2018 (12) TMI 405 - AT - Income Tax

Assessment u/s 153C - no notice issued - admission of additional evidence - Held that - Challenging the jurisdiction of the AO to make the assessment u/s. 143(3) instead of section 153C of the Act, and all the material facts, necessary for its disposal, are already on record. As held in the case of NTPC Vs CIT 1996 (12) TMI 7 - SUPREME COURT the powers of the Tribunal are not confined only to the issues arising out of order of the CIT(A) but also questions of law arising from facts which are available on record. We are, therefore, inclined to admit the additional grounds of appeal, having a pure question of law challenging the assumption of jurisdiction to pass impugned assessment order u/s. 143(3) in place of sec. 153C. Therefore, the additional grounds raised by the assessee deserve to be admitted on record. The issue raised in the addition ground is found squarely covered by the decision of co-ordinate Bench in the case of BNB Investment & Properties Ltd 2018 (8) TMI 597 - ITAT DELHI assessment under section 153C can be framed in the case of the assessee and at the time of initiating the proceeding against the assessee, should have issued notice u/s 153C which have not been done in this case. The issue of notice under section 153C is mandatory and a condition precedent for taking action against the assessee under section 153C of the I.T. Act. - Decided in favour of assessee.

Issues Involved:
1. Limitation and dating of the assessment order.
2. Violation of principles of natural justice.
3. Validity of notice under Section 143(2) of the I.T. Act.
4. Justification of the protective assessment.
5. Additions towards assessable income.
6. Separate addition of bank credits.
7. Arbitrariness and excessiveness of the total income assessed.
8. Levy of interest under Sections 234A, 234B, 234C, and 234D.
9. Validity of assessment under Section 143(3) versus Section 153C.

Detailed Analysis:

1. Limitation and Dating of the Assessment Order:
The appellant contended that the assessment order dated 31/03/2013 was antedated and thus barred by limitation. The tribunal did not specifically address this issue in the final decision, focusing instead on broader jurisdictional issues.

2. Violation of Principles of Natural Justice:
The appellant argued that no opportunity of being heard was provided before passing the assessment order. This issue was overshadowed by the tribunal's decision on jurisdictional grounds, which rendered a detailed analysis of procedural fairness unnecessary.

3. Validity of Notice Under Section 143(2):
The appellant claimed that the notice issued under Section 143(2) was invalid. The tribunal admitted this ground, emphasizing that the notice dated 21/01/2013 was issued after the due date had expired, rendering it void ab initio.

4. Justification of the Protective Assessment:
The appellant argued that the assessment on a protective basis was unjustified without a substantive assessment of the beneficiaries. The tribunal did not delve deeply into this issue, as the jurisdictional flaw rendered the entire assessment invalid.

5. Additions Towards Assessable Income:
The appellant contested the additions of Rs. 6,58,895/- and Rs. 2,19,63,154/- towards assessable income. The tribunal did not address these additions on merits, as the assessment was quashed on legal grounds.

6. Separate Addition of Bank Credits:
The appellant argued against the separate addition of bank credits, contending that the transactions were owned by another individual. This issue was not specifically resolved due to the overriding jurisdictional decision.

7. Arbitrariness and Excessiveness of the Total Income Assessed:
The appellant claimed that the total income assessed at Rs. 2,28,90,649/- was arbitrary and excessive. The tribunal did not address this issue in detail, given the quashing of the assessment order.

8. Levy of Interest Under Sections 234A, 234B, 234C, and 234D:
The appellant argued that the levy of interest was arbitrary and excessive. This issue was rendered moot by the tribunal's decision to quash the assessment order.

9. Validity of Assessment Under Section 143(3) Versus Section 153C:
The tribunal focused extensively on this issue, admitting additional grounds raised by the appellant. It was argued that the assessment should have been framed under Section 153C, not Section 143(3), as the documents seized belonged to another person. The tribunal found that the Assessing Officer failed to issue a notice under Section 153C, which is mandatory and a condition precedent for taking action. The tribunal cited several precedents, including decisions from the Delhi High Court and other ITAT benches, to support its conclusion that the assessment was invalid and void.

Conclusion:
The tribunal quashed the assessment order on jurisdictional grounds, specifically the failure to issue a notice under Section 153C. Consequently, all additions and procedural issues raised by the appellant were rendered academic. The appeal was allowed, and the assessment order was set aside.

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