INCOME TAX OFFICER, DELHI vs. SVAM SOFTWARE LTD., DELHI

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ITA 333/DEL/2024Status: DisposedITAT Delhi14 November 2024AY 2012-13Bench: SHRI SAKTIJIT DEY, HON'BLE (Vice President), SHRI M. BALAGANESH (Accountant Member)5 pages

AI SummaryAllowed

Facts

The revenue filed appeals and the assessee filed cross-objections for AYs 2012-13 and 2013-14 against an assessment order passed under section 147 r.w.s. 143(3) of the Income-tax Act. The assessee contended that the reassessment was based on material from a third-party search (Shri Anand Kumar Jain and Shri Naresh Kumar Jain) which should have triggered proceedings under section 153C, not section 147. The assessment had added Rs 4,49,96,788/- as unexplained cash credit under section 68.

Held

The tribunal held that when search material pertaining to a third party is used against a non-searched person, the correct course of action is to initiate proceedings under section 153C, not section 147. Following judicial precedents, the reassessment proceedings under section 147 were declared void ab initio and quashed. Consequently, the assessee's cross-objections were allowed, and the revenue's appeals were dismissed as infructuous.

Key Issues

Whether reassessment proceedings initiated under Section 147 are valid when based on incriminating material found during a search of a third party, which should ideally trigger proceedings under Section 153C of the Income-tax Act.

Sections Cited

Section 147, Section 143(3), Section 153C, Section 132, Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “ G”: NEW DELHI

Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI M. BALAGANESH

For Appellant: Shri Ved Jain, Adv, Shri Aayush Garg, Adv

For Respondent: Shri Mritunjay Prasad Dwivedi, Sr. DR

Hearing: 23/10/2024Pronounced: 14/11/2024

O R D E R PER M. BALAGANESH, A. M.: These are the appeals filed by the revenue and the cross objection 1. filed by the revenue in & 334/Del/2024 and CO Nos. 64 & 65/Del/2024 for AYs 2012-13 and 2013-14 arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi ([hereinafter referred to as „ld. AO)‟, in short] dated 30.11.2023 against the order of assessment passed u/s 147 r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter & 334/Del/2024 CO Nos. 64 & 65/Del/2024 Svam Software Ltd referred to as „the Act‟) dated 29.12.2019 by the Assessing Officer, ITO- 22(4), Delhi.

Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.

We find that assessee in its cross objections for assessment year 2013-14 vide ground No. 12 had raised specifically that in the instant case material found during the course of a search of a third party has been used against the assessee in the reopened proceedings under section 147 of the Act, instead of proceeding under section 153C of the Act. Since this issue goes to the root of the matter, we deem it fit to address this ground first.

We have heard the rival submissions and perused the materials available on record. A search and seizure operation was carried out under section 132 of the Act on 17-12-2015 in the case of Shri Anand Kumar Jain and Shri Naresh Kumar Jain. In the present case of the assessee, information has been received from the investigation wing on the basis of which assessment was sought to be reopened. However, the information received from the investigation wing emanated out of the information gathered during the course of search in the case of Shri Anand Kumar Jain and Shri Naresh Kumar Jain. Hence, the same becomes a search material. Since the search material found in the course of Shri Anand Kumar Jain and Shri Naresh Kumar Jain stating that the transactions carried out by the assessee are to be construed as accommodation entries is sought to be used against the assessee herein in the present reopened proceedings, any proceeding against the assessee using such information could be proceeded only under section 153C of the Act. Whereas, in the instant case, based on the information received from the investigation Page | 2 & 334/Del/2024 CO Nos. 64 & 65/Del/2024 Svam Software Ltd wing, the assessment of the assessee for assessment year 2013-14 was sought to be reopened by the learned assessing officer under section 147 of the Act. Now, when the search material of a third party is sought to be used against a non-searched person, then the right recourse available to the revenue would be to proceed only under section 153C of the Act and not under section 147 of the Act. This issue is no longer res integra in view of the decision of this tribunal in the case of ACIT vs Shri Deepak Gambhir in dated 8-7-2024, wherein it was held as under:- “It is not in dispute that the addition of Rs. 3,64,21,799/- has been made based on incriminating material found in the course of search of M/s Alankit Group as information pertaining to the assessee herein. Hence, the same becomes a search materialv incriminating material found during the course of search of Mis Alankit Group which pertains to assessee herein. Hence, the right course of action to be initiated on the assessee qua such incriminating material would be initiation of proceedings u/s 153C of the Act and not u/s 147 of the Act.