2017 (4) TMI 1563 - AT - Income Tax

Tribunal rules reassessment proceedings void, emphasizes section 153C over 147. Alleged additions quashed.

Smt. Sangeeta Chhabra Versus ITO, Ward-36 (5), New Delhi.

The tribunal held that the initiation of re-assessment proceedings under section 147 of the Act was incorrect, and the reassessment was deemed void ab ... Reopening of assessment u/s 147 OR assessment u/s 153C - addition on account of alleged purchases of bogus material and payment of commission - search in the case of Shri Vaibhav Jain and Navneet Jain were made u/s.132 of the Act who have been indulging in profiting accommodation entries through their thirty seven paper entries and charging commission from the beneficiary on the accommodation entries provided - HELD THAT:- DR in fact could not bring the reasons otherwise and therefore, in the circumstances and facts of the case, the assessment proceedings in the case of Vaibhav Jain and Navneet Jain have been initiated u/s.153C of the Act, and therefore, if in view of the department the information so received is considered as a material, the assessment in the present case should have been made u/s.153C and accordingly proceeded u/s.153A to 153C which should have been initiated in the present case but the proceedings u/s.147/148 of the Act has been initiated which itself is bad in law and the reliance is placed in the case of Rajat Subhra Chaterjee [2016 (7) TMI 258 - ITAT DELHI] In the circumstances and facts of the case, the proceedings initiated u/s.148 of the Act are ab initio and are directed to be quashed - Decided in favour of assessee. Issues:1. Initiation of re-assessment proceedings u/s.147 of the Act2. Addition on account of alleged purchases of bogus material and payment of commissionIssue 1: Initiation of re-assessment proceedings u/s.147 of the ActThe appeal raised concerns regarding the initiation of re-assessment proceedings under section 147 of the Act and the addition of alleged purchases of bogus material and commission payment. The counsel for the assessee argued that a search was conducted on individuals involved in profiting accommodation entries, and as per Section 153C, assessments should have been made on the assessee. The counsel also emphasized the rule of consistency based on previous year transactions. The AO's findings were based on information received regarding accommodation entries provided by certain individuals, leading to the initiation of proceedings under section 147. However, the counsel contended that proceedings under section 153C should have been followed instead. The tribunal referred to similar cases and held that the initiation of proceedings under section 147 was incorrect, and the reassessment was deemed void ab initio.Issue 2: Addition on account of alleged purchases of bogus material and payment of commissionThe grounds questioning the addition of a specific amount under section 28(iv) were rendered irrelevant due to the aforementioned finding that the reassessment was void ab initio. The tribunal, following the decision in a related case, quashed the reassessment, making the grounds for the addition of the amount inconsequential. As the assessee succeeded on legal grounds, the merit-based grounds were considered academic and did not require further adjudication. Consequently, the appeal of the assessee was allowed based on the legal grounds, and the reassessment proceedings were directed to be quashed.In conclusion, the tribunal's judgment addressed the issues of the initiation of re-assessment proceedings under section 147 of the Act and the addition of alleged purchases of bogus material and commission payment. The decision highlighted the incorrect application of section 147 instead of section 153C, leading to the reassessment being deemed void ab initio. The grounds related to the addition of a specific amount were considered irrelevant due to the quashing of the reassessment based on legal grounds.