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2022 (1) TMI 735 - AT - Income TaxReopening of assessment u/s 147 v/s assessment u/s 153C - proceedings initiated u/s 132 - AO jurisdiction to reopen the assessment based on the document found and seized during search action when the IT Act prescribes completely separate mechanism under section 153A to 153C dealing with the search cases which should have been followed - addition being alleged cash loan taken u/s 69D - HELD THAT - We observe from the reasons recorded for initiation of reassessment proceedings that the proceedings u/s 148 of the Act were initiated heavily relying on the documents found during search conducted in the group concerns of the Lodha group in which the employee, Shri Somnath Nair, of the group is also covered. The documents found in his position were confiscated and the Assessing Officer has fully satisfied that these documents are belongs to assessee. After recording the satisfaction, he proceeded to initiate the proceedings u/s 148/147 instead of section 153C of the Act. The assessee has raised the separate ground before Ld.CIT(A) and Ld.CIT(A) conveniently did not address this issue and he only dealt with the procedure adopted to initiate and completion of the reassessment u/s 147. He has not even whispered on this aspect. See cases BATTA YADAMMA 2018 (11) TMI 1694 - ITAT HYDERABAD and SRI SURYADEVARA AVINASH 2019 (9) TMI 898 - ITAT HYDERABAD . The correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act. 2. Jurisdiction to reopen the assessment based on documents found during a search action. 3. Addition of ?3,75,00,000/- as alleged cash loan under section 69D of the Income Tax Act. 4. Double taxation of the same amount already taxed in the hands of another individual. 5. Consideration of the said amount in the petition before the Income Tax Settlement Commission. Issue-wise Detailed Analysis: 1. Validity of Reopening the Assessment under Section 147 of the Income Tax Act: The assessee contended that the reopening of the assessment under section 147 was invalid, arguing that the Learned Assessing Officer had no jurisdiction to reopen the assessment based on documents found during a search action. The assessee argued that the IT Act prescribes a separate mechanism under sections 153A to 153C for dealing with search cases, which should have been followed. The tribunal observed that the initiation of reassessment proceedings was based on documents found during the search, and the Assessing Officer was fully satisfied that these documents belonged to the assessee. However, the tribunal noted that the proper method to reassess the income of the assessee should have been under section 153C and not under section 147. The tribunal cited various judicial pronouncements supporting this view and concluded that the reassessment order passed under section 143(3) read with section 147 was bad in law and contrary to the provisions of the Act. 2. Jurisdiction to Reopen the Assessment Based on Documents Found During a Search Action: The tribunal noted that the documents found during the search at the residence of an individual associated with the assessee's group were the basis for reopening the assessment. The tribunal emphasized that sections 153A to 153C provide a specific mechanism for assessing income in search cases, and the Assessing Officer should have followed this procedure. The tribunal highlighted that the non-obstante clause in section 153C indicates that it overrides other provisions, including section 147. The tribunal concluded that the Assessing Officer had no jurisdiction to issue notice under section 148 to reopen the assessment and should have proceeded under section 153C. 3. Addition of ?3,75,00,000/- as Alleged Cash Loan under Section 69D of the Income Tax Act: The tribunal did not specifically address the merits of the addition of ?3,75,00,000/- under section 69D, as it focused on the jurisdictional issue. However, the tribunal noted that the Assessing Officer had made the addition based on documents found during the search, which indicated that the assessee had taken cash loans from various parties. The tribunal's decision to quash the reassessment order under section 143(3) read with section 147 implied that the addition made in such assessment would automatically get canceled. 4. Double Taxation of the Same Amount Already Taxed in the Hands of Another Individual: The assessee argued that the amount of ?3,75,00,000/- was already taxed in the hands of another individual from whose premises the alleged documents were found, and hence, it could not be taxed again in the hands of the assessee. The tribunal did not specifically address this issue, as it focused on the jurisdictional aspect and quashed the reassessment order. 5. Consideration of the Said Amount in the Petition Before the Income Tax Settlement Commission: The assessee contended that the amount of ?3,75,00,000/- was already considered in the petition filed before the Income Tax Settlement Commission by the group companies of the assessee and formed part of the order of the Hon’ble Settlement Commission. The tribunal did not specifically address this issue, as it focused on the jurisdictional aspect and quashed the reassessment order. Conclusion: The tribunal concluded that the proper procedure for reassessment in cases involving documents found during a search is under section 153C, not section 147. The tribunal quashed the reassessment order passed under section 143(3) read with section 147, thereby allowing the assessee's appeal on jurisdictional grounds. The tribunal did not adjudicate on the merits of the case, keeping those grounds open. The appeal filed by the assessee was partly allowed.
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