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2021 (5) TMI 722 - AT - Income TaxRevision u/s 263 - revision of invalid assessment - Assessment u/s 153C - Assessment u/s 143(3) in pursuant to notice u/s. 142(1) - whether in cases of Section 153C, the period of six years has to be reckoned from the date of recording of satisfaction note or from the date of search carried out in a case of a person provided in Section 153A? - Scope of amendment - HELD THAT - The date of satisfaction, i.e., 25.09.2018 has to be reckoned as the date of reference from where six assessment years immediately preceding assessment years has to be construed and therefore, six preceding assessment years in this case shall be from Assessment Year 2012-13 to Assessment Year 2018-19. The instant Assessment Year, i.e., Assessment Year 2017-18 ergo would be covered in the earlier six assessment years where the assessments have to be framed u/s.153C only, whereby the Assessing Officer was required to issue a notice u/s.153C, and frame the assessment u/s.153C/143(3). Assessing Officer had issued notice u/s.142(1) and resultantly has framed the assessment u/s.143(3), treating it to be regular assessment for the year of search. The amendment to clarify this position u/s. 153C (1) was brought in the statute by the Finance Act, 2017 w.e.f. 01.04.2017, wherein it has been provided that the six preceding assessment years for the person covered u/s 153C would be same as that of the searched person covered u/s 153A. In other words, in case of the other person (i.e. person covered u/s 153C), six preceding assessment years has to be reckoned from the year of search. This amendment has been held to be prospective by the Hon ble Jurisdictional High Court in the case of CIT vs. Sarwar Agency P Ltd . 2017 (8) TMI 733 - DELHI HIGH COURT Here in this case, since the date of search is 21.07.2016, therefore, the amendment brought by the Finance Act, 2017 would not be applicable and ex consequenti the assessment for the instant Assessment Year 2017-18 ought to have been completed u/s.153C of the Act and the order of assessment dated 18.12.2018 passed u/s 143(3) in pursuant to notice u/s. 142(1) is bad in the eyes of law in view of the law interpreted and upheld by the Hon ble Jurisdictional High Court in CIT vs. RRJ Securities Ltd. 2015 (11) TMI 19 - DELHI HIGH COURT and ARN Infrastructure India Ltd. v. ACIT 2017 (4) TMI 1194 - DELHI HIGH COURT It is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. CIT/PCIT exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. The edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. However, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the provisions of the statute or was barred by limitation, then such an invalid order cannot be subject matter of further proceedings so as to validate the said assessment order in collateral proceedings like u/s 263. We hold that the present proceedings being collateral proceedings and if the assessment order is inherently invalid or bad in law, then validity of such an order can be challenged at any stage in the collateral proceedings including the proceedings u/s.263, because invalid order cannot be set aside or can be revised to make it valid. Though assessment order may be said to be erroneous but certainly it cannot be held prejudicial to the interest of the revenue in such circumstances when assessment order itself is unsustainable, in view of the provisions of law we set aside the impugned order passed u/s.263, as Ld. PCIT could not have revised the assessment order which itself is an invalid order. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Validity of the assessment order under Section 143(3) versus Section 153C. 3. Issuance and timing of notices under Sections 142(1) and 143(2). 4. Approval under Section 153D. 5. Scope of assessment confined to incriminating documents. 6. Proper enquiries or verification by the Assessing Officer. 7. Application of Section 50C and other related provisions. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The appellant challenged the jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263, arguing that the statutory preconditions were not satisfied, rendering the order void. The appellant contended that the original assessment order dated 18.12.2018 was illegal and invalid, and therefore, could not be revised under Section 263. The Tribunal held that the validity of the assessment order could indeed be challenged during the revisionary proceedings under Section 263, citing various judicial precedents. 2. Validity of the Assessment Order under Section 143(3) versus Section 153C: The appellant argued that the assessment proceedings for the Assessment Year 2017-18 should have been initiated under Section 153C, not Section 143(3), making the assessment order void ab initio. The Tribunal agreed, citing the Hon’ble Delhi High Court judgments in CIT vs. RRJ Securities Ltd. and ARN Infrastructure India Ltd., which established that the six preceding assessment years should be reckoned from the date of the satisfaction note, not the date of search. Thus, the assessment for AY 2017-18 should have been framed under Section 153C. 3. Issuance and Timing of Notices under Sections 142(1) and 143(2): The appellant contended that no notice under Section 143(2) was issued after filing the return of income on 11.10.2018, making the assessment order dated 18.12.2018 without jurisdiction. The Tribunal found that the notices under Section 143(2) were issued within the prescribed time limit, but the assessment should have been under Section 153C, rendering the assessment under Section 143(3) invalid. 4. Approval under Section 153D: The appellant argued that the approval under Section 153D was invalid and illegal, vitiating the assessment order. The Tribunal noted that the JCIT's approval was based on the material available on record and did not require a hearing with the assessee. However, since the assessment order itself was invalid, the approval under Section 153D was moot. 5. Scope of Assessment Confined to Incriminating Documents: The appellant contended that the scope of the assessment should have been confined to incriminating documents found during the search of a third party. The Tribunal held that since the assessment order was invalid, this issue was academic. 6. Proper Enquiries or Verification by the Assessing Officer: The PCIT held that the assessment order was erroneous and prejudicial to the interest of revenue because the AO did not make proper enquiries or verification. The Tribunal found that the AO had indeed made enquiries, but since the assessment order was invalid, this issue was also academic. 7. Application of Section 50C and Other Related Provisions: The PCIT found that the AO failed to invoke Section 50C(1) and 50C(2) regarding the valuation of land parcels, leading to under-assessment of income. The Tribunal held that since the assessment order was invalid, the PCIT's findings on this issue were not sustainable. Conclusion: The Tribunal concluded that the assessment order dated 18.12.2018 was invalid as it should have been framed under Section 153C and not Section 143(3). Consequently, the order passed by the PCIT under Section 263 was set aside. The appeal of the assessee was allowed, and other grounds were treated as academic.
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