ITAT Quashes Assessment Under Section 143(3) Where Search-Related Information Mandated Reassessment :

The assessee is Deep Raheja who was selected for scrutiny under the CASS module based on information available with the AO through the CRIU module. During the assessment proceedings, the AO noticed that the assessee had allegedly entered into purchase transactions with J M Jain LLP, against whom a search under Section 132 of the Income Tax Act had been conducted on 28/05/2022.

The Investigation Wing reported that J M Jain LLP was allegedly involved in systematic tax evasion through software-based techniques, including the maintenance of parallel books of accounts and suppression of income. Based on the investigation report, the AO alleged that the assessee had undertaken purchase transactions amounting to Rs. 3,04,62,816.

The AO proceeded to make an addition of Rs. 3,04,62,816 in the assessment order dated 12/03/2024 under Section 144 read with Section 144B of the Act. Aggrieved by the assessment, the assessee approached the CIT(A) which set aside the assessment and directed the AO to undertake fresh adjudication. 

Following the statutory scheme introduced with effect from 01/04/2021, the Tribunal held that such search-related information must be dealt with through the reassessment mechanism under Sections 147 and 148, rather than through an ordinary assessment under Section 143(3).

The Tribunal further observed that Section 143(3) provides the general framework for regular assessment, whereas Sections 147 and 148 prescribe the special mechanism for dealing with income escaping assessment, including cases involving search-related information. Accordingly, the Tribunal held that once the search-related proceedings attracted Explanation 2(iv) to Section 148, the AO could not sustain the regular assessment framed under Section 143(3).

The Tribunal, therefore, quashed and set aside the assessment order dated 12/03/2024 passed under Section 144 read with Section 144B, which was based on the notice issued under Section 143(2) dated 01/06/2023.