2024 (6) TMI 517 - AT - Income Tax

Validity of assessment u/s 153A/153C without recording any satisfaction - no valid approval process undertaken u/s 153D - HELD THAT - The first thing is that admittedly, this seizure was on 30.08.2014 and if same is considered as date of requisition for the purpose of Section 132A, the financial year relevant to it will be 2014-15, falling with assessment year 2015-16. Thus, in view of the provisions of section 153 r.w. clauses A and B, the assessment proceedings for the assessment year under consideration i.e., AY 2015-16 being search year were abated assessments and could not be completed u/s 153A or even 153C. In any case, the assessment could not have been completed u/s 153C as the assessee is the alleged person searched himself and for that reasons the assessment was initiated by issuance of notice u/s 153A. Admittedly revenue does not rely any satisfaction note to assess the assessee u/s 153C as other person. The argument of the ld. DR that section 153C may have been mentioned inadvertently have been rebutted duly by ld. AR by bringing forth copies of order sheets of the assessment proceedings. The noting dated 23/09/2016 shows that notice was issued u/s 153A. Then the noting of 26/12/2016 shows draft assessment was forwarded to competent authority for approval. As mentioned above the approval dated 29/12/2016 was for assessment u/s 143(3)/153C of the Act. Then on 29.12.2016 while passing the impugned order, the ld. AO specifically mentions in the order sheet that the assessment has been completed u/s 143(3)/153C of the Act. The legislative intent of Section 153D is to introduce a higher degree of scrutiny and approval for assessment orders following search or survey operations. Same cannot be considered merely a procedural step but a substantive mandate of law. In the case of PCIT vs. Anuj Bansal 2023 (7) TMI 1214 - DELHI HIGH COURT reaffirms the importance of a thorough and well-reasoned approval process under Section 153D of the Act. The aforesaid discussion firmly established that the approval granted by the ld. Addl. CIT, Range-1, Muzaffarnagar u/s 153D, on 29.02.2016, was without application of mind and can be very much construed to be given in mechanical way. In fact the assessment order opens by narrating a fact that case of assessee was selected for scrutiny. There seems to have been no endeavor to appreciate as to under what provisions of law the AO intended to initiate the assessment, proceed or conclude the assessment. CIT(A) has not cared to discuss a word on the averment of assessee that assessment could not have been u/s 153C of the Act. Thus, we are of firm view that additional grounds raised deserve to be sustained.

Summary

Issues:
- Jurisdiction under sections 153A and 153C of the Income Tax Act
- Validity of assessment order passed under section 153C
- Compliance with provisions of section 153D for assessment orders following search or survey operations

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) by the Assessee, challenging the addition of Rs. 80,77,500 under section 69A of the Income Tax Act. The cash was seized from the Assessee by the Punjab Police, and subsequent investigations revealed discrepancies in the source of the cash. The Assessee claimed the cash was given by different persons for purchasing animals, but the Assessing Officer found the explanation contradictory and made the addition under section 69A.

2. The Assessee raised multiple grounds in appeal, including challenging the assessment order's legality and the addition made under section 69A without corroborative evidence. The Assessee also contended that the assessment was completed under the wrong provisions, specifically questioning the jurisdiction under sections 153A and 153C of the Act. The Assessee argued that the assessment order was void-ab-initio and should be annulled.

3. During the hearing, the Assessee's representative argued that the assessment proceedings were initiated under section 153A, not 153C, and that the assessment order was passed under the wrong section. The Department, however, defended the jurisdiction under section 153A, citing a judgment of the Delhi High Court. The Tribunal noted discrepancies in the assessment process, including the issuance of notices under different sections, leading to confusion regarding the correct provisions applied.

4. The Tribunal observed that the approval under section 153D for the assessment order was mechanical and lacked proper scrutiny. The legislative intent behind section 153D is to ensure a thorough approval process for assessment orders following search or survey operations. The Tribunal found that the approval granted lacked proper application of mind and did not consider the Assessee's contention regarding the incorrect application of provisions.

5. Ultimately, the Tribunal allowed the Assessee's appeal, setting aside the assessment order due to procedural irregularities and the incorrect application of provisions. The Tribunal emphasized the importance of complying with the provisions of the Income Tax Act and ensuring a well-reasoned approval process under section 153D. The decision highlighted the need for meticulous scrutiny and adherence to legal requirements in assessment proceedings following search operations.

6. The judgment underscores the significance of proper jurisdictional application, compliance with procedural requirements, and the need for a substantive mandate of law in assessment proceedings under the Income Tax Act. The Tribunal's decision to set aside the assessment order reflects the importance of upholding legal standards and ensuring fair and transparent assessment processes.