2024 (10) TMI 927 - AT - Income Tax

Validity of assessment u/s 153A or 147/148 - AO has made the addition on the basis of documents found during the course of search - HELD THAT - We find considerable cogency in the contention of the AR that it is settled law that once a search has taken place u/s 132 of the Act or requisition is made u/s 132A then assessment proceedings in respect of the assessment years (earlier six years, now ten years) specified in section 153A has to be mandatorily initiated and completed u/s 153A - assessment proceedings cannot be initiated u/s 148/147 of the Act in respect of the assessment years covered u/s 153A of the Act. We find considerable cogency in the contention of the AR that it is settled law that once a search has taken place u/s 132 of the Act or requisition is made u/s 132A of the Act, then assessment proceedings in respect of the assessment years (earlier six years, now ten years) specified in section 153A has to be mandatorily initiated and completed u/s 153A. The assessment proceedings cannot be initiated u/s 148/147 of the Act in respect of the assessment years covered u/s 153A of the Act. The Hon ble Rajasthan High Court in the case of Shyam Sunder Khandelwal 2024 (4) TMI 196 - RAJASTHAN HIGH COURT held that assessment/reassessment in Section 153A, 153C in cases of search or requisition has an overriding effect to the regular provisions for assessment or reassessment under Sections 139, 147, 148, 149, 151 153. In the case of Aditi Constructions 2023 (5) TMI 281 - BOMBAY HIGH COURT has held that the specific provisions of section 153C would prevail over the general provisions of section 147. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the assessment proceedings initiated under Section 148 instead of Section 153A of the Income Tax Act.
2. Jurisdictional validity of the assessment order passed under Section 143(3) read with Section 147.
3. Applicability of judicial precedents in determining the correct procedural course for assessments following a search operation.

Issue-wise Detailed Analysis:

1. Legality of Assessment Proceedings under Section 148:
The primary issue in this case revolves around whether the proceedings initiated under Section 148 were legally valid, given that a search operation under Section 132 had already been conducted. The tribunal noted that the assessment proceedings should have been initiated under Section 153A, which specifically deals with assessments following a search or requisition. The tribunal emphasized that once a search operation takes place, any assessment for the years covered by Section 153A must be conducted under this section alone, rather than under Section 148. The tribunal highlighted that the reasons for reopening the assessment under Section 147/148 were based on evidence found during the search, thus mandating the use of Section 153A.

2. Jurisdictional Validity of the Assessment Order:
The tribunal scrutinized the jurisdictional validity of the assessment order passed under Section 143(3) read with Section 147. It was determined that the assessment order was a nullity due to the incorrect invocation of jurisdiction under Section 148 instead of Section 153A. The tribunal cited several judicial precedents, including the Hon'ble Delhi High Court's decision in PCIT v. OJJUS Medicare Private Limited, which clarified that the provisions of Sections 153A and 153C are distinct from the ordinary reassessment provisions under Section 148 and should operate independently. The tribunal further noted that the assessment order was based on evidence found during the search, reinforcing the necessity for proceedings under Section 153A.

3. Applicability of Judicial Precedents:
The tribunal relied on various judicial pronouncements to support its decision. It referred to cases such as State Bank of India v. DCIT and Vashdev G. Adnani v. ACIT, which established that Section 153A has an overriding effect on the regular assessment provisions when a search operation is conducted. The tribunal also distinguished the present case from PCIT v. Meeta Gutgutia, noting that the facts were different as the statement in the current case was recorded under Section 132(4) and incriminating material was found during the search. The tribunal concluded that the appropriate legal course was to issue a notice under Section 153A, and not under Section 148, thereby affirming the decision of the CIT(A) to annul the assessment order.

In conclusion, the tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the assessment proceedings initiated under Section 148 and the subsequent assessment order were without jurisdiction and legally invalid. The tribunal reinforced the principle that search-related assessments must adhere strictly to the procedural framework established under Section 153A.