Jurisdictional Error: Tribunal Invalidates Assessment Order under Income Tax Act

The Tribunal upheld the decision of the Ld. CIT(A) declaring the notice and subsequent assessment order void ab initio due to lack of jurisdiction under section 153C of the Income Tax Act. The Tribunal emphasized that the notice issued to the assessee under section 153C was invalid as proceedings should have been initiated under section 153A. The Tribunal dismissed the Revenue's appeal, affirming the decision on legal grounds raised by the assessee. The cross objections raised by the assessee were allowed, resulting in the dismissal of the Revenue's appeal and the upholding of the assessee's cross objections.

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Issues:
Validity of notice issued under section 153C of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of the Ld. CIT(A)-3, Visakhapatnam for the AY 2017-18. The Revenue raised grounds related to the search conducted in the case of another individual, addition of a specific amount, and the validity of the notice issued under section 153C of the Act. The assessee, engaged in pisciculture, had his premises searched after a search operation on another individual. The Ld. AO issued a notice under section 153C, leading to an assessment order with certain additions. The assessee challenged this before the Ld. CIT(A), arguing that the notice under section 153C was invalid as the proceedings should have been initiated under section 153A. The Ld. CIT(A) agreed, declaring the notice and subsequent assessment order as void ab initio due to lack of jurisdiction. The Revenue appealed to the Tribunal, disputing this decision.

During the Tribunal proceedings, the Ld. DR contended that the notice should be deemed valid under section 292BB as the assessee participated in the assessment proceedings without objection. Conversely, the Ld. AR supported the Ld. CIT(A)'s decision. The Tribunal analyzed the core issue of the notice's validity under section 153C. It emphasized that post a search, proceedings for the searched person should be initiated under section 153A, while section 153C applies to related persons. In this case, the notice under section 153C for the assessee was deemed invalid. The Tribunal upheld the Ld. CIT(A)'s decision, stating that defects in such notices are not curable under section 292BB, rendering the assessment order void. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the decision on the legal ground raised by the assessee.

The cross objections raised by the assessee were in line with the Ld. CIT(A)'s decision. As the Tribunal upheld the Ld. CIT(A)'s decision, the cross objections were allowed. Hence, the Revenue's appeal was dismissed, and the assessee's cross objections were upheld.

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