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2024 (7) TMI 86 - AT - Income TaxValidity of reassessment proceedings u/s 148 or Assessment u/s 153C - case of the assessee is this that the assessment would only be made u/s 153C Act based upon the documents / information found during the course of search of the third party therefore the proceedings initiated u/s 148 of the Act is illegal - addition u/s 69A r.w.s. 115BBE on the premises that the assessee was making cash purchase and sale and not disclosed the true profit of this cash sale in his ITR - HELD THAT - A settled principle of law that a legal ground can be raised by the party aggrieved at any stage even before the Apex Court. So far as the contentions raised by the assessee that in the case of the brother of the assessee proceedings was initiated un/s 153C and not u/s 148 as in the case of the assessee due to the reason that at the very first instance the AO was of the opinion that proceedings should have been initiated u/s 153C and only upon realizing that the time limit for completion of assessment under Section 153C as elapsed AO resorted to issuing notice un/s 148 of the Act DR failed to controvert the same. Moreso the proceeding against the brother of the assessee initiated under Section 153C of the Act has been finally dropped as it appears from the record. Thus the fact of initiation of proceeding u/s 153C of the Act against the assessee s brother has made prior to the reassessment proceedings initiated against the assessee under Section 148 of the Act demands consideration. Such 153C proceedings initiated against the said brother Vijay Kumar was further dropped. The contention made by Learned AR is therefore found to be acceptable having regard to this particular facts and circumstances of the case. Thus only on the basis of the incriminating materials found and seized during the search conducted upon Laxmi Remote India Pvt. Ltd. the reassessment proceeding was initiated against the assessee before us u/s 148. But having regard to the ratio laid down in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT such reassessment proceeding initiated under Section 148 of the Act impugned before us found to be unacceptable. Thus taking into consideration the entire aspect of the matter such assessment therefore not maintainable void ab inito illegal arbitrary and thus quashed. Appeal of the assessee is allowed.
Issues:
1. Jurisdictional validity of proceedings initiated under Section 148 of the Income Tax Act, 1961 instead of Section 153C based on incriminating material found during a search. 2. Application of legal principles regarding the time limit for completion of assessment under Section 153C and the subsequent amendment to the relevant provisions. 3. Comparison of proceedings initiated against the assessee and the assessee's brother under different sections of the Act. 4. Consideration of the approval under Section 153(1) for initiating reassessment proceedings based on incriminating material. Analysis: Issue 1: Jurisdictional Validity of Proceedings under Section 148 The case involved appeals against orders passed by the Commissioner of Income Tax (Appeals) arising from a reassessment under Section 147 of the Act. The assessee contended that the assessment should have been made under Section 153C based on incriminating material found during a search of a related entity. The Assessing Officer (AO) initiated proceedings under Section 148, leading to the appeal. The argument was that the assessment under Section 148 was void ab initio and should have been under Section 153C. The Tribunal agreed with the assessee, citing the amendment to the Act and the specific circumstances of the case as reasons for quashing the reassessment under Section 148. Issue 2: Time Limit for Completion of Assessment under Section 153C The appellant argued that the time limit for completing assessments under Section 153C had lapsed, and thus, the proceedings under Section 148 were improper. The Tribunal considered the amendments to the Act and the specific timelines for different types of assessments. The appellant's reliance on legal precedents, including the judgment in PCIT vs. Abhisar Buildwell Pvt. Ltd., supported the argument that incriminating material should lead to assessment under Section 153A. Issue 3: Comparison of Proceedings Against Assessee and Brother The Tribunal noted that proceedings against the assessee's brother were initiated under Section 153C but were later dropped. This fact, along with the sequence of events and the lack of action against the brother post-objection, supported the argument that the AO initially intended to proceed under Section 153C. The Tribunal found merit in the argument that the assessment against the assessee should have followed the same path as the brother's case. Issue 4: Approval under Section 153(1) for Reassessment The Tribunal examined the approval given under Section 153(1) for initiating reassessment based on incriminating material. The approval mentioned satisfaction based on evidence from the search of a related entity. However, considering the legal principles and precedents, including the Abhisar Buildwell Pvt. Ltd. case, the Tribunal found the reassessment under Section 148 to be improper and quashed the same. In conclusion, the Tribunal allowed the appeals, emphasizing the jurisdictional validity of proceedings and the application of legal principles regarding the assessment process under different sections of the Income Tax Act. The quashing of the reassessment under Section 148 was based on the specific circumstances of the case and the legal precedents cited by the appellant.
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