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2018 (11) TMI 1694 - AT - Income TaxAssessment u/s 147 or 153C - case reopened the assessment based on a search conducted in a third party case - HELD THAT - As decided in SHRI. SRINIVAS RAO HOSKOTE 2018 (2) TMI 1830 - ITAT BANGALORE AO reopened the assessment year 2008-09, which is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word shall used in section 153A made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-obstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment We are of the view that the AO wrongly initiated the proceedings u/s 148 and completed the assessment u/s 143(3) rws 147 of the Act, instead of initiating the proceedings u/s 153C of the Act. Therefore, we set aside the order of CIT(A) and quash the assessment made by the AO u/s 143(3) rws 147 of the Act. Since the very assessment is quashed, the additions made in such assessment automatically get cancelled. - Decided in favour of assessee
Issues Involved:
1. Validity of assessment proceedings under Section 143(3) read with Section 147 versus Section 153C of the Income Tax Act. 2. Classification and taxability of the amount received by the assessee as goodwill. Detailed Analysis: 1. Validity of Assessment Proceedings under Section 143(3) read with Section 147 versus Section 153C: The primary legal issue raised by the assessees was the validity of the assessment proceedings initiated under Section 143(3) read with Section 147 of the Income Tax Act, 1961. The assessees contended that these proceedings were void ab initio and without jurisdiction because they emanated from a Search and Seizure Operation under Section 132 of the Act. According to the assessees, the appropriate proceedings should have been initiated under Section 153C of the Act, not Section 147. The Tribunal admitted this additional ground of appeal, following the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co., Limited Vs. CIT 229 ITR 383 (SC), which allows for the admission of legal grounds if the facts are on record and do not require fresh investigation. The Tribunal considered the rival submissions and perused the material on record. It referenced a similar issue dealt with by the Bengaluru Bench of ITAT in the case of Shri Srinivasa Rao Hostake, where it was held that if there is any contradiction between Sections 153C and 148, Section 148 shall give way to Section 153C due to the non-obstante clause in Section 153C. The Tribunal noted that the scope of Sections 153A to 153C is to assess or reassess the total income of the assessee for a period of six years based on material found during the search. This is distinct from the reassessment powers under Section 147, which deals with the escapement of income. In the present case, the Tribunal found that the assessment proceedings should have been initiated under Section 153C, as the assessments were based on material found during a search of a third party. Consequently, the Tribunal quashed the assessments made under Section 143(3) read with Section 147, deeming them invalid and without jurisdiction. 2. Classification and Taxability of the Amount Received as Goodwill: The assessees argued that the amount of ?26,00,000/- received by them was not goodwill, as it was related to agricultural land used for development purposes. They contended that the amount paid was a capital payment in lieu of the source of livelihood foregone and could not be termed as goodwill, especially since the relevant project was not completed even after ten years. The Tribunal did not need to adjudicate on these grounds because the primary issue of the validity of the assessment proceedings was resolved in favor of the assessees. Since the assessments themselves were quashed, the additions made in such assessments were automatically cancelled. Conclusion: The Tribunal allowed the appeals of the assessees and dismissed the appeals of the revenue. The assessments made under Section 143(3) read with Section 147 were quashed due to the improper initiation of proceedings, which should have been under Section 153C. Consequently, the original grounds of appeal regarding the classification and taxability of the amount received as goodwill were rendered irrelevant.
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