2018 (9) TMI 405 - AT - Income Tax

Validity of reopening of assessment - provisions of section 153C were not invoked against the assessee - Held that - AO initiated reassessment proceedings u/s 147 of the Act on the basis of information received based on material qua the assessee, found in the search on the Santosh Group of Institutions, Ghaziabad. Respectfully following Sushil Gaur (2017 (8) TMI 482 - ITAT DELHI) and Arun Kapur (2012 (6) TMI 403 - ITAT AMRITSAR) and Rajat Shubra Chatterji (2016 (7) TMI 258 - ITAT DELHI), hold that since in the present case, admittedly, the assessee, with regard to whom incriminating material was found and seized, as per the reasons recorded u/s 147 in the assessee s case, from which material, it came out that a sum of ₹ 21 lac had been paid by the assessee on 03.03.2006 to Santosh Medical College, Ghaziabad, a part of the Santosh Group of Insititutions, Ghaziabad, on whom, a search was conducted on 27.06.2013, and since the assessee was not assessed u/s 153C of the Act, which provision specifically excludes the operation of section 147 of the Act, the AO erred in invoking the provisions of section 147 of the Act instead of those of section 153C, thereby illegally rendering the provisions of section 153C as redundant. Thus the reasons recorded u/s 147 of the Act and all proceedings pursuant thereto, culminating in the order under appeal, are quashed. - Decided in favour of assessee

Summary

Issues:
- Validity of assessment under section 143(3) for A.Y. 2007-08
- Typographical error in the date of transaction for A.Y. 2007-08
- Deletion of addition under section 69C of the Act
- Deletion of addition for payment of regular fee
- Validity of reasons recorded by the AO
- Nexus between documents found during search and admission of the assessee's daughter

Validity of Assessment under Section 143(3) for A.Y. 2007-08:
The Department's appeal and the assessee's Cross-objections for A.Y. 2007-08 raised various grounds challenging the assessment made by the AO under section 143(3). The CIT(A) annulled the assessment, citing lack of information in possession at the time of recording of reasons. The AO's reasons revealed sufficient material and information, but the CIT(A) disagreed. The issue centered on the validity of the assessment based on the information available to the AO at the time.

Typographical Error in the Date of Transaction for A.Y. 2007-08:
Another ground of appeal involved a typographical error in the date of transaction, where the AO mentioned 03.03.2006 instead of 03.06.2006 for the payment of donation/capitation fee. The CIT(A) annulled the assessment based on this discrepancy, highlighting the importance of accurate information in tax assessments.

Deletion of Addition under Section 69C of the Act:
The CIT(A) deleted the addition of ?25,00,000 made by the AO under section 69C of the Act. The AO had added this amount based on the payment of capitation fee by the assessee, as mentioned in a statement, but the CIT(A) found reasons to disagree with this addition.

Deletion of Addition for Payment of Regular Fee:
Similarly, the CIT(A) deleted the addition of ?10,00,000 made by the AO for payment of regular fee, emphasizing the need to consider all relevant payment details before making such additions.

Validity of Reasons Recorded by the AO:
The issue of the validity of the reasons recorded by the AO was also raised, questioning how the AO could record exact reasons if not in possession of the information at the time of issuing the notice. This highlighted the importance of accurate and timely information in tax assessments.

Nexus Between Documents Found During Search and Admission of the Assessee's Daughter:
Lastly, the CIT(A) was criticized for deleting additions made by the AO without considering the nexus between the documents found during the search and the admission of the assessee's daughter in the relevant year. This issue emphasized the need for a clear connection between evidence found during searches and the tax liabilities of the assessee.

In the final judgment, the Cross-objection of the assessee was partly allowed, and the appeal of the Department was dismissed. The reasons recorded under section 147 of the Act and all proceedings were quashed, with the conclusion that the AO erred in invoking section 147 instead of section 153C, rendering the latter provision redundant.