2021 (1) TMI 1074 - AT - Income Tax

Assessment under wrong section rendered order invalid; Tribunal allows appeal, AO's appeal dismissed

The Tribunal allowed the appeal of the assessee, holding that the assessment should have been made under Section 153C instead of Section 143(3), rendering ... Assessment u/s 153C or u/s 143(3) - HELD THAT:- When revenue has not challenged the order of the learned CIT – A on identical facts and circumstances in case of other assessee of the same group, the revenue cannot say that the order of the learned CIT – A is incorrect as it has already accepted by the revenue is correct by not filing an appeal before the coordinate bench. See PRAKASH SACHDEVA [2014 (9) TMI 1224 - ITAT DELHI] Ground of the appeal of the assessee contesting that the assessment order made by the assessing officer was bad in law and void ab initio on the ground that it was to have been made u/s 153C of the income tax act and not, as was u/s 143 (3)/147 of the income tax act 1961 is allowed. Issues Involved:1. Validity of assessment order under Section 143(3) vs. Section 153C.2. Relevance and nexus of seized material with the assessee.3. Addition on account of interest on post-dated cheques (PDCs).4. Disallowance of additional payments.Issue-wise Detailed Analysis:1. Validity of Assessment Order under Section 143(3) vs. Section 153C:The primary issue raised by the assessee was that the assessment order should have been made under Section 153C of the Income Tax Act, 1961, instead of Section 143(3). The assessee argued that the documents utilized by the Assessing Officer (AO) were seized during a search on the BPTP Group, and thus, the correct procedure was to invoke Section 153C. The CIT(A) and AO, however, contended that the seized documents did not belong to the assessee and hence, the assessment under Section 143(3) was valid. The Tribunal examined the seized documents and concluded that the documents indeed belonged to the assessee, as evidenced by the post-dated cheques issued by the assessee found during the search. Consequently, the Tribunal held that the assessment should have been made under Section 153C, rendering the assessment under Section 143(3) invalid.2. Relevance and Nexus of Seized Material with the Assessee:The assessee contended that the seized material had no nexus or relevance to its case, and the CIT(A) had erred in upholding the AO's reliance on this material. The Tribunal noted that the seized documents, including post-dated cheques issued by the assessee, were relevant and directly linked to the assessee. Therefore, the material was pertinent to the assessee's case, and the AO's reliance on it was justified.3. Addition on Account of Interest on Post-Dated Cheques (PDCs):The AO made an addition of Rs. 4,02,21,741 on account of interest on PDCs, which was upheld by the CIT(A) with directions to re-compute the interest after six months from the date of issue of the cheques. The assessee argued that the CIT(A)'s findings were based on conjectures without independent evidence, and no enquiries were made from the alleged recipients of the interest. The Tribunal, having allowed the primary ground regarding the invalidity of the assessment under Section 143(3), did not adjudicate this issue further.4. Disallowance of Additional Payments:The AO disallowed Rs. 21,31,249 on account of additional payments, which was partly upheld by the CIT(A). The CIT(A) allowed the additional payment made to the landowners or their relatives by account payee cheques as expenditure under Section 37, but disallowed payments not supported by any legal right. The Tribunal, having allowed the primary ground regarding the invalidity of the assessment under Section 143(3), did not adjudicate this issue further.Conclusion:The Tribunal allowed the appeal of the assessee on the primary ground that the assessment should have been made under Section 153C instead of Section 143(3), rendering the assessment order invalid. Consequently, the Tribunal did not adjudicate the other grounds raised by the assessee. The appeal filed by the AO was dismissed.Order Pronounced:The appeal of the assessee is allowed, and the appeal of the AO is dismissed.