2014 (1) TMI 1806 - AT - Income Tax

Reopening of assessment - assessment u/s 153C - Held that - It is evident from the reasons recorded for reopening the assessment under S.147 that it is the information received from the Central Range-1 Hyderabad upon search operations carried on in the premises of M/s. Janapriya Engineers Syndicate P. Ltd. which formed the basis for initiation of the proceedings under S.147 of the Act. It is settled position of law that in all matters emanating from search action that proceedings have to be initiated under S.153C of the Act and not under S.147 of the Act. Considering this statutory bar in the form of a non-obstante clause contained in S.153C of the Act the proceedings initiated under S.147 in the present case based on the information that came to light as a result in the course of search on the premises of Janapriya Engineers Syndicate and made available to the Assessing Officer by the Central Circle has no legal sanctity as the same is against the spirit of provisions of S.153C of the Act. - Decided in favour of assessee.

Summary

Issues involved:
Appeal against order of Commissioner of Income-tax(Appeals) IV Hyderabad for assessment year 2008-09. Revenue's appeal challenges initiation of proceedings under S.147 instead of S.153C. Assessee's cross objections contest non-adjudication on merits of additions made in assessment.

Analysis:
1. The appeal and cross objections arose from the assessment year 2008-09 where the assessee declared income with short term capital gains. The Assessing Officer computed higher capital gains, leading to an increased total income assessment under S.143(3) read with S.147 of the Act.

2. The assessee initially contested the additions to short term capital gains but later raised legal objections regarding the initiation of proceedings under S.147 instead of S.153C. The Commissioner of Income-tax(Appeals) admitted the additional grounds, found merit in the legal objections, and set aside the assessment as void ab initio, without delving into the original grounds raised by the assessee on merits.

3. The Revenue's appeal challenged the CIT(A)'s decision that the proceedings under S.147 were void ab initio, while the assessee's cross objections pertained to the non-adjudication on the merits of the additions made in the assessment. The reasons for reopening the assessment were based on information from a search operation, leading to a jurisdictional issue between S.147 and S.153C.

4. The Tribunal analyzed the statutory provisions and legal precedents, emphasizing that proceedings emanating from search actions must be initiated under S.153C and not S.147. The existence of a non-obstante clause in S.153C overrides other provisions, restricting the Assessing Officer's jurisdiction under S.147 in such cases. Citing relevant case laws, including CIT V/s. Suresh N.Gupta, the Tribunal upheld the CIT(A)'s decision, finding it in line with legal principles and supporting decisions.

5. Regarding the assessee's cross objections, the Tribunal noted that since the assessment was deemed void ab initio, considering the merits of the assessment became academic. Consequently, the cross objections were dismissed as infructuous alongside the Revenue's appeal. The Tribunal upheld the CIT(A)'s order, dismissing both the Revenue's appeal and the assessee's cross objections.

6. In conclusion, the Tribunal affirmed the CIT(A)'s decision, emphasizing the importance of adhering to the correct statutory procedures and jurisdictional provisions, ultimately leading to the dismissal of both the Revenue's appeal and the assessee's cross objections.