Assessment order quashed due to invalid assumption of jurisdiction without proper transfer under section 127(1)

ITAT Raipur quashed assessment order under section 143(3) dated 27.12.2017 framed by ITO-4(2), Raipur due to invalid assumption of jurisdiction. The tribunal found no valid transfer order under section 127(1) was passed, rendering the assessing officer's jurisdiction invalid. Following precedent reasoning in similar cases, the assessment was quashed for want of proper jurisdictional authority. The assessee's appeal was allowed, with other grounds left open due to jurisdictional invalidity.

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Issues Involved:
1. Validity of the addition of Rs. 40,08,521 under Section 68 of the Income-tax Act, 1961.
2. Jurisdictional validity of the assessment order passed by ITO-4(2), Raipur.

Issue-wise Detailed Analysis:

1. Validity of the Addition of Rs. 40,08,521 under Section 68:

The assessee contested the addition of Rs. 40,08,521 made under Section 68 of the Income-tax Act, 1961, on the grounds that the assessee was not obligated to maintain books of account under Section 44AA, which is a prerequisite for making an addition under Section 68. The assessee argued that the amount was utilized for the purchase of property and included sums received from third parties and cash-in-hand. The Assessing Officer (A.O.) did not accept the explanation, citing the inability of the assessee and the creditors/donors to substantiate their financial capability to provide such amounts. Consequently, the A.O. treated the entire investment as unexplained income and added it to the assessee's income. The Commissioner of Income-Tax (Appeals) upheld this addition.

2. Jurisdictional Validity of the Assessment Order:

The primary contention was the jurisdictional validity of the assessment order passed by ITO-4(2), Raipur. The assessee argued that the notice under Section 143(2) was issued by ITO-2(1), Raipur, but the assessment was framed by ITO-4(2), Raipur without a proper transfer order under Section 127 of the Income-tax Act, 1961. The assessee claimed that the transfer of jurisdiction was not supported by any order from the competent authority, which is a mandatory requirement under Section 127. The Department contended that no transfer order was necessary as the jurisdiction remained within the same city.

Upon examination, it was found that the case was transferred from ITO-2(1) to ITO-4(2) without any formal order of transfer as required by Section 127. The Tribunal referred to the judgments of the Hon'ble Supreme Court and various High Courts, which mandate that a transfer order is required even for intra-city transfers, and the absence of such an order renders the assessment invalid. The Tribunal concluded that the assessment framed by ITO-4(2) was invalid due to the lack of a proper jurisdictional transfer order.

Conclusion:

The Tribunal quashed the assessment order passed by ITO-4(2), Raipur, due to the invalid assumption of jurisdiction. Consequently, the Tribunal did not address the other grounds of appeal related to the addition under Section 68, as the assessment itself was invalidated. The appeal of the assessee was allowed based on the jurisdictional issue.

Order Pronouncement:

The order was pronounced in open court on the 24th day of June, 2024.

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