SMT. MAKIYA JUNAID FURNITUREWALA,MUMBAI vs. INCOME TAX OFFICER, WARD 23(2)(2), MUMBAI, MUMBAI

Brief facts relevant for adjudication of this appeal are that in the instant case, the assessment was reopened u/s 147 of the Act on the basis of material found during the course of a search and seizure action conducted in the case of a third-party group. During the said search, a ledger was found and seized from one of the premises of the searched group. From the said ledger, the Assessing Officer (in short, “AO”) observed that cash amounting to Rs.22,50,000/- was received by the third party against the sale of a property, which remained unaccounted for in its regular books of account. The AO, therefore, formed a belief that the amount of Rs.22,50,000/- allegedly paid by the Assessee represented unaccounted cash and had escaped assessment.

Consequently, vide assessment order dated 28.12.2019 passed u/s 143(3) r.w.s. 147 of the Act, the AO made an addition of Rs.22,50,000/- u/s 69 of the Act.

The Assessee challenged the said assessment order and the addition made by the AO by filing 1st appeal before the Ld. Commissioner, who ultimately affirmed the same.

Thus, the Assessee being aggrieved has preferred instant appeal.

We have heard the parties, perused the material available on record and considered the rival submissions. The Assessee has raised an additional legal ground challenging the validity of the initiation of proceedings u/s 147 of the Act and the consequential assessment order, while relying upon the judgment of the Hon’ble Jurisdictional High Court in Sejal Jewellary & Anr. v. Union of India & Ors. [(2025) 171 taxmann.com 846 (Bom.)].

On the contrary, the Ld. DR though relied upon the orders passed by the authorities below, however, could not controvert the findings arrived at, in Sejal Jewellary & Anr. v. Union of India & Ors. {supra}.

Since the Assessee by way of additional ground has raised a pure question of law arising from the facts already available on record and goes to the root of the matter, thus the same was allowed to be raised and admitted for adjudication.

We observe that the Hon’ble Jurisdictional High Court in Sejal Jewellary & Anr. v. Union of India & Ors. {supra} after considering the judgment of the Hon’ble Rajasthan High Court in Shyam Sunder Khandelwal v. Assistant Commissioner of Income Tax [(2024) 161 taxmann.com 255 (Raj.)], holds that where the material seized or requisitioned during a search belongs to, pertains to or relates to a person other than the person searched, the proceedings are required to be initiated u/s 153C of the Act and not under the general provisions of sections 147/148 of the Act. The notice issued u/s 148 of the Act and all consequential proceedings were accordingly held to be without jurisdiction and bad in law.

We further observe that the Hon’ble Gujarat High Court in Paras Chandreshbhai Koticha v. Income Tax Officer, Ward-1(2)(2) [(2026) 182 taxmann.com 204 (Guj.)] has also taken a similar view and holds that where the reopening is founded upon incriminating material seized during a search conducted in the case of another person, the AO is required to proceed in accordance with section 153C of the Act and cannot resort to sections 147/148 of the Act.

In the present case, admittedly, the entire foundation of the reopening is the ledger found and seized during the course of the search conducted in the case of a third-party group. The AO was, therefore, required to resort to the special procedure prescribed u/s 153C of the Act and could not assume jurisdiction under sections 147/148 of the Act. Thus, the case of the Assessee, is squarely covered by the judgments referred to above.

Hence, considering the peculiar facts and circumstances in totality and respectfully following the aforesaid judgments, we allow the additional ground raised by the Assessee and quash the assessment order dated 28.12.2019 passed u/s 143(3) r.w.s. 147 of the Act, along with all consequential proceedings.

Resultantly, the remaining grounds raised by the Assessee on merits become academic. Therefore, we deem it appropriate not to adjudicate the same, as such adjudication would be a futile exercise.

In the result, the Assessee’s appeal is allowed. Order pronounced in the open court on 29.07.2026.