ACIT, CIRCLE-2(1), HYDERABAD vs. Y S JAGAN MOHAN REDDY, KADAPA

ITA 670/HYD/2022Status: DisposedITAT Hyderabad12 February 2025AY 2011-12100 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal quashed the assessment order passed by the Assessing Officer under Section 143(3) dated 24.03.2014. The Tribunal held that the assumption of jurisdiction by the Additional Commissioner of Income Tax, Range-2, Hyderabad, and the consequent assessment order passed by the Assessing Officer without a valid order under Section 120(4)(b) of the Act were illegal and void ab initio. The Tribunal relied on the ratio of various decisions, including the Supreme Court's ruling in Kanwar Singh Saini Vs. High Court of Delhi, which states that conferment of jurisdiction is a legislative function and cannot be conferred by consent of parties. If a court or tribunal passes an order without jurisdiction, it is a nullity. The Tribunal found that the case laws relied upon by the Revenue were not applicable to the facts of the present case as the issue was about the validity of the assumption of jurisdiction under Section 120(4)(b). The Tribunal explicitly stated that the assessment order was liable to be quashed. The operative direction was to quash the assessment order. No specific issue was left undecided.

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2011-12, challenging the deletion of an addition of Rs. 139,67,00,000/- made under Section 56(1)(vii) towards sale of shares. The Assessing Officer (AO) had made this addition based on material found during a search in the Dalmia group, which indicated cash payments to the assessee, Y.S. Jagan Mohan Reddy. The AO relied on account entries, emails, SMS communications, and a note on capital gains. The assessee denied any relation with the Dalmia group or receipt of cash. The CIT(A) deleted the addition, stating the AO erroneously presumed the assessee was the beneficiary based on third-party evidence without sufficient corroboration. The Revenue also contested the CIT(A)'s relief on the cost of acquisition of shares in M/s Sundar Power Company Ltd. and M/s Kealwan Technologies Pvt. Ltd.

What were the issues?

1. Whether the Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 139,67,00,000/- made under Section 56(1)(vii) towards amount received on sale of shares held by M/s Dalmia Bharat Enterprises Ltd. as agent/benamidar of the assessee, and whether the AO correctly drew a presumption under Section 132(4A) based on evidence found during the search in the Dalmia group. - Assessee's contention: The proposal to make an addition based on the Investigation Report in the Dalmia group cases is outrageous and without basis. The assessee denied any relation with the Dalmia group and the alleged cash receipts. - Revenue's contention: The CIT(A) erred in deleting the addition, as the AO had analyzed evidence including account entries, emails, SMS, and a note on capital gains. The existence of regular business transactions is not mandatory, and payments were on a 'quid pro quo' basis. The evidence unearthed in the independent search operation of the Dalmia group, which was indulging in unaccounted transactions, supported the finding, and the mention of 'Jagan Reddy' and 'Vijaisaiji' and payments soon after the sale of shares of Bharathi Cement Corporation Pvt. Ltd. cannot be a coincidence. 2. Whether the Commissioner of Income Tax (Appeals) erred in granting relief on the issue of the cost of acquisition of shares of M/s Sundar Power Company Ltd. from two Mauritius-based entities, directing the AO to follow provisions relating to valuation of shares. - Revenue's contention: Information from Mauritius tax authorities indicated the entities were pass-through entities, and ultimate investor details were not available or furnished. Mere compliance with RBI and FEMA regulations does not establish genuineness, hence the AO rightly concluded funds were remitted to an unidentified person and determined the cost of acquisition as 'Nil'. 3. Whether the Commissioner of Income Tax (Appeals) erred in granting relief on the issue of the cost of acquisition of shares of M/s Kealwan Technologies Pvt. Ltd. by directing the AO to follow provisions applicable at the time of transfer, as against the value determined by the AO. - Revenue's contention: Shares were purchased at different rates within a year from related parties. M/s Kealwan Technologies Pvt. Ltd. had no independent value and derived value from M/s Sandur Power Company Ltd., thus the AO rightly determined the price at Rs. 800/- per share after considering the value of M/s Sandur Power Company Ltd. shares.

Which sections of the Income-tax Act were involved?

Section 56(1)(vii),Section 132(4A),Section 143(2),Section 142(1),Section 131,Section 132(4),Section 143(3),Section 120(4)(b),Section 124(3),Section 144(3B),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad

Before: Shri Manjunatha G. & Shri K.Narasimha Chary

For Appellant: Shri C.A.Vijay Mehta, AR
Hearing: 30/12/2024Pronounced: 12/02/2025

This appeal filed by the Revenue and cross objection filed

by the assessee is directed against the order dated 30.09.2022 of the learned Commissioner

of Income Tax (Appeals)

ITA No.670/Hyd/2022 & CO No.1/Hyd/2023 Y.S.Jagan Mohan Reddy*=

[Ld.CIT(A)],National Faceless Appeal Centre (NFAC), Delhi pertaining to A.Y.2011-12. ITA 670/Hyd/2022 (Revenue’s Ap

The order continues below.

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