ITAT Guwahati Declares Assessment Order Invalid: Section 143(3) Completion Post-Search Renders Proceedings Non-Est for Abated Assessment Year

Background of the Case

The Guwahati Bench of the Income Tax Appellate Tribunal recently addressed a critical jurisdictional issue in the matter of Amplex Projects Private Limited Vs DCIT/ACIT. The case revolved around the validity of an assessment order completed under Section 143(3) after a search operation had been conducted under Section 132 of the Income Tax Act, 1961, which resulted in the abatement of pending assessment proceedings.

The assessee company, engaged in infrastructural construction projects, had initially submitted its return of income for Assessment Year 2013-14 on September 29, 2013, declaring total income of Rs. 59,15,980/-. The case was subsequently selected for scrutiny assessment, and statutory notices under Section 143(2) were duly issued and served on September 9, 2014.

Timeline of Critical Events

The chronology of events in this case proved crucial for the final determination:

  1. Return Filing: September 29, 2013 - Original return filed under Section 139(1)
  2. Scrutiny Initiation: September 9, 2014 - Notice issued under Section 143(2)
  3. Search Operation: January 20, 2016 - Search conducted under Section 132
  4. Assessment Completion: March 15, 2016 - Order passed under Section 143(3)
  5. Section 153A Notices: Issued for AY 2010-11 to AY 2015-16

The Assessing Officer computed the total income at Rs. 3,52,15,976/- and completed the assessment under Section 143(3) on March 15, 2016. However, this completion occurred approximately two months after the search operation had been conducted on January 20, 2016, at the premises of Shri Sanjit Kumar Saha and the assessee company.

Grounds of Appeal Before the Tribunal

The assessee raised multiple grounds before the ITAT, challenging the jurisdiction and validity of the assessment order. The primary contentions included:

Original Grounds of Appeal

The assessee initially challenged the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated August 22, 2025. The grounds included contentions regarding the Settlement Commission proceedings and the legality of the assessment completed after the search date.

The assessee argued that the Commissioner (Appeals) erred in dismissing the appeal on the assumption that Assessment Year 2013-14 was not addressed by the Income Tax Settlement Commission under Section 245D(4), merely because the assessment year was under appeal before the Commissioner (Appeals).

During the tribunal proceedings, the assessee sought to raise additional grounds of appeal, which became the focal point of the entire adjudication. These additional grounds specifically challenged:

Ground 1: The assessment made by the Assessing Officer pursuant to a return filed before the search date, which had abated in terms of the second proviso to Section 153A, was completed erroneously. The Assessing Officer incorrectly completed the assessment on the abated return, and the Commissioner (Appeals) erred in adjudicating and upholding the same.

Ground 2: The order passed under Section 143(3) being bereft of jurisdiction cannot survive the scrutiny of law and should accordingly be quashed.

Admission of Additional Grounds

The Department Representative objected to the raising of additional grounds at the appellate stage. However, the Tribunal admitted these grounds after careful consideration of established legal principles.

The Tribunal relied on the landmark judgment of National Thermal Power Corporation Vs. CIT (1998) 229 ITR 383, wherein the Supreme Court had laid down comprehensive guidelines regarding the admission of additional grounds before appellate authorities.

The Supreme Court in that case had observed that taking a view that the Tribunal is confined only to issues arising out of appeals before the Commissioner (Appeals) adopts an unduly restrictive interpretation of the Tribunal's powers. While the Tribunal possesses discretion to allow or disallow new grounds, where the Tribunal is only required to examine a question of law arising from facts already on record in the assessment proceedings, such questions should be permitted to be raised when necessary to correctly determine the tax liability of an assessee.

The Tribunal in the present case noted that the additional grounds raised by the assessee were purely legal in nature, pertaining to the fundamental jurisdiction of the Assessing Officer to complete an assessment on proceedings that had already abated. Such jurisdictional issues, being questions of law, could be raised at any stage of proceedings.

Understanding Section 153A and the Abatement Provision

The resolution of this case hinged entirely on the proper interpretation and application of Section 153A of the Income Tax Act, 1961, particularly the second proviso to sub-section (1).

Statutory Framework of Section 153A

Section 153A of the Income Tax Act, 1961, creates a special regime for assessment following search operations under Section 132 or requisitions under Section 132A. The provision begins with a non-obstante clause, overriding the normal assessment procedures laid down in Section 139, Section 147, Section 148, Section 149, Section 151, and Section 153.

Upon initiation of search operations after May 31, 2003, the Assessing Officer is empowered to:

  1. Issue notices requiring the assessee to furnish returns for each of the six assessment years preceding the year relevant to the previous year in which search was conducted
  2. Assess or reassess the total income for these six assessment years

The Critical Second Proviso

The second proviso to Section 153A(1) contains the abatement clause, which states:

"Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate."

This proviso creates a clear and unambiguous legal consequence: any pending assessment or reassessment proceedings for years falling within the six-year block period stand automatically abated upon initiation of search operations.

Meaning and Implications of Abatement

The term "abatement" in legal parlance refers to suspension or termination of proceedings. When applied to tax assessments, abatement means that the pending proceedings cease to exist and lose their legal validity from the date of search.

The word "pending" in the second proviso carries significant weight. It is qualified by the phrase "on the date of initiation of the search," making it abundantly clear that only such assessment or reassessment proceedings that remain pending (not completed) as on the search date are liable to abate.

This distinction is crucial:

  • Pending Assessments: Stand abated upon search initiation
  • Completed Assessments: Remain valid unless incriminating material is discovered

The legislative intent behind this provision is to prevent dual assessment proceedings for the same assessment year - one under regular assessment provisions and another under Section 153A following search operations.

Application to the Present Case

In the present matter, the factual matrix clearly established that:

  1. The assessee had filed its return on September 29, 2013
  2. Scrutiny assessment proceedings were initiated with notice under Section 143(2) on September 9, 2014
  3. Search operations were conducted on January 20, 2016
  4. Assessment was completed on March 15, 2016 under Section 143(3)

Critical Finding on Abatement

The Tribunal found that on the date of search (January 20, 2016), the assessment proceedings for AY 2013-14 were undeniably pending before the Assessing Officer. The assessment had not been completed as of that date.

Consequently, by operation of the second proviso to Section 153A(1), the pending assessment proceedings stood automatically abated with effect from January 20, 2016.

Loss of Jurisdiction by Assessing Officer

Once the assessment proceedings abated on the search date, the Assessing Officer lost jurisdiction to complete the regular assessment under Section 143(3). The only permissible course of action available to the Assessing Officer was to assess or reassess the income under Section 153A.

Despite this clear legal position, the Assessing Officer proceeded to complete the assessment under Section 143(3) on March 15, 2016 - nearly two months after the proceedings had already abated. This action was taken without jurisdiction and contrary to the statutory mandate.

Declaration of Non-Est Status

The Tribunal held that the assessment order dated March 15, 2016 passed under Section 143(3) was "non-est" - meaning it was void ab initio and had no legal existence from the very beginning.

When an order is declared non-est, it means:

  • The order was passed without jurisdiction
  • The order has no legal validity whatsoever
  • The order cannot form the basis for any subsequent proceedings
  • All consequential actions based on that order also become invalid

Judicial Precedents Supporting the Decision

The Tribunal's decision was fortified by reliance on several authoritative judicial pronouncements, creating a consistent line of precedent on this jurisdictional issue.

Abhisar Buildwell Case - Supreme Court

The Tribunal placed considerable reliance on the Supreme Court judgment in Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. reported in (2023) 149 taxmann.com 399 (SC).

The Supreme Court in that landmark case had clarified the entire framework of Section 153A assessments. The key holdings included:

On Abatement: The Court held that as per the second proviso to Section 153A, assessment or reassessment proceedings pending on the date of initiation of search under Section 132 shall abate. This abatement is automatic and does not require any formal order.

On Completed Assessments: In case of completed (unabated) assessments, the Assessing Officer can assess or reassess under Section 153A only if incriminating material is found during the search. In the absence of incriminating material, no addition can be made in respect of completed assessments.