In case of a company, on 14.03.2014 an assessment was completed u/s 143(3) and some additions were made u/s 68 in respect of unsecured loans. An appeal was preferred before CIT(A). In the meantime a search u/s 132 was carried out in the residence of a director and consequently notice u/s 153C was issued to the company and assessment was completed on 16.12.2016 in which the same addition was made stating that to keep the matter alive without there being any new material or facts. An appeal against the order u/s 153C was also preferred before CIT (A). The CIT (A) , on 17.8.2019.decided the appeal against the original order u/s 143(3) dated 14.03.2014 and deleted the addition. Based on the appellate order, effect was given by the AO on 27.09.2019, and he deleted the demand raised vide assessment order passed u/s 153C. Later the CIT(A) on 26.08.2021 dismissed the appeal filed against assessment order dated 16.12.2016 passed u/s 153C.
My queries are as follows:
1. Whether the original assessment u/s 143(3) become nullity after the fresh assessment passed u/s 153C ?
2. Whether the effect to appellate order dated 17.08.2019 given by AO was proper or there was a mistake on his part.
3. What action would be taken by AO on the appellate order dated 26.08.2021 and whether the demand which was cancelled earlier would again get revived?
06 July 2024
Based on the facts provided, here are the responses to your queries:
1. **Original Assessment u/s 143(3) vs Assessment u/s 153C**: - The assessment under section 143(3) made on 14.03.2014 and the subsequent assessment under section 153C made on 16.12.2016 are distinct assessments. - The assessment under section 153C was initiated based on the search conducted under section 132, which linked undisclosed income or assets found during the search to the company. - The addition made under section 68 in both assessments pertained to unsecured loans. - The appellate process resulted in the CIT(A) deleting the addition based on the original assessment under section 143(3) on 17.08.2019. - The assessment under section 143(3) doesn't become nullity per se due to the subsequent assessment under section 153C. Each assessment stands on its own unless the appellate authority or higher courts decide otherwise. The CIT(A)’s order deleting the addition under section 143(3) implies that the addition was not sustainable based on the evidence presented during the appeal.
2. **Effect Given to Appellate Order by AO**: - The AO is required to give effect to the appellate order within a reasonable time frame after it is received. In this case, the AO gave effect to the CIT(A)’s order on 27.09.2019 by deleting the demand raised under the assessment order passed under section 153C. - This action was proper if the AO acted upon the CIT(A)’s direction to delete the demand. If there was a mistake or if the AO did not correctly implement the order, it could have led to further legal recourse, such as a review petition or higher appeal.
3. **Action on Subsequent Appellate Order (26.08.2021)**: - The CIT(A) dismissed the appeal against the assessment order dated 16.12.2016 passed under section 153C on 26.08.2021. - If the dismissal of the appeal by CIT(A) on 26.08.2021 is final and not challenged further, the demand that was cancelled earlier (in response to the CIT(A)’s order dated 17.08.2019) may indeed get revived. - However, this depends on the specifics of the appellate order. If the dismissal implies a reinstatement of the earlier demand, the AO may take action to recover the demand based on the assessment order under section 153C.
### Recommendations:
- **Consult a Tax Advisor**: Given the complexity and legal implications involved in these assessments and appellate orders, it is advisable to consult with a tax advisor or a qualified legal professional who specializes in income tax matters. - **Review Orders and Notices**: Review all relevant orders, notices, and communications from the income tax department carefully to understand the exact implications and any further actions required. - **Consider Further Appeals**: If there are grounds for challenging the dismissal of the appeal dated 26.08.2021 or for reconsidering the demand revived, consider consulting with legal counsel to assess the feasibility of further appeals or petitions.
These steps will help ensure that all actions taken are in compliance with tax laws and regulations, and that your rights as a taxpayer are adequately protected.
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