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Facts
The assessee's income tax assessments for AY 2016-17, resulting in additions for undisclosed investments and short-term capital gains, were made ex-parte under section 144 due to non-compliance with notices. The CIT(A) set aside the assessments for fresh adjudication by the AO, relying on a new proviso to section 251(1)(a). The assessee appealed to the ITAT, contending that the CIT(A) failed to address crucial legal grounds challenging the AO's jurisdiction, specifically regarding the absence of a timely notice under section 143(2) and a transfer order under section 127.
Held
The Tribunal found that the CIT(A) had indeed overlooked and not adjudicated the fundamental legal grounds concerning the AO's jurisdiction. The ITAT ruled that it was the duty of the CIT(A) to decide all issues raised by the assessee. Consequently, the case was remanded back to the CIT(A) with specific directions to adjudicate these legal grounds, ensuring proper opportunity for the assessee to present their case.
Key Issues
The key legal issues were the validity of the assessment order due to lack of a timely notice under section 143(2) and the AO's jurisdiction in the absence of a transfer order under section 127.
Sections Cited
250, 144, 143(2), 142(1), 69, 127, 251(1)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
आदेश / O R D E R Per Bench:
1. The captioned appeals are filed by the assessee’s namely, (i) M/s Ashta Vinayak Estate, (ii) M/s Ashta Vinayak Farms, pertains to a same group against the separate orders of Commissioner of Income Tax (Appeals), NFAC, Delhi, [in short “Ld. CIT(A)”], dated 12.11.2024 and 18.11.2024, under section 250 of the Income Tax Act, 1961 (in short “the Act”), for the Assessment Year 2016-17, which in turn arises from the order u/s 144 of the Act, passed by Assistant Commissioner of Income Tax, Circle-1(1), Raipur, (in short “Ld. AO”), dated 14.12.2018 and 13.12.2018, respectively.
2. The amended grounds of appeal along with additional grounds of appeal filed by the assessee in the aforesaid appeals are as under:
, Amended Grounds of Appeal:
Additional Ground:
"Assessment order passed by ACIT-1(1), Raipur is illegal inasmuch as no order u/s 127 was passed for transfer of case from ACIT-4(1), Raipur to ACIT-1(1), Raipur. Assessment order is liable to be quashed."
Additional Ground:
"Assessment order passed by ACIT-1(1), Raipur is illegal inasmuch as no order u/s 127 was passed for transfer of case from ITO-2(1), Raipur to ACIT-1(1), Raipur. Assessment order is liable to be quashed."
Since the aforesaid two appeal pertains to same group of assessees, having common and identical issues except the quantum involved therein, therefore, the same are being heard together and decided by this common order.
For the sake of convenience and brevity, the case of M/s Ashta Vinayak Estate in is taken up as the lead case, wherein our observations and decisions on the common issues involved therein, shall apply mutatis mutandis to the grounds raised in the other case in the matter of M/s Ashta Vinayak Farms in .
The brief facts of the case of M/s Ashta Vinayak Estate are that the assessee firm has filed its Return of Income (ROI) on 30.06.2016 by declaring total income of Rs.1,22,97,810/-. The case of assessee was selected through compulsory manual selection. Statutory notices u/s 143(2) was issued on 21.09.2017. Further, notice u/s 142(1) dated 08.12.2018 and 10.12.2018 were issued, seeking details of sales & purchases of lands, producing books of accounts and to substantiate the Short-Term Capital Gain. The assessee did not respond to the notices issued by the Ld. AO, thus, in absence of any response by the assessee on various occasions, the Ld. AO had made additions of Rs.66,66,000/- u/s 69 of the Act, on account of undisclosed investment and for and Rs.10,81,74,000/-, on account of Short Term Capital Gain, respectively.
Aggrieved with the aforesaid additions, assessee preferred an appeal before the Ld. CIT(A) assailing various grounds on merits as well as to challenge the legality in framing the impugned assessments u/s 144 of the Act qua the assumption of jurisdiction by the Ld. AO. After discussing the case of assessee, Ld. CIT(A) disposed of the appeal of the assessee with the following observations: 7. Decision: (i) I have considered the submissions of the appellant and perused the material available on record. In para 1,2 of. page No. 1&2 of the assessment order, the learned AO stated that "Notice u/s 143(2) of the Act dated 21.09.2017 was duly served upon the assessee to produce evidences in support of the Return of Income. Further, notices u/s 142 (1) of the Act dated 08.12.2018 and 10.12.2018 were served upon the assessee seeking details of sales & purchases of lands, producing books of accounts and to substantiate the Short Term Capital Gain claimed. However, the assessee did not comply with the various legal notices in any manner. In absence of any reply from the assessee, it is construed that the assessee has no explanation regarding source of investments in land and to substantiate the LTCG claimed in the ITR. Therefore, the total income of the assessee is being computed as under:-
On perusal of ITS data, it is seen that during the previous year, the assessee has purchased following immovable properties:-
Sl. Date of Transaction Transaction Amount in Rs. Filer Branch 1 21.05.2015 66,66,000/- Sub-registrar, Collectorate Campus, Raipur
However, on perusal of return of income of the assessee, it is found that the assessee has not disclosed any asset in its return of income for the assessment year under consideration. Since, the assessee disclose the transaction of purchase of lands in its return of income or alternatively, since, the assessee has failed to explain the queries raised by the undersigned in respect of the above transactions of Rs.66,66,000/- are construed to be undisclosed investment of the assessee u/s 69 of the Act."
On the other hand, the appellant pleaded that due to its nature of business activity the mailbox was not opened regularly as the appellant has no business over e-mail. In view of that, the appellant pleaded that it was not able to comply with the notice of Ld. AO. Further, the appellant submitted financial statements etc. for the consideration during the appellate proceedings. The remand report called from the Ld. AO not yielded anything other than pleading that the additional evidence should not be admitted at this stage.
(ii) On going through the submissions filed by the appellant, I am of the considered opinion that the issues contained in the response of the appellant require extensive enquiries and verification. It would best serve in the interest of justice if the appellant gets another chance to represent his case before Ld. AO and thereupon Ld. AO can verify the submission of the appellant and conduct necessary enquiries to gather material for a true and correct estimation of income of the appellant.
(iii) As per the newly inserted proviso to section 251(1)(a) of the Act, Commissioner (Appeals) in case of order of assessment made u/s. 144 of the Act, may set aside such assessment and refer the case back to the Ld. AO for making a fresh assessment. This proviso has been inserted in the Act w.e.f. 1.10.2024. The said proviso to section 251(1)(a) of the Act is reproduced as under:
"251. (1) In disposing of an appeal, the Commissioner (Appeals)] shall have the following powers-
in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;
[Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;]
(iv) Thus, as per the new provisions coming into effect from 01.10.2024 the CIT(A) have been granted powers to set- side assessments to Ld. AO in cases where assessment order has been issued u/s 144. As in the present case the assessment order has been issued u/s 144 by the Ld. AO and there are issues which need to be further examined and investigated by the Ld. AO, it's a fit case for set-aside of assessment made by the Ld. AO. In view of the above facts and changes in the Act, as enumerated above, it is felt that the consideration of the submissions filed by the appellant for the first time in the appellate proceedings, are germane to the correct appreciation of the issues under deliberation.
(v) Therefore, the assessment order passed by the Ld. AO u/s. 144 of the Act dated 14.12.2018 is hereby set aside for making fresh assessment, de-novo, after taking into account the above submissions filed by the appellant. Needless to say that the Ld. AO should, while conducting the set aside proceedings, give proper opportunities of representation to the appellant in view of principles of natural justice and take into account any further submissions which it has to file during the course of the said proceedings. The ld. AO should also conduct all necessary enquiries to verify the submissions filed by the appellant. The appellant is also directed to comply with all the notices/correspondences issued by the ld. AO.
(vi) Therefore, all grounds filed by the appellant are thus remanded to the Ld. AO and the case is set aside for re-adjudication by the ld. AO afresh.
In the aforesaid order, Ld. CIT(A) had set aside the assessment for fresh adjudication to the files of Ld. AO, however, the legal ground raised by the assessee challenging the assumption of jurisdiction by the Ld. AO in passing the assessment order without issuance of notice u/s 143(2) within the prescribed time was not adjudicated, therefore, the assessee being aggrieved, preferred the present appeal which is under consideration before us.
At the outset, Shri R. B. Doshi, CA, Authorized Representative (in short “Ld. AR”) on behalf of the assessee have submitted that the assessee is not aggrieved with the decision of Ld. CIT(A) on merits by setting aside the assessment order and remitting the to the file of Ld. AO for fresh adjudication, however as the legal ground raised by the assessee before the Ld. CIT(A) was not adjudicated by him, the same needs to be decided, as the assessment order passed in violation of mandatory provisions of law is illegal, bad in law, at nullity, therefore, liable to be quashed..
Per Contra, Shri S. L. Anuragi, CIT-DR vehemently supported the order of Ld. CIT(A) and submitted that since the issues in appeal of assessee restored back to the file of Ld. AO for fresh adjudication, the assessee has fair opportunity to represent its case before the Ld. AO, therefore the Ld. CIT(A’s) order is justified and deserves to be sustained.
We have considered the rival submissions, perused the material available on record inter alia the amended grounds of appeal including additional ground raised by the assessee qua the validity of assessment for want of assumption of jurisdiction by the Ld. AO, who had passed the assessment. Admittedly, on perusal of order of Ld. CIT(A), it is evident that the legal ground No. 5 raised by the assessee before the Ld. CIT(A) was not deliberated upon, for the sake of completeness of information, the ground raised before the First Appellate Authority, which was not adjudicated, is culled out as under: “Assessment order passed by ACIT-1(1), Raipur is illegal inasmuch as no order u/s 127 was passed for transfer of case from ACIT-4(1), Raipur to ACIT-1(1), Raipur. Assessment order is liable to be quashed.”
The Ld. CIT(A) had only discussed the matter on merits and restore back to the file of Ld. AO for fresh adjudication, whereas it was the duty of Ld. CIT(A) to decide all the issues raised by the assessee during appellate proceedings before him.
In view of aforesaid facts and circumstances in the instant case, as the appeal of assessee was not disposed of by the Ld. CIT(A) qua the legal ground raised by the assessee, therefore, we find it appropriate to restore this matter back to the file of Ld. CIT(A) for the limited purpose to decide the legal ground raised by the assessee before him, and at the same time the assessee would be at liberty to furnish necessary explanations, evidence, supporting case laws etc. before the Ld. CIT(A) to support its legal contentions.
Consequently, the matter for adjudication of legal ground has been referred to the file of Ld. CIT(A) for adjudication of legal ground, following the mandate of law. Needless to say, reasonable opportunity of being heard shall be provided to the assessee in the set aside appellate proceedings.
Resultantly, the present appeal in M/s Ashta Vinayak Estate filed by the assessee is Partly Allowed for statistical purposes. in the case of M/s Ashta Vinayak Estate to the file of Ld. CIT(A) for the limited purpose to adjudicate the legal ground raised by the assessee, having similar facts and circumstances and ground which was not adjudicated by the Ld. CIT(A), the matter in M/s Ashta Vinayak Farms is also directed to restore back to the file of Ld. CIT(A) for adjudication of the legal ground raised therein which was not dealt with. Resultantly, M/s Ashta Vinayak Farms filed by the assessee is Partly Allowed for statistical purposes.
M/s Ashta Vinayak Estate and M/s Ashta Vinayak Farms filed by the assessee are Partly Allowed for statistical purposes, in terms of our aforesaid observations.
Order pronounced in the open court on 04/02/2025.