AI Structured Summary
Not yet generated for this judgment
Judgment
PER MAHAVIR SINGH, VP:
This appeal by the assessee is emanating from the order of the Ld. Commissioner of Income Tax (Appeal-26), Delhi (hereinafter referred as CIT(A)), dated 16.1.2026. Assessment was framed by the ACIT, Central Circle-16, Delhi vide order dated 09.4.2024 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as “Act”) relevant to assessment year 2022-23.
The first and foremost issue on jurisdiction is as regards the order of the CIT(A) challenging the action of the AO in framing assessment u/s. 143(3) of the Act despite the fact that the same has been passed without following the prescribed procedure of assessment specified u/s. 147 by issuing notice u/s. 148 of the Act read with the Explanation 2 of section 148 of the Act. For this, assessee has raised the following ground nos. 7 & 8.
“7.On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in confirming the assessment order passed under section 143(3) of the Act despite the fact that the same has been passed without following prescribed procedure of assessment under section 147 by issuing notice under section 148 read with the Explanation 2 of section 148 of the Act.
8.On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in confirming the assessment order passed under section 143(3) of the Act which has been framed consequent to a search under section 132 of the Act which itself was unlawful and invalid in the eyes of law.
Brief facts of the case are that assessee filed return of income on 7.11.2022 declaring total loss of Rs. 13,93,974/-. A search and seizure action u/s. 132 of the Act has been conducted in the case of Bharat Seats Limited and Sharda Motors Industries Limited group cases on 19.5.2023. Accordingly, notice u/s. 143(2) has been issued on 28.6.2023 to verify the return of income and consequently the notice u/s. 142(1) of the Act was issued and in response to the same, assessee duly furnished the requisite reply alongwith the supporting documents like ledger account, bank statements, ITR ack., audited financial statements, purchase invoice. The AO made the addition of Rs. 2,09,43,322/- to the income of the assessee. Against the same, assessee preferred the appeal before the CIT(A), who vide impugned order confirmed the action of the AO. Aggrieved, assessee is in appeal before the tribunal.
Heard the rival contentions and gone through the facts and circumstances of the case. It is undisputed fact that assessee filed return of income on 7.11.2022 declaring total loss of Rs. 13,93,974/- and a search and seizure action u/s. 132 of the Act has been conducted in the case of Bharat Seats Limited and Sharda Motors Industries Limited group cases on 19.5.2023. It was the claim of the assessee that the assessment for the year under appeal was completed u/s. 143(3) of the Act, however, when a search action was taken u/s. 132 of the Act in the case of the assessee, therefore, in terms of Explanation 2 clause (i) to Section 148, the assessment proceedings should have been initiated u/s. 148 of the Act and the assessment must be framed u/s. 147 of the Act. In view of Explanation 2, it is conferred that the assessment ought to have been made u/s. 148 of the Act where search was conducted on or after 1.4.2021. Despite the search being conducted in the case of the assessee and the AO being fully aware of the this fact, he had proceeded to conclude the assessment proceedings initiated by issued the notice u/s. 143(2) of the Act on 28.6.2023. As per the Memorandum explaining the provisions of the Finance Bill, 2021, wherein, it has been clarified that in cases where search is conducted on or after 1.4.2021, the assessment for the year immediately preceding the year of search is required to be undertaken under the provision of section 147, subject to the procedure prescribed u/s. 147, 148 and Section 148B. Thus, under these circumstances, proper cause of action would be to initiate the proceedings u/s. 148 as outlined in Explanation 2(i) to Section 148 of the Act as there was deemed escapement of income. Failure to comply the statutory procedure as provided under the Act constitutes a jurisdictional defect. The Coordinate Delhi Bench of the Tribunal in the case of Montage Enterprises Pvt. Ltd. in ITA No. 5458/Del/2025 dated 29.12.2025 by following the judgement of the coordinate Chandigarh Bench of Tribunal in the case of Homelife Buildcon (P) Ltd. vs. DCIT reported in (2025) 176 Taxmann.com 614 (Chandigarh Trib) and in case of Jamna Das Nikkamal Jain Saraf Pvt Ltd. vs. DCIT in ITA No. 403/Chd/2025 dated 4.11.2025 has held as under:-
“5.We have given our thoughtful consideration to the assessee’s and the revenue’s foregoing vehement submissions. We find merit in the assessee’s legal ground herein once the impugned search had taken place in its case, no normal assessment under section 143(3) of the Act could have been framed in light of the tribunal’s foregoing twin decisions going against the department. We thus adopt the above extracted reasons mutatis mutandis to quash the impugned assessment framed by the Learned Assessing officer on 30th March, 2024 in very terms.”
In view of the aforesaid factual matrix and respectfully following the aforesaid precedents, we are of the considered view that the assessment for the year before us ought to have been completed u/s. 147 of the Act after following the procedure as provided in section 148 and 148B of the Act which has not been done in the instant case. Therefore, the assessment order so passed u/s. 143(3) is invalid and is hereby quashed.
In the result, the appeal of the assessee is allowed in the aforesaid terms.