INCOME TAX ACT, 1961

Section 147

Reassessment - Validity - Reopening being based on search in another case -

During course of search in case of a person 'N', a loan agreement was found. As per the said loan agreement, assessee had given cash loan to N. Although both the assessee as well as N claimed that the said loan was never advanced since the same was not accounted for in the books of account, however, the AO concluded that as per the agreement, it was clearly mentioned that loan was given and accordingly, he reopened assessment in the case of the assessee. Held: It is well settled law that in case of assessment made on assessee consequent to the search in another case, AO is bound to issue notice under section 153C and thereafter proceed to assess the income under section 153C and if the AO proceeded with reassessment under section 147/148 and passed the order under section 143(3)/148, the same would be illegal and arbitrary and without jurisdiction. In instant case, it was clear that loan agreement was found during the course of search in the case of N, and AO initiated re-assessment proceedings only on that basis. Thus, the AO was not justified in initiating the reassessment proceedings and the correct course of action would have been to proceed against the assessee under section 153C. Hence, initiation of re-assessment proceedings under section 147/148 was wholly invalid, void and bad in law.

Relied:G. Koteswara Rao & Ors. v. DCIT (2015) 64 taxmann.com 159 (Visak-Trib): 2016 TaxPub(DT) 0070 (Visakhapatnam-Trib)

REFERRED : ITO v. Arun Kumar Kapoor (2011) 140 TTJ 249 (Amritsar-ITAT) : 2012 TaxPub(DT) 0473 (Asr-Trib) and Indian Express Newspapers (Bombay) P. Ltd. & Anr. v. UOI & Ors. (2008) 300 ITR 351 (Bom.): 2008 TaxPub(DT) 1440 (Bom-HC)

FAVOUR : In assessee's favour.

A.Y. :

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