2023 (5) TMI 1398 - AT - Income Tax

Assessment u/s 147 v/s 153C - material collected in the search on Jain Brothers i.e. third party u/s. 132 - HELD THAT - Undisputedly proceedings u/s. 147/148 of the Act have been initiated on the basis of information and material collected in the search on Jain Brothers i.e. third party u/s. 132 of the Act and the reassessment on the basis of incriminating material found in the search of third party attracts the provisions of section 153C of the Act. In the present case instead of taking action u/s. 153C of the Act the Assessing Officer of search person send the material and information to the Assessing Officer of present assessee and he invoked action u/s. 147/148 of the Act. These facts are also clearly emerged from the copy of the reasons available that the Assessing Officer of assessee took action under u/s. 147/148 of the Act on the basis of information received from DDIT (Inv) Delhi based on the search and seizure operation in the case of Shri Surender Kumar Jain Group. It is pertinent to take cognizance of order of Saurashtra Color Tones Pvt. Ltd. 2020 (4) TMI 289 - ITAT DELHI wherein the co-ordinate bench adjudicating the identical legal issue held no justification for the A.O. to have been initiated proceedings us. 147 / 148 - The correct course of action would have been to proceed against the assessee under section 153C. Thus, in the present case also there was no valid justification for the Assessing Officer to take action u/s. 147/148 of the Act on the basis of information and material found and seized during the course of search operation on third party i.e. Surender Kumar Jain Group. The correct course of action would have been to take recourse and to proceed against the assessee u/s. 153C of the Act - Decided in favour of assessee.

Summary

Issues:
Admission of additional legal ground for AY 2011-12 regarding the validity of proceedings initiated u/s. 147/148 of I.T. Act.

Analysis:
The appeal was filed against the order of CIT(A)-1 New Delhi for AY 2011-12. The assessee sought to raise an additional legal ground challenging the initiation of proceedings u/s. 147/148 of the I.T. Act. The AR argued that this ground, though not raised before the lower authorities, was crucial and could be decided based on existing records, citing judgments of the Hon'ble Supreme Court. The Senior DR opposed the admission of the additional ground.

Upon careful consideration, the Tribunal admitted the additional ground for adjudication, following precedents set by the Hon'ble Supreme Court. The AR relied on judgments of ITAT Delhi and other co-ordinate benches, emphasizing that the proceedings initiated under u/s. 147/148 were unwarranted and should have been under u/s. 153C due to the nature of the seized material from a third party. The AR's arguments were supported by various case laws, highlighting the applicability of Sec. 153C in such scenarios.

The Senior DR presented written submissions based on judgments of ITAT Ahmedabad and Pune, arguing that the Assessing Officer's jurisdiction under Sec. 153C required a specific intimation from the Assessing Officer of the relevant person. However, the Tribunal noted that the proceedings were indeed initiated based on information from a third party search, falling under the purview of Sec. 153C. The Tribunal referenced the Saurashtra Color Tones Pvt. Ltd. case to support the invalidity of proceedings under u/s. 147/148 and the necessity of action under Sec. 153C.

Considering the consistent view of various co-ordinate benches, the Tribunal held that the initiation of reassessment proceedings under u/s. 147/148 was invalid and quashed the reassessment and first appellate order. The Tribunal refrained from adjudicating on the merits of the assessee's grounds due to the relief granted on the legal issue. Consequently, the appeal was partly allowed, and the order was pronounced on 26.05.2023.