Assessment under section 147 void when based solely on seized documents without fresh information

ITAT Visakhapatnam held that assessment proceedings under section 147 were void-ab-initio where the AO relied solely on seized documents from search operations. The tribunal ruled that when AO acts based on seized material from searched premises without fresh information from normal course, assessment must be framed under section 153C, not section 147. Since section 153C overrides sections 139, 147, 148, and 151, and the AO failed to record any independent information beyond seized documents, the assessment order was quashed as procedurally invalid.

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Issues involved:
The appeal challenges the order of the Ld. Commissioner of Income Tax (Appeals)-10, Hyderabad in DIN & Order No. ITBA/APL/S/250/2022-23/1046188608(1), dated 6/10/2022 u/s. 147 of the Income Tax Act, 1961 [the Act] for the AY 2016-17.

Issue 1: Initiation of proceedings u/s 147 of the Act

The assessee, an NRI engaged in Medical Profession in USA, filed a return of income admitting a total income of Rs. 8,860/- for AY 2016-17. It was discovered that the assessee entered into an agreement for purchase of property worth Rs. 7,89,85,000/-. The Ld. AO initiated proceedings u/s 147 based on seized documents. The Ld. CIT(A) partly allowed the appeal by deleting an addition and sustaining another. The legal issue raised by the assessee regarding the initiation of proceedings u/s 147 was not adjudicated by the Ld. CIT(A).

Issue 2: Validity of notice u/s 148 vs. 153C of the Act

The assessee contended that since the Ld. AO acted based on seized documents, the assessment should have been framed u/s 153C, not u/s 147. The Ld. AR relied on various case laws to support this argument. The Ld. DR supported the Ld. Revenue Authorities' order. The Tribunal found merit in the argument that section 153C overrides other sections. Citing relevant case laws, the Tribunal held that the assessment order passed u/s 147 was void-ab-initio and quashed it. Grounds 3 and 4 raised by the assessee on merits were disposed of as infructuous due to the quashing of the assessment order.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order passed u/s 147 of the Act and disposing of the other grounds as infructuous. The decision was pronounced in the open Court on 18th April, 2024.

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