Reopening us 147 based on material found in search not permissible – ITAT

Reopening us 147 based on material found in search not permissible. In such cases section 153C applies for framing assessment  which excludes application of section 147 – ITAT

ABCAUS Case Law Citation:
ABCAUS 2029 (2017) (08) ITAT

Assessment Year :  2007-08

Important Case Laws Cited/relied upon by the parties:
ACIT vs. Arun Kapur
Cargo Clearing Agency vs. JCIT
Rajat Shubra Chatterji vs. ACIT

Brief Facts of the Case:

The Assessing Officer (AO) initiated reassessment proceedings u/s 148 of the Income Tax Act, 1961 (the Act) in the present case on the basis of information received based on the material found during the course of search from the premises of a Medical College run by a Trust.

The assessee in response to notice u/s. 148 of the Act, furnished return of income declaring NIL income. The assessee was asked to furnish the source of payment made to the Trust for admission to the said medical college. After considering the reply of the assesee, the AO made an addition of Rs. 25,50,000/- being unexplained cash invested in payment of fee. The income of the assessee was assessed at Rs. 25,50,000/- vide order passed u/s 147/143(3) of the Act.

Aggrieved with the assessment order, assessee appealed before the CIT(A), who dismissed the appeal of the Assessee by confirming the action of the AO.

Contention of the Appellant Assessee:

It was contended that provisions of section 153C provides that persons relating to whom some material is found in search of some other person should be assessed under section 153C of the Act. The provisions of section 153C are non-obstantive provisions and specially excludes the operation of section 147 of the Act.

Therefore, it was submitted that the Assessing Officer had erred in invoking the provisions of section 147, instead of 153C of the Act. To support the contention it was further argued that if action under section 147 is permitted on the basis of material found in the course of search, then the provisions of section 153 would be redundant.

Observations made by the Tribunal:

It was noted that ITAT Amritsar, in a similar case, had come to the conclusion that in such situation, provisions of section 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT had declared the notice issued under section 148 and proceedings initiated under section 147 as illegal and void ab initio.

It was also noted that reassessment was quashed on the similar facts and circumstances by ITAT, New Delhi too by following the ITAT, Amritsar decision.

Held:

It was held that the provisions of section 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the hence, notice issued under section 148 of the Act and assessment framed in furtherance thereto under section 147 read with section 143(3) of the Act was void ab initio.