2019 (10) TMI 1026 - AT - Income Tax

Assessment u/s 153C OR 147/148 - HELD THAT - The amended provisions of section 153C of the Act w.r.e. from 2013 apply to the year under consideration. Considering the above settled legal proposition on this issue (common in both the appeals) we do not find force in the order of the CIT(A). The issue raised in the present appeal is squarely covered by the issue before the Tribunal in Joshi Wadewale Hadapsar Vs. DCIT 2018 (3) TMI 1583 - ITAT PUNE and following the same parity of reasoning we hold that re-assessment proceedings initiated against the assessee under section 147 / 148 of the Act are not warranted. The Assessing Officer after receipt of information belonging to the assessee should have invoked provisions of section 153C of the Act and not section 147 / 148 of the Act. Accordingly we hold so. Consequently re-assessment order passed under section 148 of the Act does not stand.

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 147/148 versus section 153C of the Income Tax Act, 1961.
2. Denial of opportunity to cross-examine the author of the seized diaries.
3. Legality of additions made based on seized materials.
4. Levy of interest under section 234B of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148 versus Section 153C:
The primary issue in both appeals was whether the reassessments should have been conducted under section 153C of the Income Tax Act, 1961, instead of section 147/148. The Tribunal observed that the seized diary containing various entries belonged to the Chhoriya group, and the provisions of section 153C should have been invoked. The Tribunal referred to its previous decisions in the cases of Jayant Hemraj Choudhari and Shri V.L. Khandge, where it was held that when the seized material belongs to a person searched by the Department and the entries relate to that searched person, the relevant provisions for making the assessment are under section 153C and not under section 147/148. Consequently, the Tribunal quashed the reassessment orders made by the Assessing Officer under section 144 read with section 148, as they were unsustainable in law.

2. Denial of Opportunity to Cross-Examine:
The assessee raised an additional ground stating that the opportunity to cross-examine the author of the seized diaries and related persons from the Chhoriya group was denied. This denial formed the basis of the addition of ?18,52,000 made under section 69, which was further enhanced to ?32,13,100. The Tribunal did not specifically address this issue in detail due to the quashing of the reassessment orders on the primary legal ground.

3. Legality of Additions Based on Seized Materials:
The assessee contended that the additions made by the Assessing Officer and confirmed by the CIT(A) were based on documents seized from the Chhoriya group during a search and seizure action. The Tribunal, having quashed the reassessment orders on legal grounds, did not find it necessary to adjudicate on the merits of these additions, rendering the discussion academic.

4. Levy of Interest under Section 234B:
The assessee denied liability to pay any interest under section 234B of the Income Tax Act, 1961, and sought deletion of the impugned interest levied. However, this issue was not specifically addressed by the Tribunal due to the quashing of the reassessment orders on the primary legal ground.

Conclusion:
The Tribunal allowed the appeals of the assessee on the primary legal issue, quashing the reassessment orders made under section 147/148. Consequently, the other grounds raised by the assessee were dismissed as academic. The appeals were partly allowed, with the order pronounced on 05th September 2019.