In a recent judgement, the Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has ruled that, based on material found at a third person’s premises, assessment proceedings should be conducted under Section 153C of the Income Tax Act instead of Section 147 of the Income Tax Act, 1961
The current assessment proceedings were initiated following a search at the premises of Sankalp Group, a third party. Given this context, the appropriate procedure would have been to commence proceedings under Section 153C of the Income Tax Act, which specifically addresses the assessment of income in cases involving searches at third-party premises. The Assessing Officer, however, assessed the income under Section 147 of the Income Tax Act. The assessee’s counsel contended that based on judicial precedents, proceedings should have been conducted under Section 153C rather than Section 148, and therefore, the assessment proceedings are subject to being quashed.
The current assessment proceedings were initiated following a search at the premises of Sankalp Group, a third party. Given this context, the appropriate procedure would have been to commence proceedings under Section 153C of the Income Tax Act, which specifically addresses the assessment of income in cases involving searches at third-party premises. The Assessing Officer, however, assessed the income under Section 147 of the Income Tax Act. The assessee’s counsel contended that based on judicial precedents, proceedings should have been conducted under Section 153C rather than Section 148, and therefore, the assessment proceedings are subject to being quashed.
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The counsel for the assessee Divya Agrawal argued that when incriminating material is found at third-party premises, the Department is required to proceed under Section 153C, which should be followed by action under Section 153A concerning the assessee. The argument is that the existence of a specific provision under Section 153C, which includes a non obstante clause, precludes the use of Section 148 of the Income Tax Act.
The bench reviewed the legal stance on this issue and noted that where a search is conducted at a third party’s premises, the Assessing Officer should proceed under Section 153C. This section is explicitly designed for handling searches at third-party locations, and proceeding under Section 148 is not permissible in such circumstances.
In the present case, the two member bench of the tribunal comprising Ramit Kochar (Accountant member) and Siddartha Nautiyal (Judicial member) observed that the additions to the assessment were solely based on documents found at Sankalp Group, and since these additions were based entirely on material unearthed from a third party’s premises, the Department should have proceeded under Section 153C, following the appropriate process outlined in that section, rather than under Section 148.
The reassessment proceedings were deemed invalid as they were conducted without following the correct procedural path under Section 153C. The subsequent revisionary proceedings were also based on an invalid order and lacked jurisdiction. Judicial precedents, including the decisions in ITO vs. Vikram Sujitkumar Bhatia. Accordingly, the appeal of the assessee was allowed.
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