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2016 (6) TMI 1445 - AT - Income TaxAssessment u/s 153C OR 148 - Whether reasons recorded by the AO do not make mention of any search or of any appraisal report and that the assessment, as made by the AO under the provisions of section 148, is fully justified, not calling for any interference? - HELD THAT - As decided in ARUN KUMAR KAPOOR 2012 (6) TMI 403 - ITAT AMRITSAR only the provision in which any assessment could be made against the assessee in the Income Tax Act was section 153C r.w.s. 153; that it was also apparent from the record that that the Officer at Delhi had mentioned in his letter that necessary action may be taken as per law under sections 153C/148; that the provisions of section 153C were clearly applicable when section 153 supersedes the applicability of sections 147 148 of the Act; that therefore, the notice u/s 148 and the proceedings u/s 147 were illegal and void ab initio, since in view of the provisions of section 153C, sections 147/148 stand ousted; and that since the procedure provided u/s 153C had not been followed by the AO, the assessment had become invalid and the ld. CIT(A) was fully justified in quashing the reassessment order. As it is evidence from the Appraisal Report in the case of Sh. Neeraj Puri, as noted hereinabove, that the sale deed of the assessee was found only during the search in the case of Sh. Neeraj Puri. That being so, the provisions of section 153C of the Act are directly applicable. To reiterate, the Hon ble Supreme Court, in the case of Manish Maheshwari 2007 (2) TMI 148 - SUPREME COURT has laid down that if the procedure in section 158BD is not followed, block assessment proceedings would be illegal. It is irrefutable that the provisions of section 153C of the Act are in pari materia with those of section 158BD. Therefore, as taken note of, if the procedure laid down in section 153C is not followed and recourse is not taken to section 158BD, the same would be bad in law. Arun Kumar Kapoor 2012 (6) TMI 403 - ITAT AMRITSAR is also to the same effect. In accordance therewith, we hold that the proceedings u/s 148 of the Act, as rightly contended on behalf of the assessee, are not sustainable, in view of the presence of section 153C, which obliterate to the operation of the provisions of sections 147/148 of the Act, in given circumstances, which exist in the case of the present assessee also. Thus finding the grievance of the assessee to be justified, the same is accepted. The assessment framed u/s 148 of the Act is quashed.
Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act. 2. Applicability of Section 153C versus Section 147/148 for assessment. 3. Validity of assessment framed under Section 143(3) read with Section 144 instead of Section 147. 4. Legality of the assessment framed under Section 143(3) instead of Section 153C. 5. Justification of sustaining the capital gain income. 6. Restriction of deduction claimed under Section 54B. 7. Consideration of additional evidence by the CIT(A). Detailed Analysis: 1. Validity of Notice Issued Under Section 148: The appellants contended that the Assessing Officer (AO) was not justified in issuing a notice under Section 148 based on material that did not pertain to the assessee. The assessment framed under such proceedings was argued to be invalid. The AO issued the notice based on information that the assessee had not paid taxes on capital gain income, which was contested as the income did not arise to the assessee in his individual capacity. 2. Applicability of Section 153C Versus Section 147/148 for Assessment: The appellants argued that the assessment should have been framed under Section 153C, as the incriminating documents were found during a search on a third party (Sh. Neeraj Puri). The ITAT referred to the case of 'Income Tax Officer vs. Arun Kumar Kapoor', where it was held that reassessment under Section 147 on the basis of documents found in a third-party search should be framed under Section 153C. The Tribunal found that the provisions of Section 153C were applicable and superseded the applicability of Sections 147/148, making the notice under Section 148 and the subsequent proceedings illegal and void ab initio. 3. Validity of Assessment Framed Under Section 143(3) Read with Section 144 Instead of Section 147: The appellants contended that the assessment framed under Section 143(3) read with Section 144 was barred by limitation and should have been framed under Section 147. The Tribunal noted that the AO completed the assessment as a 'Best Judgment Assessment' under Section 144 due to non-appearance of the assessee. 4. Legality of the Assessment Framed Under Section 143(3) Instead of Section 153C: The Tribunal observed that the sale deeds executed by the assessee were found during a search on Sh. Neeraj Puri, and therefore, the assessment should have been framed under Section 153C. The Tribunal held that the proceedings under Section 148 were not sustainable due to the presence of Section 153C, which eclipses the applicability of Sections 147/148 in such circumstances. 5. Justification of Sustaining the Capital Gain Income: The CIT(A) sustained the capital gain income to the extent of Rs.72,85,000 against the nil income claimed by the assessee. The Tribunal found that the CIT(A) had correctly reduced the gross sale consideration by the amount paid for eviction and computed the capital gain accordingly. 6. Restriction of Deduction Claimed Under Section 54B: The appellants contended that the CIT(A) wrongly restricted the deduction claimed under Section 54B. The CIT(A) restricted the deduction to the amount mentioned in the registration deed rather than the agreement to sell. The Tribunal upheld the CIT(A)'s decision, stating that the registration deed's sale consideration is sacrosanct for the purposes of Section 54B. 7. Consideration of Additional Evidence by the CIT(A): The Tribunal allowed the additional evidence (Appraisal Report) to be taken on record, which was relevant for deciding the issue at hand. The Tribunal found that the incriminating material related to the assessee came to light during the search on Sh. Neeraj Puri, making the provisions of Section 153C applicable. Conclusion: The Tribunal quashed the assessment framed under Section 148 of the Act and allowed the appeals of the assessees. The Tribunal held that the assessments should have been framed under Section 153C due to the incriminating documents found during the search on a third party. The Tribunal also upheld the CIT(A)'s decisions regarding the computation of capital gain and the restriction of deduction under Section 54B.
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