2011 (8) TMI 1238 - AT - Income Tax

Validity of assessment u/s 153A r w s 153B - Held that - CIT(A) was not correct in law in holding that assessment for the previous year in which search took place or requisition was made had to be completed under the normal provisions of the Act. Considering the above reported decision of the Tribunal, we are of the opinion, the additional ground, which is legal in nature and raised by the assessee s counsel for the first time before us is admitted and adjudicated in favour of the assessee making the assessment order invalid. Accordingly, the additional ground is allowed.

Summary

Issues:
1. Validity of assessment completed under section 143(3) for the assessment year 2004-05 instead of section 153A r.w.s 153B.
2. Interpretation of the provisions of section 153A and related case laws.
3. Admissibility of additional ground challenging the assessment method.

Analysis:
1. The appeal challenged the assessment order under section 143(3) for the assessment year 2004-05, contending that it should have been completed under section 153A r.w.s 153B due to a search conducted in the year. The appellant relied on the judgment of the Allahabad High Court and the Indore Bench of the Tribunal to support the argument that assessments for the year of search must be completed under specific provisions. The Tribunal agreed with the appellant, citing the case of Sushil Kumar Jain, and held that the assessment for the year in which the search took place should not have been completed under normal provisions.

2. The Tribunal referred to the judgment of Sushil Kumar Jain to emphasize that the initiation of search under section 153A is crucial, leading to the reopening of assessments for the relevant years, regardless of the presence of incriminating material. The Tribunal highlighted that once a search is conducted, assessments for all seven years, including the current year, must be completed under sections 153A, 153B, and 153C. The Tribunal clarified that even assessments completed before the search date would reopen, while pending proceedings would abate, necessitating reassessment for all these years.

3. The appellant raised an additional ground challenging the validity of the assessment method, which was not part of the original appeal. The Tribunal, considering the legal nature of the additional ground, admitted it and ruled in favor of the appellant, deeming the assessment order invalid. Consequently, the original grounds raised in the appeal were considered academic in light of the finding on the additional ground and were dismissed as such. Ultimately, the Tribunal partly allowed the appeal of the assessee based on the invalidity of the assessment order under section 143(3) for the assessment year 2004-05.

This judgment underscores the importance of adhering to specific provisions for assessments following a search, as outlined in section 153A r.w.s 153B, and highlights the significance of legal grounds raised by appellants even if presented at a later stage.