BHOOMI PROPERTIES,MUMBAI vs. ACIT, CENTRAL CIRCLE 8(4), MUMBAI

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ITA 2732/MUM/2026Status: DisposedITAT Mumbai13 August 2026AY 2021-229 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that following a search initiated after 01.04.2021, for the three preceding assessment years, the Assessing Officer must invoke reassessment proceedings under section 147/148. Framing the assessment directly under section 143(3) without following this procedure renders the assessment void ab initio.

What were the facts?

A search under section 132 was conducted on the assessee on 31.12.2021. The assessment for AY 2021-22 was completed under section 143(3) without issuing a notice under section 148, despite the search falling within the period covered by Explanation 2 to section 148.

What were the issues?

Whether an assessment framed under section 143(3) is valid when a search has been conducted and the assessment year falls within the three preceding years as per Explanation 2 to section 148, which mandates reassessment proceedings under section 147/148.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI SANDEEP GOSAIN & SHRI JAGADISH

Pronounced: 13.08.2026

PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. CIT (A), 50 Mumbai vide DIN: ITBA/APL/S/250/2025-26/1084820860(1) dated 15- Jan-2026 for the Assessment Year 2021-22. The assessee has raised the following grounds of appeal:

1.

That on the facts and in the circumstances of the case and in law, the assessment order passed under section 143(3) of the Income-tax Act, 1961 by the Ld. ACIT, 1 Central Circle-8(4) is bad in law and void ab initio, as the appellant's case was governed by the faceless assessment procedure under section 144B of the Act and no valid transfer in terms of section 144B(8) was effected prior to assumption of jurisdiction, thereby rendering the entire assessment proceedings without jurisdiction. 2. That on the facts and circumstances of the case and in law, the notice issued u/s. 143(2) by the Ld. ACIT-CC-8(4) is bad in law and liable to be quashed as the same is issued in violation of the provisions of faceless assessment laid down as per section 144B(8) of the Act. 3. That on the facts and circumstances of the case and in law, the assessment order dated 28.12.2022 passed u/s. 143(3) by ACIT-CC-8(4) is wholly without jurisdiction as the same violates the provisions of Instruction No. 1/2011 dated 31st January, 2011 issued by CBDT and as such, where income declared/returned by such assessee is up to Rs. 20 lakhs, the jurisdiction would be of an officer of the rank of "ITO" and not ACIT. Thus, the entire order is liable to be quashed. Reliance can be placed on the decision of the Hon'ble Jurisdictional High Court in the case of Ashok Devichand Jain vs. UOI & Ors. WP NO.3489 of 2019. 4. That on the facts and circumstances of the case and in law, the Ld. A.O. as well the Ld. CIT(A) erred in making an addition amounting to Rs. 46,55,15,390/- u/s 45(4) of the Act. 5. That on the facts and circumstances of the case and in law, the Ld. A.O. as well the Ld. CIT(A) erred in invoking section 45(4) of the Act, without appreciating that the deed for retirement was entered with effect from 01.12.2020 i.e. prior to introduction of section 45(4) of the Act on 28.03.2021, therefore, section 45(4) of the Act is not applicable. 6. That on the facts and circumstances of the case and in law, the Ld. A.O. as well the Ld. CIT(A) erred in not considering the fact that section 45(4) of the Act is not applicable in the present case as firm is not bearing the liability for payment of additional sum to the retiring partner but it is the existing partners who are bearing the liability for payment of additional sum. 7. Without prejudice, on the facts and circumstances of the case and in law, the Ld. A.O. as well the Ld. CIT(A) erred in invoking section 45(4) of the Act, without appreciating that no partner has received any consideration during the year under consideration, and therefore the provisions of Section 45(4) are not applicable to the facts of the present case. 8. Without prejudice, on the facts and circumstances of the case and in law, the Ld. A.O. as well the Ld. CIT(A) erred in invoking section 45(4) of the Act, without appreciating that the expression used in Section 45(4) is "received" and not "receivable." In the present case, no amount has been paid to the retiring partner during the relevant previous year over and above the capital balance standing to his credit. Accordingly, no sum has been "received" by the retiring partner during the current financial year so as to attract the provisions of Section 45(4) of the Act, and therefore the same are not applicable to the facts of the case.

Additional Ground of Appeal (filed vide application dated 09.07.2026):

"That on the facts and circumstances of the case and in law, the impugned assessment order dated 29.12.2022 passed under section 143(3) is wholly without jurisdiction and liable to be quashed since the concerned AY is immediately preceding the A.Y. in which the search is conducted (i.e., on 31.12.2021), the AO ought to have invoked proceedings under Section 147 r/w 148 and not under 143(3), thus being bad in law and liable to be quashed."

2.

The assessee, M/s. Bhoomi Properties, is engaged in the business of builders and developers. It electronically filed its return of income for the year under consideration on 31.03.2022. A search and seizure action under section 132 of the Act was conducted on 31.12.2021 in the Bhoomi Group, wherein the assessee was also covered. Pursuant thereto, notice under section 143(2) of the Act was issued on 29.06.2022 and the assessment was completed under section 143(3) of the Act vide order dated 29.12.2022, wherein an addition of Rs.46,55,15,390/- was made under section 45(4) of the Act. The Ld. CIT(A) confirmed the said addition. Aggrieved, the assessee is in appeal before us.

3.

The assessee has raised various grounds challenging the validity of the assessment on jurisdictional grounds as well as the addition made under section 45(4) of the Act. During the course of hearing, the assessee also raised an additional legal ground vide application dated 09.07.2026 contending that the assessment framed under section 143(3) of the Act is wholly without jurisdiction, since for the year under consideration, being one of the three assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted on 31.12.2021, the Assessing Officer ought to have invoked the provisions of section 147 read with section 148 of the Act and not section 143(3).

4.

The Ld. Authorized Representative submitted that the additional ground is purely legal in nature, goes to the root of the jurisdiction of the Assessing Officer, and does not require investigation into any fresh facts. Reliance was placed upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. for admission of the additional ground.

5.

On merits of the additional ground, the Ld. AR submitted that Explanation 2 to section 148, inserted by the Finance Act, 2021 with effect from 01.04.2021, creates a statutory deeming fiction that where a search under section 132 is initiated on or after 01.04.2021, the Assessing Officer shall be deemed to have information suggesting escapement of income for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated. Since the search in the present case was conducted on 31.12.2021, i.e., during Previous Year 2021-22 relevant to Assessment Year 2022-23, Assessment Year 2021-22 admittedly falls within the three immediately preceding assessment years.

Therefore, according to the Ld. AR, the Assessing Officer could have assumed jurisdiction only under section 147 read with section 148 of the Act. However, no notice under section 148 was issued and the assessment was directly framed under section 143(3), rendering the entire assessment void ab initio.

6.

In support of the above contention, reliance was placed on the decisions of the Coordinate Benches of ITAT in M/s. Torque Pharmaceuticals Pvt. Ltd. v. DCIT [2026 (4) TMI 1690 - ITAT Chandigarh], Homelife Buildcon Pvt. Ltd. v. DCIT [2025 (7) TMI 1231 - ITAT Chandigarh], Rajdhani Flour Mills Ltd. v. DCIT [2026 (5) TMI 1005 - ITAT Delhi], Miraj Products Pvt. Ltd. v. ACIT [2026 (5) TMI 408 - ITAT Jodhpur], DCIT v. Vijay Kumar Agarwal [2026 (4) TMI 557 - ITAT Delhi], Gas Supply Co. Pvt. Ltd. v. ACIT [2026 (4) TMI 972 - ITAT Delhi], Jagdeep Singh Gill v. DCIT/ACIT [2026 (6) TMI 461 - ITAT Delhi], M/s. Malbros International Pvt. Ltd. v. DCIT [2026 (1) TMI 983 - ITAT Chandigarh], Pilot Industries Ltd. v. DCIT [2026 (5) TMI 690 - ITAT Delhi] and Pradeep Kumar Agarwalla v. DCIT [2026 (5) TMI 314 - ITAT Delhi].

7.

On the other hand, the Ld. DR relied upon the orders passed by the lower authorities. It was submitted that since the return of income was filed on 31.03.2022, the Assessing Officer rightly issued notice under section 143(2) of the Act and validly completed the assessment under section 143(3). He accordingly supported the addition made under section 45(4) of the Act and the order of the Ld. CIT(A).

8.

We have heard the rival submissions, perused the material available on record and carefully considered the statutory provisions as well as the judicial precedents cited before us.

9.

At the outset, we find that the additional ground raised by the assessee is purely legal in nature and goes to the very root of the jurisdiction assumed by the Assessing Officer. Since no fresh investigation of facts is required for its adjudication, the same is admitted for adjudication.

10.

The undisputed facts emerging from the record are that a search under section 132 of the Act was conducted in the case of the assessee on 31.12.2021; the search was thus initiated after 01.04.2021 during Previous Year 2021-22 relevant to Assessment Year 2022-23; the assessment year under consideration is Assessment Year 2021-22; notice under section 143(2) was issued on 29.06.2022; and the assessment came to be completed under section 143(3) vide order dated 29.12.2022. Admittedly, no notice under section 148 of the Act was issued.

11.

For proper appreciation of the controversy, it would be relevant to refer to Explanation 2 to section 148, inserted by the Finance Act, 2021 with effect from 01.04.2021, which provides that where a search under section 132 is initiated on or after 01.04.2021, the Assessing Officer shall be deemed to have information suggesting escapement of income for the three assessment years immediately preceding the assessment year relevant to the previous year in which such search is initiated.

12.

A plain reading of the above provision leaves no manner of doubt that, in the case of searches initiated on or after 01.04.2021, the Legislature has consciously brought the three immediately preceding assessment years within the ambit of the reassessment mechanism by creating a statutory deeming fiction. In the present case, the search having been conducted on 31.12.2021, the three immediately preceding assessment years are A.Ys. 2019-20, 2020-21 and 2021-22. Consequently, the assessment year under consideration squarely falls within the scope of Explanation 2 to section 148 of the Act.

13.

Once such deeming fiction operates, the Assessing Officer is required to assume jurisdiction in accordance with the procedure prescribed under sections 147 and 148 of the Act. However, in the present case, admittedly no proceedings under section 147/148 were initiated. Instead, the Assessing Officer directly proceeded under section 143(3) of the Act and completed the assessment thereunder.

14.

We find that this very issue now stands consistently decided by various Coordinate Benches of the Tribunal. In M/s. Torque Pharmaceuticals Pvt. Ltd. v. DCIT (supra), the Chandigarh Bench held that where the search was initiated after 01.04.2021 and the assessment pertained to one of the three immediately preceding assessment years, the only permissible course available to the Assessing Officer was to issue notice under section 148 and complete the assessment under section 147. Consequently, the assessment framed under section 143(3) was quashed as being without jurisdiction. Similar view has been taken in Homelife Buildcon Pvt. Ltd. (supra), Rajdhani Flour Mills Ltd. (supra), Miraj Products Pvt. Ltd. (supra), Vijay Kumar Agarwal (supra), Gas Supply Co. Pvt. Ltd. (supra), Jagdeep Singh Gill (supra), Malbros International Pvt. Ltd. (supra), Pilot Industries Ltd. (supra) and Pradeep Kumar Agarwalla (supra).

15.

Respectfully following the aforesaid decisions of the Coordinate Benches and applying the statutory mandate contained in Explanation 2 to section 148 of the Act, we hold that the Assessing Officer lacked jurisdiction to frame the impugned assessment under section 143(3) of the Act. The assessment ought to have been initiated, if at all, only by invoking the provisions of section 147 read with section 148 of the Act. The impugned assessment framed under section 143(3), without following the mandatory statutory procedure, is therefore without jurisdiction, bad in law and liable to be quashed.

16.

Accordingly, we quash the assessment order dated 29.12.2022 passed under section 143(3) of the Act.

17.

Since we have quashed the assessment itself on the aforesaid legal ground, the other grounds challenging the validity of the assessment as well as the addition made under section 45(4) of the Act have become academic and are, therefore, not adjudicated.

18.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 13.08.2026.

Sd/- Sd/- JAGADISH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 13.08.2026 RY-SrPS Copy to: BHOOMI PROPERTIES, 801, A WING 8TH FLOOR, HDIL KALEDONIA OFF SAHAR ROAD, OPP 1 VIJAY NAGAR COLDONGRI, ANDHERI (EAST),, MUMBAI-400059, MAHARASHTRA

ACIT, CENTRAL CIRCLE 8(4),, ROOM NO. 658, 6TH FLOOR, AAYAKAR 2 BHAVAN, M.K. ROAD,, MUMBAI-400020, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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