In a recent ruling, the Delhi High Court held that the reassessment of income under Section 147 of the Income Tax Act, 1961, was valid despite challenges to jurisdiction and restored the case to ITAT for proceedings.
In this case, the revenue has appealed against the order of the Income Tax Appellate Tribunal ( ITAT ).
During the assessment proceedings for the financial year 2010-11, it was alleged that the assessee had received Rs. 25 lakh as accommodation entries routed through dummy entities linked to the Jain Brothers. And the evidence from the 2010 search on the Jain Brothers included seized documents such as diaries and registers corroborating the alleged transactions.
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The Assessing Officer issued ( AO ) a notice in March 2018 under Section 148 of the Income Tax Act, 1961 and the AO passed the assessment order by making an addition of Rs. 25.45 lakhs.
Although the assessee appealed before the Commissioner of Income Tax ( Appeals ) [ CIT ( A ) ], but there were no favorable results. Aggrieved by the above order, the assessee appealed before the ITAT.
The assessee contended before the ITAT that proceedings under Section 147 or 148 of the Income Tax Act were without jurisdiction as only proceedings under Section 153C of the Act could be initiated. The above-mentioned ground was accepted by the ITAT, and the appeal was allowed.
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ITAT held that the AO was to take recourse under Section 153C of the Income Tax Act.
The High Court observed the AO can be justified in initiating proceedings under Section 147, as the conditions for reopening the assessment under Section 153C of the Act were not satisfied.
It further observed that ‘on the date on which the AO had received the information from the Investigation Wing, which is stated to be 12.03.2013, reassessment under Section 153C of the Act, was impermissible. Section 153(1) of the Act was amended subsequently by virtue of the Finance Act, 2015.’
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The bench relied on the judgments of the Supreme Court in the cases of ITO v. Sujit Kumar Bhatia ( 2023 ) and Principal Commissioner of Income Tax v. Abhisar Buildwell (P.) Ltd. ( 2023 ) and observed that the jurisdictional preconditions for Section 153C, particularly the necessity for materials belonging to the assessee, were absent.
The bench, comprising Justice Vibhu Bakhru and Justice Swarna Kanta Sharma, allowed the revenue’s appeal and restored the case before the ITAT for consideration on the other grounds raised by the assessee.
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