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2025 (5) TMI 507 - AT - Income TaxValidity of assessment framed u/s 143(3) - notice u/s 143(2) was issued by ITO Ward 38(2) New Delhi and the assessment was framed by the ITO Ward 5(2)(3) Noida u/s 143(3) - contention that without the transfer order u/s 127 transferring the jurisdiction to Noida from New Delhi the assessment framed is invalid - HELD THAT - On perusal of notice u/s 143(3) of the Act the same was issued by the ITO Ward 38(2) Delhi the assessment was completed by the Income Tax Officer Ward 5(2)(3) Gautam Budh Nagar Noida. There is nothing on record to suggest that the assessment framed by the ITO Ward 5(2)(3) Gautam Budh Nagar Noida had obtained jurisdiction by virtue of an order u/s 127 of the Act transferring the jurisdiction from ITO Ward 38(2) Delhi. As relying on Saroj Sangwan 2024 (5) TMI 961 - ITAT DELHI and VIMAL GUPTA 2017 (10) TMI 1670 - DELHI HIGH COURT the assessment framed by the Assessing Officer u/s 143(3) by the ITO Ward 5(2)(3) Noida without the transfer order u/s 147 is bad in law and therefore the same is quashed. Since the assessment order is quashed on legal point the other grounds of the assessee are left open since the adjudication of the same renders only academic at this stage.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Assessment framed under section 143(3) by a non-jurisdictional Assessing Officer without transfer order under section 127 Relevant legal framework and precedents: Section 127 of the Act governs the transfer of cases between Assessing Officers. The validity of assessment proceedings depends on the proper assumption of jurisdiction by the Assessing Officer. Precedents relied upon include the coordinate bench decision in Saroj Sangwan Vs. ITO and the Hon'ble Jurisdictional High Court decision in Pr. CIT Vs. Vimal Gupta. Court's interpretation and reasoning: The Tribunal examined the facts that the notice under section 143(2) was issued by ITO, Ward 38(2), New Delhi, but the assessment under section 143(3) was completed by ITO, Ward 5(2)(3), Noida. There was no record of any transfer order under section 127 transferring jurisdiction from the New Delhi officer to the Noida officer. The Tribunal noted that the assessment notice under section 143(3) was issued by the New Delhi officer, but the assessment was completed by the Noida officer without jurisdiction. Key evidence and findings: The notice under section 143(3) was issued by ITO, Ward 38(2), New Delhi, but the assessment order was passed by ITO, Ward 5(2)(3), Noida. No transfer order under section 127 was on record. The Tribunal relied on the paper book and notices to establish this fact. Application of law to facts: The Tribunal applied the principle that an Assessing Officer can validly complete assessment proceedings only if jurisdiction is properly transferred under section 127. Without such transfer, the assessment framed is invalid. Treatment of competing arguments: The Revenue did not produce any valid transfer order or evidence to establish jurisdiction of the Noida officer. The assessee's argument that the assessment was bad in law for lack of transfer order was accepted. The Tribunal followed the precedent in Saroj Sangwan and the High Court decision in Vimal Gupta to hold the assessment invalid. Conclusion: The assessment framed by the Noida officer under section 143(3) without a valid transfer order under section 127 is held to be invalid and bad in law. Issue 2: Validity of reopening of assessment under sections 147/148 by non-jurisdictional Assessing Officer without independent recording of reasons and transfer of jurisdiction Relevant legal framework and precedents: Sections 147 and 148 govern reopening of assessments. Validity requires that the Assessing Officer who reopens must have jurisdiction and must record reasons independently. The Tribunal relied on the coordinate bench decision in Saroj Sangwan Vs. ITO, the ITAT Agra Bench decision in S.N. Bhargawa Vs. ITO, and the Hon'ble Gujarat High Court decision in Hynoup Food & Oil Industries Ltd. Vs. ACIT. Court's interpretation and reasoning: The Tribunal observed that the reopening notice under section 148 was issued by a non-jurisdictional officer who had not recorded reasons for reopening. The jurisdictional officer who completed the reassessment did not record fresh reasons. The Tribunal emphasized that the officer issuing the notice and recording reasons must be the same, and jurisdiction must be validly assumed. Key evidence and findings: The reopening notice was issued by ITO, Ward 69(1), New Delhi, but the reassessment was completed by ITO, Ward 4(1), Gurgaon. No transfer order under section 127 was on record. The jurisdictional officer did not record reasons for reopening. The Tribunal also considered correspondence indicating transfer of case but no valid assumption of jurisdiction. Application of law to facts: Applying the principle from Hynoup Food & Oil Industries Ltd. and S.N. Bhargawa, the Tribunal held that the reopening was invalid because the officer who recorded reasons and issued notice was not the same, and there was no valid transfer of jurisdiction. Treatment of competing arguments: The Revenue argued that the jurisdictional officer proceeded on transfer of case, but the Tribunal rejected this relying on precedents that mere transfer letters do not confer jurisdiction for reopening. The assessee's contention that reopening was illegal was accepted. Conclusion: The reopening of assessment under sections 147/148 by a non-jurisdictional officer without independent recording of reasons and valid transfer of jurisdiction is illegal and liable to be quashed. Issue 3: Consideration of cash flow statement and documentary evidence in sustaining addition under section 69 read with section 115BBE Relevant legal framework and precedents: Section 69 deals with unexplained cash credits, and section 115BBE imposes tax on such unexplained credits. The assessee contended that the cash flow statement furnished was ignored by the CIT(Appeals). Court's interpretation and reasoning: The Tribunal noted the assessee's submission that the cash flow statement was completely ignored by the CIT(Appeals), as referred to in paragraph 5.2 of the CIT(Appeals) order. However, since the assessment itself was quashed on jurisdictional grounds, the Tribunal did not adjudicate on the merits of the addition under section 69/115BBE. Key evidence and findings: The record showed the assessee had submitted a cash flow statement, but the CIT(Appeals) dismissed the appeal for lack of documentary evidence. The Tribunal did not examine the correctness of this finding due to the quashing of the assessment. Application of law to facts: Since the assessment was quashed on legal grounds, the Tribunal left the question of evidentiary sufficiency and addition under section 69/115BBE open. Treatment of competing arguments: The assessee argued for consideration of the cash flow statement; the Revenue relied on the CIT(Appeals) order sustaining the addition. The Tribunal did not resolve this dispute. Conclusion: The issue of addition under section 69 r.w.s. 115BBE and the treatment of cash flow statement remains undecided due to quashing of the assessment on jurisdictional grounds. 3. SIGNIFICANT HOLDINGS "The assumption of jurisdiction by the AO is illegal and bad in law. The AO at Faridabad had not validly assumed jurisdiction to initiate reassessment proceedings against the assessee. This view is further supported by judgment of Hon'ble Gujarat High Court in the case of Hynoup Food & Oil Industries Ltd. vs. ACIT (2008) 307 ITR 115 in which it is observed that AO recorded reasons for reassessment and AO issued a notice u/s 148 must be the same person. Successor AO cannot issue notice u/s 148 on the basis of reasons recorded by predecessor AO." "The ACIT, Circle 34(1), New Delhi has admittedly not recorded that he had reasons to believe that income chargeable to tax of the Assessee has escaped assessment. He continued reassessment proceedings initiated by the ITO, Ward 34(4) of the Act without independently recording reasons for reopening or issuing a fresh notice u/s 148 of the Act. There is no order u/s 127 of the Act transferring the jurisdiction of the case from ITO, Ward 34(4) to ACIT, Ward 34(1). Thus this order of reassessment passed by the ACIT u/s 34(1) of the Act is without jurisdiction and hence is bad in law." Core principles established include:
Final determinations:
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