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2021 (5) TMI 586 - AT - Income TaxAssessment u/s 147 or 153C - search from the premises of a 3rd party - Unexplained Money addition under Section 69A - HELD THAT - In the present assessee s case, search seizure action u/s 132 of the Act was carried out on 15.10.2009 in the premises of Mr. Abhinav Arora and Mrs. Ranju Arora. Consequently, the Assessing Officer initiated reassessment proceedings u/s 147 of the Act relying upon the information received based on the certain documents found during the course of search from the premises of a 3rd party i.e. Mr. Abhinav Arora and Mrs. Ranju Arora. Thus, the assessment is based upon the documents found during the course of search of 3rd party premises, but that can be made only u/s 153C of the Act. The provision of Section 153C of the Act is attracted when there are any incriminating documents pertaining to the assessee which are found during the search of 3rd party premises. The contention of the Ld. AR that the provisions of Section 153C of the Act are non-obstantive provisions and the same specifically excludes the operation of Sec. 147 of the Act, therefore, the Assessing Officer in the present case has grossly erred in invoking the provisions of Sec. 147, instead of 153C of the Act appears to be correct in legal parlance. When any incriminating documents are found Section 153C is invoked and the same has to be applied by the Revenue authorities as Section 147 has its own separate footing for invoking the provisions. If Sec. 147 is permitted on the basis of documents found in the course of search of 3rd party premises, then the provisions of Sec. 153C of the Act would become redundant. As decided in ARUN KUMAR KAPOOR 2012 (6) TMI 403 - ITAT AMRITSAR held that the notice issued u/s 148 of the Act and the consequent assessment framed u/s 147 of the Act is void-ab-initio as in the instant case, assessment based upon incriminating documents found during the course of search of 3rd party premises can be made u/s 153C of the Act. Thus, the assessment in the present case itself becomes null and void. Where the basis for making the addition in the hands of the buyer has been held as inadmissible and unsustainable, the addition made in the hands of the assessee HUF solely relying on the additions in the hands of the buyer does not sustain and the same has to be deleted, particularly, in view of the fact that the said valuation report has not been found from the possession of the assessee. Besides this, the report of the valuation officer found during search does not specifically set out that differential amount has been received by the assessee. Thus, it can be clearly established that the addition made on the basis of valuation report does not sustain and deserved to be deleted. Therefore, we are allowing the cross objections of the assessee. Since we have allowed the additional grounds of the cross objections and held that the assessment itself is null and void, the appeal of the revenue which is on the merit of the addition does not sustain. Hence, appeal of the Revenue is dismissed.
Issues Involved:
1. Validity of the reopening of assessment proceedings under Section 147 r.w.s. 148 of the Income Tax Act, 1961. 2. Legality of the assessment proceedings completed without passing a speaking order. 3. Correctness of the sales consideration of the property under Section 50C of the Act. 4. Reference for valuation under Section 55A of the Act. 5. Conversion of reassessment proceedings from protective to substantive. 6. Applicability of Section 153C instead of Section 147 for assessment based on documents found during the search of a third party. Detailed Analysis: 1. Validity of the Reopening of Assessment Proceedings: The assessee challenged the validity of the reopening of assessment proceedings under Section 147 r.w.s. 148 of the Income Tax Act, 1961. The assessee argued that the reopening was based on information received from the CIT(A)-13 regarding additions made in the hands of the buyers of the property. The Tribunal observed that the Assessing Officer (AO) did not provide the approval of the appropriate authority for reopening the case, which is a mandatory requirement under Section 151 of the Act. The AO also failed to apply his own mind and relied solely on the additions made by another officer, which constitutes "borrowed satisfaction." The Tribunal concluded that the reopening was invalid and mechanical in nature, thus quashing the notice issued under Section 148. 2. Legality of the Assessment Proceedings Completed Without Passing a Speaking Order: The assessee contended that the AO completed the assessment without disposing of the objections raised against the reasons for reopening. The Tribunal noted that the AO did not pass a speaking order addressing the objections, which is a violation of the procedure laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. The failure to dispose of the objections rendered the assessment proceedings invalid and void. 3. Correctness of the Sales Consideration of the Property Under Section 50C: The AO made an addition of ?2,18,88,000/- to the income of the assessee under Section 69A, alleging unexplained money received from the sale of property. The CIT(A) restricted the addition to ?8,02,993/- based on the valuation report of the DVO, which was received after the completion of assessment proceedings. The Tribunal held that the valuation report obtained for raising a bank loan cannot be used as a yardstick for unaccounted investments. Since the valuation report was not found from the possession of the assessee, the addition made based on the report was deleted. 4. Reference for Valuation Under Section 55A of the Act: The CIT(A) relied on the valuation report under Section 55A of the Act, received after the completion of reassessment proceedings. The Tribunal observed that the AO had referred the property for valuation during the pendency of reassessment proceedings, but the report was received after the assessment was completed. The Tribunal held that the AO had no jurisdiction to consider any report received after the time barring date, thus invalidating the reliance on the DVO's report. 5. Conversion of Reassessment Proceedings from Protective to Substantive: The assessee argued that the AO converted the reassessment proceedings from protective to substantive through a rectification order under Section 154 of the Act. The Tribunal did not specifically address this issue in detail, but the overall findings rendered the reassessment proceedings invalid, thereby nullifying any subsequent conversions. 6. Applicability of Section 153C Instead of Section 147: The Tribunal emphasized that the assessment based on documents found during the search of a third party should be made under Section 153C of the Act, not under Section 147. The Tribunal cited decisions from the Amritsar Tribunal and the Delhi Bench, which held that assessments based on incriminating documents found during the search of third-party premises must be made under Section 153C. The Tribunal concluded that the AO erred in invoking Section 147, rendering the assessment null and void. Conclusion: The Tribunal allowed the cross objections of the assessee, quashing the reassessment proceedings and deleting the additions made by the AO. Consequently, the appeal of the Revenue was dismissed. The Tribunal's decision emphasized the importance of following procedural requirements and independent application of mind by the AO in reopening assessments.
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