Observation of CIT(A) that AO is empowered to reopen the assessment u/s 147/148 can not be said to be illegal – ITAT
In a recent judgment, the ITAT Delhi has held that observation of CIT(A) that Assessing Officer (AO) is empowered to reopen the assessment under section 147/148 being directory cannot be declared as illegal since the AO is empowered to reopen the assessment u/s 147/148 as per the law.
ABCAUS Case Law Citation:
4414 (2025) (02) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in observing that in the given case the Assessing Officer is empowered to issue notice under section 147/148 the Income Tax Act, 1961 (the Act).
A search and seizure action under section 132 of the Act was carried out in the case of one individual and his associates and various transacting parties. During the search, it was established that the person searched had entered into unaccounted cash transactions with the various persons/entities. The premise locker of assessee was also covered during the search operation.
The appellant assessee had originally filed the Income-tax Return for relevant Assessment Year and the same was processed under section 143(1) of the Act at returned income. The return was further revised. CRUI Module of insight portal inputs pertaining to assessee, showed that a search and seizure action was concluded under section 132 of the Act by Investigation Wing in case of a business group and established that one penny stock company used to provide accommodation entries by bogus LTCG. Name of assessee figures mentioned in the beneficiaries list with a given trade value.
Proceedings under section 148 of the Act was initiated after recording reasons in writing and obtaining sanction under section 151 of the Act. Proceedings under section 153A of the Act was initiated. In response to notice, assessee e-filed return at an income.
Subsequently, notice under section 143(2) of the Act and detailed questionnaires under section 142(1) of the Act were issued. The assessee filed necessary submissions through ITBA Portal on various dates. Subsequently, the assessee vide e-mail requested to abate the proceedings under section 148 of the Act as the same was covered under section 153A of the Act.
Considering the request of assessee under section 153A of the Act, proceedings in case of assessee are going on. The proceedings initiated under section 148 were abated and notice under section 142(1) of the Act, asking the assessee to furnish details and documents to conclude the assessment proceedings were issued. The assessee submitted the calculation and documentary evidence with regard to the gains and transactions in the penny scrip of the company in question. On completion of proceedings, the AO vide assessment order passed u/s 153A made addition under section 68 of the Act.
The CIT(A) observed that it was clear that no assessment was pending as on date of search and notice u/s 148 was issued after the search and seizure action. Therefore, abatement of proceedings u/s 148 was not correct as per law. The appellant had herself requested for the abatement of the proceedings u/s 148 in view of the search on her. But such requests made by the assessee cannot change the legal position.
The CIT(A) further observed that it is a well established law that the jurisdiction cannot be conferred by consent or agreement. Now the question before me is that can the AO use other information in his possession while making the assessment u/s 153A in completed assessments where no incriminating material pertaining to the impugned assessment year was found/unearthed during the search operation.
The CIT(A) noted that the issue has been decided by Hon’ble Supreme Court in the case of Abhisar Buildwell that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/un-abated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The CIT(A) noted that it was evident that the addition was not based on any material unearthed during the search operation on the assessee but is based on material/information conveyed to the AO by CRUI on the basis of information gathered by the Deptt. in some other search. The year under consideration is an unabated assessment year which cannot be interfered with by the AO in absence of incriminating material found during the search operation.
Accordingly, the CIT(A) held that the addition made by the AO cannot be sustained in the assessment u/s 153A. As such, the assessee was given relief on this ground of appeal.
However, the CIT(A) in the appellate order observed that as stated by the Hon’ble Supreme Court, in such cases, AO is empowered to reopen the assessments u/s 147/148.
Before the Tribunal, the assessee contended that CIT(A) erred in stating that Assessing Officer is empowered to issue notice under section 147/148 of the Act.
The Tribunal noted that it was evident that the assessee had been granted relief by the CIT(A). The Tribunal further held that the observation of the CIT(A) that “AO is empowered to reopen the assessment u/s 147/148” being directory cannot be declared as illegal since the AO is empowered to reopen the assessment u/s 147/148 as per law.
Accordingly, the appeal filed by assessee was dismissed.
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