2023 (4) TMI 943 - AT - Income Tax

Assessment u/s 143(3) instead of section 153A - disallowance to 10% of the claim out of foreign travel expenses of the directors - Whether action of the assessing officer of making assessment u/s 143(3) instead of section 153A since the satisfaction note was prepared by the Assessing officer on 29/01/2014, which became the substituted date of search u/s 153C of the Act and the AY 2013-14 fell within the six preceding assessment years, i.e., from AY 2008-09 to 2013-14 for the purpose of assessment u/s, thus, the assessment framed u/s 143(3) is not legally valid and should be annulled? - HELD THAT - We have gone through the decision of Delhi E Bench of the Tribunal in assessee s own case in 2020 (1) TMI 725 - ITAT DELHI whereby the orders of the authorities below have been set aside and the assessment order passed under section 143(3) of the Act has been quashed We hold that the impugned assessment order is illegal and bad in law and is not sustainable in law. Accordingly, the orders of the Ld. AO/CIT(A) are set aside and the assessment order passed by the Ld. AO under section 143(3) of the Act is hereby quashed - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of assessment under section 143(3) instead of section 153A.
2. Disallowance of 10% of foreign travel expenses of directors.

Summary:

Issue 1: Validity of Assessment under Section 143(3) Instead of Section 153A

The assessee argued that the CIT(A) erred in confirming the assessment under section 143(3) of the Act instead of section 153A, as the satisfaction note was prepared on 29/01/2014, which became the "substituted" date of search under section 153C. The assessment year 2013-14 fell within the six preceding assessment years (2008-09 to 2013-14) for the purpose of assessment under section 153A. The Tribunal referenced its decision in the assessee's own case for AY 2012-13, where it was held that the assessment order passed under section 143(3) was quashed. The Tribunal reiterated that the six assessment years should be considered from the date of recording satisfaction under section 153C. Since the AO did not issue a notice under section 153C, the assessment order under section 143(3) was deemed illegal and unsustainable. Consequently, the orders of the AO and CIT(A) were set aside, and the assessment order was quashed.

Issue 2: Disallowance of 10% of Foreign Travel Expenses

The assessee contested the estimated disallowance of Rs. 16,42,500/- (10% of foreign travel expenses of directors), arguing that no incriminating material was recovered during the search. The CIT(A) confirmed the disallowance, stating that a personal element could not be ruled out. The Tribunal, however, did not need to address the merits of this issue as the assessment order itself was quashed on legal grounds, rendering the disallowance moot.

Conclusion:

The appeal of the assessee was allowed, and the assessment order passed under section 143(3) was quashed. Consequently, all additions, including the disallowance of foreign travel expenses, were deleted.