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2024 (11) TMI 1031 - AT - Income TaxValidity of assessment proceedings u/s 153A/153C - satisfaction note for initiation of proceedings u/s 153C - satisfaction note as drawn u/s 153C by the AO of the searched person that seized documents/digital data/information found in the course of search indicates that the other person namely, the assessee herein has purchased a property in which some cash component is involved and such information/document etc. has bearing on the determination of total income of other person namely, the assessee - HELD THAT - While search in the instant case was carried on 06.01.2021 i.e. previous year relevant to AY 2021-22, the documents were handed over in the previous year relevant to AY 2022-23. Based on such matrix, the assessment upto Assessment Year 2021-22 stood covered within ambit of section 153C. This being so, domain for assessment qua undisclosed income for Assessment Year 2021-22 falls within sweep of section 153C of the Act. AO has committed substantive error in proper appreciation of jurisdictional provisions of section 153C of the Act by excluding AY 2021-22 from the ambit of section 153C of the Act erroneously based on actual date of search rather than based on date of receipts of incriminating documents. In order to frame assessment based on the searched document, the notice ought to have been issued under section 153A r.w.s. 153C of the Act. The regular assessment passed by issuance of notice u/s 143(2) of the Act without aid of section 153C of the Act despite satisfaction note from AO of searched person thus, is not supportable in law. The impugned assessment framed under section 143(3) of the Act thus, is void ab-initio as rightly pleaded on behalf of the assessee. Hence, the assessment order passed is vitiated in law and requires to be quashed at the threshold. Assessee appeal allowed.
Issues Involved:
1. Non-compliance with Section 153C of the Income Tax Act, rendering the assessment order void ab-initio. 2. Assessment order passed without approval under Section 153D, rendering it invalid. 3. Jurisdictional challenge on the assessment order passed under Section 143(3) instead of Section 153C. 4. Use of digital evidence without proper authentication under Section 65B of the Indian Evidence Act. 5. Non-compliance with mandatory CBDT instructions/guidelines. Issue-wise Detailed Analysis: 1. Non-compliance with Section 153C: The primary issue raised by the assessee was the non-compliance with Section 153C of the Income Tax Act. The assessee argued that the assessment should have been conducted under Section 153C, as the documents were handed over to the Assessing Officer (AO) of the assessee in the previous year relevant to Assessment Year (AY) 2022-23. According to the proviso to Section 153C, the date of search is substituted by the date of handing over the documents. The AO's failure to issue a notice under Section 153C rendered the assessment order void ab-initio. The Tribunal found substantial merit in this argument, noting that the AO had erroneously based the assessment on the actual date of search rather than the date of receipt of incriminating documents. Consequently, the assessment for AY 2021-22 should have been completed under Section 153C, and the failure to do so invalidated the assessment order. 2. Assessment Order Passed Without Approval Under Section 153D: The assessee contended that the assessment order was invalid as it was passed without the mandatory approval under Section 153D of the Act. The approval was instead taken under Section 119, which does not provide the authority for such approval. The Tribunal noted that the absence of approval under Section 153D, which is required for assessments related to search actions, rendered the assessment order invalid. The Tribunal emphasized that compliance with Section 153D is mandatory, and any breach results in an invalid assessment. 3. Jurisdictional Challenge on Assessment Order Passed Under Section 143(3): The assessee challenged the jurisdiction assumed by the AO in framing the assessment under Section 143(3) instead of Section 153C. The Tribunal agreed with the assessee, stating that the assessment for AY 2021-22 should have been conducted under Section 153C, given the satisfaction note and the incriminating documents related to the assessee. The regular assessment under Section 143(3) was thus not supportable in law, and the assessment order was deemed void ab-initio. 4. Use of Digital Evidence Without Proper Authentication: The assessee argued that the addition of Rs. 97,37,300/- under the head long-term capital gain was based on digital evidence found from third-party devices, which were not corroborated by facts on record and lacked a valid certificate of authentication under Section 65B of the Indian Evidence Act. The Tribunal did not specifically address this issue, as the assessment order was already quashed on jurisdictional grounds. 5. Non-compliance with Mandatory CBDT Instructions/Guidelines: The assessee claimed that the assessment was completed without adhering to mandatory CBDT instructions/guidelines. However, the Tribunal did not delve into this issue, given the quashing of the assessment order on other grounds. Conclusion: The Tribunal quashed the assessment order, finding it void ab-initio due to the jurisdictional error of not conducting the assessment under Section 153C and the lack of mandatory approval under Section 153D. Consequently, the appeal of the assessee was allowed, and the assessment order was set aside.
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