Assessment Officer lacked jurisdiction for A.Y. 2014-15 without Section 153C notice after search on other person

ITAT Delhi ruled that AO lacked valid jurisdiction to pass assessment order for A.Y. 2014-15. The tribunal held that since search was conducted on other person, AO was required to issue notice u/s 153C before initiating assessment proceedings, which was not done. Additionally, the notice u/s 143(2) issued on same date as receiving acknowledgment of return filing was invalid as AO had not examined the actual return. The assessment order and all subsequent proceedings were quashed as void-ab-initio for non-compliance with mandatory legal requirements.

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Issues Involved:

1. Admission of additional grounds of appeal.
2. Validity of assessment order due to non-compliance with Section 143(2) of the Income Tax Act.
3. Application of Section 153C regarding jurisdiction and assessment proceedings.
4. Deduction of prior period expenses.

Issue-wise Detailed Analysis:

1. Admission of Additional Grounds of Appeal:

The assessee sought admission of additional grounds of appeal, arguing that these grounds were legal in nature and went to the root of the validity of the assessment. The Tribunal admitted these additional grounds, acknowledging their relevance and the legal precedent set by the Supreme Court in similar cases. The Tribunal emphasized that these grounds could be adjudicated based on the existing record without the need for extraneous material.

2. Validity of Assessment Order Due to Non-compliance with Section 143(2):

The assessee contended that the assessment order was invalid as it was completed without adhering to the mandatory requirements of Section 143(2) of the Income Tax Act. The Tribunal noted that the notice under Section 143(2) was issued on the same day the return was filed, indicating a lack of application of mind by the Assessing Officer (AO). Citing the judgment of the Delhi High Court in the case of Society for Worldwide Interbank Financial Telecommunications, the Tribunal held that the AO must examine the return before issuing a notice under Section 143(2). Since the AO issued the notice without having the return, the Tribunal concluded that the notice was invalid, leading to the quashing of the assessment order.

3. Application of Section 153C Regarding Jurisdiction and Assessment Proceedings:

The Tribunal examined whether the AO had validly assumed jurisdiction under Section 153C for the assessment year 2014-15. The Tribunal referred to the ITAT's decision in the case of Mapsa Tapes Pvt. Ltd., which clarified that the six-year period for assessment under Section 153C should be counted from the date of recording satisfaction by the AO of the searched person. In this case, the satisfaction was recorded on 22.09.2015, making the relevant assessment years 2010-11 to 2015-16. Since the AO did not issue a notice under Section 153C for the assessment year 2014-15, the Tribunal held that the AO did not have valid jurisdiction, leading to the quashing of the assessment order.

4. Deduction of Prior Period Expenses:

The assessee argued for the deduction of prior period expenses amounting to Rs. 11,05,027/-, claiming there was no dispute on their allowability except for the period they pertained to. The Tribunal did not adjudicate on this issue as the appeal was partly allowed on legal grounds, rendering the merits of the case infructuous.

Conclusion:

The Tribunal allowed the appeal partly, quashing the assessment order due to the AO's failure to comply with the mandatory requirements of Sections 143(2) and 153C. The additional grounds of appeal were admitted, and the Tribunal emphasized the importance of following procedural requirements to ensure the validity of assessment orders. The issue of prior period expenses was dismissed as not pressed, and the grounds on merits were not adjudicated due to the relief granted on legal grounds.

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