ITAT Quashes Assessment Framed Under Section 143(3) Instead of 153A in Search Case

A search under Section 132 was conducted in February and April 2019 in connection with the Kochar group, during which the residential premises of the assessee’s son were also covered. Locker No. 887, jointly held by Shri Bir Kumar Jain and his wife, was subjected to restraint and later operated. The last panchnama recording seizure of jewellery was drawn on 03.04.2019. The Assessing Officer, however, framed assessment for AY 2019-20 under Section 143(3), making addition under Section 69 in respect of jewellery found in the locker.

The CIT(A) examined the panchnama and statutory provisions of Sections 153A and 153B, and held that since the last authorization was executed in FY 2019-20 (relevant to AY 2020-21), the assessment ought to have been framed under Section 153A and not under Section 143(3). On this jurisdictional defect, the CIT(A) quashed the assessment. The Revenue appealed, while the assessee filed cross-objection challenging the approval granted under Section 153D as mechanical.

Main Issue: Whether an assessment framed under Section 143(3), instead of Section 153A, pursuant to a search where the last panchnama was drawn in FY 2019-20, is legally sustainable; and whether approval under Section 153D granted in a mechanical manner vitiates the assessment.

HC Held: The Income Tax Appellate Tribunal upheld the order of the CIT(A) and dismissed the Revenue’s appeal. The Tribunal noted that the last panchnama evidencing seizure was drawn on 03.04.2019. In terms of Sections 153A read with 153B, the relevant assessment year was AY 2020-21, and therefore proceedings for earlier six years, including AY 2019-20, could only have been undertaken under Section 153A. Framing the assessment under Section 143(3) without issuing jurisdictional notice under Section 153A rendered the entire assessment void.

The Tribunal found merit in the assessee’s contention that approval under Section 153D had been granted in a consolidated and mechanical manner on the same date as the request, covering multiple assessment years with generic observations unrelated to the assessee’s facts. Such non-application of mind further vitiated the proceedings. Therefore, the Revenue’s appeal was dismissed, the cross-objection was allowed, and the impugned assessment order stood quashed.

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