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2025 (1) TMI 1407 - AT - Income TaxValidity of assessment made u/s 143(3) v/s 153C - assessee s contention is that since the assessment was made pursuant to search and based on materials found in the course of search the assessment in the case of the Assessee being the person other than the searched person should have been made u/s 153C of the Act instead of regular assessment u/s 143(3) HELD THAT - In this case undoubtedly the addition made in the assessment order passed u/s 143(3) for the AY 2021-22 was based on the search and seizure operations conducted on Hans Group of cases on 06.01.2021 wherein the mobile phone of Shir Vaibhav Jain was seized and based on the watts app chats on 01.12.2020 in the mobile phone of Shri Vaibhav Jain the addition came to be made while completing the assessment u/s 143(3) of the Act. The contention of the assessee in this appeal was that when once the assessment of the Assessee was made based on the materials seized in the case of Hans Group such assessment should have been made u/s 153C having recorded the satisfaction note u/s 153C of the Act and not u/s 143(3) as was done by the AO. On perusal of the decision of the Tribunal in the case of Mukul Rani Thakur 2024 (11) TMI 1031 - ITAT DELHI we observed that on identical facts and in same search of Hans Group on 06.01.2021 the AO completed the assessment u/s 143(3) having recorded the satisfaction note u/s 153C for the assessment years 2015-16 to 2021-22. Having regard to the first proviso to section 153C AY 2023-24 relevant to the FY 2022-23 would be the year of search and therefore the Assessing Officer was required to complete the assessment for six assessment years prior to year of search AY 2023-24 u/s 153C for assessment years 2017-18 to 2022-23. AO completed the assessment for AY 2021-22 u/s 143(3) which is not permissible under law. We hold that the regular assessment made u/s 143(3) of the Act despite recording of satisfaction note u/s 153C from Assessing Officer of searched person and also as the AO of the person other than the searched person is not permissible in law. Thus we hold that the assessment framed u/s 143(3) of the Act for AY 2021-22 is void ab initio and the same is hereby quashed. The additional ground raised by the assessee is allowed.
ISSUES PRESENTED AND CONSIDERED
The core legal issues considered in this appeal were:
ISSUE-WISE DETAILED ANALYSIS Validity of Assessment under Section 143(3) Relevant Legal Framework and Precedents: The primary legal framework involves sections 143(3) and 153C of the I.T. Act. Section 143(3) pertains to regular assessment, whereas section 153C deals with assessments related to materials found during a search on a third party. The precedents cited include decisions from the Supreme Court and various High Courts, emphasizing the procedural requirements for assessments involving search-related materials. Court's Interpretation and Reasoning: The Tribunal noted that the assessment for AY 2021-22 was based on materials seized during a search on the Hans Group, a third party. The Tribunal emphasized that when assessments are based on search materials, they should be conducted under section 153C, not section 143(3). Key Evidence and Findings: The evidence included WhatsApp chats found during the search on the Hans Group, which were used to make additions to the assessee's income. The Tribunal found that the Assessing Officer (AO) had recorded a satisfaction note under section 153C, indicating the applicability of this section. Application of Law to Facts: The Tribunal applied the law by determining that the satisfaction note recorded under section 153C required the AO to proceed under this section for assessments related to the seized materials. The Tribunal found that the AO's decision to proceed under section 143(3) was incorrect. Treatment of Competing Arguments: The assessee argued that the assessment should have been under section 153C, citing procedural errors in the AO's approach. The Revenue supported the assessment under section 143(3). The Tribunal sided with the assessee, emphasizing the procedural missteps. Conclusions: The Tribunal concluded that the assessment under section 143(3) was void ab initio due to the failure to follow the correct procedural path under section 153C. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "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." Core Principles Established: The Tribunal established that when assessments are based on materials seized during a search on a third party, section 153C must be invoked. The procedural requirements under section 153C are mandatory, and failure to comply renders the assessment void. Final Determinations on Each Issue: The Tribunal determined that the assessment for AY 2021-22 was void ab initio due to the incorrect application of section 143(3) instead of section 153C. Consequently, the additional ground raised by the assessee was allowed, and the assessment order was quashed. The other grounds raised by the assessee were not adjudicated as they became academic following the decision on the procedural issue.
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