SATYANARAYANA MURTHY ADAPA,RAJAHMUNDRY vs. ITO., WARD-13(1), HYDERABAD

The assessee has raised the following grounds of appeal: “1) The order of the learned CIT (Appeals), NFAC is arbitrary, unjust, illegal and contrary to the facts of the case. 2) On the facts and circumstances of the case and in law, the Learned Commissioner (Appeals), NFAC failed to appreciate the fact that, no order u/s 127 was passed for transfer of juri iction from ITO, Ward-2(3), Visakhapatnam to ITO, Ward-13(1), Hyderabad and Order u/s 127 was passed by Pr.CIT-4, Hyderabad for transfer of juri iction from Ward- 13(1), Hyderabad to Circle-13(1) Hyderabad. 3) On the facts and circumstances of the case and in law, the learned CIT(Appeals) failed to appreciate the fact that, in the absence of valid order u/s 127 for transfer of appellant's juri iction from Visakhapatnam to Hyderabad, the assessment order passed in the appellant case is without juri iction and the assessment order is liable to be quashed. 4) On the facts and circumstances of the case and in law, the Learned Commissioner (Appeals), NFAC ought to have appreciated the fact that, if the appellant original juri iction lies with ITO, Ward-13(1), Hyderabad, the notice u/s 143(2) issued in this case is bad-in-law and without juri iction and accordingly, the said notice along with the assessment order passed on the foundation of such notice are liable to be quashed. 5) On the facts and circumstances of the case and in law, the Learned Commissioner (Appeals), NFAC erred in confirming the additions of Rs 28,21,222/- under Sec 69A towards cash deposits in bank a/c no. 73061459857 during demonetisation period without appreciating the facts of the case and ignoring the explanations submitted by the appellant on 13-06-2025. 6) On the facts and circumstances, the learned CIT (Appeals), NFAC erred in confirming the action of assessing officer in invoking the provisions of Sec 115BBE of the act and in thereby taxing the entire additions at 60% and levying surcharge at 25% even though the appellant explained the sources. 7) Any other legal and factual ground that may be urged at the time of hearing of the appeal”.

Also, the assessee has raised the following additional ground of appeal: "The assessing officer is not justified in levying tax at increased rate of 60% u/s 115BBE of the Act in as much as the amended provisions of S.115BBE of the Act are applicable only from A.Y.2018-2019 onwards." 4. Learned Authorized Representative (“Ld. AR”) submitted that the additional ground so filed is admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). The Learned Departmental Representative (“Ld. DR”) did not make any objection for admission of the additional ground. The prayer for admission of additional ground noted above which is not in memorandum of appeal is being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional ground is legal in nature for which relevant facts are stated to be emanating from the existing records. 5. The brief facts of the case are that the assessee is an employee of Andhra Pradesh Grameena Vikas Bank. The assessee filed his return of income for the Assessment Year 2017–18 on 05.08.2017 declaring a total income of Rs.11,28,510/-. The case of the assessee was selected for scrutiny under CASS for examining the issue of cash deposits made during the demonetisation period. Accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued to the assessee on 24.09.2018. During the course of assessment proceedings, the assessee failed to comply with various notices issued by the Learned Assessing Officer (“Ld. AO”). On verification of the bank accounts of the assessee, the Ld. AO found that the assessee had deposited cash amounting to Rs.5,00,000/- and Rs.23,21,222/- in two different bank accounts. In the absence of any satisfactory explanation from the assessee regarding the source of the said cash deposits, the Ld. AO treated the entire cash deposits amounting to Rs.28,21,222/- as unexplained money under section 69A of the Act and completed the assessment under section 143(3) of the Act on 27.12.2019. 6. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee and confirmed the addition made by the Ld. AO. 7. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. Under Ground No. 4 of the appeal, the assessee has challenged the validity of the juri iction assumed by the Ld. AO in passing the assessment order. In this regard, the Ld. AR invited our attention to the acknowledgement of the return of income filed by the assessee for the Assessment Year 2017–18 placed at page no. 1 of the paper book and submitted that the assessee has declared his address as 554-C, Type-IV, BHEL, Hyderabad-500005, which clearly falls within the territorial juri iction of the Assessing Officer at Hyderabad. The Ld. AR also inviting our attention to the notice issued under section 143(2) of the Act placed at page Nos. 2 and 3 of the paper book, submitted that the initial notice under section 143(2) of the Act was issued by ITO Ward-2(3), Visakhapatnam, who is not the juri ictional Assessing Officer of the assessee. The Ld. AR further invited our attention to the notice issued under section 142(1) of the Act, dated 24.10.2018 placed at page Nos. 6 and 7 of the paper book and submitted that subsequently the case of the assessee was taken up by ITO Ward-13(1), Hyderabad. The Ld. AR further invited our attention to the show cause notice dated 10.12.2019 issued by ACIT Circle- Accordingly, the Ld. AR submitted that the juri iction exercised by ACIT Circle- 13(1), Hyderabad is not valid, as the said officer has not issued any notice under section 143(2) of the Act and therefore the assessment order passed under section 143(3) of the Act is liable to be held invalid. 8. Per contra, the Ld. DR submitted that as per the details available on the Income Tax portal the address of the assessee falls within the territorial juri iction of Hyderabad. Accordingly, considering the address of the assessee, the case of the assessee was transferred from ITO Visakhapatnam to ITO Hyderabad through the ITBA system. The Ld. DR submitted that since the address of the assessee was located at Hyderabad, the Assessing Officer at Hyderabad was competent to continue the assessment proceedings and complete the assessment. Therefore, according to the Ld. DR, there is no infirmity in the juri iction exercised by the Assessing Officer in completing the assessment under section 143(3) of the Act. 9. We have heard the rival submissions and perused the material available on record. The Ld. AR has challenged the validity of the juri iction assumed by the Assessing Officer in completing the assessment. In this regard, we have gone through the acknowledgement of the return of income filed by the assessee for the Assessment Year 2017–18 placed at page no. 1 of the paper book, which is to the following effect: 10. On perusal of above, we find that the assessee has declared his address as 554-C, Type-IV, BHEL, Hyderabad-500005, which clearly falls within the territorial juri iction of the Assessing Officer at Hyderabad. 11. We have also gone through the notice issued under section 143(2) of the Act placed at page Nos. 2 and 3 of the paper book, which is to the following effect: 12. On perusal of above, it is evident that the notice under section 143(2) of the Act was issued by ITO Ward-2(3), Visakhapatnam, at the Hyderabad address of the assessee. This means that the ITO Ward-2(3), Visakhapatnam, at the time of issue of notice under section 143(2) of the Act was in the knowledge that the territorial juri iction of the assessee does not lies with him and it falls within the territorial juri iction of Hyderabad ITO. However, without immediately transferring the case of the assessee to the juri ictional Assessing ITO Ward-2(3), Visakhapatnam. The Ld. AR has submitted that subsequently the case was handled by ITO Ward-13(1), Hyderabad and finally the assessment order under section 143(3) of the Act was passed by ACIT Circle- 13(1), Hyderabad. In this regard, we have gone through the show cause notice issued by the ACIT Circle-13(1), Hyderabad placed at page Nos.9 & 10 of the paper book, which is to the following effect: 13. On perusal of above, it is evident that the show cause notice has been issued by ACIT Circle-13(1), Hyderabad. Further, there is no dispute about the fact that the assessment order has been passed by the ACIT Circle-13(1), Hyderabad. According to the Ld. AR, the juri ictional Assessing Officer at Hyderabad, who ultimately completed the assessment, never issued any notice under section 143(2) of the Act and therefore the assessment order suffers from a fundamental juri ictional defect. 14. On the basis of our above observation, we find merit in the submission of the Ld. AR that the address declared by the assessee in the return of income clearly falls within the territorial juri iction of the Assessing Officer at Hyderabad. In such circumstances, the juri iction to issue notice under section 143(2) of the Act was vested with the Assessing Officer having juri iction over the assessee at Hyderabad. However, in the present case the notice under section 143(2) of the Act was issued by ITO Ward-2(3), Visakhapatnam, who did not have territorial juri iction over the assessee on the basis of the address declared in the return of income. Thereafter the assessment proceedings were continued by the Assessing Officer at Hyderabad and the final assessment order under section 143(3) of the Act was passed by ACIT Circle-13(1), Hyderabad. It is a settled principle of law that issuance of a valid notice under section 143(2) of the Act is a mandatory requirement for making an assessment under section 143(3) of the Act. In the case of ACIT v. Hotel Blue Moon (321 ITR 362) the Hon’ble Supreme Court has held that service of notice under section 143(2) of the Act is a condition precedent for making an assessment under section 143(3) of the Act and absence of such notice renders the assessment invalid. The Hon’ble Supreme Court in the case of CIT v. Laxman Das Khandelwal (417 ITR 325) has further held that where there is a complete absence of notice under section 143(2) of the Act, the defect goes to the root of juri iction and cannot be cured even by the provisions of section 292BB of the Act. In the present case, the notice under section 143(2) of the Act was issued by an Assessing Officer who did not possess juri iction over the assessee, whereas the Assessing Officer who ultimately passed the assessment order under section 143(3) of the Act did not issue any notice under section 143(2) of the Act. Thus the mandatory statutory requirement of issuance of notice under section 143(2) of the Act by the juri ictional Assessing Officer has not been fulfilled. Consequently, the assessment order passed under section 143(3) of the Act by ACIT Circle-13(1), Hyderabad cannot be sustained in law. Copy to: S.No Addresses 1 Satyanarayana Murthy Adapa, 3-325, HIG 19, APHB Colony, Lalcheruvu, Rajahmundry, Andhra Pradesh-533106. 2 Income Tax Officer, Ward-13(1), Aayakar Bhavan, Hyderabad, Telangana-500004. 3 Pr. CIT, Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File