ACIT Vs Ramasubbu Minnalkodi (ITAT Chennai)
Assessment Quashed—Notice Issued by Non-Jurisdictional AO After Transfer u/s 127 Held Invalid- Notice by Old AO after Transfer Invalid- Jurisdictional Error Fatal- Entire Assessment Held Void
Assessee, proprietor of M/s Maries Blue Metals, engaged in quarrying & crushing business, was subjected to a survey u/s 133A on 26.02.2020. Certain documents were impounded, & statements were recorded. During survey, a customer admitted to purchase at under-invoiced value, & the Assessee in her statement admitted turnover of ₹ 6.64 crore & agreed to offer 8% = ₹ 53.18 lakh as business income. She also accepted ₹ 57.59 lakh as unexplained unsecured loans. However, in her return filed on 24.12.2020, she declared total income of only ₹ 20.99 lakh (business ₹ 20.64 lakh + other ₹ 35k).
AO treated the shortfall of ₹ 87.78 lakh as suppression. AO completed assessment u/s 143(3) on 29.09.2022, determining income at ₹ 1.25 crore, making two additions- ₹ 32.53 lakh as undisclosed business income (based on survey turnover), & ₹ 72.20 lakh as unexplained loans u/s 68 r.w.s 115BBE.
CIT(A) deleted both additions (25.03.2025). Revenue appealed to ITAT.
Assessee’s Legal Objection under Rule 27
Assessee raised a jurisdictional challenge:
- After the survey, jurisdiction was transferred from ITO Ward-4, Tirunelveli to Central Circle-2, Madurai vide PCIT-1, Madurai Order u/s 127 dated 09.12.2020.
- Nevertheless, the notice u/s 143(2) initiating scrutiny was issued later (29.06.2021) by the old ITO Ward-4, who no longer had jurisdiction.
- Hence, the entire assessment was void ab initio.
Tribunal’s Findings
