Case Law Details
Gaurav Singhal Vs ITO (ITAT Delhi)
The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals)-22, New Delhi, for Assessment Year (AY) 2014-15. The assessment had treated the assessee’s claimed exempt long-term capital gains of ₹49,67,060 as income from other sources, made an addition of ₹2,48,353 as undisclosed income on account of undisclosed expenditure, and levied tax under Section 115BBE. Before the Tribunal, the assessee challenged the validity of the assessment on the ground that the Assessing Officer (AO) who completed the assessment lacked jurisdiction.
The assessee submitted that the return of income was filed with Income Tax Officer (ITO), Ward 40(1), which issued a notice under Section 143(2) within the prescribed time. Subsequently, notices were issued by ITO Ward 71(2), ITO Ward 71(5), and finally ITO Ward 17(4). The assessment under Section 143(3) was ultimately framed by ITO Ward 17(4). The assessee contended that the notice issued by ITO Ward 17(4) was beyond the prescribed time limit and that no order under Section 127 of the Income-tax Act had been passed transferring jurisdiction from ITO Ward 71(5) to ITO Ward 17(4). It was argued that a mere transfer of records could not be equated with a valid transfer of jurisdiction under Section 127. The assessee relied upon several Tribunal decisions holding that assessments made by a non-jurisdictional Assessing Officer without a valid transfer under Section 127 were liable to be quashed.
The Revenue argued that the assessee had not challenged jurisdiction within the period prescribed under Section 124(3) and contended that no order under Section 127 was required because there had been no transfer of the case to an Assessing Officer lacking jurisdiction.
The Tribunal examined the sequence of notices and transfers. It found that ITO Ward 71(2) had validly issued a notice under Section 143(2) within the prescribed time. However, the notice issued by ITO Ward 17(4), which ultimately completed the assessment, was beyond the statutory time limit. The Tribunal further noted that the Revenue was unable to produce any order under Section 127 transferring jurisdiction from ITO Ward 71(5) to ITO Ward 17(4), nor any material showing that ITO Ward 17(4) had assumed jurisdiction under Section 120 based on the assessee’s residence or place of business.
Referring to earlier Tribunal decisions in similar circumstances, the Tribunal held that, in the absence of a valid assumption of jurisdiction under Section 127, the assessment order passed by ITO Ward 17(4) was illegal and invalid. It distinguished the decisions relied upon by the Revenue, including Abhishek Jain, on the ground that the facts were different, and observed that the assessee’s case was supported by the Delhi High Court decision in S.K. Industries, where an assessment was held unsustainable because the Assessing Officer lacked jurisdiction after failing to issue a valid notice under Section 143(2) within the prescribed period.
Accordingly, the Tribunal held that the assessment framed under Section 143(3) by ITO Ward 17(4) was liable to be quashed for want of valid jurisdiction under Section 127(2). Since the appeal was allowed on the jurisdictional issue, the Tribunal did not examine the merits of the additions. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is preferred against the order of the ld. CIT(A)-22, New Delhi dated 03.07.2018 pertaining to A.Y 2014-15.
2. The grounds raised by the assessee read as under:
“1. The Id. CIT(A) has erred in law and facts while upholding the validity of assessment framed on the basis of notice issued u/s 143(2) by the Income tax officer Ward 71(2) and thereafter transfer of the file to Ward 17(4) without following the prescribed procedure of law
2. The ld. CIT(A) has erred in law and facts while upholding the income from capital gains to be income from undisclosed sources.
3. The ld. Assessing Officer has erred in law and facts while dismissing the ground that the provisions of section 68 were not applicable on the assessee when he was not maintaining any books of accounts.
4. The ld. CIT(A) has erred in law and facts while upholding the addition of Rs. 2,48,353/- on account of expenditure from undisclosed sources to be income u/s 68 of the Income Tax Act.
5. The Id. CIT(A) has erred in law and facts while upholding the assessment on the basis of some information provided by some other authority/office about some person or shares not having any direct connection with the assessee.
6. The ld. CIT(A) has erred in law and facts by upholding the assessment framed by the Id. Assessing Officer without providing an opportunity to confront the evidences or the person making the statement before the investigating agencies and officers.
7. The Id. CIT(A) has erred in law and facts, while upholding the assessment against the assessee merely on the basis of own whims and surmises without any concrete evidence against the assessee.
8. The ld. CIT(A) has erred in law and facts, while upholding the imposition of tax u/s 115BBE of the Income Tax Act.
9. The Assessee hereby requests to be allowed for any alteration, amendment or addition to any ground of appeal before or during the hearing proceedings of the appeal.”
3. Briefly stated, the facts of the case are that the assessee filed his return of income declaring his total taxable income of Rs.4,55,610/- on 21.02.2015. The assessee derived his income from salary, income from house property and income from other sources. Besides these, he had also claimed Rs. 49,67,060/- as exempt income u/s 10(38) on account of long term capital gains from sale of listed shares on which STT was paid. The AO treated the exempt income of Rs. 49,67,060/- from capital gains to be income from other sources and another amount of Rs. 2,48,353/-to be undisclosed income on account of undisclosed expenditure vide order u/s 143(3) of the Act dated 28-12-2016.Thus, assessment was framed at a total income of Rs. 56,71,020/- and tax was charged u/s 115BBE @ 30% on 28.11.2018.
4. Aggrieved the assessee went in appeal before the ld. CIT(A) and vehemently contended that no due opportunity was given to the assessee company to justify its claim. The assessee further contended that the Assessing Officer passed assessment order on the basis of notice u/s 143(2) issued by another Assessing Officer without complying and following the procedures prescribed under law.
5. After considering the facts and submissions, the ld. CIT(A) was not satisfied with the reply of the assessee and relying upon the decision of the Hon’ble Delhi High Court in the case of Abhishek Jain 94 com 355 [Delhi] dismissed the appeal.
6. The aggrieved assessee is now before us. At the very outset of the opening of the arguments, the ld counsel of the assessee challenged the assumption of jurisdiction as legally invalid as notice u/s 143(2) was issued by the Assessing Officer who had no jurisdiction on the assessee. It is the say of the ld AR that the ITR for AY 2014-15 was filed with Income Tax Officer, Ward 40(1) on 21-02-2015. The assessee received notice u/s 143(2) from Ward 40(1) on 18-09-2015. The assessee again received a notice u/s 143(2) from Ward 71(2) on 22-09-2015, from Ward 71(5) on 22-09-2016 and from Ward 17(4) on 22.07.2016.
7. The ld AR submitted that the assessment u/s 143(3) was framed by Ward 17(4) on 28-12-2016 on the basis of notice issued u/s 143(2) by ITO Ward 71(2) dated 22-09-2015. The ld AR vehemently argued that the notice issued u/s 143(2) by ITO Ward 17(4) was time barred and there was no order u/s 127 to dispense with the requirement for issue of fresh notice u/s 143(2). The ld AR relied on the following decisions:
i. Sunworld Infrastructure Pvt Ltd Vs ITO Ward 24(3), Delhi
ii. Rungta Irrigation Limited Vs ACIT, Central Circle-3(1), Kolkatta
iii. Abhishek Jain Vs Income Tax Officer Ward 55(1), New Delhi
iv. S. K. Industries Vs. ACIT circle 50(1), Delhi
8. It is the say of the ld. counsel for the assessee that there was no order u/s 127 of the Act transferring the case from ITO Ward 71(5) to ITO 17(4). Therefore, it is reiterated that the notice u/s 143(2) issued by the ITO Ward 17(4), who has passed assessment order, being time barred, the assessment framed u/s 143(3) of the Act was bad in law. It was also submitted that there was only transfer of record which cannot be equated with transfer of case u/s 127(2) and accordingly assessment proceedings cannot be taken as transferred.
9. The ld. counsel for the assessee relied upon the decision of the co-coordinate bench in the case of Sangeeta Wahi ITA No. 930/DEL/2023 order dated 20.11.2024 wherein under similar circumstances, it has been held that “transfer of case of the assessee from Ward No. 52(2) to 50(2), New Delhi since found to have without any support of issuance of order u/s 127 of the Act, the entire proceedings is found to have no basis”. The Ld AR also relied on the decision of co-ordinate bench in the case of Ashwani Kumar ITA N. 179/DEL/2024 order dated 05.07.2024. The ld AR also relied on the decision of SMC, Delhi in the case of Pushpa Gupta ITA no 3604/Del/2019 dated 18.04.2024 which held that where notices are issued from non-jurisdictional AO, the assessment made is liable to be quashed.
10. Per contra, the ld DR relied on the orders of the authorities below and vehemently submitted that the assessee has not made a case that he challenged the jurisdiction of the AO within time allowed u/s 124(3). It is the say of the ld DR that in facts of the present case there has been no transfer of case to an AO who is otherwise not having jurisdiction and therefore passing of order u/s 127 was not required in this case.
11. We have heard the rival submissions and have perused the relevant material on record. On careful consideration of the facts and submissions, we find that in the judgment of the Hon’ble High Court of Delhi in the case of Abhishek Jain [supra], relied upon by the ld. CIT(A)/ld DR, there can be two or even more Assessing Officers u/s 120 of the Act having jurisdiction over an assessee based on his business or residence or other details. However, the issue in the present appeal is whether an Assessing Officer can pass an assessment order in the case of an assessee on the basis of notice u/s 143(2) of the Act issued by another Assessing Officer, without assuming jurisdiction under section 127(2) of the Act.
12. We find from the factual matrix of the case that the Assessee filed his Return of income for AY 2014-15 at Rs. 4,55,610/- vide return dated 21-02-2015 with Income Tax Office, Ward 40(1), Delhi. Thereafter, the Income Tax Officer, Ward 40(1), Delhi issued and served notice u/s 143(2) dated 18-09-2015 to the assessee. Soon thereafter, notice u/s 143(2) dated 22.09.2015 was also received from Income Tax Officer, Ward 71(2), Delhi. Assessee further received notices u/s 142(1) dated 29.4.2016, 17.5.2016 and 10.6.2016 from ITO Ward 71(2) and the assessee attended assessment proceedings on various dates.
13. Subsequently vide transfer memo dated 28-06-2016, records were transferred by ITO Ward 71(2) to ITO Ward 71(5), Delhi. Again the ITO Ward 71(5), Delhi issued notice u/s 143(2) dated 29.6.2016 and dated 6.7.2016 and were replied by the assessee. Meanwhile, the Income Tax Officer, Ward 71(5) again transferred the records to ITO Ward 17(4) by a suo moto transfer memo. Thereafter, the Income Tax Officer, Ward 17(4), Delhi issued a notice u/s 143(2) dated 22.07.2016 and finally framed the assessment on 28.12.2016.
14. We find that the ITO 71(2) validly issued the notice u/s 143(2) within time period allowed. However, the notice u/s 143(2) issued by the ITO 17(4), who finally framed the assessment u/s 143(3), was not valid as the same was issued beyond the prescribed time period. In such a situation, we are called upon to adjudicate whether the ITO 17(4) can pass an assessment order on the strength of valid notice u/s 143(2) issued by ITO 71(2), without assuming a valid jurisdiction over the assessee u/s 127(2). The ld DR has not been able to controvert the submission of the assessee that no order u/s 127 was passed/issued for transferring the jurisdiction from ITO 71(5) to ITO Ward 17(4). The ld DR also could not place any material/evidence on record to show that the ITO 17(4) assumed jurisdiction u/s 120 on the basis of the residence or place of business of the assessee.
15. In similar facts, the ITAT decided in the case of Sangeeta Wahi (supra) and the case of Pushpa Gupta (supra) relied upon by the assessee, that without a valid assumption of jurisdiction u/s 127, the assessment order would be rendered illegal and invalid. The reliance on the case of Ashwani Kumar is misplaced as the same dealt with a situation where notice u/s 143(2) was not issued. The case of Abhishek Jain (supra) relied upon by the Id. DR are distinguishable from the facts of the instant case. In that case, the assessee had raised objections over the jurisdiction of the AO issuing notice i.e. ITO ward (1)(1), Noida and asked to transfer his case to Delhi, which is not in the present case. The case of the assessee is supported by the decision of Hon’ble Delhi High Court in the case of S K Industries (supra) where the court held that assessment order is unsustainable in law since it was passed without the AO having jurisdiction over the assessee issuing notice u/s 143(2) within prescribed time limit.
16. In view of the above, we are of the considered view that the ITO 17(4) passed the assessment order without validly assuming jurisdiction u/s 127(2) rendering the assessment made u/s 143(3) by ITO 17(4) liable to be quashed and the same is hereby quashed. We allow the ground no 1 of the appeal of the assessee on jurisdiction. Since we have decided the appeal on technical ground, we do not dwell into the merits of the case.
17. In the result, the appeal of the assessee in ITA No. 5786/DEL/2018 is allowed.
The order is pronounced in the open court on 29.01.2025.
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