2018 (8) TMI 1246 - AT - Income Tax

Validity of assessment u/s 153A instead of u/s 153C - Levy of penalty u/s 271AAB - alleged documents found from search action on other person - Held that - neither a search was initiated under section 132 nor books of account, other documents or any assets were requisitioned under section 132A against the assessee. - the notice U/s 153A dated 24/07/2015 issued to the assessee was without jurisdiction and consequently entire assessment proceedings were void and illegal ab-initio. The assessment is, thus, quashed.

Summary

Issues Involved:
1. Validity of the addition of ?3,19,16,899/- made by the Assessing Officer under Section 143(3) of the Income Tax Act.
2. Jurisdictional validity of the proceedings initiated under Section 153A of the Income Tax Act.
3. Legality of the penalty proceedings initiated under Section 271AAB of the Income Tax Act.

Detailed Analysis:

1. Validity of the Addition of ?3,19,16,899/-
The appeal by the assessee challenges the order dated 22.05.2017 by the CIT(A)-IV, Kanpur, which sustained the addition of ?3,19,16,899/- made by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act. The addition was based on documents found during a search at the premises of the Eminent & Dynamic Group, including the premises of the assessee. The AO noted expenses totaling ?4,69,16,899/- from a diary found during the search and made the addition after crediting ?1,50,00,000/- surrendered by the assessee in his return of income.

2. Jurisdictional Validity of the Proceedings Under Section 153A
The assessee contended that the entire proceedings were void ab initio as no search warrant under Section 132 was issued against the assessee, and the proceedings should have been initiated under Section 153C, not 153A. The assessee argued that the search was conducted on the premises of another individual, Pankaj Agarwal, and not on the assessee's premises. The AO's assumption of jurisdiction under Section 153A was thus challenged.

The Tribunal examined the facts and the legal provisions under Section 153A, which mandates that a notice can only be issued if a search is initiated under Section 132 or documents/assets are requisitioned under Section 132A. The Tribunal found that no such search or requisition was conducted against the assessee, as confirmed by the Additional DIT (Inv), Agra, in a letter dated 11.12.2017, which stated that no search warrant was issued against the assessee.

3. Legality of the Penalty Proceedings Under Section 271AAB
The assessee also challenged the penalty proceedings under Section 271AAB, arguing that such proceedings could only be initiated against a person on whom a search warrant under Section 132(1) was issued. The CIT(A)-IV, Kanpur, had remanded this issue to the Additional DIT (Inv), Agra, who confirmed that no search was conducted on the assessee. Consequently, the penalty under Section 271AAB was treated as ab initio invalid and annulled.

Conclusion:
The Tribunal held that the notice under Section 153A was issued without jurisdiction, rendering the entire assessment proceedings void and illegal ab initio. The assessment was quashed, and the appeal of the assessee was allowed. The Tribunal's order was pronounced in the open court on 08/08/2018.