Assessment u/s 143(3) Cannot Replace Reassessment Process | ITAT

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AO Bypass Reassessment ITAT

Case Details: Homelife Buildcon (P.) Ltd. v. Deputy Commissioner of Income-tax - [2025] 176 taxmann.com 614 (Chandigarh - Trib.)

Judiciary and Counsel Details

  • Rajpal Yadav, Vice President
  • Krinwant Sahay, Accountant Member
  • Sudhir Sehgal, Adv. & Rohit Kapoor, C.A for the Appellant
  • Manav Bansal, CIT-DR for the Respondent

Facts of the Case

The assessee was engaged in the real estate business. A search and seizure operation was conducted on the assessee’s business premises and on one ‘AP’ (Sale Deed Writer) and ‘RK’ (Broker in real estate). A distinct and different Panchanama was drawn in their respective names.

The Assessing Officer (AO) framed an assessment under section 143(3) on the basis of material seized from third parties and made additions on account of cash payments made by the assessee to ‘GS’ for the purchase of land.

The assessee contended that the assessment should have been completed under Section 147, rather than Section 143(3), given the timing of the search and the applicability of Section 147 in relation to the impugned assessment year. Aggrieved by the order, an appeal was filed to the Tribunal

ITAT Held

The ITAT held that the AO proceeded to frame the assessment under section 143(3) despite relying heavily on material found during searches conducted on third parties. The AO, instead of complying with the jurisdictional preconditions laid down under the reassessment provisions, proceeded without recording the mandatory satisfaction and without obtaining prior sanction from the competent authority. This conduct not only violates the express mandate of law but also renders the assessment a jurisdictional error.

The AO has, in fact, gone a step further by bypassing the legal safeguards embedded in Section 147, thereby vitiating the assessment proceedings from the outset.

Furthermore, a plain reading of the Finance Act 2021 and the Explanatory Memorandum to the Finance Bill clearly indicates that the legislative intent was to bring all searches conducted on or after April 1, 2021, within the ambit of the new reassessment regime under Section 147. This new regime was introduced through significant amendments to sections 147 and 148, along with the insertion of Explanations 1 and 2. The concept of ‘information suggesting escapement of income’ was explicitly defined. Furthermore, there is a mandatory statutory requirement that, in all cases involving search-related assessments falling within the assessment year immediately preceding the year of the search, prior approval from the Joint Commissioner is required under Section 148B.

In the instant case, the AO has proceeded without obtaining such approval, which is a clear violation of the procedural safeguards envisaged under the law and, as such, vitiates the assessment proceedings.

List of Cases Referred to

List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied