The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) dismissed the appeal, ruling that no opportunity of hearing was required for the taxpayer when a case is transferred between Assessing Officers within the same city under Section 127(3) of the Income Tax Act, 1961.
The assessee Saikrupa Developers, is involved in the business of developing industrial plots, including purchasing land, developing it, and then selling the industrial plots. On 13.10.2014, the assessee filed their income tax return under Section 139(1) of the Income Tax Act for the assessment year in question, declaring a total income of Rs. NIL after setting off brought forward losses of Rs. 34,194/- for the assessment year 2014-15. On 30.10.2018, a survey action under Section 133A was conducted at the assessee’s business premises located at 418, Gala Empire, Ahmedabad, relating to their industrial plot development activities for the Sankalp Group.
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Additionally, a search was conducted at the corporate office of Robin Goenka, a partner in the assessee firm with a 25% profit-sharing ratio. The search took place at Sankalp House, Bodakdev, and Ahmedabad. Besides his partnership in the assessee firm, Goenka was also a Director of Sankalp Organizers Pvt. Ltd., for whom the industrial plots in question were developed by the assessee firm.
The case background indicates that a survey was conducted at the assessee firm’s premises and a search at Robin Goenka’s corporate office, who holds a 25% partnership in the firm. For the relevant assessment years, the assessee firm had developed and sold certain plots of land for the Sankalp Group. During the search at Robin Goenka’s corporate office, evidence concerning the Sankalp Industrial Estate project at Village Chiyada, Ahmedabad, was discovered and seized.
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The assessee had developed the land and plotted it into various plots totaling 125,350 sq. meters. The Income Tax Department, upon verifying the seized evidence from Robin Goenka’s office, found that the assessee had maintained detailed records of plot bookings, including buyers’ names, plot areas, selling prices, and crucially, the receipt of on-money for the sale of each plot. Consequently, the Department initiated proceedings under Section 148 of the Act by issuing a notice to the assessee on 27.03.2021.
The Department concluded that the documents found during the search at Robin Goenka’s office were self-explanatory and were corroborated by the sale deeds executed by the purchasers of plots in the Sankalp Industrial Estate developed by M/s. Saikrupa Developers. The Assessing Officer, after reviewing the evidence and the assessee’s response, observed that the assessee admitted to developing and selling the industrial plots under the name Sankalp Industrial Estate at Bavla, Ahmedabad. Furthermore, evidence of on-money transactions was found and seized during the search at Shri Robin Goenka’s corporate office.
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The assessee did not deny receiving on-money for the sale of the plots, and the seized documents were corroborated with the firm’s books of accounts, registered sale deeds, and the selling prices listed in the seized materials. As a result, the Assessing Officer made an addition of Rs. 24, 04,282/- to the assessee’s income for the year under consideration.
Regarding the appeal, the assessee’s Counsel relied on the case of Dharamshibhai H. Patel vs. ITO, where proceedings under Section 158BC of the Income Tax Act were set aside due to a failure to issue notice under Section 127 while transferring the case within the same city. The Counsel argued that the facts of that case were similar to the assessee’s, as the original jurisdiction was with ITO, Ward-2(3), Ahmedabad, and following the search, the case was centralized with Central Circle-1(2), Ahmedabad. The assessee contended that the order passed by the Assessing Officer was invalid due to the lack of a Section 127 notice and the absence of an opportunity to be heard before the case transfer.
Upon reviewing the facts, the bench did not accept the assessee’s contention, noting that Section 127(3) of the Income Tax Act explicitly stated that no opportunity is required to be given to the assessee when transferring the case from one Assessing Officer to another within the same city.
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The bench, comprising Ramit Kochar (Accountant Member) and Siddartha Nautiyal (Judicial Member), also declined to rely on the judicial precedent cited by the assessee’s Counsel for two reasons: firstly, the ITAT in the cited decision did not analyze the language of Section 127(3) in relation to the assessee’s facts; and secondly, given the specific wording of Section 127(3), there is no requirement to provide an opportunity of hearing when transferring a case within the same city. Consequently, the bench dismissed assessee’s appeal.
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