2021 (3) TMI 1008 - AT - Income Tax

Revision u/s 263 - Assessment u/s 153A - HELD THAT - Additions made u/s 143(3) of the Act were repeated in the assessment order framed/s 153A r.w.s 153C of the Act. This means that no additions had any link with any incriminating material found at the time of search as assessed income u/s 143(3) of the Act is the assessed income u/s 153C of the Act. Hon'ble High Court of Delhi in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT has held that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The Hon'ble Supreme Court in the case of Singhad Technical Educational Society 2017 (8) TMI 1298 - SUPREME COURT has also held that in the absence of any incriminating material, no jurisdiction can be assumed by the Assessing Officer u/s 153C of the Act. Assessment framed u/s 153C of the Act in A.Ys 2008-09 and 2010-11 are without jurisdiction and, therefore, bad in law and deserve to be quashed as null and void. Assumption of jurisdiction u/s 263 of the Act in respect of an assessment which is non-est is also bad in law as a non-est order cannot be erroneous and prejudicial to the interest of the Revenue. An order framed u/s 263 of the Act for both the A.Ys 2008-09 and 2010-11 are accordingly quashed on the principle of Sublato Fundamento Cadit Opus, meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation, i.e. the order u/s 153C has been removed, the super structure i.e. the order u/s 263 must fall. - Decided in favour of assessee.

Summary

Issues:
Appeals against orders under section 263 of the Income Tax Act, 1961 for Assessment Years 2008-09 and 2010-11. Additional ground challenging jurisdiction under section 263 raised. Validity of assessment orders under section 153C questioned.

Analysis:
The appeals were filed against orders passed under section 263 of the Income Tax Act for two separate assessment years. The assessee challenged the jurisdiction of the Principal Commissioner of Income Tax under section 263 to review and revise the assessment orders passed under section 153C/153A, contending that the original orders were illegal due to an invalid assumption of jurisdiction. The additional ground raised by the assessee was admitted for adjudication based on the precedent set by the Supreme Court in the case of NTPC 229 ITR 383. Since the additional ground was considered crucial, it was taken up first for adjudication.

The assessment orders for the relevant years were initially framed under section 143(3) of the Act. Subsequently, after a search and seizure action under section 132, the assessments were re-framed under section 153A read with section 153C and section 143(3) of the Act. The Principal Commissioner of Income Tax set aside the assessment orders, stating that the merger of two companies required the additions made in one company to be assessed in another, rendering the original orders erroneous and prejudicial to revenue. However, it was argued that since the additions were repeated from the original assessment orders to the reassessment orders, without any link to incriminating material found during the search, the assessments under section 153C lacked jurisdiction.

Citing legal precedents, including the High Court of Delhi in Kabul Chawla and the Supreme Court in Singhad Technical Educational Society, it was established that in the absence of incriminating material, the Assessing Officer cannot assume jurisdiction under section 153C. Consequently, the assessments under section 153C for the relevant years were deemed without jurisdiction and quashed as null and void. The Tribunal invoked the principle that an order based on a non-existent foundation is itself non-est, leading to the quashing of the orders under section 263 as well. The appeals filed by the assessee were allowed, and the orders under section 263 were set aside.

In conclusion, the Tribunal found that the assessments under section 153C lacked jurisdiction due to the absence of incriminating material, leading to the quashing of both the assessment orders and the revision orders under section 263. The legal principle that a decree passed without jurisdiction is a nullity was upheld, resulting in the allowance of the appeals filed by the assessee.