White Orchid Hospitality Private Limited Vs DCIT (ITAT Delhi)
No 153C Notice, No Jurisdiction: ITAT Quashes Search Assessment Based on ‘Dumb’ Agreement to Sell
The Delhi Bench of the Income Tax Appellate Tribunal quashed the assessment for AY 2021-22 framed in the case of White Orchid Hospitality (P) Ltd., holding that the proceedings were void ab initio for complete lack of jurisdiction due to non-issuance of a mandatory notice under section 153C.
The Tribunal noted that although a search under section 132 was conducted in October 2020 in a third party’s case, the assessee-company was merely proceeded against on the basis of a seized agreement to sell dated 27.07.2020, which was unsigned by the buyer and thus treated as a “dumb document”. Crucially, while notices under section 153C were issued for AYs 2015-16 to 2020-21, no notice under section 153C was ever issued for AY 2021-22. Instead, the AO issued a notice under section 143(2) and still passed the assessment order under section 153C read with section 143(3).
The Tribunal held that once proceedings are sought to be initiated under section 153C, the only permissible route of assessment is section 153A, and jurisdiction cannot be assumed without issuing a valid 153C notice. Relying on CIT v. Laxman Das Khandelwal (SC) and the Karnataka High Court decision in DCIT v. Sunil Kumar Sharma (affirmed by the Supreme Court), the Tribunal reiterated that issuance of a jurisdictional notice is a sine qua non and not a curable defect.
It was further observed that the satisfaction note was mechanically recorded for seven assessment years, even though the assessee-company came into existence only in AY 2019-20, demonstrating non-application of mind. Since the very foundation of jurisdiction failed, the Tribunal quashed the notice under section 143(2) and the consequent assessment order dated 07.09.2022.
Accordingly, the assessee’s appeal was allowed on jurisdictional grounds, and all other grounds were left open without adjudication.
FULL TEXT OF THE ORDER OF ITAT DELHI
