Reassessment shall not be framed u/s 153C of Income Tax Act,  if notice for search proceedings  issued  u/s 153A of Act: ITAT deletes Penalty [Read Order]

The Income Tax Appellate Tribunal (ITAT) Amritsar Bench held that reassessment should not be framed under Section 153C of Income Tax Act, 1961 if notice for search proceedings was issued under Section 153A of the Income Tax Act. Therefore the bench deleted the penalty imposed by the assessing officer.

Assesee Pawan Kumar, filed the appeal against the order of Commissioner of Income Tax (Appeals)[CIT(A)].

The facts leading to file the appeal was,there were search and seizure proceedings under Section 132 on 25.09.2019 conducted on the premises of M/s AIRWINGS SERVICES PVT. LTD in which the appellant is an employee.  A search was also conducted separately at the residential premises of the appellant.

Thereafter proceedings under Section 153C of  Income Tax Act were initiated on the basis of material seized from Cambridge International Foundation school. That the documents seized pertain to noting of salary in respect of school and includes the salary 'paid to maids'  which pertain to M/s Pal Enterprises for which the appellant is a proprietor.

Further  notice under Section 153C of the Act was issued for the AY 2014-15 to 2019-20 on 16.04.2021 by taking into consideration the documents seized from the premises of M/s Cambridge International Foundation School. In response to the said notice the appellant filed a return of income on a year to basis.

Subsequently assessment was completed  under Section 153C for the AY 2014-15 to 2019-20 and made addition.Accordingly the AO initiated penalty proceedings.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax Appeal(CIT(A)), who dismissed  the appeal. Therefore the assessee filed the second appeal before the tribunal.

Before the bench counsel for the assessee   submitted that the assessee was subjected to search and seizure operation and as such, the assessment proceedings ought to have been initiated by issuing notice under Section 153A Income Tax Act. Therefore, the reassessment framed under Section 153C Income Tax Act  is bad in law. 

Counsel for the revenue  supported the decision of the lower authorities.

It was observed by the tribunal that search was also conducted separately at the residential premises of  assessee and as such the assessee ought to have been issued notice under Section 153A Income Tax Act. Thus none of the conditions are satisfied in the case of the assessee, for the issue of notices under Section  153C Income Tax Act to the assessee in respect of the Assessment Year  2014-15 to 2019-20 and hence, the proceedings under Section  153C of the  Income Tax Act, per se is bad in law.

After considering the facts and circumstances of the case and also explanation of the assessee two member bench of  Anikesh Banerjee, (Judicial Member) and Dr. M. L. Meena, (Accountant Member) held that reassessment should not be framed under Section 153C of Income Tax Act, if notice for search proceedings was issued under Section 153A of the Income Tax Act.

Therefore the bench deleted the penalty order passed under section271(l)(c)/270A of Income Tax Act.

Rohit Kapoor, C counsel appeared for assessee and V.S. Aggarwal, counsel appeared for revenue.

To Read the full text of the Order CLICK HERE

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