Case Law Details
Kuldip Kumar Goel Vs ACIT (ITAT Delhi)
The ITAT Delhi partly allowed the assessee’s appeal in a reassessment case relating to sale of immovable property where the AO had disallowed 50% of the claimed cost of improvement (₹44.05 lakh) while computing capital gains. The Tribunal upheld the validity of reopening u/s 147, noting that fresh tangible material such as AIR data regarding property sale and non-response to notices justified formation of “reason to believe” and reopening was not a mere change of opinion. Jurisdictional and procedural objections were also rejected.
However, on merits, the Tribunal found that both the assessment order and the CIT(A)’s decision were ex-parte and the CIT(A) had not passed a proper speaking order as required u/s 250(6). Since the issue of allowability of improvement cost was not properly adjudicated, the matter was restored to the AO for fresh decision after granting opportunity to the assessee to furnish documentary evidence within 60 days. Accordingly, the appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal is filed by the assessee /appellant against the order of Learned Commissioner of Income Tax (Appeals)/ NFAC, Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] dated 19.03.2025 for the A.Y. 2012-13 wherein the appeal was dismissed and the addition made by the Assessing Officer (‘AO’) was confirmed.
2. The facts in brief as culled out from the Authorities below are that the Kuldip Kumar Goel as the appellant is an individual and has filed original Income Tax Return for A.Y. 2012-13 on 26.07.2013 declaring income of Rs. 30,85,160/-. The assessment under section 143(3) of the Act was completed on 17.03.2015 by accepting the return income. Subsequently, the case was reopened for the reason that appellant has sold immovable property for consideration of Rs. 1,91,00,000/- during financial year 2011-12. The assessment u/s 144 r.w.s. 147 of the Act was completed after making addition of Rs. 44,05,518/-. The said addition was made on account of disallowance of cost of improvement claimed by the appellant.
2.1 Aggrieved by the order passed u/s 144 of the I.T. Act the appellant filed an appeal before the Ld. CIT(A). It is also found mentioned at page no. 6 of the impugned order that the appellant had filed a Writ Petition No. 184/2019 challenging the proceedings initiated u/s 147/148 of the Act, and the consequent impugned assessment order and impugned Demand notice. The Hon’ble Delhi High Court vide its dated 09.01.2020 disposed of the writ of the appellant and directed that the Ld. Commissioner of Income Tax (Appeals) should deal with all the grounds raised by the petitioner (including the ground of jurisdiction). Accordingly, the appellant filed the appeal before the Ld. CIT(A) raising all those grounds which were raised before the Hon’ble High Court including the ground on merit with respect to the addition of Rs. 44,05,518/-. Vide detailed order and elaborate discussion in para no. 6 of the order, the Ld. CIT(A) has dismissed the all ground raised by the assessee including the ground pertaining to the jurisdictional exercise u/s 147 pertaining to the reassessment.
3. Aggrieved by the impugned order, the assessee is in appeal before the Tribunal and raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the National Faceless Assessment Centre (“NaFAC”), vide the Impugned Order dated 19.03.2025, has legally erred in upholding the proceedings u/s 147/148 of the Income-tax Act, 1961 (the “Act’).
2. On the facts and in the circumstances of the case, the NaFAC has, legally erred in not cancelling, quashing or annulling the impugned assessment order inspite of noncompliance of the decision of the Hon’ble Supreme Court in the case of G. K. N. Driveshafts [2002] 125 Taxman 963/[2003] 259 ITR 19 (SC)
4. On the facts and in the circumstances of the case, the NaFAC has erred in upholding the reassessment proceedings without appreciating that the very assumption of jurisdiction by the Ld. AO was based on an incorrect reason to believe that the Appellant is a non-PAN case.
5. On the facts and in the circumstances of the case, the NaFAC has erred in upholding the reassessment proceedings as the entire proceedings are without jurisdiction and non est since no notice u/s 148 of the Act was served to the Appellant within a period of six years from the end of the AY as provided u/s 149(1) of the Act.
6. On the facts and in the circumstances of the case, the NaFAC erred in upholding the reassessment proceeding initiated beyond a period of four years from the end of the relevant AY, given the absence of a categorical finding in the reasons recorded that the appellant has failed to fully and truly disclose all material facts.
7. On the facts and in the circumstances of the case, the impugned order dated 19.03.2025 passed by the NaFAC, which upholds the reassessment proceedings, is untenable in law and plainly wrong, as the reassessment proceedings initiated by the Ld. AO are a mere change of opinion, since the very same transaction of sale of immovable property and expenses incurred towards cost of construction/improvement were examined during the original assessment proceedings framed u/s 143(3) of the Act.
8. On the facts and in the circumstances of the case, the NaFAC has, legally erred in passing the impugned Order, inspite of the fact that the said order was passed in violation of principles of natural justice.
8. On the facts and in the circumstances of the case, the NFAC erred in upholding the assessment order, whereby a disallowance of 50% of the expenses incurred on the cost of improving the immovable property was made, and thereby an addition of Rs. 44,05,518 was made to the income of the Appellant.”
4. At the time of hearing, non-appeared for the assessee and nothing was argued in support of ground raised in the appeal.
5. Ld. DR for the revenue submitted that the Ld. CIT(A) has decided all the grounds with regard to reopening of assessment by detailed discussion but the ground no. 9 on merit regarding the addition made by the AO seems to be disposed without passing a speaking order. It is further, submitted that the assessment order is also ex parte, hence, for the limited purpose of deciding the issue of addition Rs. 44,05,518/- for improvement cost may be restored to the Ld. AO for deciding afresh.
6. We have considered the submission and examined the record. The ground raised by the assessee before the Ld. CIT(A) in pursuance of disposal of appeal by Hon’ble High Court has been decided in para No. 6 including ground no. 9 on merit and the relevant portion of the decision of Ld. CIT(A) extracted as below:
“6. Decision:
I have carefully considered/perused appellate documents, submissions filed, and the order passed by the Ld. JAO.
For the appellate year under consideration, ROI was filed at Rs.30,85,160 and the scrutiny assessment completed at returned income. Reopening notice was issued after recording reasons and obtaining permission of the competent authority. ROI in response to notice was not filed. Ld. JAO gave following finding of fact in the case.
‘2. Submission of the assessee have been considered but not found satisfactory as the AR of assessee did not furnish any details as per the query raised vide notice u/s 142(1) of the Income Tax Act, 1961 dated 10/12/2019. AR of the assessee company not even filed detailed computation of Long Term Capital Gain. AR of the assessee also failed to furnish documentary evidence in respect of ‘Cost of Improvement” amounting to Rs. 88,11,036/- claimed during the year, assessee not even furnish the basis details of year/s when such cost of improvement was incurred by him.
3. Till date the assessee has not filed its return of income for the year under consideration u/s 148 of the Income Tax Act. In view of above, the undersigned is left with no option to complete the assessment on the basis of material available on record. Hence, 50% of such cost of improvement claimed by the assessee is hereby disallowed and added to the total income of the assessee as the assessee has failed to produce any documentary evidence in this regard. Total addition made on this account is Rs. 44,05,518/-. Penalty proceedings U/s 271(1)(c) of the Income Tax Act,1961 for furnishing inaccurate particulars of income within the meaning of explanation1 to the sub-section (1) of the section 271(1)(c) of the Income Tax Act, 1961 are initiated.
Addition: Rs. 44,05,518/-
The issue on merits at the heart of the matter is allowability of the cost of improvement for which no evidence has been furnished till date.
With above background the grounds of appeal are adjudicated as follows Ground of Appeal One, Two, Ten and Eleven are general in nature and not adjudicated thus.
Ground of Appeal Three, Four, Five, Six and Seven are regarding the assertion that assessment order is illegal as concluded assessment under section 143(3) of ITA 1961 has been reopened and that there was no omission on part of appellant and that it was change of opinion and that AO failed to discharge its burden.
It is seen from the perusal of the assessment order that the Ld. JAO has recorded the reasons for reopening, taken approval from the competent authority and served the notice on appellant. No evidence has been bought on record of any infarction of law or laid procedure for causing interference in action of Ld. JAO.
It has been averred by Appellant that ‘reason to believe’ mandate has not been fulfilled while processing the case for issuance of notice under section 148. It has been contended by appellant that qua initiation of reassessment proceedings, satisfaction drawn by Ld. JAO was inadequate as condition precedent was not satisfied. Appellant averred that the link between tangible material and formation of belief was missing.
If there is relevant material based on which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. The existence of a valid ‘reason to believe’ is a sine qua non to exercise the jurisdiction under Section 147 of the Act.
The expression ‘reason to believe’ requires following four elements viz.
a. tangible material or materials to establish that income has escaped assessment
b. nexus between such material and the belief of escapement of income from assessment as envisaged under Section 147
c. application of mind by the Assessing Officer to such material
d. an inference, based on reason, drawn tentatively by the officer that income has escaped assessment.
After the original assessment, the cross-verification of the data from the SRO was undertaken. The assessee’s repeated non-response to 133(6) letter triggered suspicion that income from capital gains or details about the cost-of-improvement might have been underreported or wrongly claimed. This is fresh tangible information, and hence not the “change of opinion” as claimed by the appellant. Even if the appellant made some general references to improvement cost earlier, the it never produced specific documentary evidence (invoices, contractor bills, payment proofs) in either the original or reopened proceedings. It can be large percentage of the property’s sale amount has been offset by unverified improvement costs—an issue that justifies reopening.
Application of mind by the AO to the new and tangible material must be discerned from the reasons recorded in each case and from the perusal of the reasons recorded for reopening the assessment. In the present case, there is no doubt in my mind that tangible material in form of information as regards to ‘unreasonable cost of improvement claim’ of appellant was available to LJAO. As per reasons recorded by Ld. JAO, the large amount of cost of improvement cost sowed seeds of suspicion in mind of tax authorities and thus assessment for current year was rightly reopened.
As regards to proposition that for reopening beyond four years there must be an omission or failure on part of assessee to disclose fully and truly all material facts necessary for assessment, I hold that appellant failed in revealing all facts before Ld. JAO.
To quote –
“Thus, the question of full and true disclosure of primary or material facts is a pure question of fact, to be determined on the facts and circumstances of each case. No general principle can be laid down. It was observed by the Apex Court, in various cases that there should be some “tangible material” coming into the possession of the Assessing Officer in such cases to enable him to resort to section 147 of the Act. Despite being a case of full and true disclosure, tangible material coming to the possession of the Assessing Officer after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed earlier, by the assessing authority; he can with justification change it, but that would not be a case of a “mere change of opinion” unguided by new facts or change in the legal position. It will be a case of the assessing authority having “reason to believe”, notwithstanding that full and true particulars were furnished by the assessee which were examined, or presumed to be examined, by him.”
Quote from Para 2.11 of decision rendered by Hon’ble Mumbai ITAT in case of Crescent Construction Co. vs ACIT 82 taxmann.com 468 dated 26/05/2017.
It is seen that during original proceedings, the AIR data showing sale for Rs.1.91 crore was not fully reconciled with the alleged cost-of-improvement claim, which was exceptionally high Rs.88 Lacs and above. Even if documents were partially furnished earlier, the appellant had not proven that these specific improvement expenses were properly disclosed and verified.
As seen from the above discussion higher judicial forums have repeatedly emphasizing that the reasons must establish escapement of income that emanates from incomplete disclosure. Here, the reasons recorded noted non-response to section 133(6) queries about a high-value property sale. In large-value transactions, partial/ambiguous records are effectively a failure to fully and truly disclose relevant facts. Reliance on “some earlier ledger” or “some annexures” is insufficient if the alleged improvement claim was never properly substantiated.
Thus, the information regarding the large claim of cost of improvement, constitutes new and tangible material for initiating reassessment proceedings. The application of mind by Ld. JAO to new and tangible material must be discerned from reasons recorded in each case and from perusal of reasons recorded for reopening the assessment in the present case, I am of the considered opinion that all the aforesaid conditions are fulfilled and Ld. JAO has rightly initiated the reassessment proceedings under section 147 of the ITA. I therefore hold that the action of Ld. JAO forming belief for reopening was based on correct understanding of law and all ingredients were present for such action. Thus, ground of appeal is dismissed.
Ground of Appeal Eightis regarding jurisdictional objections not being addressed by the AO
The jurisdiction of the IT Authorities and the AO is derived from Chapter XIII titled Income Tax Authorities. The section concerned in case of the appellant are reproduced as below for a ready reference-
60[Jurisdiction of Assessing Officers.
61 124. (1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction—
(a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and
(b) in respect of any other person residing within the area.
(2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the 62[Principal Director General or] Director General or the 62[Principal Chief Commissioner or] Chief Commissioner or the 62[Principal Commissioner or] Commissioner; or where the question is one relating to areas within the jurisdiction of different 62a[Principal Directors General or] Directors General or 62a[Principal Chief Commissioners or] Chief Commissioners or 62a [Principal Commissioners or] Commissioners, by the 62a[Principal Directors General or] Directors General or 62a[Principal Chief Commissioners or] Chief Commissioners or 62a [Principal Commissioners or] Commissioners concerned or, if they are not in agreement, by the Board or by such 62a[Principal Director General or] Director General or 62a[Principal Chief Commissioner or] Chief Commissioner or 62a[Principal Commissioner or] Commissioner as the Board may, by notification in the Official Gazette, specify.
(3) No person shall be entitled to call in question the jurisdiction of an Assessing Officer—
(a) where he has made a return 63[under sub-section (1) of section 115WD or] under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or 63 [sub-section (2) of section 115WE or] sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier;
(b) where he has made no such return, after the expiry of the time allowed by the notice under 64[sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144] to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier;
65[(c) where an action has been taken under section 132 or section 132A, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 153A or subsection (2) of section 153C or after the completion of the assessment, whichever is earlier.]
(4) Subject to the provisions of sub-section (3), where an assessee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made.
(5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or subsection (2) of section 120.]
60. Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 14-1988. Prior to its substitution, section 124 was amended by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
61. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
62. Inserted by the Finance (No. 2) Act, 2014, w.r.e.f. 1-6-2013.
62a. Inserted by the Finance (No. 2) Act, 2014, w.r.e.f. 1-6-2013.
63. Inserted by the Finance Act, 2005, w.e.f. 1-4-2006.
64. Substituted for “sub-section (1) of section 142 or under section 148 for the making of the return or by the notice under the first proviso to section 144” by the Finance Act, 2005, w.e.f. 1-4-2006.
65. Inserted by the Finance Act, 2016, w.e.f. 1-6-2016.
It can be seen from the perusal of the section that as per provisions of section 124(1) and 124(5) of ITA 1961, both the office of the ACIT and the ITO can have jurisdiction over the appellant. It would not be necessary to issue notice by other office when the notice has already been issued by another office.
Hon’ble Jurisdictional HC of Allahabad in the case of CR Foods (India) (P.) Ltd. vs ITO Agra vide [2012] 26 taxmann.com 241 (All.) held that in matter of ‘Concurrent jurisdiction – Where Two or more Assessing Officers have territorial jurisdiction in respect of same income, they exercise concurrent jurisdiction in matter of issuing notice to assessee also’
Para 27 of the judgment is reproduced as below for a ready reference-
‘27. The A.O. having jurisdiction at the assessee’s principal place of business, would have the power to call for return of the assessee’s total income, which includes income of all the branches of the business. He may call for the records pertaining to any branch office even if independent enquiries have been made and the accounts have been examined by the A.O. having jurisdiction at the branch office. It is open to the A.O. having jurisdiction at the branch office to frame an estimate of the profits of that branch and to send that estimate to the A.O. at the tax payer’s principal place of business. The effect of sub-section (1) and (5) of Section 124, read together is that where two or more A.O. have territorial jurisdiction in respect of same income, they exercise concurrent jurisdiction in the matter of issuing notice to the assessee and where notices have been issued by any one officer, it is unnecessary for the other office to issue the same notice again.’ (emphasis added)
As regarding the transfer of the case provision of section 127 are squarely applicable.
Section 127 is reproduced as below for a ready reference
32[Power to transfer cases.33
34 127. (1) The 35[Principal Director General or] Director General or
35[Principal Chief Commissioner or] Chief Commissioner or 35[Principal Commissioner or] Commissioner may 36, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case36 from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
(2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same 35[Principal Director General or] Director General or 35[Principal Chief Commissioner or] Chief Commissioner or 35[Principal Commissioner or] Commissioner, —
(a) where the 35[Principal Directors General or] Directors General or 35[Principal Chief Commissioners or] Chief Commissioners or 35[Principal Commissioners or] Commissioners to whom such Assessing Officers are subordinate are in agreement, then the 35[Principal Director General or] Director General or 35 [Principal Chief Commissioner or] Chief Commissioner or 35[Principal Commissioner or] Commissioner from whose jurisdiction the case is to be transferred may36, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order;
(b) where the 35[Principal Directors General or] Directors General or 35[Principal Chief Commissioners or] Chief Commissioners or 35[Principal Commissioners or] Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such 35[Principal Director General or] Director General or 35[Principal Chief Commissioner or] Chief Commissioner or 35[Principal Commissioner or] Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.
(3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.
(4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage 37 of the proceedings, and shall not render necessary the re-issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.
Explanation. —In section 120 and this section, the word “case” 37, in relation to any person whose name is specified in any order or direction issued thereunder, means all proceedings under this Act37 in respect of any year which may be pending on the date of such order or direction or which may have been completed on or before such date, and includes also all proceedings under this Act which may be commenced after the date of such order or direction in respect of any year.]
32. Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 14-1988. Prior to its substitution, section 127 was substituted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and amended by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-1975.
33. See also Circular No. 770, dated 16-9-1998 (Instructions issued in 1998 apply only for specified period). For details, see Taxmann’s Master Guide to Income-tax Act.
34. For relevant case laws, see Taxmann’s Master Guide to Income-tax Act.
35. Inserted by the Finance (No. 2) Act, 2014, w.r.e.f. 1-6-2013.
36. For the meaning of the terms “may” and “any case”, seeTaxmann’s Direct Taxes Manual, Vol. 3.
37. For the meaning of terms/expressions “stage”, “case” and “all proceedings under this Act”, see Taxmann’s Direct Taxes Manual, Vol. 3. As per section 129(3), transfer within same city, locality or place do not require opportunity to be given to appellant. It is administrative decision wherein transfer can be made any stage of proceedings and shall not require reissue of any notices already issued. In latest judgment Hon’ble Delhi HC in [2023] 150 com 459 (Delhi) in the case of Sanjay Gandhi Memorial Trust v. Commissioner of Income-tax. (Exemption) W.P.(C) NO. 3535 OF 2021 & CM APPLICATION NO. 10693 OF 2021 & OTHS in judgment dated 26/05/2023 held as under –
“44. The Constitution Bench of the Supreme Court in KashiramAggarwalla vs. Union of India and Others, (1965) 1 SCR 671 has authoritatively interpreted as well as outlined the scope and ambit of Section 127 of the Act. The Supreme Court has held that a transfer order under Section 127 of the Act is a mere administrative order invariably made on ground of administrative convenience. Neither is there any requirement of recording of reasons under Section 127 nor any requirement that a reasonable opportunity is to be given to the assessee, when the transfer is within the same city – like in the present batch of writ petitions. The relevant portion of the said judgment is reproduced as under:
“6. There is another consideration which is also relevant. Section 124 of the Act deals with the jurisdiction of Income Tax Officers. Section 124(3) provides that within the limits of the area assigned to him the Income Tax Officer shall have jurisdiction— (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area.
This provision clearly indicates that where a transfer is made under the proviso to Section 127(1) from one Income Tax Officer to another in the same locality, it merely means that instead of one Income Tax Officer who is competent to deal with the case, another Income Tax Officer has been asked to deal with it. Such an order is purely in the nature of an administrative order passed for considerations of convenience of the department and no possible prejudice can be involved in such a transfer. Where, as in the present proceedings, assessment cases pending against the appellant before an officer in one ward are transferred to an officer in another ward in the same place, there is hardly any occasion for mentioning any reasons as such, because such transfers are invariably made on grounds of administrative convenience, and that shows that on principle in such cases neither can the notice be said to be necessary, nor would it be necessary to record any reasons for the transfer. The provisions contained in Section 124(3) of the Act deal with the same topic which was the subject-matter of Section 64(1) and (2) of the earlier Income Tax Act, 1922 (11 of 1922). There is, however this difference between these two provisions that whereas Section 124 fixes jurisdiction, territorial or otherwise, of the Income Tax Officers, Section 64 fixed the place where an assessee was to be assessed. xxx xxxxxxxxx
9. It is in the light of these considerations that we have to construe the proviso to Section 127(1). As we have already indicated, the construction for which Mr Jain contends is a reasonably possible construction. In fact, if the words used in the proviso are literally read, Mr Jain would be justified in contending that the requirement that reasons must be recorded applies even to cases falling under it. On the other hand, if the obvious object of the proviso is taken into account and the relevant previous background is borne in mind, it would also seem reasonable to hold that in regard to cases falling under the proviso, an opportunity need not be given to the assessee, and the consequential need to record reasons for the transfer is also unnecessary, and this view is plainly consistent with the scheme of the provision and the true intent of its requirements. We would according hold that the impugned orders cannot be challenged on the ground that the Board has not recorded reasons in directing the transfer of the cases pending against the assessee from one Income Tax Officer to another in the same locality.” (emphasis supplied)
45. Almost all the High Courts have held that transfer under Section 127 of the Act for the purpose of coordinated investigation is a sufficient reason for passing of such an administrative order. Consequently, it is settled law that a transfer order under Section 127 of the Act does not affect any fundamental or legal right of an assessee and the Courts ordinarily refrain from interfering with exercise of such power.”
The judgment wherein it had held based on guidance given by Hon’ble SC’s decision in Kashiram Agrawalla (supra), I hold that there was no requirement for communication of transfer to the appellant and it does not vitiate assessment proceedings in any manner.
Ground of Appeal Nine is on merits of the addition and fact that the issue was examined in original assessment
It is seen that even during the reassessment stage, the appellant had not provided vouchers, bills, or third-party confirmations to show that these improvement outlays were incurred wholly and exclusively to enhance the property’s value, thereby justifying deduction from sale amount. Due to non-compliance and the absence of credible supporting evidence, the Ld.JAO invoked best judgment (u/s 144), disallowing 50% of the claimed Rs.88,11,036/-. The onus was solely on the assessee to substantiate high-value improvement expenses. Under the provisions of the ITA 1961, the burden of proof lies upon the appellant to furnish documentation to prove any deduction or cost claims. In the face of repeated non substantiation, the Ld. JAO was justified in disallowing the amount.
It may be noted that the assessment under section 143(3) of ITA 1961, was completed on 17/03/2015, accepting the returned income. Subsequently, it was discovered from the NonPAN AIR data that the appellant had sold immovable property for Rs.1,91,00,000 in FY 2011–12. The Ld. JAO noted that inquiries under section 133(6) went unanswered. A notice u/s.148 of ITA 1961 was issued on 27/03/2019 which well within six years from the end of AY 2012–13) after receiving prior approval of the competent authority ie. PCIT. The reasons recorded was in regard to the sale of property for Rs.1.91 crore, that of the escaped capital gains, and the lack of a response to inquiries. The appellant never filed a fresh return pursuant to section 148, nor did it produce documentary evidence for the claimed “cost of improvement” of Rs.88,11,036 despite repeated requests. Above discussion and adjudication shows that a very large amount of claim of deduction as cost of improvement was not substantiated and would have never come to light unless, Ld. JAO issued notices based on collected information. The ground of appeal is dismissed. Appeal for AY 2012-13 is dismissed.”
7. We have also examined the assessment order where it is clearly stated that the assessee had not furnished any detail in pursuance to query raised u/s 142(1) of the Act. The Ld. AR of the assessee company not even filed detailed computation of long term capital gain. It is further observed by Ld. AO that the assessee also failed to furnish documentary evidence in respect of ‘Cost of Improvement’ amounting to Rs. 88,11,036/- claimed during the year. Hence, the addition was made to the extent of 50% of such cost of improvement claimed by the assessee and total addition of Rs. 44,05,518/- was made and the penalty proceeding u/s 271(1)(c) of the Act were also initiated.
8. We have also perused the finding of the ld. CIT(A) regarding ground No. 9 on merit. We have noticed that the said finding on merit is not inconsonance with the provision of Section 250(6) of the Act and the dismissal of ground no. 9 is not by way of speaking order. In these facts and circumstances, we are of the considered opinion that end of justice required that the assessment order having been passed ex parte with respect to the addition made therein and the Ld. CIT(A) has also not decided the ground on merit with regard to the addition so made by the AO, by way of speaking order, hence, for that limited purpose, the matter is restored to the file of the ld. AO for deciding the question of addition made in the assessment order afresh by affording opportunity of hearing to the assessee. The assessee is directed to file the detail/documents within the period of 60 days from this order. The appeal of the assessee is disposed of accordingly in above terms.
9. In the result, the appeal of the assessee is partly allowed in above terms for statistical purposes.
Order pronounced in open Court on 06 February, 2025
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