Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, B BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the Ld.CIT(A)-2, Panaji dated 28/03/2024 in respect of the A.Y. 2012-13 and raised the following grounds:
2. The assessee is into the real estate business and filed his return of income on 31/12/2012. Thereafter a search u/s. 132 was conducted on 06/09/2017 and based on the search, a notice u/s. 153A was issued on 14/01/2019 by the DCIT, Central, Belagavi. In response to the said notice, the assessee also filed his return of income on 17/12/2019 and disclosed an additional income of Rs. 97,490/-. Thereafter a notice u/s. 143(2) was issued and notice u/s. 142(1) were also issued along with the questionnaire. The assessee also filed the response to the said notices.
3. The AO based on the statement recorded u/s. 132(4) of the Act and also the answer given to question no. 37, the sale consideration in respect of the plots sold were estimated. The AO based on the said statement, had come to the conclusion that the assessee had shown a lesser sale value and added the said difference as undisclosed income. The AO also made an addition under the head income from other sources. As against the said order, the assessee filed an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee raised several grounds on merits and also filed written submissions questioning the jurisdiction of the AO at Bellary on the ground that the transfer made u/s. 127 of the Act, transferring the jurisdiction from the Kalaburagi (Gulbarga) to Bellary is not correct since CIT had not issued any notice u/s. 127 and recorded his satisfaction, after the assessee filed their objections to the said transfer. The assessee also submitted that the AO at Belgaum (Belagavi) who had issued a notice u/s. 153A is also not having jurisdiction when the jurisdiction of the assessee has been transferred to the said AO. The assessee also submitted that the order passed u/s. 153A is also barred by limitation and the commission issued to the DVO u/s. 131(i)(d) of the Act for estimating the value of investment is also to get further time for making the assessment, when the construction was completed long back. The Ld.CIT(A) had decided the first objection that the DCIT, Central Circle, Belgaum had no jurisdiction to issue notice u/s. 153A of the Act when the jurisdiction was not transferred to him before 14/01/2019. The Ld.CIT(A) at the time of hearing, called for the documents from the AO and noticed that order u/s. 127 of the Act was passed by the Ld.CIT(A), Kalaburagi on 03/07/2018 and therefore the ACIT, Central Circle, Belagavi (Belgaum) had jurisdiction to issue a notice u/s. 153A of the Act. The Ld.CIT(A) also relied on another transfer order dated 22/10/2019 issued by the PCIT, Central, Bangalore wherein the jurisdiction of the assessee was again transferred from DCIT, Central Circle, Belgaum to DCIT, Central Circle, Bellary. The Ld.CIT(A) relied on the said transfer orders and upheld the order passed by the authorities. The Ld.CIT(A) further held that since the notice u/s. 153A was issued by the DCIT, Central Circle, Belagavi (Belgaum), subsequent to the transfer order dated 03/07/2018, is valid and the subsequent officer to whom the jurisdiction has been transferred was correct in continuing the proceedings further. Insofar as the limitation raised by the assessee, the Ld.CIT(A) had relied on the reference made to the DVO on 21/12/2019 and therefore as per the explanation to section 153B of the Act, the period of reference made to the valuation officer and the date on which the report has been received should be excluded for the purpose of calculating the limitation u/s. 153B of the Act and therefore arrived the conclusion that the order passed u/s. 153A on 23/06/2021 is within the period of limitation. Insofar as the other grounds raised on merits, the Ld.CIT(A) had partly allowed the grounds raised by the assessee and confirmed the balance additions made by the AO.
4. As against the said order of the Ld.CIT(A), the present appeal has been filed before this Tribunal.
5. At the time of hearing, the Ld.AR submitted that the assessee had no knowledge about the transfer order dated 03/07/2018 passed by the CIT, Kalaburagi (Gulbarga) transferring the assessee’s case from Kalaburagi (Gulbarga) to Belagavi (Belgaum). The Ld.AR further submitted that no notice has been issued before passing the order u/s. 127 and also reasons recorded by the Ld.CIT(A), Kalaburagi (Gulbarga) for transferring the jurisdiction from Kalaburagi (Gulbarga) to Belagavi (Belgaum) was not communicated to the assessee, for filing the objections to the same and therefore the said order is non-est in law and based on that, the proceedings could not be initiated by the AO. The Ld.AR further submitted that only from the order of the Ld.CIT(A), the assessee came to know that there was an order dated 03/07/2018 passed by the Ld.CIT, Kalaburagi (Gulbarga) which was not communicated to the assessee till date and therefore sent representation on 25/06/2024 to the CIT(A) for providing the notice and the order passed u/s. 127 of the Act. Subsequently, the assessee also sent a representation to the AO, Central Circle, Bellary on 09/07/2024 seeking the copy of the said notice and order passed u/s. 127 of the Act. The Ld.AR submitted that the AO as well as the Ld.CIT(A) had not furnished the said details till date. The Ld.AR further submitted that the Ld.DR may be directed to give a report about the service of the notice and the reasons recorded by the Ld.CIT for transferring the case from Kalaburagi (Gulbarga) to Belagavi (Belgaum) before passing the order u/s. 127 of the Act on 03/07/2018 and also to furnish the copy of the said order.
The Ld.AR further submitted that on going through the records submitted by the Ld.DR, it came to light that the Ld.CIT, Bangalore (Central) had also passed an order u/s. 127 of the Act on 22/10/2019 transferring the assessee’s case from Belagavi (Belgaum) to Bellary. The Ld.AR further submitted that even before passing this order, the Ld.CIT had not issued any notice and no reasons were communicated and the said order was also not served on the assessee and therefore the said transfer order is also not a valid order in the eye of law. The Ld.AR further submitted that in both the orders, a common order was passed by the respective CITs and no reasons were communicated to the assessee. The Ld.AR further submitted that when the jurisdiction was already transferred from Kalaburagi (Gulbarga) to Belagavi (Belgaum), the Ld.PCIT, Kalaburagi (Gulbarga) need not issue a Kalaburagi (Gulbarga) to Bellary on 02/12/2019. The Ld.AR submitted that before issuing this order, notices were issued and order has been passed u/s. 127 of the Act. The Ld.AR submitted that before coming to this Tribunal, the assessee was under the impression that there was only one transfer order dated 02/12/2019 but later on he came to know that already two transfer orders were passed by the respective CITs. The Ld.AR therefore submitted that the notice issued u/s. 153A by the DCIT, Central Circle, Belagavi (Belgaum) on 14/01/2019 pursuant to the transfer order passed by the Ld.CIT(A), Kalaburagi (Gulbarga) on 03/07/2018 is without jurisdiction for the simple reasons that the transfer order has been passed u/s. 127 of the Act, without issuing notice to the assessee and without recording the reasons for transferring the jurisdiction from Kalaburagi (Gulbarga) to Belagavi (Belgaum) and also without inviting any objections from the assessee and finally without communicating the said order to the assessee. The Ld.AR further submitted that the subsequent transfer order dated 22/10/2019 from Belagavi (Belgaum) to Bellary is also an illegal one and therefore the subsequent proceedings could not be sustained. Finally, the Ld.AR submitted that when the respective CITs had already transferred the jurisdiction from Kalaburagi (Gulbarga) to Belagavi (Belgaum) and from Belagavi (Belgaum) to Bellary, the subsequent transfer order passed on 02/12/2019 by the PCIT, Kalaburagi (Gulbarga) is also not in accordance with law and therefore prayed that the entire assessment should be set aside. The Ld.AR also made his submissions in respect of the limitation as well as on merits and prayed to allow the appeal.
The Ld.AR also filed three paper books and also enclosed the orders of the Hon’ble High Courts and Hon’ble Supreme Court. The Ld.AR also filed a statement showing the datewise sequence of events.
The Ld.DR relied on the order of the Ld.CIT(A) and submitted that the notice u/s. 153A was issued by the DCIT, Belagavi (Belgaum) on 14/01/2019 after the CIT, Kalaburagi (Gulbarga) has transferred the case of Kalaburagi (Gulbarga) to Belagavi (Belgaum) on 03/07/2018. The Ld.DR also filed a small note about the order passed u/s. 127 of the Act and furnished the order dated 08/06/2018 in which the Centralised order was passed by the PCIT, Central Circle, Bangalore. The Ld.DR also furnished the copy of the transfer order dated 03/07/2018 and 22/10/2019 in which the assessee’s name was found. The Ld.DR therefore submitted that the notice issued u/s. 153A by the DCIT, Belagavi (Belgaum) is in order and therefore the subsequent proceedings are also in order.
We have heard the arguments of both sides and perused the materials available on record.
Before going into the merits of the case, first we will decide about the legal grounds raised by the assessee. The legal ground raised by the assessee is, whether the transfer order passed u/s. 127 of the Act by the PCIT, Kalaburagi (Gulbarga) transferring the assessee’s case from Kalaburagi (Gulbarga) to Belagavi (Belgaum) on 03/07/2018 is in accordance with the provisions of the Act or not. We have considered the submissions made by the assessee that the assessee had no knowledge about the said transfer but came to know about the said transfer order only from the order of the Ld.CIT(A) while deciding the appeal filed by the assessee. We have also perused the said transfer order dated 03/07/2018 which was furnished by the Ld.DR. In the said transfer order, the Ld.CIT, Kalaburagi (Gulbarga) had simply transferred the jurisdiction of the various assessees by virtue of the powers conferred u/s. 127 of the IT Act. In the reference column also, the Ld.CIT, Kalaburagi (Gulbarga) had mentioned about the Centralised order dated 08/06/2018 passed by the PCIT, Central, Bangalore. From the plain reading of the said order, we found that the said order has been passed without giving any notice to the assessee and also without recording any reasons for the transfer of the cases from one AO to the another.
11. For the sake of clarity, we are extracting the section 127, “Power to transfer cases” “Power to transfer cases. 127. (1) The Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,— where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Principal Director General or Director General or (a) Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; where the Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be (b) passed by the Board or any such Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf.”
12. As per section 127(1), we understand that the Statute mandates that the authority can transfer any case from one AO to another AO after giving the assessee a reasonable opportunity of being heard in the matter and after recording his reasons for doing so. In the present case, the Ld.CIT, Kalaburagi (Gulbarga) had not granted any such notice and also not communicated the reasons for the transfer of the case from the AO, Kalaburagi (Gulbarga) to AO, Belagavi (Belgaum). The transfer order dated 03/07/2018 also does not indicate about the notices issued as well as the communication of the reasons before passing the said transfer order. We have also sought for the assistance of the Ld.DR to find out the details about the said notice and the communication of the reasons and finally the service of the said order to the assessee. The Ld.DR expressed his inability to provide the details and relied on the order of the Ld.CIT(A).
From the above said facts, it is clear that the transfer order passed by the Ld.CIT, Kalaburagi (Gulbarga) is bad in law and it could not be sustained on the ground that the said order has not been issued in accordance with the mandatory directions contained in section 127(1) of the Act. Further, the revenue is not able to substantiate that the transfer order was communicated to the assessee. In such circumstances, the objections made by the assessee that the transfer order dated 03/07/2018 is illegal, is liable to be sustained. Further, we are not able to find out any evidence to show that the said transfer order was communicated to the assessee. In such circumstances, when we upheld the transfer order dated 03/07/2018 as invalid, in which the jurisdiction has been transferred from Kalaburagi (Gulbarga) to Belagavi (Belgaum), the notice issued u/s. 153A of the Act by the DCIT, Central, Belagavi (Belgaum) on 14/01/2019 is certainly without jurisdiction. The revenue also committed a serious mistake in passing the transfer order dated 03/07/2018.
Similarly, the another transfer order dated 22/10/2019 is also not in accordance with the provisions of section 127(1) of the Act. In both the orders, the authorities had not issued any notice inviting objections and also AO to another and also not communicated the said transfer order to the assessee and therefore the subsequent order also not made in compliance with the provisions of the Act.
We also drew our support from the judgment of the Hon’ble Supreme Court reported in 1976 AIR 437 (SC) in the case of Ajantha Industries And Ors vs. Central Board of Direct Taxes, New Delhi wherein the Hon’ble Supreme Court had dealt with the procedures to be followed u/s. 127 of the Act and also spelled out the effect of the non-compliance with the said procedures. “This judgment was rendered by this Court on December 21, 1956, and we find that in the 1961 Act section 127 replaced section 5(7A) where the legislature has introduced, inter alia, the requirement of recording reasons in making the order of transfer. It is manifest that once an order is passed transferring the case file of an assessee to another area the order has to be communicated. Communication of the order is an absolutely essential requirement since the assessee is then immediately made are of the reasons which impelled the authorities to pass the order transfer. It is apparent that if a case file is transferred from the usual place of residence or office where ordinarily assessments are made to a distant area, a great deal of inconvenience and even monetary loss is involved, That is the reason why before making an order of transfer the legislature has ordinarily imposed the requirement of a show-cause notice and also recording of reasons. The question then arises whether the reasons are at all required to be communicated to the assessee. It is submitted, on behalf of the Revenue, that the very fact that reasons are recorded in the file, although these are not communicated to the assessee, fully meets the requirement section 127(1). We are unable to accept this submission. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is based on irrelevant and extraneous condonations Whether such a writ or special leave application ultimately fails is not We are clearly of opinion that the requirement of recording reasons under section 127(1) is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee. Mr. Sharma drew our attention to a decision of the Delhi High Court in Sunanda Rani Jain vs Union of India and others, where the learned single Judge has taken a contrary view. For the reasons, which we have given above, we have to hold that the said decision is not correct. The appellant drew our attention to a decision of this Court in Shri Pragdas Umar Vaishya vs.Union of India and Other where rule 55 of the Mineral Concession Rules, 1960, providing for exercise of reversional power by the Central Government was noticed. It was held that under rule 55 the Central Government in disposing of the revision application must record its reasons and communicate these reasons to the parties affected thereby. It was further held that the reasons could not be gathered from the nothings in the files of the Central Government. Recording of reasons and disclosure thereof is not a mere formality. Mr. Sharma drew our attention to a decision of this Court in Kashiran Aggarwalalla vs. Union of India and other. It is submitted that this Court took the view that orders under section 127(1) are held in that decision to be purely administrative in nature" passed for consideration of convenience and no possible prejudice could be involved in the transfer. It was also held therein that under the proviso to section 127(1) it was not necessary to give the appellant an opportunity to be heard and there was consequently no need to record reasons for the transfer. This decision is not of any assistance to the Revenue in the present case since that was a transfer from one Income- tax Officer to another Income-tax Officer in the same city, or, as stated in the judgment itself, in the same locality" and the proviso to section 127(1), therefore, applied. When law requires reasons to be recorded in a particular order affecting prejudicially the interests of any person, who can challenge the order in court, it ceases to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons is not expiated Mr. Sharma also drew our attention to a decision of this Court in S Narayanappa and Others vs. Commissioner of Income-tax, Bangalore where this Court was dealing with section 34 of the old Act. It is clear that there is no requirement in Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under section 34 must also be communicated to the assessee. The Income-tax Officer need not communicate to the assessee the reasons which led him to initiate the proceedings under section 34. The case under section 34 is clearly distinguishable from that of a transfer order under section 127(1) of the Act. When an order under section 34 is made the aggrieved assessee can agitate the matter in appeal against the assessment order, but an assessee against whom an order of transfer is made has no such remedy under the Act to question the order of transfer. Besides, the aggrieved assessee on receipt of the notice under section 34 may even satisfy the Income-tax Officer that there were no reasons for reopening the assessment. Such an opportunity is not available to an assesse under section 127(1) of the Act. The above decision is, therefore, clearly distinguishable. We are, therefore, clearly of opinion that non- communication of the reasons in the order passed under section 127(1) is a serious infirmity in the order for which the same is invalid. The judgment of the High Court is set aside. The appeal is allowed and the orders of transfer are quashed. No costs.”
We have also considered the judgment of the Hon’ble Allahabad High Court reported in [1996] 221 ITR 568 in the case of Vinay Kumar Jaiswal And Ors. vs. CIT And Ors wherein similar issue came up for consideration and the Hon’ble High Court has given the following findings “9. That apart the petitioners have alleged in paragraphs 11 and 13 to the writ petition that the transfer order has not been communicated to them. It has been held by the Supreme Court in the case of Ajantha Industries v. CBDT [1976] 102 ITR 281 that non-communication of the transfer order is a serious infirmity and hence the order was invalid. The same view was also taken by the Andhra Pradesh High Court in the case of V.K. Steel Industries Pvt. Ltd. [1991] 187 ITR 403.”
The above said judgments of the Hon’ble Supreme Court and the Hon’ble High Court supports the view taken by us. We, therefore, have no hesitation to conclude that the transfer order dated 03/07/2018 passed by the Ld.CIT, Kalaburagi (Gulbarga) transferring the case from the jurisdiction Kalaburagi (Gulbarga) to Belagavi (Belgaum) is illegal and therefore the consequential notice issued u/s. 153A of the Act by the DCIT, Central, Belagavi (Belgaum) is without jurisdiction. When we have held that the transfer order dated 03/07/2018 is bad in law and the consequential notice issued by the DCIT, Belagavi (Belgaum) u/s. 153A dated 14/01/2019 is also not sustainable, the subsequent proceedings dated 21/06/2021 passed by the DCIT, Central Circle, Bellary u/s. 143(3) r.w.s. 153A of the Act could not be sustained.
In view of the decision taken by us in respect of the legal plea raised by the assessee, we are not adjudicating the other issues raised by the assessee including the grounds raised on merits. We leave it open to the assessee to raise it at appropriate time as and when required.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 29th August, 2025.