SOVNA CHANDAK, ROURKELA V. WARD-2, ROURKELA, ROURKELA

ITA 266/CTK/2023

AI Insights

This case involves an appeal by Sovna Chandak, representing M/s. Hathi Industries, against the assessment order for the year 2015-16, which was passed by the ITO, Ward-2, Rourkela. The primary contention was the improper transfer of jurisdiction and the lack of procedural compliance, specifically the absence of a notice under section 127 of the Income Tax Act, which is required for transferring the case file from one jurisdiction to another. The appellant also contested the assessment of capital gains from transactions involving Jackson Investments Ltd., alleged to be a penny stock, arguing that the principles of natural justice were violated as they were not given an opportunity to rebut the evidence against them.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300466 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 16-10-2023
• Assessment Year: misc
• Appeal Filed On: 13-08-2023
• Other Referred Cases: CIT vs. Shivkumar Agarwal, 186 ITR 734 (Orissa)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Set aside; Capital Gains

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE Sovna Chandak, M/s. Industries, Udit Rourkela. PAN/GIR No. (Appellant This is an appeal filed by the assessee aga CIT(A), NFAC, Delhi 24/1053792553(1) 2. Shri M.R.Sahu, CA appeared for the ld Sr DR appeared for the revenue. 3. It was submitted by ld AR that the return of income was filed by the assessee with ITO, Ward copy of the return, which is also shown at page extracted below: IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK ‘SMC’ BENCH, CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL ITA No.266/CTK/2023 Assessment Year : 2015-16 Sovna Chandak, M/s. Hathi Industries, Uditngar, Vs. ITO, Ward PAN/GIR No.AATPR 3275 M (Appellant) .. ( Respondent Assessee by : Shri M.R.Sahu, CA Revenue by : Shri Charan Dass, Date of Hearing : 17/10 Date of Pronouncement : 17/10 O R D E R This is an appeal filed by the assessee against the order of the ld CIT(A), NFAC, Delhi dated 19.6.2023 in Appeal No.ITBA/NFAC/S/250/2023 24/1053792553(1) for the assessment year 2015-16. Shri M.R.Sahu, CA appeared for the assessee and Shri Charan Dass, ld Sr DR appeared for the revenue. It was submitted by ld AR that the return of income was filed by the assessee with ITO, Ward-2(4), Cuttack. Ld AR drew my attention to the copy of the return, which is also shown at page 1 of the paper book and extracted below: Page1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, , CUTTACK JUDICIAL MEMBER ITO, Ward-2, Rourkela Respondent) M.R.Sahu, CA : Shri Charan Dass, Sr DR 10/2023 : 17/10/2023 inst the order of the ld ITBA/NFAC/S/250/2023- 16. assessee and Shri Charan Dass, It was submitted by ld AR that the return of income was filed by the 2(4), Cuttack. Ld AR drew my attention to the 1 of the paper book and ITA No.66/CTK/2023 Assessment Year : 2015-16 Page2 | 8 “ ITA No.66/CTK/2023 Assessment Year : 2015-16 Page3 | 8 4. It was the submission that notice u/s.143(2) of the Act was issued by the ITO, Ward -2(4), Cuttack on 28.7.016. It was the submission that after the said notice was issued, the file of the assessee was shifted to ITO, Ward-2, Rourkela. It was the submission that no notice u/s.127 nor order u/s.127 had been issued to the assessee and no objection of the assessee had been called for. Ld AR has filed a letter today dated 17.10.2023 mentioning that the ITO, Ward -2(4), Cuttack is the Assessing Officer of the assessee for the assessment year 2015-16 as follows: “As required by the Hon’ble Member, I am confirming that the AO is ITO, Ward 2(4), Cuttack for the assessee as mentioned in the assessment order dated 29.11.2017.” It was the submission that as the assessee had not been served with the order nor notice u/s.127, the assessment order as passed by the AO being ITO, Ward-2, Rourkela is an nvalid order. It was the further submission that the assessment has been done by bringing to tax the capital gains claimed as exempt by the assessee u/s.10(38) of the Act in respect of the transaction relating to alleged penny stock being Jackson Investments Limited. It was the submission that neither the statement of the person who alleged the Jackson Investments Ltd., as penny stock has been put to the assessee nor has opportunity been granted to the assessee nor has any evidence as relied upon by the AO been put to the assessee. It was the submission that the assessment order is liable to be annulled on ITA No.66/CTK/2023 Assessment Year : 2015-16 Page4 | 8 account of violation of principles of natural justice as also on account of jurisdiction. 5. In reply, ld Sr DR vehemently supported the order of the AO and ld CIT(A). Ld Sr DR submitted that the assessee has cooperated in the assessment and, therefore, as per provisions of section 292BB, the assessment order is to be upheld. It was the further submission that the file had been transferred to ITO, Ward (2),Rourkela on account of residential address of the assessee being at Rourkela. It was the submission that the order of the ld CIT(A) is liable to be upheld. It was the submission that the assessee has not been able to prove the genuineness of investment in Jackson Investments Ltd., by the assessee. 6. I have considered the rival submissions. A perusal of the facts of the present case clearly shows that the assessee has made offline purchase of the scrip of Jackson Investments Ltd., from Saikat Tradelink Private Limited. A perusal of the assessment order at page 6 shows the name of various persons whose statements have been recorded in regard to Jackson Investments Ltd. None of these statements were put to the assessee nor produced before the Tribunal. The assessment order is nothing but a thesis on how penny stock transactions are done. No reference of the statement where the assessee’s name is referred to has been produced. The assessee’s transactions have not been specifically pointed out by the alleged entry operators. It is also an admitted fact that ITA No.66/CTK/2023 Assessment Year : 2015-16 Page5 | 8 other than producing the ledger account of the share transactions, the purchase bill of Saikat Tradelink Private Limited and the statement showing the payment and receipt of the consideration and demat account has also been produced and nothing else In the said demat account, the demat request is on 7.12.2013 and the demat acceptance is on 19.12.2013. The demat account further shows the sale is from 3.11.2014 to 2.2.2015. It is also noticed from the assessment order that notice u/s.143(2) has been issued by the Assessing Officer being ITO, Ward 2(4), Cuttack. The assessment order does not talk of any order having been passed u/s.127 of the Act. In such situation, how the Assessing Officer being ITO, Ward-2, Rourkela could have passed an assessment u/s.143(3) on the said return in respect of the notice u/s.143(2) issued by the ITO, Ward 2(4),Cuttack and the same is valid is not evident. This being so, I have no alternate option but to set aside the assessment order as passed irregularly by the ITO, Ward-2, Rourkela dated 29.11.2017 for the assessment order 2015-16 in the case of the assessee. However, in view of the decision of the Hon’ble Jurisdictional High Court in the cases of CIT vs. Shivkumar Agarwal, 186 ITR 734 (Orissa), as it is evident that notice u/s.143(2) has been issued by the ITO, Ward 2(4), Cuttack and ld AR of the assessee has also admitted that the jurisdiction in respect of the assessee lies with the AO being ITO, Ward 2(4), Cuttack for the assessment year 2015-16, as the irregularity has taken place at the point of the proceedings of the assessment after the ITA No.66/CTK/2023 Assessment Year : 2015-16 Page6 | 8 issue of notice 143(2), by the ITO, Ward 2(4), Cuttack, the issues in this appeal would stand restored to the file of the ITO, Ward 2(4), Cuttack for proceedings from the point of issuance of notice u/s.143(2) of the Act. This is in view of the decision of the Hon’ble Jurisdictional High Court in the case of Shivkumar Agrawal (supra), which has also been followed by the coordinate Bench of this Tribunal in the case of Ekalavya Career Academy Trust in ITA No.176/CTK/2016 order dated 31.5.022, wherein, on identical facts, it has been held as under: “14. Admittedly, under normal circumstances, a consequential assessment order passed by the ITO Ward-2, Rourkela would be liable to be quashed. However, a perusal of the assessment order shows that a notice u/s.143(2) of the Act had originally been issued by the ACIT, Rourkela Circle, Rourkela, who had the jurisdiction to do the assessment of the assessee. The procedural defect occurred when the JCIT, Rourkela Range, Rourkela transferred the file of the assessee from the ACIT, Rourkela Circle, Rourkela to the ITO Ward- 2, Rourkela. This procedural defect is incurable and at the point of defect the proceedings would have to be cut. However, as valid proceeding had been initiated by the ACT, Rourkela Range, Rourkela, the assessment order is being set aside and the assessment is restored to the file of ACIT, Rourkela Circle, Rourkela for completion of the assessment insofar as the proceedings had been validly initiated but the proceedings had been disposed off by an officer having no jurisdiction. This does not mean that proceedings came to an end. The proceedings can validly be completed and finalized by an officer who has valid jurisdiction and who had initiated the proceedings. This view of ours find support from the decision of the Hon’ble Jurisdictional High Court in the case of Shivkumar Agrawal [1990] 186 ITR 734 (Orissa). 15. Under such circumstances, the assessment order passed by the ITO, Ward-2, Rourkela in the case of the assessee for the A.Y.2010- 2011 is set aside. Consequently, the order of the ld. CIT(A), who was adjudicated the appeal against the said assessment order passed by the ITO Ward-2, Rourkela, is also set aside. As the proceedings have been validly initiated by the ACIT, Rourkela Circle, Rourkela in the ITA No.66/CTK/2023 Assessment Year : 2015-16 Page7 | 8 case of the assessee for the assessment year 2010-20 11, the issues in the present appeal are restored to the file of ACIT, Rour kela Circle, Rourkela for de novo assessment in accordance with law.” 7. In the set aside proceedings, if the AO proposes to use any evidence against the assessee, the same shall be provided to the assessee for his rebuttal. The assessee shall also produce all such evidences as are required by the AO to substantiate his claim u/s.10(38) of the Act. It is also noticed that the ITO, Ward 2, Rourkela when passing the assessment order has not given any evidence but has simply relied upon statements recorded from various persons for disallowing the claim of the assessee. Such statement cannot be relied upon unless the same are put to the assessee for rebuttal. 8. In the result, appeal of the assessee stands partly allowed for statistical purposes. Order dictated and pronounced in the open court on 17/10/2023. Sd/- (George Mathan) JUDICIAL MEMBER Cuttack; Dated 17/10/2023 B.K.Parida, SPS (OS) ITA No.66/CTK/2023 Assessment Year : 2015-16 Page8 | 8 Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Sovna Chandak, M/s. Hathi Industries, Udidngar, Rourkela 2. The Respondent: ITO, Ward-2, Rourkela 3. The CIT(A)-NFAC, Delhi. 4. Pr.CIT, Sambalpur 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//