SBS REALTORS PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

The above captioned two appeals by the assessee are preferred against two separate orders dated 21.03.2017 framed u/s 263 of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] of the Commissioner of Income Tax [Appeals], Central -1, New Delhi pertaining to Assessment Years 2008-09 and 2010-11 respectively. Since both these appeals involve common issues, they are being disposed off by this common order for the sake of convenience and brevity.

In both the appeals, the assessee has raised the following additional ground of appeal in addition to the grounds taken in Form No. 36:

Since the additional ground goes to the root of the matter and requires no verification of any fact, the same is admitted for adjudication in light of the ratio laid down by the Hon’ble Supreme Court in the case of NTPC 229 ITR 383.

Since the additional ground goes to the root of the matter, the same is taken up first for adjudication.

The ld. PCIT invoked the provisions of section 263 of the Act and set aside the assessment order dated 30.03.2015 holding that because after the merger of M/s Sarla Fabrics Pvt Ltd with M/s Shahi Exports Pvt Ltd, whatever additions were made in the hands of M/s Sarla Fabrics Pvt Ltd were to be assessed in the hands of M/s Shahi Exports Pvt Ltd and accordingly, order of M/s Shahi Exports Pvt Ltd, as passed by the Assessing Officer u/s 153C of the Act, amounts to erroneous and prejudicial to the interest of the Revenue.

As per the facts mentioned hereinabove, additions made u/s 143(3) of the Act were repeated in the assessment order framed/s 153A r.w.s 153C of the Act. This means that no additions had any link with any incriminating material found at the time of search as assessed income u/s 143(3) of the Act is the assessed income u/s 153C of the Act.

The Hon'ble High Court of Delhi in the case of Kabul Chawla in 380 ITR 573 has held that “if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act.”

In light of the above binding decisions, assessment framed u/s 153C of the Act in A.Ys 2008-09 and 2010-11 are without jurisdiction and, therefore, bad in law and deserve to be quashed as null and void.

The Supreme Court in the case of Kiran Singh & Others vs Chaman Paswan & ors [1955] 1 SCR 117 has held as under: “ It is a fundamental principle well established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. “

In light of the aforesaid ratio laid down by the Hon'ble Supreme Court, we are of the considered opinion that the assumption of jurisdiction u/s 263 of the Act in respect of an assessment which is non-est is also bad in law as a non-est order cannot be erroneous and prejudicial to the interest of the Revenue. An order framed u/s 263 of the Act for both the A.Ys 2008-09 and 2010-11 are accordingly quashed on the principle of Sublato Fundamento Cadit Opus, meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation, i.e. the order u/s 153C has been removed, the super structure i.e. the order u/s 263 must fall.

In the result, both the appeals filed by the assessee in & 2071/DEL/2017 are allowed”.

On the other hand, the Ld. D.R. relied upon the impugned Order of the Learned Pr. CIT and submitted that since assessee did not challenge the reopening of the assessment, therefore, it cannot be challenged in proceedings under section 263 of the I.T. Act, 1961.

After considering the rival submissions, we are of the view that the Learned Pr. CIT has wrongly assumed the jurisdiction under section 263 of the I. T. Act, 1961. It is an admitted fact that in A.Y. 2009-2010 the A.O. has recorded similar reasons for reopening of the assessment. However, the same have been quashed by the Tribunal vide Order Dated 01.04.2019 (supra). The A.O. in the impugned re- assessment order has mentioned the information received from DIT (Inv.)-II, New Delhi that assessee has received accommodation entries of Rs.40 lakhs. However, A.O. was satisfied with the explanation of assessee and did not make any addition after examining the issue in detail vide Order Dated 30.06.2014. It would, therefore, show that A.O. has 39 ITA.No.2996/Del./2017 M/s. SBS Realtors Private Limited, New Delhi. taken one of the possible view under the Law. Therefore, on the same set of facts the Learned Pr. CIT should not have taken different view by exercising powers under section 263 of the I.T. Act, 1961. Since the re-assessment proceedings are already declared illegal and bad in Law in A.Y. 2009- 2010 in the case of assessee on the same reasons, therefore, in assessment year under appeal also initiation of re- assessment proceedings is illegal and bad in Law. Therefore, the same cannot be subject to proceedings under section 263 of the I.T. Act, 1961. This issue is, therefore, covered by Order of the ITAT, Delhi G-Bench, New Delhi in the case of M/s. Shahi Exports Pvt. Ltd., New Delhi vs., The Pr. CIT, Circle-1, New Delhi (supra). In view of the above, we set aside the Order of the Learned Pr. CIT-8, New Delhi and quash the Order passed under section 263 of the I.T. Act, 1961 and restore the Order of the A.O. Accordingly, appeal of the Assessee is allowed.

In the result, appeal of Assessee allowed.