2022 (12) TMI 1354 - AT - Income Tax

Tribunal dismisses jurisdiction challenge, allows appeal on valuation dispute.

Mr. Imran Khan Versus ITO, Ward-3 (3), Jaipur

The Tribunal dismissed the appeal ground challenging the validity of the transfer of jurisdiction under Section 127, citing that a formal order is not ... Transfer of assessment record u/s 127 - transfer orders in the same city - HELD THAT:- ITO has the power to transfer within Ward as per the territorial jurisdiction, the above said transfer of record has been within the same Ward where the territorial jurisdiction where the case lies with ITO, Ward-3(3), Jaipur and transfer is done to ITO, Ward -3(3).The Citation where the ld. AR for the assessee submitted before us is not relevant to his case. We arrived at the conclusion that as per sec127(3) and the decision in the case Kashiram Aggarwalla V Union of India and Others [1964 (10) TMI 8 - SUPREME COURT]. Where the transfer of jurisdiction only involves Assessing Officer situated in the same city [Section 127(3)] Section 127(3) makes it clear that no opportunity is required to be given in respect of transfer of jurisdiction within the same city. It was held that the mandatory requirement of recording reasons was not to be applicable, as the transfer orders were in the same city and only wards were changed but the court did observe about the nature of transfer orders under section 127. Hence, ground No. 1 of the assessee appeal is dismissed. Nature of property - Unexplained investment OR residential property - Assessee had duly submitted the valuation report of the registered valuer but Assessing Officer did not accepted the same nor referred the case to valuation Officer, which is bad in law - whether the property is commercial property or residential property? - HELD THAT:- We observed that the Registrar Department has made valuation for the property considering it be a commercial property, where as the same was residential property from the documents furnished. We observed that the assessee has sold the above property on 05.02.2015 where the valuation of same half portion of the property was made by the Registration Department at Rs. 17,17,516/-. Further perusing the calculation sheet of DLC value, the Assessing Officer failed to note that the valuation was made by the Registrar Department considering it to be a residential property AO and CIT (A ) erred in not appreciating the facts that Valuation Report of sub registration was submitted and perused by the lower Authorities . The property was sold before the Assessment Year. On perusing the Sale deed which is mentioned of this order clearly mentioned has residential property. Ground No. 2 of the appeal of the assessee is allowed on merit. Issues Involved:1. Validity of the transfer of jurisdiction under Section 127.2. Addition of Rs. 7,97,015/- on account of unexplained investment.Detailed Analysis:Issue 1: Validity of the Transfer of Jurisdiction under Section 127The assessee contended that the Income Tax Officer (ITO), Ward-3(3), Jaipur, assumed the role of the Assessing Officer (AO) without a valid transfer order under Section 127 of the Income Tax Act, 1961. The case was initially handled by ITO, Ward-3(4), Jaipur, and later transferred to ITO, Ward-3(3), Jaipur, via a transfer memo dated 18.05.2016 without a formal transfer order under Section 127.The Tribunal observed that Section 127(3) of the Act allows for the transfer of jurisdiction within the same city without the necessity of recording reasons or giving the assessee an opportunity to be heard. Citing the Supreme Court decision in Kashiram Aggarwalla V Union of India and Others (1965) 56 ITR 14 (SC), the Tribunal concluded that the transfer of jurisdiction within the same city does not require a formal order under Section 127. Therefore, the Tribunal dismissed the assessee's ground on this issue.Issue 2: Addition of Rs. 7,97,015/- on Account of Unexplained InvestmentThe assessee purchased a property jointly with another individual for Rs. 28,00,000/- during the financial year 2013-14. The Stamp Duty Authority valued the property at Rs. 43,94,029/-, and the AO added half of the difference amounting to Rs. 7,97,015/- to the assessee's total income as unexplained investment under Section 56(2)(vii)(b) of the Act.The assessee argued that the property was residential, but the Stamp Duty Authority valued it as commercial. The assessee provided a valuation report from a registered valuer and other supporting documents, including an affidavit and a calculation sheet from the registration department, which indicated the property was residential. The AO did not refer the matter to the Department Valuation Officer (DVO) despite the assessee's claim that the stamp duty valuation exceeded the fair market value.The Tribunal noted that the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] failed to consider the evidence provided by the assessee, including the sale deed indicating the property was residential. The Tribunal cited the decision in Income Tax Officer vs. M/s Aditya Narain Verma (HUF) ITA No. 4166/Del/2013, which held that the AO should refer the valuation to a DVO if the assessee claims the stamp duty valuation exceeds the fair market value.The Tribunal concluded that the AO and CIT(A) erred in not referring the valuation to a DVO and not considering the assessee's evidence. Therefore, the addition of Rs. 7,97,015/- was not justified, and the Tribunal allowed the assessee's appeal on this ground.ConclusionThe appeal was partly allowed. The Tribunal dismissed the ground regarding the validity of the transfer of jurisdiction under Section 127 but allowed the ground concerning the addition of Rs. 7,97,015/- on account of unexplained investment. The Tribunal emphasized the necessity for the AO to refer valuation disputes to a DVO and consider all relevant evidence provided by the assessee.