2025 (3) TMI 1467 - AT - Income Tax

Validity of proceedings u/s 153C r.w.s. 143(3) - challenge to validity of the impugned assessments framed u/s 143(3) than that under section 153C or under section 148 - HELD THAT - We find no reason to sustain the impugned section 153C assessment. We first of all deem it appropriate to quote section 153C(1) 1st proviso stipulating that reference to the date of initiation of search under section 132 or making of requisition shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the AO having jurisdiction Hon ble jurisdictional high court s recent various landmark decisions CIT-7 Vs. RRJ Securities Ltd. 2015 (11) TMI 19 - DELHI HIGH COURT PCIT Vs. Ojjus Medicare (P) Ltd. 2024 (4) TMI 268 - DELHI HIGH COURT and CIT Vs. Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT have already settled the issue that the reference in such an instance u/s 153C is the date when the Assessing Officer records his corresponding 153C satisfaction. We therefore are of the considered view that the given fact that the learned lower authorities have framed section 243(3) assessments in these twin assessee s cases based on the seized materials without either taking recourse to section 153C or section 148 of the Act as the case may be the same are not sustainable in law. We accordingly quash the impugned twin assessments in very terms

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. The validity of assessments framed under Section 143(3) of the Income-tax Act, 1961, rather than under Section 153C or Section 148, following a search operation.

2. The admissibility of additional grounds raised by the assessee at a belated stage in the appellate proceedings.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Assessments under Section 143(3)

Relevant Legal Framework and Precedents: The legal framework revolves around Sections 143(3), 153C, and 148 of the Income-tax Act, 1961. Section 153C pertains to the assessment of income of any other person, other than the person searched, in whose case incriminating documents are found during a search. Section 143(3) involves the regular assessment procedure, while Section 148 deals with reassessment.

Court's Interpretation and Reasoning: The Tribunal examined the applicability of Section 153C and determined that the assessments should have been framed under this section, given the context of the search operation and the seized materials. The Tribunal referenced the first proviso of Section 153C(1), which clarifies that the date of initiation of search or requisition should be construed as the date when the Assessing Officer receives the seized documents or assets.

Key Evidence and Findings: The evidence primarily involved the seizure of a mobile phone image indicating a property transaction, which was used to frame the assessments under Section 143(3). The Tribunal noted that the assessments were based on seized materials without invoking Section 153C or Section 148.

Application of Law to Facts: The Tribunal applied the legal provisions and precedents to conclude that the assessments under Section 143(3) were not sustainable, as they should have been framed under Section 153C, considering the nature of the seized evidence.

Treatment of Competing Arguments: The Revenue argued for the validity of the Section 143(3) assessments, citing the timing of the search. However, the Tribunal found this argument unpersuasive, relying on established legal interpretations from higher courts.

Conclusions: The Tribunal quashed the assessments under Section 143(3), holding that the correct procedure under Section 153C was not followed, rendering the assessments invalid.

2. Admissibility of Additional Grounds

Relevant Legal Framework and Precedents: The Tribunal referred to the landmark decision in National Thermal Power Co. Ltd. vs. CIT, which allows the admission of additional grounds in appellate proceedings if relevant facts are part of the record.

Court's Interpretation and Reasoning: The Tribunal admitted the additional grounds raised by the assessee, emphasizing the importance of determining the correct tax liability and the presence of all relevant facts on record.

Key Evidence and Findings: The Tribunal noted that the additional grounds pertained to the core issue of assessment validity, which was crucial for determining the correct tax liability.

Application of Law to Facts: The Tribunal applied the precedent from the National Thermal Power Co. Ltd. case to admit the additional grounds, facilitating a comprehensive determination of tax liability.

Treatment of Competing Arguments: The Revenue objected to the admission of additional grounds at a late stage, but the Tribunal overruled this objection based on established legal principles.

Conclusions: The Tribunal allowed the additional grounds, enabling a full examination of the assessment's validity.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal emphasized the interpretation of Section 153C, stating, "reference to the date of initiation of search under section 132 or making of requisition........., shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction....."

Core Principles Established: The judgment reinforced the principle that assessments following a search should be framed under the appropriate section (153C) when incriminating materials are found, rather than under the regular assessment procedure (143(3)).

Final Determinations on Each Issue: The Tribunal quashed the assessments under Section 143(3), ruling them invalid due to the improper application of the relevant sections. The additional grounds raised by the assessee were admitted, leading to a comprehensive resolution of the tax liability issue.

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