Assessment under section 147 void when section 153C applies, notice under section 148 invalid

ITAT Delhi held that assessment under section 147 was void ab initio when section 153C provisions were applicable. The case involved unexplained cash credit under section 68 where assessee received accommodation entries as bogus LTCG/STCG from entry operator. CIT(A) correctly determined that section 153C excluded application of section 147, making the notice under section 148 and subsequent assessment invalid. The reassessment for AY 2017-18 was quashed and Revenue's appeal dismissed.

---

---

Issues Involved:

1. Differentiation of information concluded on the basis of seized material as per section 153C of the Act.
2. Necessity of satisfaction note by AO of the searched person for proceedings u/s 153C of the Act.
3. Overlooking the fact that no satisfaction note was sent to the AO of the assessee.

Summary:

Issue 1: Differentiation of information concluded on the basis of seized material as per section 153C of the Act

The Ld. CIT(A) granted relief to the assessee by holding that assessment should have been done u/s 153C and not by way of reopening u/s 147 of the I.T Act, 1961. The CIT(A) analyzed Section 153C, stating it supersedes sections 147, 148, 149, 151, and 153. It was concluded that the seized paper, based on its contents and the statement of Mr. S K Gupta, acquired the nature of "Incriminating paper." Hence, any addition on the basis of this paper should be made u/s 153C.

Issue 2: Necessity of satisfaction note by AO of the searched person for proceedings u/s 153C of the Act

The CIT(A) held that the correct section under which any addition on the basis of the seized paper can be made is Section 153C of the Act. Judicial decisions cited, such as ITO Vs Arun Kumar Kapoor and Rajat Shubra Chatterji Vs. ACIT, supported the view that provisions of sec. 153C were applicable, which exclude the application of sections 147 and 148 of the Act.

Issue 3: Overlooking the fact that no satisfaction note was sent to the AO of the assessee

The CIT(A) noted that the assessment was framed pursuant to the reopening of the case u/s 147 of the I.T Act, 1961. The CIT(A) held that the provisions of sec. 153C were applicable for framing the assessment, excluding the application of section 147. Therefore, the reassessment u/s 147/148 of the Act for AY 2017-18 was quashed. This decision was upheld by the ITAT, finding no infirmity in the order of the CIT(A).

Conclusion

The appeal of the Revenue was dismissed, and the order pronounced in the open court on 01/05/2024.

---