The assessee company filed an appeal against the order passed by the Commissioner of Income Tax (Appeals)-30, New Delhi, arising out of an assessment order dated 07.09.2022 passed under section 153C read with section 143(3) of the Income-tax Act, 1961 for Assessment Year 2021-22.

The assessee had filed its original return of income declaring nil income. A search and seizure action under section 132 was conducted on 14.10.2020 in the case of one Shri Manoj Kumar Singh, his associate Shri Subhash Chander Gupta, and related parties. During the search, an unsigned agreement to sell dated 27.07.2020 relating to a property at Gurugram was found and seized from the residence of Shri Subhash Chander Gupta. The agreement purportedly reflected payment of ₹2 crore in cash by Mrs. Manya Gupta to the assessee as part of earnest money.

Based on the said document, the Assessing Officer recorded a satisfaction note dated 18.04.2022 covering seven assessment years from AY 2015-16 to AY 2021-22 and proceeded to frame assessment for AY 2021-22 by making an addition of ₹2 crore under section 69A of the Act. The Commissioner (Appeals) upheld the assessment.

Before the Tribunal, the assessee raised a jurisdictional challenge contending that it was incorporated only on 18.04.2018 and therefore could not have been assessed for earlier assessment years. It was further contended that for AY 2021-22, no notice under section 153C was ever issued, and the proceedings were wrongly initiated by issuance of a notice under section 143(2). The assessee also pointed out that the seized agreement to sell was unsigned by the buyer, subsequently cancelled, and part of the advance was refunded, rendering the document a “dumb document” incapable of forming the basis of addition.

The Tribunal examined the assessment records and noted that the satisfaction note mechanically covered multiple assessment years despite the fact that the assessee was not even in existence for several of those years. It was further observed that for AY 2021-22, no notice under section 153C had been issued, which was a mandatory jurisdictional requirement for initiating assessment proceedings pursuant to a search. The Tribunal also noted that even the show-cause notices and questionnaires for AY 2021-22 referred only to section 143(3) and not section 153C, clearly demonstrating lack of jurisdiction.

Relying on the decision of the Hon’ble Karnataka High Court in DCIT v. Sunil Kumar Sharma, affirmed by the Hon’ble Supreme Court, and other settled judicial principles, the Tribunal held that recording of proper satisfaction and issuance of statutory notice under section 153C are sine qua non for valid assumption of jurisdiction. In the absence of such compliance, the assessment was held to be void ab initio.

Accordingly, the Tribunal quashed the assessment order for AY 2021-22. Other grounds raised on merits were left open.

Source Link- https://itat.gov.in/public/files/upload/1767950195-pfgGqr-1-TO.pdf

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