Assessment Held Invalid as Framed u/s 143(3) Instead of Mandatory Sec 153C in Search Case

ACIT Vs RV Café Pvt. Ltd. (ITAT Delhi)

ITAT Delhi Dismisses Revenue Appeal – Assessment Held Invalid as Framed u/s 143(3) Instead of Mandatory Sec 153C in Search Case

In ACIT CC-30 vs RV Café Pvt. Ltd., the ITAT Delhi upheld the order of CIT(A) and dismissed the Revenue’s appeal holding that the assessment for AY 2017-18 was wrongly framed u/s 143(3) though it formed part of the block period arising from search proceedings. The Tribunal noted that the assessee belonged to the searched Sukhija Group and the correct block period for a non-searched person must be computed from the date of recording satisfaction note, not from the date of search.

Relying on Delhi High Court decisions including Ojjus Medicare Pvt. Ltd., CIT(A) held that the impugned year fell within the six-year block period and therefore assessment ought to have been made u/s 153C. Since the AO completed assessment under the wrong provision, the appellate relief granted by CIT(A) was justified. ITAT agreed that the legal defect vitiated the assessment and therefore the Revenue’s appeal was dismissed.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal is filed by the revenue against the order of the Ld. CIT (A), u/s 250 of the Income Tax Act (for short, the “Act”), order dated 30.06.2025 in the Appeal No. CIT(A), Delhi-30/10565/2019-20.

2. At the threshold it is observed that the appeal is time-barred by 8 days. An application for condonation of delay has been filed by the revenue. After considering the facts stated therein, we hereby condone the minor delay of 8 days in filing of appeal being on account of Bonafide reasons.

3. The revenue has raised following grounds of appeal:

“1. Whether on the facts and in the circumstances of the case and in the provisions of law, the Ld. CIT(A) is correct in allowing the appeal of the assessee without appreciating the facts of the case?

2. Whether the Ld. CIT(A) is correct in allowing the appeal in accordance with the provisions of section 153C instead of section 143(3) of the Act by considering the additional grounds?

3. Whether the Ld. CIT(A) is correct in allowing the appeal of the assessee ignoring the fact that in this case, search was conducted on 22.10.2016 i.e. during FY 2016-17, therefore, assessment proceedings were initiated u/s 143(2) of the Act for the year under consideration and six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted assessment proceedings were initiated in accordance with the legal framework provided under section 153C of the Act?

4. Whether the Ld. CIT(A) is correct in not adjudicating the appeal without considering the merits of the case?

5. The grounds of appeal are without prejudice to each other.

6. The appellant craves to add, alter, or amend any/ all of the grounds of appeal before or during the course of hearing of appeal.”

3. Brief facts are that the assessee had filed original return for A.Y. 2017-18 on 22.01.2018, declaring loss of Rs. 18,70,909/-. Subsequently, the case of the assessee was centralised pursuant to a search and survey action conducted in the case of the Sukhija Group and its associates on 22.10.2016. The assessee, being a part of Sukhija Group, survey u/s 133A of the Act was also conducted at the premises of the assessee. The case was selected for scrutiny and the assessment was completed u/s 143(3) at an income of Rs. 2,21,10,291/-, after making the following additions:

i. On account of profit from unaccounted sales – Rs. 60,81,200/-

ii. Investment received treated as unexplained u/s 68- Rs. 1,39,00,000/-

iii. Unexplained receipts as per seized documents – Rs. 40,00,000/-

Aggrieved, the assessee preferred an appeal before Ld. CIT(A).

3.1 The assessee’s appeal was allowed by the Ld. CIT(A) on the legal ground relating to the computation of the block period in the case of a non-searched person after following the decision of the Hon’ble Jurisdictional High Court in the case of PCIT (Central-1) vs. Ojjus Medicare Pvt. Ltd. [2024] 161 taxmann.com160 as per which the impugned assessment year being part of the Block period, assessment should have been made u/s 153C of the Act. Aggrieved, with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal.

4. We have heard the rival submissions and perused the material placed on record. After careful consideration of the facts and circumstances, we are of the considered view that Ld. CIT(A) has allowed the appeal of the assessee after detailed discussion of the relevant judicial pronouncements on the issue and has held as under:

“9.17 Respectfully following the decisions of the Hon’ble Supreme Court in the case of Jasjit Singh(supra) and the Hon’ble Delhi High Court in the case of OJJUS MEDICARE PVT. LTD.(supra) and M/s Pavitra Realcon Pvt. Ltd. (Supra), I concur with the contention of the appellant company that the six preceding assessment years in his case should be calculated from the date of recording satisfaction note by the AO on 26.09.2018 and not from the date of search. Appellant has furnished satisfaction note, where in appellant’s case, satisfaction note and notices have been issued for A.Ys. 2011-12 to 2016-17 only

9.18 However, the correct six assessment years block period for the purpose of making assessment u/s 153C in case of the assessee would be the AY 2013-14 to AY 2018-19. Admittedly, the year under consideration (A.Y. 2017-18) falls in this correct block period of six AYs, therefore, the assessment for the impugned AY 2017-18 should have been carried out in accordance with the provisions of Section 153C of the Act and consequent order should also be passed under that section only not under sec. 143(3) of the Act. Accordingly, the additional ground raised by the assessee is allowed.”

6.2 Since the impugned assessment for A.Y. 2017-18 has been wrongfully framed u/s 143(3) instead of section 153C since it was part of the Block period, the order of Ld. CIT(A) is justified. We, therefore, find no reason to interfere with the order of Ld. CIT(A).

7. In the result, appeal of the revenue is hereby, dismissed.

Order pronounced in the Open Court on 20 -01-2026.