The assessee, a proprietor, was engaged in the business of manufacturing and trading bullions, precious stones, studded jewellery and gold and diamond ornaments. He filed his return of income for the assessment year declaring his total income. The case was selected for scrutiny and the Assessing Officer made an addition on account of unverifiable purchases from parties. The assessee appealed against the addition and the CIT(A) deleted the same. The department’s appeal before the Tribunal was also dismissed. Subsequently, the Assessing Officer reopened the assessment under section 147 of the Income Tax Act, 1961 (the Act) on the basis of information received from the Investigation Wing that one entity from whom the assessee had made purchases was a bogus entity managed by an individual, who was engaged in providing accommodation entries.

The Assessing Officer issued a notice under section 148 of the Act to the assessee and passed a reassessment order, making an addition as bogus purchase. The assessee challenged the validity of the reopening and the addition before the National Faceless Appeal Centre (NFAC), which upheld the action of the Assessing Officer. The assessee then filed an appeal before the Tribunal. Appeal was also on erroneous exercise of jurisdiction by the ITO at Delhi without due notice under section 127 on the transfer of jurisdiction.

The Tribunal held that the reopening of the assessment and the issuance of notice were invalid and void-ab initio, as the Assessing Officer had not obtained the proper sanction from the Joint-Commissioner of Income-tax as required under section 151(2) of the Act and had not issued the notice from the competent jurisdictional Assessing Officer as there was no order under section 127 for transfer of the case from jurisdiction A to B. (AY. 2007-08)