Assessment order under Section 143(3) quashed as illegal when Section 153C proceedings already initiated with satisfaction note

ITAT Delhi quashed an assessment order passed under Section 143(3) after finding it illegal and non-maintainable. The case involved under-reporting of sale consideration for immovable property where search action was conducted at third party premises under Section 132, and documents were seized. The AO had recorded satisfaction note under Section 153C for assessment year 2021-22. The tribunal held that once Section 153C proceedings are initiated with proper satisfaction note, regular assessment proceedings under Section 143(3) must be abated. Following precedent in similar case, the assessment order was quashed in favor of the assessee.

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Issues:
Challenge to additions made by AO under Section 45 for underreporting of sale consideration of immovable property; Additional grounds raised under Rule 11 regarding assessment year and notice under Section 153C; Jurisdiction of AO under Section 153C; Validity of Assessment Order under Section 143(3) in light of Section 153C; Admissibility of additional grounds; Interpretation of satisfaction note under Section 153C; Comparison of provisions of Section 143(3) and Section 153C.

Analysis:
The appeal was filed against the Assessment Order dated 30.12.2022 by the AO under Section 143(3) concerning AY 2021-22, challenging additions under Section 45 for underreporting of sale consideration. The assessee raised additional grounds under Rule 11, questioning the assessment year and absence of notice under Section 153C. The AO admitted the legal nature of additional grounds, allowing their adjudication.

The crux of the matter revolved around whether the Assessment Order should have been passed under Section 153C instead of Section 143(3). The assessee argued that the prerequisites for invoking Section 153C existed, based on a search action and satisfaction notes, making the assessment under Section 143(3) impermissible. The Revenue contended that the AO had the power to frame a regular assessment under Section 143(3) despite the provisions of Section 153C.

The satisfaction note under Section 153C, dated 03.10.2022, indicated the connection of seized assets to the assessee, mandating proceedings under Section 153C for various AYs, including 2021-22. Citing judicial precedents, the Tribunal found merit in the assessee's argument, quashing the Assessment Order under Section 143(3) and allowing the appeal. Consequently, the additions under challenge were not considered for adjudication, and other grounds raised by the assessee were deemed unnecessary.

In conclusion, the Tribunal allowed the appeal, pronouncing the order on 11.10.2024, based on the invalidity of the Assessment Order under Section 143(3) in light of Section 153C, as per the satisfaction note and judicial interpretations of the relevant provisions.

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