ITAT Delhi Holds Assessment Void for Wrong Section Invocation in Section 153C Search Block Case

Background and Context

The Delhi Bench of the Income Tax Appellate Tribunal in ACIT CC-30 vs RV Café Pvt. Ltd. dealt with a key jurisdictional issue: whether an assessment for a year forming part of a search-related block period could validly be framed under Section 143(3) instead of Section 153C of the Income Tax Act 1961.

The Tribunal ultimately endorsed the order of the CIT(A), holding that the assessment for AY 2017-18 was legally unsustainable as it was passed under Section 143(3) despite the year falling within the six-year block period governed by Section 153C. Consequently, the Revenue’s appeal was dismissed.

This decision reiterates that once a case falls within the statutory block period arising from search action and satisfaction is recorded under Section 153C, the assessment machinery of Section 153C becomes mandatory and cannot be bypassed by resorting to Section 143(3).

Procedural History

Appeal before ITAT

  • The Revenue filed an appeal against the order of the CIT(A), Delhi-30 dated 30.06.2025 passed under Section 250.
  • There was a delay of 8 days in filing the appeal. An application for condonation of delay was submitted.
  • After examining the explanation, the Tribunal accepted that the delay was due to bona fide reasons and condoned it, allowing the appeal to be heard on merits.

Grounds Raised by Revenue

The Revenue challenged the CIT(A)’s decision on multiple grounds, primarily revolving around:

  • The alleged error of the CIT(A) in allowing the assessee’s appeal on legal grounds.
  • The CIT(A)’s decision to apply Section 153C rather than treating the assessment under Section 143(3) as valid.
  • The Revenue’s contention that the search on 22.10.2016 justified initiation of proceedings under Section 143(2) for AY 2017-18, while Section 153C proceedings were separately initiated for six years preceding the year relevant to the previous year in which search occurred.
  • An additional grievance that the CIT(A) did not go into the merits of the additions after accepting the legal ground.

Facts of the Case

Return Filing and Centralisation

  1. Return of Income

    • The assessee, RV Café Pvt. Ltd., filed its original return of income for AY 2017-18 on 22.01.2018, declaring a loss of Rs. 18,70,909/-.

  2. Search and Survey Operations

    • A search and survey action was conducted on 22.10.2016 in the case of the Sukhija Group and its associates.
    • The assessee formed part of the Sukhija Group, and a survey under Section 133A was also carried out at its premises.
    • Based on this, the case of the assessee was centralised with the Central Circle.

  3. Scrutiny and Assessment

    • The case was selected for scrutiny.
    • The Assessing Officer (AO) framed an assessment under Section 143(3) and determined total income at Rs. 2,21,10,291/-, making the following additions:
      • Profit from alleged unaccounted sales – Rs. 60,81,200/-
      • Investment received treated as unexplained under Section 68 – Rs. 1,39,00,000/-
      • Unexplained receipts based on seized material – Rs. 40,00,000/-

  4. First Appeal before CIT(A)

    • Aggrieved, the assessee challenged the assessment before the CIT(A).
    • Apart from contesting the additions, the assessee raised a legal ground that the assessment itself was void as it ought to have been framed under Section 153C, not Section 143(3), in light of the search proceedings and the recorded satisfaction note.