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September 5, 2022

ITAT upheld the addition for cash paid for land that was not part of the agreement value

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

ITAT upheld the addition for cash paid for land that was not part of the agreement value

Facts and Issue of the Case

The assessee has raised the following grounds

“1. Ld. Assessing Officer lacked the valid jurisdiction to issue notice, conduct proceedings and pass assessment order as no order u/s 127 was passed by competent authority to transfer jurisdiction from Dy. Direction of Income Tax, Circle-1(1), New Delhi. Even if both of the Assessing Officer may be falling under the jurisdiction of same PCIT/DG or the transfer is on request of assessee, the legal necessity of passing the transfer order u/s 127 cannot be foregone. No such procedure has been followed by department as confirmed by the Ld. AO and also upheld by Ld. CIT(A) Ground on merit.

2. That the Ld. Assessing Officer has erred in making the addition of Rs. 700000/- u/s 69C because: a) Expense was never a ‘unexplained expenditure’, due to the fact that assessee had already explained the nature of expenditure and source thereof on.”

The facts of the case are that assessee is an NRI, who was a resident of Hongkong, decided to shift to India along with his family. The assessee filed his return of income for assessment year 2012-13 declaring total income of Rs. 1,55,660/-. The return of income was processed u/s 143(1) and was picked up for scrutiny by issuing notice u/s 143(2) of the I.T. Act, 1961. Account of change of jurisdiction a fresh notice u/s 143(2) of the Act was issued on which was duly served upon the assessee. During the assessee submitted to the AO vide letter that the assessee had purchased a plot of land situated in Jaipur for disclosed consideration of Rs. 5,21,000/- which was paid by cheque. The AO issued summon u/s 131(2) the seller, Smt. Choti Devi. In her statement recorded on oath u/s 131 before AO on 07.01.2015, she stated that the said plot was sold by her to the assessee for a consideration of Rs. 12,21,000/- out of which, Rs. 5,21,000/- was received through cheque and Rs. 7,00,000/- through cash. The cash amount of Rs. 7,00,000/- was found credited in the bank account of Smt. Choti Devi on 01.10.2011.

The copy of statement of the seller was provided to the assessee. In response, the assessee admitted to have made total payment of Rs. 12,21,000/- including cash of Rs. 7,00,000/-. The assessee explained that a dispute arose with the seller after the agreement and cash of Rs. 7,00,000/- was paid in settlement as the seller was not ready to handover the physical possession of the plot. The assessee submitted copy of relevant agreement to the AO. The AO observed that the agreement was executed between the appellant and Smt. Choti Devi which showed consideration of Rs. 5,21,000/- being paid by cheque. However, the cash deposit in the bank account of Smt. Choti Devi was made on 01.10.2021. In her statement recorded 131, Smt. Choti Devi had confirmed that the said cash was given by Shri Brijesh Sharma on 01.10.20211. The AO noted that cash was given by the assessee on 01.10.2011 much before the date of agreement executed on 11.01.2012. It was, therefore not possible that cash was paid before the date of agreement to resolve the dispute as the assessee had earlier submitted that the dispute had arisen after the agreement. The AO therefore, concluded that the payment of Rs. 7,00,000/- was made out of the undisclosed income and added the same.

Aggrieved with the assessment, the assessee has filed this appeal. The AO arrived the finding that it is clear that the assessee must be residing outside India and must be NRI which is not case of the assessee. Hence, I do not find any merit in the submission of the assessee. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has reiterated its arguments. The ld. CIT(A) for the reason stated in his appellant order has rejected arguments and submissions made by the assessee. Aggrieved by the CIT(A) order, the assessee is in appeal before us. Before the CIT (A), the assesee has reiterated at his submissions, which was not taken on record by the CIT (A).

Observation by the Court

The court had heard both the parties, perused materials available on record. The Bench noted that Income tax return having the residential address of Jaipur, was e-filed by the assessee. Notice u/s 143(2) was served by Asst. Director of Income Tax, International Taxation, New Delhi. The assessee raised the objection for the wrong jurisdiction and a fresh notice u/s 143(2) dated 20/10/2014 was served by DDIT. International Taxation, Jaipur (PB24). No communication was made by either ADIT, International Taxation, Delhi or DDIT, International Taxation, Jaipur with the assessee for having transferred his jurisdiction from Delhi to Jaipur. Assessment Order u/s 143(3) was passed by DDIT, International Taxation. The Assessing Officer informed the assessee, in reply to his application under Right to Information Act, 2005, that no order u/s 127 for transfer of case from ADIT, was passed because the Additional Director International Taxation, Circle 1(1). New Delhi was holding charge of Additional Director International Taxation, International Taxation, Jaipur also. When the assessee raised this ground before ld. CIT(A), it was held that in this case, no order u/s 127 is required to be passed. He also mentioned that assessee had participated in the proceedings and now cannot take such ground. The question which falls for consideration is whether under section 127 of the Act, an Assessing Officer on his own can transfer an income-tax file to another officer and whether an order is required to be passed.

From a reading of the language of section 127(3) it is evident that when a file is transferred from one Assessing Officer to another whose offices are located in the same city, locality or place, though other statutory formalities are required to be complied with, the opportunity of hearing as postulated in section 127(1) and (2) in case of intercity transfer, is not required. Scheme of the Income-Tax provides that when an officer has jurisdiction over the assessee, the same cannot be transferred and assumed by the another officer, unless there is an appropriate order passed by the competent authority transferring the jurisdiction. In this case, assessee himself has requested for transfer of his case from Delhi to Jaipur, which can be deemed to be no-objection from the side of assessee. However, the necessity of passing order u/s 127 cannot be dispensed with. It is undisputed fact that the AO at New Delhi had transferred the file to the AO at Jaipur and, therefore, even if they are both under the jurisdiction of the same Director-General or the Pr. CIT, the notice u/s 127(1) was to be given to the assessee and order u/s 127(3) was to be passed by Director-General or Pr. CIT who can transfer the case u/s 127 of the Act. No such procedure has been followed by the revenue. Therefore, we are of the opinion that the notice u/s 143(2) by DDIT, Jaipur is without jurisdiction and authority, and consequently the order passed u/s 143(3) is held to be void ab-initio.

In Ground No. 2, the court  have considered the appeal on technical ground, therefore, the ground raised by the assessee on merits become infructuous and does not required any adjudication.

Conclusion

The appeal of assessee is allowed by the court.

Brijesh-Sharma-Vs-DCIT-ITAT-Jaipur

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