2022 (5) TMI 1347 - AT - Income Tax

Validity of assessment u/s 153C - Search operation u/s. 132 conducted in the residential premises of Sri Kondrothu Venkata Rama Rao and subsequently the assessee was subjected to search operation - HELD THAT - In the instant case, the Ld. AO ought to have issued notice u/s. 153A of the Act instead of notice u/s. 153C of the Act. Further, the Act also indicates that in case any documents relating to person other than the person searched was found, then the notice to be issued to such other person is u/s. 153A r.w.s 153C. Therefore, the initiation of proceedings u/s.153C of the Act in the case of the assessee who is other than the person searched is not valid. The same view was also taken by the Ld. CIT(A) while allowing the legal ground raised before him and held that the notice issued U/s. 153C of the Act is invalid in the case of the assessee. It is not out of place to mention that any defects in notices u/s. 153A / 153C of the Act, whereby the Assessing Officer assumes jurisdiction, are not curable U/s. 292BB of the Act even the assessee participated in the assessment proceedings without objection. Therefore, it can be safely concluded that in the instant case, since the issue of notice u/s. 153C is invalid and consequently, the assessment order passed U/s. 143(3) r.w.s 153C is bad in law and void ab initio. Accordingly, we uphold the decision of the Ld. CIT(A) on the issue of legal ground and dismiss the grounds raised by the Revenue.

Summary

Issues:
Validity of notice issued under section 153C of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of the Ld. CIT(A)-3, Visakhapatnam for the AY 2017-18. The Revenue raised grounds related to the search conducted in the case of another individual, addition of a specific amount, and the validity of the notice issued under section 153C of the Act. The assessee, engaged in pisciculture, had his premises searched after a search operation on another individual. The Ld. AO issued a notice under section 153C, leading to an assessment order with certain additions. The assessee challenged this before the Ld. CIT(A), arguing that the notice under section 153C was invalid as the proceedings should have been initiated under section 153A. The Ld. CIT(A) agreed, declaring the notice and subsequent assessment order as void ab initio due to lack of jurisdiction. The Revenue appealed to the Tribunal, disputing this decision.

During the Tribunal proceedings, the Ld. DR contended that the notice should be deemed valid under section 292BB as the assessee participated in the assessment proceedings without objection. Conversely, the Ld. AR supported the Ld. CIT(A)'s decision. The Tribunal analyzed the core issue of the notice's validity under section 153C. It emphasized that post a search, proceedings for the searched person should be initiated under section 153A, while section 153C applies to related persons. In this case, the notice under section 153C for the assessee was deemed invalid. The Tribunal upheld the Ld. CIT(A)'s decision, stating that defects in such notices are not curable under section 292BB, rendering the assessment order void. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the decision on the legal ground raised by the assessee.

The cross objections raised by the assessee were in line with the Ld. CIT(A)'s decision. As the Tribunal upheld the Ld. CIT(A)'s decision, the cross objections were allowed. Hence, the Revenue's appeal was dismissed, and the assessee's cross objections were upheld.