2024 (11) TMI 1070 - HC - Income Tax

Assessment u/s 147 v/s 153C - choice of correct course of assessment - name of the Assessee featured in the list of beneficiaries of accommodation entries by way of share capital premium / loan - HELD THAT - As in the present case, no satisfaction note was recorded by the AO of the search person or forwarded to the AO of the Assessee. Thus, in any event the conditions for reopening of the assessment u/s 153C of the Act were not satisfied. For this reason as well, recourse to Section 147 of the Act based on information as received by the Investigation Wing was not precluded. AO could not be faulted for proceedings under Section 147/148 of the Act instead of Section 153C of the Act. It is also material to note that the search in the case of Jain Brothers was conducted on 14.09.2010. Section 153C(1) of the Act as in force at the material time postulated that the assessment/reassessment of income of person (other than the searched person) u/s 153C of the Act could be initiated only if the assets, documents or books of accounts or material found during the search under Section 132 of the Act or requisitioned u/s 132A of the Act in respect of another person, belongs or belong to such person other than the one searched who could then be assessed u/s 153C of the Act subject to other conditions being satisfied. Thus, on the date on which the AO had received the information from the Investigation Wing, which is stated to be 12.03.2013, reassessment under Section 153C of the Act, was impermissible. Section 153(1) of the Act was amended subsequently by virtue of the Finance Act, 2015. As in Sujit Kumar Bhatia 2023 (4) TMI 296 - SUPREME COURT clarified that the amendment would also be applicable to search conducted prior to 01.06.2015. The present case is covered squarely by the decision of Abhisar Buildwell (P.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT as the jurisdictional condition for the AO of the Assessee to assume jurisdiction under Section 153C of the Act was not satisfied. Present appeal is allowed and the Assessee s appeal is restored before the learned ITAT for consideration on other grounds as raised by the Assessee.

Summary

Issues:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act.
2. Applicability of Section 153C of the Act in the given circumstances.

Analysis:

Issue 1: Validity of reassessment proceedings under Section 147/148 of the Income Tax Act
The case involved the Revenue appealing against an order passed by the Income Tax Appellate Tribunal (ITAT) in favor of the Assessee, M/s Agroha Fincap Ltd. The Assessee's income for the assessment year 2011-12 was re-opened based on information received regarding accommodation entries provided by Sh. Surinder Kumar Jain through dummy companies. The Assessee's name was found in the list of beneficiaries of such entries. The Assessing Officer made an addition to the Assessee's income under Section 68 and Section 69C of the Act, which was challenged by the Assessee before the CIT(A) and subsequently before the ITAT. The ITAT allowed the Assessee's appeal, holding that the reassessment proceedings under Section 147/148 were invalid as only proceedings under Section 153C could be initiated. The High Court upheld the ITAT's decision, emphasizing that the correct course for the Assessing Officer was to proceed under Section 153C of the Act.

Issue 2: Applicability of Section 153C of the Act in the given circumstances
The High Court analyzed the conditions for reopening the assessment under Section 153C of the Act and noted that no satisfaction note was recorded by the AO of the search person or forwarded to the AO of the Assessee. The Court held that the conditions for reopening the assessment under Section 153C were not satisfied in this case. The Court further explained that the search in the case of Jain Brothers was conducted prior to the date when reassessment under Section 153C would have been permissible. Referring to relevant case law, the Court concluded that the jurisdictional condition for the AO of the Assessee to assume jurisdiction under Section 153C was not met. Therefore, the High Court allowed the Revenue's appeal, restoring the Assessee's appeal before the ITAT for consideration on other grounds raised by the Assessee.

This judgment clarifies the procedural requirements for reopening assessments under different sections of the Income Tax Act and highlights the importance of satisfying jurisdictional conditions before initiating reassessment proceedings.