2018 (3) TMI 1745 - AT - Income Tax

Tribunal rules AO erred in invoking wrong section for assessment, deems order void, allows assessee's appeals.

M/s. Rayoman Carriers Pvt. Ltd. Versus. Asst. CIT Mumbai

The Tribunal held that the Assessing Officer erred in invoking Section 147 instead of Section 153C for assessment following a search and seizure action. ... Reopening of assessment u/s 147 when assessment has already been taken up u/s.153C - validity of notice issued u/s. 148 - AO already issued notice u/s. 153C to the appellant prior to the date of issue of notice u/s. 148 - HELD THAT:- Section 153C provides that persons relating to whom some material is found in search of some other person should be assessed under sec. 153C. The provisions of section 153C are non-obstantive provisions and specially exclude the operation of sec. 147, therefore, the Assessing Officer in the present case has erred in invoking the provisions of sec. 147. If action u/s 147 is permitted on the basis of material found in the course of' search, then the provisions of sec. 153 would be redundant. The provisions of sec.153C were applicable which excludes the application of sections 147 and 148 of the Act and hence the notice issued under sec. 148 and proceedings under sec. 147 are void ab initio. Consequences to search at the premises of director, proceedings u/s.153C has been initiated in the hands of assessee company, the AO was not justified in not complying with the provisions of 153C and proceeding with the provisions of Section 147. Thus, assessment order framed u/s.143(3) r.w.s. 147 is without any jurisdiction. - Decided in favour of assessee. Issues Involved:1. Validity of notice issued under Section 148.2. Treatment of proceeds received on transfer of shares as unexplained money.3. Assessment under Section 69C of the Income Tax Act.Issue-wise Detailed Analysis:1. Validity of Notice Issued Under Section 148:The primary legal grievance of the assessee concerns the assumption of jurisdiction under Section 147 and the framing of the assessment under Section 143(3) read with Section 147, despite the case falling under the purview of Section 153C. The assessee argued that once proceedings under Section 153C were initiated, the issuance of notice under Section 148 was invalid. The assessee contended that Section 153C, which deals with assessments related to search actions, specifically excludes the operation of Section 147. The Tribunal found that documents belonging to the assessee were discovered during a search and seizure action at the premises of a company director, leading to the issuance of a notice under Section 153C. However, no assessment under Section 153C was completed, and a notice under Section 148 was subsequently issued. The Tribunal held that the Assessing Officer (AO) erred in invoking the provisions of Section 147 when the case should have been assessed under Section 153C. The Tribunal cited several judicial pronouncements, including the ITAT Delhi Bench in Rajat Shubra Chatterji vs. ACIT and ITAT Amritsar Bench in Arun Kumar Kapoor, which supported the view that Section 153C assessments exclude the application of Sections 147 and 148. Consequently, the Tribunal set aside the assessment order framed under Section 143(3) read with Section 147, deeming it without jurisdiction and void ab initio.2. Treatment of Proceeds Received on Transfer of Shares as Unexplained Money:The assessee challenged the Commissioner of Income Tax (Appeals) [CIT(A)]'s decision to treat the proceeds from the transfer of shares of Transmission Securities Ltd. as unexplained money. The Tribunal did not provide a detailed analysis on this issue, as the primary focus was on the jurisdictional validity of the notice issued under Section 148 and the subsequent assessment under Section 147. Since the Tribunal set aside the assessment order on jurisdictional grounds, this issue was rendered moot.3. Assessment Under Section 69C of the Income Tax Act:The assessee also contested the CIT(A)'s decision to assess a certain amount under Section 69C of the Income Tax Act. Similar to the issue of unexplained money, the Tribunal did not delve into a detailed analysis on this matter. The focus remained on the jurisdictional issue, and with the setting aside of the assessment order under Section 143(3) read with Section 147, this issue was also rendered moot.Conclusion:The Tribunal concluded that the AO was not justified in invoking the provisions of Section 147 when the case fell under the purview of Section 153C due to the search and seizure action. The assessment order framed under Section 143(3) read with Section 147 was set aside as being without jurisdiction. Consequently, the appeals of the assessee were allowed, and the orders passed by the AO for both assessment years were set aside. The Tribunal's decision was pronounced in the open court on March 16, 2018.