consistent with established legal precedents.

- Treatment of Competing Arguments: The Revenue argued for the entire addition, but the Tribunal favored the Ld. CIT(A)'s approach of taxing only the profit element.

- Conclusions: The Tribunal found no error in the Ld. CIT(A)'s decision to delete the majority of the addition, sustaining only the profit element.

Issue 2: Validity of Notice and Jurisdiction

- Relevant Legal Framework and Precedents: Sections 148, 147, 143(3), and 127 of the Income Tax Act were central to this issue. The principle of jurisdiction and the requirement for a valid notice under Section 148 were emphasized.

- Court's Interpretation and Reasoning: The Tribunal found that the notice under Section 148 was issued by ITO-1(3), Raipur, who did not have valid jurisdiction. The assessment was framed by ITO-2(1), Raipur, without a valid transfer order under Section 127.

- Key Evidence and Findings: The Tribunal noted the lack of a valid jurisdictional transfer order and the absence of a proper notice by the jurisdictionally competent officer.

- Application of Law to Facts: The Tribunal applied the principle that any assessment made without proper jurisdiction is invalid. The lack of a valid transfer order and the issuance of notice by an officer without jurisdiction rendered the proceedings void.

- Treatment of Competing Arguments: The Tribunal emphasized the importance of jurisdiction and proper procedural compliance, rejecting the Revenue's position due to procedural lapses.

- Conclusions: The Tribunal concluded that the reassessment was invalid due to the lack of jurisdiction and proper procedural compliance, rendering all subsequent proceedings void.

SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "If a statute expressly confers a power or imposes a duty on a particular authority, then such power or duty must be exercised or performed by that authority itself."

- Core Principles Established: The importance of jurisdictional authority and the requirement for a valid notice under Section 148 were reinforced. The Tribunal reiterated that assessments made without proper jurisdiction are null and void.

- Final Determinations on Each Issue: The deletion of the majority of the addition by the Ld. CIT(A) was upheld, taxing only the profit element. The reassessment proceedings were declared void due to the lack of jurisdiction and proper procedural compliance.