2025 (11) TMI 996 - AT - Income Tax

Transfer under s.127 valid; AO assumed jurisdiction without re-issuing s.143(2); s.147 reopening sustained; appeal dismissed

ITAT held transfer under s.127 within the same city valid and succeeding AO validly assumed jurisdiction without re-issuing s.143(2) notice. Reopening ... Transfer of Case u/s 127 from one AO to another within Same City - Validity of reopening of assessment - ITO, Ward-3(3)(8) assemption of jurisdiction to frame assessment u/s.147 - HELD THAT:- Assessee fairly admitted before us that both the AOs from whom the case was transferred and to whom the case was transferred, were located in the same city. Therefore, there was no requirement in law of providing the assessee any opportunity of hearing before such transfer took place. Section 127 of the Act as noted above clearly states that succeeding AO is not required to re-issue any notice to the assessee. The argument of assessee therefore that succeeding AO in the present case i.e. ITO, Ward-3(3)(8) could have validly assumed jurisdiction to assess the case of the assessee only on re-issuing notice u/s. 143(2) of the Act which had already been issued by the earlier AO i.e. ITO, Ward 3(3)(2), is clearly against the provisions of law. There is no merit in the contention of assessee that succeeding AO in the present case i.e. ITO, Ward-3(3)(8) had not assumed valid jurisdiction to frame assessment u/s.147 of the Act, since he failed to re-issue notice u/s.143(2) of the Act. Addition on account of the assessee having not returned to tax Capital gains earned on sale of immovable property - Reopening was resorted to by the AO on the basis of information in his possession that the assessee had sold immovable property alongwith other co-owners for a total sale consideration of Rs. 50 Crores -HELD THAT:- The fact of the matter is that in the case of two co-owners, the case was neither reopened nor assessed by the AO. Therefore, the plea of the assessee that the department had accepted the capital gains in the impugned transaction be non-taxable in the hands of two co-owners, we hold, has no merits and reject the same. Even otherwise, assessee himself has pointed out that in the case of another co-owner, the Department found the capital gains to the extent of his share in the sale consideration to be identically taxable as in the case of the assessee. Therefore, it cannot be said that the department has accepted no capital gains to be taxed in the impugned transaction. This argument of assessee is accordingly, rejected. In the hands of one of the co-owners, the assessee had been given the benefit of cost of acquisition and indexation thereof while computing the capital gains earned on the sale of land - plea of assessee before us was that the present assessee should also be given the benefit of indexed cost of acquisition while computing capital gains. However, we may add that no evidence with regard to the cost incurred by the assessee for acquiring the impugned land was filed before us. Assessee had never raised this plea either during assessment or even in the appellate proceedings and was raising it for the first time before us - Assessee was pointed out at bar that as to how a factual plea of the assessee be entertained at this stage that too after a lapse of almost seven years since the assessment was first framed and approximately 13 years since the impugned assessment year, more particularly when the assessee has not come up with any evidence regarding the cost incurred by it to acquire the impugned asset despite the lapse of so many years. Assessee except for pleading that the other co-owners had also been given the benefit of indexed cost of acquisition has nothing else to say. Considering all of the above, we are of the view that the assessee has not made out any case for admitting this contention that he should be granted the benefit of the cost of acquisition of the asset. Appeal filed by the assessee is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the reopening of assessment under section 147/148 was invalid on the ground that the assessee was not supplied the complete reasons for reopening or that the reasons were undated. 2. Whether, upon transfer of the case between Assessing Officers under section 127, the succeeding Assessing Officer was required to re-issue notice under section 143(2) to validly complete assessment under section 147. 3. Whether the addition of capital gains on sale of immovable property was sustainable on the merits where the Department alleged conversion of land and sale proceeds attributable to the assessee were not returned to tax. 4. Whether differential treatment of co-owners (i.e., reopening/assessment in some co-owners' cases and not in others) estops the Department from assessing the present assessee. 5. Whether the assessee was entitled to benefit of indexed cost of acquisition when no evidence of cost of acquisition was produced and the plea was raised late in the proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening: completeness and dating of reasons Legal framework: Sections 147/148 require formation of belief supported by reasons for reopening; principles of natural justice require supply of reasons to the assessee to enable effective response. Precedent treatment: No binding precedent was applied by the Court to invalidate reopenings purely for alleged nondisclosure of reasons where the assessee fails to substantiate the plea that complete reasons were not furnished. Interpretation and reasoning: The assessee asserted only an abstract or non-supply of reasons; on the evidence at hearing the assessee could not produce the copy he purportedly received and relied instead on a copy supplied by Revenue which showed reasons recorded on 16 March 2018 and approved on 25 March 2018. The Tribunal found the factual premise of the challenge (non-furnishing or undated reasons) to be unsubstantiated or factually incorrect. The Court emphasized that an allegation of nondisclosure cannot stand where the appellant fails to substantiate it and where the record demonstrates dated reasons recorded and approved. Ratio vs. Obiter: Ratio - where the assessee fails to establish non-supply or nondating of reasons and the record shows dated reasons, reopening is not vitiated on that ground. Obiter - general observations on natural justice were not expanded beyond the facts. Conclusion: The challenge to reopening based on non-supply or undated reasons is rejected; reasons were dated and approved and the jurisdictional exercise under section 147/148 stands valid. Issue 2 - Effect of transfer under section 127 and requirement to re-issue notice under section 143(2) Legal framework: Section 127 permits transfer of cases between Assessing Officers; sub-section (3) dispenses with opportunity to the assessee where transfer is between officers in the same city/locality; sub-section (4) states transfer shall not render necessary the re-issue of any notice already issued by the transferring AO. Precedent treatment: The assessee relied on an ITAT decision holding that where assessment is completed by a different AO post-transfer a fresh section 143(2) notice should be issued. The Tribunal considered but did not adopt that view in the present facts, applying the statutory language of section 127(4). Interpretation and reasoning: The Tribunal held that where (as admitted) both AOs were situated in the same city, section 127(3) and (4) operate so that no fresh hearing opportunity or re-issuance of previously issued notices is required; the succeeding AO may continue proceedings from the stage left off by the earlier AO. Consequently, the absence of a fresh section 143(2) notice by the succeeding AO does not invalidate the assessment framed under section 147. Ratio vs. Obiter: Ratio - transfer under section 127 between AOs in same city does not require re-issuance of notice under section 143(2) by the succeeding AO and does not vitiate the subsequent assessment. Obiter - reliance on contrary ITAT authority was considered distinguishable and not followed. Conclusion: The contention that the succeeding AO lacked jurisdiction for not re-issuing section 143(2) notice is rejected; transfer under section 127(3)/(4) validated continuation and completion of proceedings. Issue 3 - Merits: chargeability of capital gains on sale of immovable property Legal framework: Capital gains are chargeable where there is a transfer of capital asset (section 45 and related provisions); assessment can be reopened where information indicates escapement of income. Precedent treatment: No authoritative precedent altering principles of chargeability was applied; the Tribunal applied ordinary principles of capital gains taxation to assessed facts. Interpretation and reasoning: Revenue possessed information that the land was converted from agricultural to non-agricultural immediately before sale and that total sale consideration was Rs. 50 crores with the assessee's share Rs. 1.50 crores, which led the AO to form belief of escapement of income. The Tribunal found no defect in the AO's belief or in the reopening. On the merits, the assessee did not produce evidence to refute the factual foundation of the AO's conclusion or to demonstrate absence of transfer or non-taxability. The Tribunal therefore sustained the addition for unreported capital gains. Ratio vs. Obiter: Ratio - where material indicates conversion and sale yielding consideration to the assessee and the assessee fails to rebut or produce evidence, capital gains inclusion is sustainable. Obiter - the Tribunal did not elaborate on nuanced questions (e.g., character of land, exemptions) absent specific pleadings or evidence. Conclusion: The addition for capital gains on sale of immovable property is sustained for want of contrary evidence or successful factual/legal rebuttal by the assessee. Issue 4 - Alleged estoppel/differential treatment because co-owners were not similarly reopened Legal framework: Administrative disparity or selective reopening does not ipso facto preclude assessment unless it is shown that revenue had examined the co-owners and accepted a contrary position or that there was demonstrable estoppel. Precedent treatment: The Tribunal rejected an argument that non-reopening of some co-owners' cases amounted to departmental acceptance; it noted that absence of reopening is not equivalent to an examined, adverse finding favoring the assessee. Interpretation and reasoning: The Tribunal observed that in one co-owner's case identical addition was in fact made (so no departmental acceptance), and in other co-owners' situations the cases were neither reopened nor assessed (mere inaction cannot be construed as acceptance of non-taxability). Thus, differential treatment or non-action does not estop the Department absent evidence of an examined contrary stance. Ratio vs. Obiter: Ratio - mere absence of reopening/assessment in respect of other co-owners does not bar reopening/assessment against the present assessee; estoppel requires demonstrable acceptance after examination. Obiter - administrative consistency expectations noted but not made determinative. Conclusion: The plea of estoppel/differential treatment is rejected; no bar arises from co-owners' differing procedural status where no departmental acceptance of non-taxability is shown. Issue 5 - Entitlement to indexed cost of acquisition when no evidence produced and plea raised late Legal framework: Benefit of indexed cost of acquisition is a factual entitlement dependent on proof of acquisition cost and dates; appellate and adjudicatory forums require production of evidence to substantiate such claims. Precedent treatment: The Tribunal applied established administrative and evidentiary principles that late factual pleas unsupported by records may be rejected, especially after lengthy lapses of time and where the plea was not taken earlier. Interpretation and reasoning: The assessee sought parity with a co-owner who was allegedly allowed indexed cost benefit, but the assessee produced no evidence of cost of acquisition and had not raised the point in earlier proceedings. Given the substantial lapse of years and absence of documentary proof, the Tribunal declined to admit or entertain the belated factual plea. Ratio vs. Obiter: Ratio - entitlement to indexed cost must be pleaded and supported by evidence in a timely manner; a belated, unsupported factual claim may be refused. Obiter - reference to procedural propriety and prejudice from delayed claims. Conclusion: The claim for indexed cost of acquisition is rejected for lack of evidence and for being raised belatedly after assessments and proceedings. Overall Conclusion The legal challenges to the reopening and to jurisdiction arising from alleged nondisclosure/undated reasons and from non-reissuance of section 143(2) notice post-transfer are rejected; on the merits the addition for unreported capital gains is upheld; pleas based on differential treatment and late unsupported claims for indexed cost are also rejected. The appeal is dismissed.