The Assistant Commissioner of Income Tax, Central Circle-2, , Rajahmundry V. Kegitha Mathaiah , Undi

ITA 143/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1131 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 02-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 132; 143(3); 142(1); 153A; 292BB; 143(2); 153C

Judgement Text

आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.143/Viz/2021(ननधधारण वर्ा / AY:2017-18) Asst. Commissioner of Income Tax, Central Circle-2, Rajahmundry. Vs. Sri Kagitha Mathaiah, D.No.8-61, Balajiraopet, Undi, West Godavari Dist. PAN: ENWPK 6577 H (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) C.O. No. 02/Viz/2022 (In आयकर अपील सं./ I.T.A. No. 143/Viz/2021) (ननधधारण वर्ा / AY: 2017-18) Sri Kagitha Mathaiah, D.No.8-61, Balajiraopet, Undi, West Godavari Dist. PAN: ENWPK 6577 H Vs. Asst. Commissioner of Income Tax, Central Circle-2, Rajahmundry. (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : Sri GVN Hari प्रत्यधथी की ओर से / Respondent by : Sri MN Murthy Naik, CIT-DR सुनवधई की तधरीख / Date of Hearing : 26/04/2022 घोर्णध की तधरीख/Date of Pronouncement : 26/05/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : The captioned appeal is filed by the Revenue against the order of the Ld. CIT(A)-3, Visakhapatnam in appeal No.652/10588/2019-20/CIT(A)-3/VSP/2021-22, dated 24 th May, 2 2021 passed U/s. 143(3) r.w.s 153C and U/s. 250(6) of the Act for the AY 2017-18. The assesse has raised the Cross Objection No.02/Viz/2022. 2. The Revenue has raised the following grounds in its appeal: “1. The Ld. CIT(A) erred in holding that the search was conducted in the case of the assessee when the warran t was issued in the case of Sri Kondrothu Venkata Rama Rao. 2. The Ld. CIT(A) erred in law and on f acts in deleting the addition of Rs. 1,31,27,000/-. 3. The Ld. CIT(A) erred in not appreciating that as per the provisions of section 292BB of the IT Act, if the assessee participated in the proceedings by way of legal f iction, notice would be deemed to be valid even if there be infractions as detailed in said section. Further, the CIT(A) ought to have appreciated the f act that the assessee has participated in the assessment proceedings and not raised any objection during the course of assessment proceedings. 4. Any other ground urged at the time of hearing.” 3. Brief facts of the case are that the assessee is an individual engaged in the business of pisciculture during the AY 2017-18 and filed his return of income for the AY 2017-18 on 5/8/2017 admitting a total income of Rs. 5,26,820/-. Search was conducted in the case of Sri K. Venkata Rama Rao on 02/11/2017 and subsequently the appellant was also subjected to search U/s. 132 of the Act and certain documents were seized. Since the documents seized pertains to the determination of income of the assessee, a notice U/s. 153A of the Act was issued 3 on the assessee and in response the assessee filed the return of income for the AY 2013-14 admitting total income of Rs. 59,15,150/- and the agricultural income of Rs. 1,00,000/-. Subsequently, the statutory notices U/s. 143(2) and 142(1) were issued and thereafter the Ld. AO completed the assessment U/s. 143(3) r.w.s 153C of the Act and determined the assessed income at Rs. 1,90,42,150/- against the returned income of Rs. 59,15,150/- and passed assessment order on 30/12/2019 making certain additions. Aggrieved with the order of the Ld. AO, the assessee went on appeal before the Ld. CIT(A). 4. Before the Ld. CIT(A), the assessee has raised various ground against the additions made by the Ld. AO besides a legal ground on the validity of issue of notice U/s. 153C of the Act which is as under: “2. The appellant himself was subjected to search u/s. 132 of the Act and as such the proceedings ought to have been initiated U/s. 153A and not U/s. 153C of the Act. Consequently, the notice issued U/s. 153C is liable to be quashed as illegal and the entire assessment proceedings are liable to be quashed as void ab initio.” 5. On this ground, the Ld. CIT(A) made an elaborate discussion in his order and held that the impugned notice issued by the AO U/s. 153C of the Act suffers from infirmity because of lack of 4 jurisdiction invoked by the Ld. AO U/s. 153C of the Act. Consequently, the assessment order passed by the Ld. AO U/s. 143(3) r.w.s 153C of the Act is bad in law and void ab initio in the eyes of law. Accordingly, the Ld. CIT (A) allowed the legal ground in favour of the assessee and partly allowed the assessee’s appeal. Aggrieved with the decision of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the above mentioned grounds of appeal. 6. Before us the Ld. DR argued that as per the provisions of section 292BB of the Act, if the assessee had participated in the proceedings by way of legal fiction, notice would be deemed to be valid even if there be infractions detailed in the section. Therefore, considering the above, since the assessee had participated during the assessment proceedings without any objection, the decision taken by the Ld. AO is valid and prayed for sustaining the order of the Ld. AO. 7. On the other hand, Ld. AR argued in support of the order of the Ld. CIT(A) and reiterated the submissions made before the Ld. CIT(A). 8. We have heard both the sides and perused the materials on record as well as the orders of the authorities below. The core 5 issue involved in this appeal relates to the validity of issue of notice U/s. 153C of the Act. In the instant case, search operation U/s. 132 of the Act was conducted in the residential premises of Sri Kondrothu Venkata Rama Rao and subsequently the assessee was subjected to search operation. The Ld. AO issued a notice U/s. 153C of the Act. As per the provisions of the IT Act, 1961, consequent to the search, as per the requirement of law, in case the premises of the persons have been searched, then the proceedings to be initiated are by way of issue of notice U/s. 153A of the Act. In the instant case, the Ld. AO ought to have issued notice U/s. 153A of the Act instead of notice U/s. 153C of the Act. Further, the Act also indicates that in case any documents relating to person other than the person searched was found, then the notice to be issued to such other person is U/s. 153A r.w.s 153C. Therefore, the initiation of proceedings U/s.153C of the Act in the case of the assessee who is other than the person searched is not valid. The same view was also taken by the Ld. CIT(A) while allowing the legal ground raised before him and held that the notice issued U/s. 153C of the Act is invalid in the case of the assessee. It is not out of place to mention that any defects in notices U/s. 153A / 153C of the Act, whereby the Assessing Officer assumes jurisdiction, are not 6 curable U/s. 292BB of the Act even the assessee participated in the assessment proceedings without objection. Therefore, it can be safely concluded that in the instant case, since the issue of notice U/s. 153C is invalid and consequently, the assessment order passed U/s. 143(3) r.w.s 153C is bad in law and void ab initio. Accordingly, we uphold the decision of the Ld. CIT(A) on the issue of legal ground and dismiss the grounds raised by the Revenue. 9. In the result, appeal of the Revenue is dismissed. C.O. No.02/Viz/2022 (By Assessee) 10. The cross objections raised by the assessee are in support of the decision of the Ld. CIT(A). While adjudicating the Revenue’s appeal, since we have upheld the decision of the Ld. CIT(A), the cross objections raised by the assessee are treated as allowed. 11. Ex-consequenti, the Revenue appeal is dismissed and the Cross Objection raised by the assessee is allowed. 7 Pronounced in the open Court on the 26 th May, 2022. Sd/- Sd/- (द ु व्वूरु आर.एल रेड्डी) (एस बालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 26.05.2022 OKK - SPS आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee – Sri Kagitha Mathaiah, D.No.8-61, Balajiraopet, Undi, W.G. District, Andhra Pradesh. 2. रधजस्व/The Revenue –ACIT, Central Circle-2, Shiva Towers, 5 th Floor, Danavaipeta, Rajahmundry, Andhra Pradesh – 533 103. 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam. 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals)-3, Visakhapatnam. 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam