Assessment made u/s 143(3) despite AY comprised in block period under satisfaction note recorded u/s 153C was void ab initio – ITAT
In a recent judgment, ITAT Delhi has held that assessment completed u/s 143(3) despite satisfaction note recorded u/s 153C for the Assessment Year comprised in block period was void ab initio.
ABCAUS Case Law Citation:
4393 (2025) (01) abcaus.in ITAT
Important Case Laws relied upon by Parties:
Thermal Power Ltd. Vs. CIT (229 ITR 383)
Jute Corporation of India Ltd. Vs. CIT (187 ITR 688).
In the instant case, the assessee had challenged the order passed by the CIT(A) arising out of the assessment order passed u/s 143(3) and in sustaining the addition made towards long term capital gain u/s 45 of the Income Tax Act, 1961 (the Act).
At the outset, the assessee requested the Tribunal for admission of an additional legal grounds of appeal in respect of the validity of assessment made u/s 143(3) of the Act. It was submitted that since the additional ground challenges the very validity of assessment made u/s 143(3) as void ab initio the legal ground be admitted and adjudicated upon.
By way of the additional ground the assessee challenged the very validity of the assessment made u/s 143(3) of the Act. The assessee’s contention was that since the assessment was made pursuant to search and based on materials found in the course of search, the assessment in the case of the assessee being the person other than the searched person should have been made u/s 153C of the Act instead of regular assessment u/s 143(3) and therefore the assessment made u/s 143(3) was void ab initio.
The assessee submitted that in the present case, a search and seizure operation u/s 132 was carried out at the premises of a Business Group in January 2021 during which certain Whats App chat pertaining to the appellant was found. The Assessing Officer, in the present cases, was the same as in the case of the person searched and the satisfaction notes had been framed by him both as the AO of the person searched and that of the other person. It was submitted that based on the above satisfaction note, the AO was inclined to reopen the assessment for seven AY’s ending AY 2021-22. But having done so, the AO, despite recording a satisfaction u/s 153C, opted to proceed with the assessment in the present case for AY 2021-22 u/s 143(3) of the Act. The reason may be that the AO was under incorrect impression that since the year under consideration is search year in the case of the searched person, the assessment in the case of other person i.e. the Assessee need be completed u/s 143(3) of Act.
It was submitted that it is a settled law that when provisions of proviso to section 153C are applied, then date of search/ year of search, for the purpose of above section, is substituted by date of handing over of the documents by the Assessing Officer of the person searched to the Assessing Officer of the other person (present assessee).
It was submitted that the assessment for AY 2021-22 would fall in the block period in view of the first proviso to section 153C of the Act and such assessment was required to be completed u/s 153C of the Act after complying with the requirements of the said section. The AO was needed to record necessary satisfaction u/s 153C of the Act and thereafter, to issue a notice u/s 153C calling the assessee to file return of income after considering the impact of the material found in the case of the person searched.
It was submitted that in the present case although the AO had recorded separate satisfaction u/s 153C of the Act but the AO failed to issue a notice u/s 153C of the Act without which assessment u/s 153C could not be completed and has not been completed. In view of above, the assessment completed u/s 143(3) of the Act was in defiance of the provisions of section 153C of the Act ignoring the fact that the provisions of section 153A/ 153C is a complete code in itself.
The Tribunal observed that undoubtedly the addition was made in the assessment order passed u/s 143(3) of the Act for the AY 2021-22 was based on the search and seizure operation.
The Tribunal observed that on identical facts and in same search the Assessing Officer completed the assessment u/s 143(3) of the Act having recorded the satisfaction note u/s 153C of the Act for the assessment years 2015-16 to 2021-22. The Assessing Officer, however, for the AY 2021-22 proceeded to complete the regular assessment u/s 143(3) by issue of notice u/s 143(2) of the Act. In the circumstances, the Co-ordinate Bench held that while search in the instant case was carried in January 2021 i.e. previous year relevant to the AY 2021-22 and the documents were handed over in the previous year relevant to AY 2022-23 as the date of handing over was June 2021. Therefore, the Tribunal held that the assessment upto the AY 2021-22 stood covered within the ambit of section 153C of the Act.
The Tribunal further observed that in the case in hand, undoubtedly the satisfaction note u/s 153C of the Act was recorded in September 2022 which fall in the previous year 2022-23 relevant to the AY 2023-24. Therefore, having regard to the first proviso to section 153C, AY 2023-24 relevant to the FY 2022-23 would be the year of search and therefore the Assessing Officer was required to complete the assessment for six assessment years prior to year of search AY 2023-24 u/s 153C for assessment years 2017-18 to 2022-23. However, the Assessing Officer completed the assessment for AY 2021-22 u/s 143(3) which is not permissible under law.
In view of the above, Tribunal held that the regular assessment made u/s 143(3) of the Act despite recording of satisfaction note u/s 153C from Assessing Officer of searched person and also as the AO of the person other than the searched person, was not permissible in law.
Accordingly, the Tribunal held that the assessment framed u/s 143(3) of the Act for AY 2021-22 was void ab initio and the same was quashed.
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