Ramesh Zalpuri Vs DCIT/ACIT (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal (ITAT) Delhi quashed assessments framed under Section 143(3) against the assessees for AY 2022-23 after holding that additions based on documents seized from a third party during a search operation could not be sustained without following the mandatory reassessment procedure under Sections 147/148 of the Income Tax Act. The case arose from a search conducted on the U-Flex/Montage Group, where certain documents and electronic records allegedly showed that employees received cash salary over and above regular salary. Based on these third-party documents, the Assessing Officer made additions under Section 69A for unexplained money. However, the Tribunal held that since the incriminating material was seized from another person, the Assessing Officer was required to invoke Section 148 after recording satisfaction and obtaining mandatory approval from the competent authority. Since the statutory safeguards and reassessment procedure were not followed, the Tribunal declared the assessments invalid and quashed them, while also observing that the remaining grounds became academic.
Facts: A search under section 132 was conducted on Uflex/Montage Group on 21.02.2023, during which certain excel sheets, emails and WhatsApp data were found from the possession of employees of the searched group allegedly evidencing cash salary payments to the assessees over and above regular disclosed salary. Based on such third-party seized material, the AO completed assessments under section 143(3) for AY 2022-23 and made additions under section 69A towards alleged unexplained cash salary received from Montage Enterprises Pvt. Ltd. The assessees contended that no incriminating material was found from their possession and, therefore, proceedings ought to have been initiated under section 147/148 in terms of Explanation 2 to section 148 after recording satisfaction and obtaining statutory approval.
