SINGHAL MARKETING PRIVATE LIMITED, RAIPUR,RAIPUR V. ACIT, CENTRAL CIRCLE-1, RAIPUR, RAIPUR

ITA 469/RPR/2024

AI Insights

The case involves Singhal Marketing Private Limited appealing against the order of the Commissioner of Income Tax (Appeals), which confirmed the disallowance of Rs.2,68,00,000 on account of transfer expenses claimed under the head of Capital Gains. The primary legal contention was the validity of the jurisdiction under which the assessment was made, as no formal transfer order under section 127 was issued for the case's transfer from DCIT-2(1) to DCIT-1(1). The Tribunal examined the procedural adherence to jurisdictional transfer and the substantive merits of the disallowance of the claimed expenses.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 106811 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: Kusum Goyal vs. ITO, Sarita Jain vs ITO, Roop Das vs ITO, Shreyansh Bothra vs ITO, Vedanta Resources Ltd. Vs The Asstt. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TARANNUM VERMA
• Assessee Lawyers: R. B. DOSHI; HONBLE CALCUTTA HIGH COURT; IF IT IS
• Keywords: Set aside; Opportunity of being heard; Gift; Capital Gains; Principle of natural justice; Assessment record
• Section: 148; 144; 143(3); 143(2); 250; 192; 271(1)(c); 48; 13; 158BD

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 469/RPR/2024 (िनधाŊरण वषŊ Assessment Year: 2015-16) Singhal Marketing Private Limited, Vandana Building, M. G. Road, Raipur- 492 001, C.G. V s Assistant Commissioner of Income Tax, Central Circle-1, Raipur, C.G. PAN: AADCS2842Q (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri R. B. Doshi, CA राजˢ की ओर से /Revenue by : Smt. Tarannum Verma, Sr. DR सुनवाई की तारीख / Date of Hearing : 27.01.2025 घोषणा की तारीख/Date of Pronouncement : 28.02.2025 आदेश / O R D E R Per Arun Khodpia, AM: This captioned appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeal), NFAC, Delhi, [in short “Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 (in short “the Act”), dated 30.08.2024, for the Assessment Year 2015-16, which in turn arises from the order of Assistant Commissioner of Income Tax-1(1), (in short “Ld. AO”) u/s 143(3) of the Act, dated 11.12.2017. 2 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 2. The grounds of appeal raised by the assessee, are as under: 1. Ld. CIT(A) erred in confirming disallowance of Rs.2,68,00,000/- made by AO on account of transfer expenses claimed by appellant under the head Capital Gains. The disallowance made by AO and confirmed by Ld. CIT(A) is arbitrary, baseless and not justified. 2. The assessment order passed by AO is illegal, ab initio void inasmuch as no notice u/s 143(2) was issued by jurisdictional AO. Assessment order is illegal and liable to be quashed. 3. Assessment order passed by AO is illegal inasmuch as no order u/s 127 was passed for transfer of case from DCIT-2(1), Raipur to DCIT-1(1), Raipur. Consequently DCIT-1(1) did not acquire jurisdiction to frame assessment. Assessment proceedings is illegal and consequent assessment order is liable to be quashed. 4. The appellant reserves the right to amend, modify or add any of the ground/s of appeal. 3. Brief facts are that the assessee is a private limited company, had filed its Return of Income for AY 2015-16 on 30.09.2015 declaring income at “NIL”, consisting of Business Loss of Rs. (5,55,406/-) and Long-Term Capital Loss of Rs. (46,40,342/-). During the assessment proceedings, it was noticed by Ld. AO that the working of Capital Loss by the assessee is not justifiable, as the assessee had claimed transfer charges of Rs. 2,68,00,000/- and claimed expenses towards sale of the subject land. Assessee’s submission that the transfer charges consist of payments towards cancellation of agreements with (i) Vandana Rolling 3 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur Mills for Rs. 78,00,000/- and (ii) Vandana Ispat Ltd. For Rs. 1,90,00,000/-. The claim of assessee before the Ld. AO was denied with the observations that (i) Vandana Rolling Mills and Vandana Ispat Ltd. are group entities of the assessee company, having common directors and shareholders, (ii) It was just to divert the profits from taxable entity to entities having unabsorbed losses, (iii) Unregistered agreements on simple paper, an afterthought, veracity of such arrangement is doubtful (iv) tool of tax evasion, (v) No handing over of possession or any binding encumbrance between the parties at the time of such agreement, just a colorable device, it is a vague claim with no substance, the same cannot be allowed. Ld. AO in conclusion disallowed the claim of assessee for Rs. 2,68,00,000/- and have determined the taxable income of assessee at Rs. 2,19,16,3,75/-. 4. 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 143(3) 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: 4 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 7. Decision: All the information available on record along with the impugned assessment order, the grounds of appeal and submissions filed on various dates by the appellant in this case has been considered. The only issue raised in this appeal is against the disallowance of agreement cancellation charges of Rs.2,68,00,000/- by the AO. The submission made by the appellant as well as the assessment order has been carefully perused. It is noticed that the agreement to sell filed by the appellant is not notarized. Further, no actual payment was made in the form of advance while entering into agreement or compensation at the time of its cancellation only ledger adjustments were made. Although the agreement is stated to be made on 18.09.2007, but no date has been mentioned by either parties or witnesses to the document. Therefore, the AO alter noticing discrepancy is justified in making the disallowance. From the copies of board resolution submitted by the appellant authorizing its directors to sign or to cancel the agreement and to decide the amount of compensation, it is noticed that all the companies involved are located in the same premise. Further, it is noticed from the website of Registrar of companies, MCA that the directors of buyer and seller companies i.e. Shri Subhash Chand Agrawal and Shri Ashok Kumar Agrawal respectively are son of Shri N.L. Agrawal and they have been director/whole time directors of various group companies at different times invariably. The details of directorship of Shri Subhash Chand Agrawal and Shri Ashok Kumar Agrawal in the buyer and seller companies as per the website of Registrar of companies, Ministry of Corporate affairs are as under: 5 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur Buyer/ seller company Name of directors/ whole time director Shri Subhash chand Agrawal Shri Ashok Kumar Agrawal Singhal Marketing Private Limited (Seller) 28.03.1995 to till date ------ Vandana Rolling Mills Limited (Buyer) 01.12.2007 to 01.01.2023 23.11.1994 to 01.04.2009 Vandana Ispat Limited (Buyer) 03.01.1995 to 01.04.2009 03.01.1995 to till date As per the details available on website of Registrar of companies, Ministry of Corporate affairs Shri Subhash Chand Agrawal and Shri Ashok Kumar Agrawal are/were directors/whole time directors in 46 and 26 group companies including the companies Involved in this case at different time period respectively. It is clear that Shri Subhash Chand Agrawal was involved in the capacity of director/whole time director of seller as well buyer companies both to nominate authorized person via board resolution to decide the alleged compensation and Shri Ashok Kumar Agrawal was director in various other group companies. Thus it can be concluded that Shri Subhash Chand Agrawal, the director and the authorized person of the appellant company was a beneficiary in this arrangement being the director of seller companies on the both the occasion. Further the fact that no actual payment were made in the form of advance while entering into agreement or paid compensation by seller at the time of cancellation of contract but made ledger adjustments only clearly indicates that the alleged arrangement with the group 6 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur companies was made to avoid the tax liability. The Hon'ble Apex court has also opined that Tax planning may be legitimate provided it is within the framework of law. Colorable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honorable to avoid the payment of tax by resorting to dubious methods. Therefore, the submissions made by appellant against the disallowance of Rs.2,68,00,000/- are not acceptable. Hence, the disallowance of Rs. 2,68,00,000/- made by the AO on account of transfer expenses vide order u/s 143(3) of the Act for A.Y. 2015-16 is confirmed. Accordingly, the grounds raised in this appeal are dismissed. 5. Dissatisfied with the aforesaid order of Ld. CIT(A), assessee preferred an appeal, which is under consideration before us. 6. At the outset, Shri RB Doshi, authorised representative on behalf of assessee (for short “Ld. AR”), on merits have submitted that, (i) the Assessee entered into two sale agreements on 18.09.2007 and 20.11.2007 with Vandana lspat Ltd. and Vandana Rolling Mills Ltd. for sale of its lands for Rs. 96,85,000/- and 40,00,000/- respectively. Copy or agreements at PN 41 to 44 and 125 to 128 of PB. (ii) On 30.08.2014, assesses company had passed a resolution to cancel both the agreements as the price of land had substantially increased and to offer compensation of Rs. 1,90,00,000/- and Rs.78,00,000/- respectively to the two companies. Resolution at PN 220 & 221 of PB. (iii) Agreement for sale cancelled. Cancellation agreements dt.19.09.2014 & 20.11.2014 at PN 46 to 48 and 130 to 132 of PN. 7 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur (iv) Impugned lands sold for Rs.4,17,36,970/-. Sale deed at PN 50 to 124 and 134 to 219 of PB. Cancellation compensation of Rs.2,68,00,000/- claimed as deduction from computation of capital gain. Computation at PN 36 to 39 of PB. Old agreements were cancelled on account of business prudence as eventually, assessee could sell the lands at a much higher price. (v) Amount of cancellation compensation included by the two companies in their income. Extract of profit & loss a/c at 49 to 133 of PB. (vi) Rs.2,68,00,000/- being cost of transfer is allowable as deduction. 7. Baked by aforesaid submission, Ld. AR argued that the transactions of cancellation charges are duly recorded and are genuine being through banking channel, therefore, these are allowable as deduction while calculating the claim of assessee under Capital Gains. Disallowance of the same by revenue authorities without properly appreciating the facts of the case was arbitrary, baseless and unjustified, therefor the orders of both the authorities below are liable to be quashes and the claim of assessee deserves to be allowed. 8. Per contra, Dr. Tarannum Verma. Ld. Sr. DR representing the revenue reiterated the facts from orders of both the revenue authorities and submitted that the order of Ld. AO was well speaking with the elaborate reasons to substantiate the findings that the claim of assessee is not tenable in the law, the same had thus rightly rejected by both revenue 8 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur authorities. Ld. Sr. DR strongly supported the orders of Ld. AO as well as Ld. CIT(A) and requested to uphold the same. 9. We have considered the rival contentions, perused the material available on records. After giving a thoughtful consideration to the facts of issue, evidence and material available before us, we observe that alleged agreements are executed within the group entities, in absence of any corroborative evidence to prove the genuineness of such transactions / agreements such as, registered agreements, no actual payment of advance for executing the agreement or payment of compensation for cancellation of agreement, only ledger adjustments are made. We, find substance in the finding of Ld. AO, which is further approved by the Ld. CIT(A) and rightly so for the reason that the entire exercise to prepare an unregistered agreement on a plain paper, resolution and ledger entries for payments of cancellation charges are just an afterthought in the form of self-made evidence for evasion of legitimate taxes though colourable devise which is not permissible within the framework of law. We, thus, approve the decision of Ld. CIT(A) on merits. In result Ground no. 1 of the assessee’s appeal, stands dismissed. 9 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 10. The next contention raised by the Ld. AR was qua the jurisdiction of the Ld. AO over the case of assessee, that the Assessment order passed by AO is illegal in as much as no order u/s 127 was passed for transfer of case from DCIT-2(1), Raipur to DCIT-1(1), Raipur. Consequently DCIT-1(1) did not acquire jurisdiction to frame assessment. Assessment proceedings is illegal and consequent assessment order is liable to be quashed. On these issues the submissions of the Ld. AR are as under: 1. Jurisdic1ion over assessee was with ACIT 1(1), Raipur. 2. Initially notice u/s 143(2) issued by ACIT 2(1), Raipur who thereafter transferred the case to ACIT 1(1), Raipur. No order u/s 127 received by the assessee and no reference of the same appearing in the assessment order. 3. ACIT 1(1). Raipur did not acquire jurisdiction validly in absence of any transfer order u/s 127. 4. Reliance on: i) Kusum Goyal vs. ITO (2010) 329 ITR 283 (Cal.), PN 240 to 244 of PB, relevant finding at PN 244, para no. 10.  Assessee challenged transfer of case from ITO Ward 54(2), Kolkata to DCIT. Circle 54, Kolkata. Both under same PCIT (Para No. 2, PN 242 of PB).  DCIT specifically informed the assessee that no order u/s 127 was needed for transfer of case from ITO, Ward 54(2), Kolkata to DCIT, Circle 54, Kolkata (para no.9, PN 243-244 of PB).  Vide para 10. PN 244 of PB, Hon'ble High Court held that for transfer within the same city, locality or place although opportunity of hearing is dispensed with other statutory formalities which includes issuing an order are required to be complied with. Argument of Revenue that in case of any intra city transfer no order is required, cannot be accepted in view of the law laid down in cash in Kashiran Aggarwalla (1965) 56 ITR 14 (SC) and S. L. Singhania (1992) 193 ITR 275 (Del.). 10 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur ii) Sarita Jain vs ITO in ITA No. 260/RPR/2023 dt. 24.06.2024. PN 260 to 281 of PB. Relevant finding at PN 280, para no.19 iii) Roop Das vs ITO in ITA No. 310 & 311/RPR/2023 dt. 09.04.2024. PN 245 to 259 of PB. Relevant finding at PN 254 (para no. 13) and 257 (para no. 14). iv) Shreyansh Bothra vs ITO in ITA No. 114/RPR/2019 dt. 16.10.2022. PN 224 to 239 of PB. 5. Notice issued by AO, who had no jurisdiction over the assessee and if thereafter, the jurisdictional AO issues any notice after the case is transferred to him, it could not be held to be in continuation of the proceedings initiated by the earlier AO, who was the non-jurisdictional AO. Reliance on Pavan Morarka vs ACIT (2022) 325 CTR (Bom.) 377. referred to and relied in Shreyansh Bothra at para no. 13 of the order. 6. ACIT 1(1), Raipur was required to issue notice u/s 143(2) before the time prescribed under the proviso to sec. 143(2). 11. Elaborating on the aforesaid contentions further, Ld. AR submitted that the aforesaid issue is squarely covered by the decision of SMC Bench of the ITAT, Raipur in the case of Roop Das Vs ITO (supra), wherein after considering the judgments in the case of Ajanta Industries Vs. Central Board of Direct Tax (1976) 102 ITR 281 (SC), and judgment of Hon’ble High Court of Calcutta in the case of Kusum Goyal Vs. ITO & Ors. (supra), ITAT has held that dehors order of transfer u/s 127(1) of the Act, the Ld. AO, who had framed the assessment, is not vested with valid assumption of jurisdiction, therefore, the assessment proceedings on the foundation of 11 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur such invalid assumption of jurisdiction is liable to be quashed. The exhaustive findings by the SMC Bench of the Tribunal in the case of Roop Das Vs. ITO (supra), are extracted for the sake of clarity and its applicability in the present case: 9. I have thoughtfully considered the contentions of the Ld. Authorized Representatives of both the parties in the backdrop of the material available on record. Before proceeding any further, I deem it fit to cull out the provisions of Section 127 of the Act, which reads as under: \"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,- (a) 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 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; (b) 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 12 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur order transferring the case may, similarly, be 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. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. (4) The transfer of a case under sub-section (1) or sub-section (2) may be made at any stage of the proceedings, and shall not render necessary the re- issue of any notice already issued by the Assessing Officer or Assessing Officers from whom the case is transferred.\" (emphasis supplied by me) 10. Admittedly, it is a matter of fact borne from record that the case of the assessee was transferred by the ITO-1(4), Bhilai to ITO-2(1), Bhilai vide his letter dated 11.04.2018. On a perusal of the aforesaid letter dated 11.04.2018, it transpires that the ITO-1(4), Bhilai had stated that though the case of the assessee was reopened u/s. 148 of the Act by his office but since the jurisdiction over the said case was vested with ITO-2(1), Bhilai, therefore, the same was being transferred to him for taking necessary action. As regards the claim raised by the ITO-2(1), Bhilai vide his letter dated 14.03.2024 that the case of the assessee was transferred from ITO-1(4), Bhilai to ITO-2(1), Bhilai by virtue of an order u/s. 120(2) of the Act, the same in absence of any supporting material cannot be summarily accepted on the very face of it. On the contrary, the Ld.AR had placed on record a Notification No.1/2014-15 dated 15.11.2014, as per which, the JCIT, Range-2, Bhilai in exercise of the powers conferred upon him under sub-section (1), (2) and (3) of Section 120 of the Act by Pr. Commissioner/Commissioner of Income Tax-2, Raipur, had directed the A.O to 13 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur exercise and perform functions under the Income Tax Act, 1961/Wealth Tax Act, 1957 in respect of respective cases or classes of persons in the territorial areas specified in the notification. Nothing has been brought on record by the Ld. DR which would reveal that any notification vesting jurisdiction over the case of the assessee with the ITO-2(1), Bhilai was issued after the notice u/s 148, dated 26.03.2018 of the ITO-1(4), Bhilai. 11. Apropos the claim raised by the A.O, i.e. ITO-2(1), Bhilai in her letter dated 14.03.2024 (supra) that as the jurisdiction over the assessee's case remained within the same range, therefore, there was no requirement for the Pr. CIT to pass any order of transfer u/s. 127 of the Act, the same is found to be both factually and principally wrong. The case of the assessee had been transferred from ITO-1(4), Bhilai to ITO-2(1), Bhilai, i.e from Range 1 to Range 2. Be that as it may, as per the mandate of Section 127 of the Act transfer of any case from one A.O to any other A.O would mandatorily require recording of reasons for doing so on the part of the concerned authority, viz. Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. It is further provided in sub- section (1) of Section 127 of the Act that wherever it is possible to do so the appropriate authority shall afford a reasonable opportunity of being heard in the matter to the assessee. Although sub-section (3) of Section 127 of the Act dispenses with the requirement of affording a reasonable opportunity of being beard to the assessee in a case where the transfer of case is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place, but it does not dispenses with the statutory requirement of recording of the reasons for doing so by the concerned 14 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur authority. As such, in the case before me, where jurisdiction over the case of the assessee had been transferred to ITO-2(1), Bhilai from ITO-1(4), Bhilai, i.e. within the same city, though no requirement of affording a reasonable opportunity of being heard to the assessee was required, but the pre-condition contemplated under sub section (1) of Section 127 of the Act, i.e., recording of reasons for doing so by the appropriate authority could not have been done away with. 12. My aforesaid view that the requirement of recording reasons u/s.127(1) of the Act for transferring of a case from one A.O to another is mandatorily required, is supported by the judgment of the Hon'ble Supreme Court in the case of Ajanta Industries Vs. Central Board of Direct Tax (1976) 102 ITR 281 (SC). It was, inter alia, observed by the Hon'ble Apex Court that requirement of recording reasons u/s. 127(1) of the Act is a mandatory direction under the law and non- communication thereof is not saved by showing that the reasons exist in the files although not communicated to the assessee. It was further observed that recording of reasons and disclosure thereof is not a mere idle formality. The Hon'ble Apex Court observed that now 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. For the sake of clarity, the relevant observations of the Hon'ble Apex Court are culled out as under: \"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.\" 15 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur (emphasis supplied by me) 13. Also, my aforesaid view that as per the mandate of law, a transfer order is statutorily required to be passed by the prescribed authority u/s. 127 of the Act, and an A.O cannot on his own transfer an income tax file to another officer in absence of the aforesaid order is squarely covered by the judgment of the Hon'ble High Court of Calcutta in the case of Kusum Goyal Vs. ITO and Ors, (2010) 329 ITR 283 (Cal.). For the sake of clarity, the relevant observations of the Hon'ble High Court are culled out as under: \"The question which falls for consideration is whether under section 127 of the Act an Assessing Officer on his own can transfer an income tax file to another officer and whether an order is required to be passed. In order to appreciate the issue it is necessary to refer to the relevant provisions in section 127 of the Act which is as under : \"127.(1) The Director General or Chief 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 Director General or Chief Commissioner or Commissioner - (a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred 16 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 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; (b) Where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place.\" (Emphasis supplied ) From a reading of the language of section 127(3) it is evident that when a file is transferred from one assessing officer to another whose offices are located in the same city, locality or place, though other statutory formalities are required to be complied with, the opportunity of hearing as postulated in section 127 (1) and (2) in case of inter city transfer, is not required. Now keeping the position of law in mind let the letter/notice dated 21st October, 2009 issued by the respondent no.2 be examined. In order to appreciate the issue it is necessary to refer to the relevant portion of the impugned intimation issued by the respondent no.2 which is as under: \"Since your income has exceeded minimum threshold limit of Rs.10 lac for the assessment year 2007-2008, the jurisdiction to/of your case automatically gets vested with the Jurisdictional DCIT-Circle-54, Kolkata as per above Directives. 17 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur You are kindly informed hereby that no order u/s 127 of the Income Tax Act 1961 by the Ld. Commissioner of Income Tax - XIX, WB is required to be passed for getting the assessment records transferred from ITO Ward- 54(2), Kolkata to DCIT Circle-54, Kolkata by virtue of the provisions of sub- section 3 of section 127 of the Income Tax Act, 1961. For your ready reference the provisions of the said section is appended below. Section 127 sub-section (3) of the Income Tax Act, 1961 states/reads as: ...... From the foregoing provisions it is clear that the Commissioner of Income Tax is not required to pass any order transferring the case from/to any Assessing Officer(s) if \"the offices of all such officers are situated in the same city, locality or place.\" (Emphasis supplied). It is evident that the respondent no.2 had sought to justify his action by stating that the jurisdiction automatically gets vested with the jurisdictional officer and no order under section 127 is required to be passed. In my view, the letter/notice dated 21st October, 2009 is patently illegal since it has been held in this judgement that in case of transfer within the same city, locality or place although the opportunity of hearing as postulated in section 127(1) and (2) has been dispensed with, other statutory formalities which includes issuing an order are required to be complied with. Similarly transfer of files for the assessment years 2007-2008, 2008-2009 and the earlier years as intimated in the letter/notice dated 30th July, 2009 issued by the respondent no.1 is also bad in law. The argument of the respondents that in case of intra city transfer no order is required to be passed, cannot be accepted in view of the settled position of law in Kashiram Aggarwalla (supra) and in S.L.Singhania (supra) wherein the validity of the orders were under challenge, meaning thereby an order recording transfer has to be on the records. The judgement in Subhas Chandra Bhaniramka (supra) where it has been held that in case of transfer of file under section 158BD resort has to be made to section 127 also 18 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur applies in the instant case. The judgement in M.A.E.K.K. Verma (supra) relied on by the Revenue is not applicable as it dealt with the question whether in case of intra city transfer notice is required to be served and whether separate orders of transfer are required under Wealth Tax Act, 1957 and Gift Tax Act, 1956. Therefore, since it has been held in this judgement that it is imperative on part of the respondents to issue order under section 127(3), the letters/notices under challenge are set aside and quashed. The writ petition is allowed. Consequential proceedings are also set aside and quashed. Accordingly, the notice dated 6th January, 2010 regarding the penalty proceedings under section 271(1)(c) for the assessment year 2006-07 is also set aside and quashed. The application being G.A.No. 81 of 2010 is also allowed. No order as to costs\" (emphasis supplied by me) 14. As in the case before me no order of transfer u/s. 127(1) of the Act had been shown to have been passed, and in fact, the case of the assessee had been transferred simplicitor on the basis of a letter dated 11.04.2018 addressed by ITO- 1(4), Bhilai to ITO-2(1), Bhilai; therefore, it is a clear case of invalid assumption of jurisdiction on the part of the ITO-2(1), Bhilai who in absence of any valid assumption of jurisdiction had framed the assessment vide his order u/s.147 r.w.s. 144 of the Act, dated 30.11.2018. I, thus, in terms of my aforesaid observations quash the assessment framed by the ITO-2(1), Bhilai u/s. 147 r.w.s. 144 of the Act dated 30.11.2018 for want of valid assumption of jurisdiction on his part. 19 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 15. As I have quashed the assessment framed by the A.O u/s. 147 r.w.s. 144 of the Act dated 30.11.2018 for want of valid assumption of jurisdiction, therefore, I refrain from adverting to and dealing with the grounds of appeal raised by the assessee, based on which, the additions made by the A.O has been assailed before me, which, thus, are left open. 16. In the result, the appeal of the assessee in ITA No.310/RPR/2023 for A.Y.2011-12 is allowed in terms of the aforesaid observations. 12. In rebuttal, Ld. Sr. DR, requested for some time to consult the assessment records and a report from the Ld. AO, as to find out whether any order of transfer u/s 127 of the Act from DCIT-2(1) [who had initiated the assessment proceedings by issue of notice u/s 143(2)] to DCIT-1(1) [to whom, the case was subsequently transferred and who had framed the impugned assessment u/s 143(3) dated 11.12.2017] was issued or not ? Time was granted and a report dated 14.01.2025 prepared by the Ld. DCIT-1(1), Raipur was submitted before us, which for the sake of clarity has been extracted as under: 20 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 21 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur 13. Based on aforesaid report, it was submission by the Ld. Sr. DR that, although copy of order u/s 127 of the Act could not be traced by the concerned AO, but the PAN of assessee was transferred from Circle- 1(1), Raipur to Ward-1(1), Raipur on 08.06.2020 and Circle-2(1), Raipur to Circle-1(1), Raipur on 13.12.2017, accordingly, there was a valid transfer of PAN as per orders of Ld. Pr.CIT-1, Raipur, therefore, the issue of transfer raised by the assessee does not call for any inference at this stage, the same is without any substance, consequently, liable to be 22 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur rejected and the adjudication in the present matter shall be on merits of the facts. Ld. Sr. DR placed her reliance on the judgment of Orrisa High Court in the case of Vedanta Resources Ltd. Vs The Asstt. Commissioner of Income Tax, in W. P. (C) Nos. 6372 & Ors. of 2022 dated 09.02.2023, wherein Hon’ble High Court while dealing with order of transfer u/s 127(2) of the Act had observed that, “in terms of section 120 of the Act, it might be possible for the CIT(IT) to transfer jurisdiction from one Assessing Officer to Another within his jurisdiction, there is no power u/s 120 of the I. T. Act to transfer jurisdiction to an AO, who is not subordinate to the CIT(IT). For that purpose, it is only section 127(2)(a) of the Act that could apply”. Based on such observation by the Hon’ble Orrisa High Court, it was the prayer that, since in present case, the jurisdiction of both the AO’s within whom the case was transferred falls under the jurisdiction of same PCIT, Raipur, therefore, the transfer order u/s 127 is not required, accordingly, the contention raised by the Ld. AR are not tenable in the eyes of law, which needs to be rejected in view of the said judgment of Hon’ble Orrisa High Court. 14. In rebuttal, to the report of Ld. AO dated 14.01.2025, Ld. AR submitted that as there was no trace about the order of transfer u/s 127 in 23 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur the present case, admittedly, there is no order u/s 127 was issued, which is mandatory under the relevant provisions of the Act, which is a settled position of law as laid down by Hon’ble Apex Court, Hon’ble Calcutta High Court which in the cases referred to supra, is further followed by the jurisdictional tribunal, in absence of which the order passed by the Assessing Officer, who does not conferred with the valid assumption of jurisdiction to frame the assessment in the present case, the assessment order so passed u/s 143(3) dated 11.12.2017 by such an Assessing Officer is unsustainable in the eyes of law, illegal and liable to be quashed. Ld. AR further pointed out that both the dates i.e., 13.12.2017 and 08.06.2020, mentioned by the present AO in his report dated 14.01.2025 are post the date of completion of assessment in the present case on 11.12.2017, even the date of transfer in the assessment order dated 21.07.2017, does not have any coincide with the aforesaid dates. After pointing out such facts from the report of present AO, Ld. AR argued that in absence of mandatory order of transfer u/s 127, the assessment framed in present case has no sanctity to stand under the mandate of law, accordingly, the same merits to be struck down. Regarding reference of judgment of Hon’ble Orrisa High Court in the case of Vedanta Ltd. (supra), it was the submission by Ld. AR that though the order passed by Hon’ble Orrisa High Court, while deciding the issue of transfer of case 24 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur from CIT(IT)-1, New Delhi to his counterpart at Kolkata, the reference to section 120 was made for transfer of jurisdiction from one Assessing Officer to another within the jurisdiction of same CIT, however, since the transfer of jurisdiction in present case was done by passing an order u/s 120 could not be substantiated by the revenue, even the PAN transfer details pertains to dates subsequent to the passing of impugned assessment, thus, there was no communication effectively transfer from one AO to another in the present case. Therefore, the judgment in the case of Vedanta Resources Ltd.(supra), cannot be of any help to revenue in the instant case. 15. Ld. AR further argued that, without prejudice to the aforesaid contentions even if it is presumed that there was a transfer of jurisdiction as per provisions of section 120 of the Act, being both the Assessing Officers, within whom the transfer has took place are working under the jurisdiction of same PCIT, the order of Hon’ble Calcutta High Court in the case of Kusum Goyal Vs. ITO & Othrs. (supra), shall prevail and apply in the present case following the ratio of law laid down in the judgment of Hon’ble Apex Court in the case of CIT Vs Vegetable Products, (1973), 88 ITR 192 (SC), wherein, Hon’ble Apex Court has held that, “If the language is plain, the fact that the consequence of giving effect to it. may 25 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. This is a well 'accepted rule of construction recognised by this Court in several of its decisions.”, accordingly, the issue in present case, which is in favour of assessee by Hon’ble Calcutta High Court and if it is considered to be against the assessee as per the impugned judgment of Hon’ble Orrisa High Court, the judgment favouring the assessee must be adopted. With such assertion, it was the request that the decision of Hon’ble Calcutta High Court in the case of Kusum Goyal (supra), may be applied in the present case which is followed by ITAT, Raipur SMC bench in the case of Roop Das vs ITO (supra), consequently, the impugned order passed u/s 143(3) dated 11.12.2017 is liable to be quashed. 16. We have considered the rival submissions, perused the material available on record and case laws relied upon by the Ld. AR in support of the aforesaid contention. Admittedly, on facts it can be safely gathered that in present case while the proceedings of assessment u/s 143(3) are transferred from DCIT-2(1) to DCIT-1(1), Raipur, the mandatory order u/s 127 was not passed and, therefore, the same was 26 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur stated to be not traceable on records by the revenue. Regarding transfer of PAN, it was brought to our notice by the department that an order was passed vide no. 200000417990 dated 13.12.2017, the same is also issued after 11.12.2017 the date of passing of the impugned order u/s 143(3), thus, the same remains irrelevant in the present context. Regarding reliance of revenue on the judgment of Hon’ble Orrisa High Court in the case of Vedanta Resources Ltd. Vs ACIT (supra), though no order u/s 120 passed by the jurisdictional PCIT have been placed before us, even if it is considered that the order for PAN transfer dated 13.10.2017 is passed as per provisions of section 120, the principle of liberal construction as laid down by Hon’ble Apex Court in the case of CIT vs Vegetable Products Ltd. (supra), shall come to the rescue of assessee, thereby we are inclined to accept the contention raised by Ld. AR. In sum & substance, the decision of ITAT, Raipur in the case of Roop Das Vs ITO (supra), have a strong bearing on the identical facts in the present case, consequently, the impugned order dated 11.12.2017, dehors an order of transfer u/s 127, cannot survive, as the validity of jurisdiction assumed by Ld. AO i.e., DCIT-1(1), Raipur, who had framed the assessment, which was initiated by DCIT-2(1), Raipur was not validly transferred. In totality of the facts and circumstances, as the impugned order u/s 143(3) dated 11.12.2017 was framed by Ld. AO i.e., DCIT-1(1), 27 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur Raipur, in absence of vested assumption of jurisdiction, thus, respectfully following the decision / judgments relied upon by the Ld. AR, we hold that the impugned assessment order cannot survive for the want of valid assumption of jurisdiction, the same therefore, stands quashed. 17. As we have quashed the assessment framed by the AO i.e., DCIT-1(1), Raipur u/s 143(3) of the Act dated 11.12.2017 in terms of our aforesaid observations, we refrain from deliberating and to deal with the remaining legal ground no. 2 of the present appeal raised by the assessee, the same, therefore, has been left open. 18. In result, the appeal of assessee in ITA No. 469/RPR/2024 is partly allowed, in terms of our aforesaid observations. Order pronounced in the open court on 28/02/2025. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 28/02/2025 Vaibhav Shrivastav 28 ITA No. 469/RPR/2024 Singhal Marketing Private Limited Vs. ACIT, Central Circle-1, Raipur आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- Singhal Marketing Private Limited 2. ŮȑथŎ / The Respondent- ACIT, Central Circle-1, Raipur 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // सȑािपत Ůित True copy // "