2018 (11) TMI 632 - AT - Income Tax

Tribunal invalidates assessment under section 143(3), nullifies order for non-compliance with section 153C.

The Tribunal set aside the lower authorities' orders, quashed the assessment, and allowed additional grounds of appeal. The assessment under section ... Assessment u/s 153C - non issue of notice - assessment order passed u/s 143(3) - Non recording of satisfaction - Held that:- A.O should have framed the assessment under section 153C of the I.T. Act in the case of the assessee and at the time of initiating the proceeding against the assessee, should have issued notice under section 153C of the I.T. Act which have not been done in this case. No satisfaction note have been recorded under section 153C of the I.T. Act for the assessment year under appeal. No assessment under section 153C have been framed. Further, no notice under section 153C have been issued and no incriminating material was found against the assessee for the assessment year under appeal. The above conditions of Section 153C are mandatory for taking action against the assessee under section 153C of the I.T. Act. The assessment order passed by the A.O. under section 143(3) of the I.T. Act, therefore, vitiated, void, illegal and bad in law and cannot be sustained. See M/S. BNB INVESTMENT & PROPERTIES AND SHRI RANJAN GUPTA VERSUS DCIT CENTRAL CIRCLE-1. [2018 (8) TMI 597 - ITAT DELHI] - Decided in favour of assessee. Issues Involved:1. Validity of assessment proceedings under section 153C of the Income Tax Act.2. Legality of assessment framed under section 143(3) instead of section 153C.3. Requirement of incriminating material for assessment under section 153C.4. Validity of notice issuance under section 153C.Issue-wise Detailed Analysis:1. Validity of Assessment Proceedings under Section 153C:The assessee challenged the initiation and completion of assessment proceedings under section 153C of the Income Tax Act, arguing that no material belonging to the assessee was found during the search. The assessee contended that the proceedings under section 153C were invalid and bad in law. The CIT(A) noted that the present assessment was under section 143(3) and not section 153C, thus dismissing the issue. However, it was argued that the assessment for A.Y. 2011-2012 should have been framed under section 153C, as the period prescribed in the proviso to Section 153C should be calculated from the date of recording the satisfaction note and not from the date of the search.2. Legality of Assessment Framed under Section 143(3) Instead of Section 153C:The assessee argued that the assessment framed under section 143(3) was invalid and lacked jurisdiction as it should have been framed under section 153C. The Tribunal noted that the satisfaction note was recorded on 18.09.2012, and the six assessment years for which assessments or reassessments could be made under section 153C should be construed from this date. Therefore, the assessment years should be 2007-2008 to 2012-2013. Since no notice under section 153C was issued for the assessment year under appeal, the assessment under section 143(3) was deemed invalid.3. Requirement of Incriminating Material for Assessment under Section 153C:The assessee contended that no incriminating material was found during the search, and thus the assessment under section 153C was invalid. The Tribunal observed that no incriminating material was found against the assessee for the assessment year under appeal. The conditions of Section 153C, including the necessity of incriminating material, are mandatory for taking action against the assessee under this section.4. Validity of Notice Issuance under Section 153C:The Tribunal noted that no notice under section 153C was issued before initiating the proceedings against the assessee, which is a mandatory requirement. The absence of such notice rendered the assessment proceedings void and illegal. The Tribunal relied on previous judgments, including the Hon’ble Delhi High Court's decision in the case of Pr. CIT vs. Sarwar Agency P. Ltd., and concluded that the assessment order framed under section 143(3) was invalid.Conclusion:The Tribunal set aside the orders of the authorities below, quashed the assessment order, and allowed the additional grounds of appeal. Consequently, all additions were deleted, and the assessment order was deemed null and void due to the lack of compliance with the mandatory provisions of section 153C.