DCIT CENTRAL CIRCLE 7(2), MUMBAI, MUMBAI vs. JESUS SUDHIR LALL, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

against the order of the order ld CIT(A)-51 Mumbai,dated31.10.2025 for

assessment year (AY) 2012-13. The revenue/ AO has raised following grounds

of appeal;

(1) On the facts and circumstances of the case and in law, cash constitutes an 'asset 'for the purposes of section 149(1)(b) of the Act.

(2) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in law in holding that income in the form of unaccounted cash receipts is not ' represented in the form of an asset' under section 149(l)(b) of the Act. (3) On the facts and circumstances of the case and in law, unexplained expenditure assessed under section 69C necessarily presupposes existence of unaccounted money and therefore satisfies the asset condition under section149(1)(b) (4) On the facts and circumstances of the case and in law, receipt of unsecured loans in cash resulted in escaped income represented in the form of an ‘asset’ notwithstanding in subsequent accounting as a liability. (5) On the facts and circumstances of the case and in law, the interpretation adopted by the Ld.CIT(A) defeats the object of extended limitation provided under section (6) The appellant craves leave to add, alter, amend, modify and/or delete any or all of the above said grounds of appeal. The appellant reserves its right to the further submission in the appeal. 2. On receipt of notice of appeal, the assessee filed his Cross Objection (CO)

raising following grounds;

income for the A.Y. 2012-13 on 30.09.2012, declaring income of Rs.

89,78,500/- (90 Lakhs approximately). The case was selected for scrutiny and

an assessment was completed under Section 143(3) on 31.03.2015

determining the total income of Rs. 1.95 Crores. Subsequently, a search

action under section 132 was carried out in Universal Education Group on

14.03.2022. The assessee is the key person of Universal group; hence, the assessee was also covered in the search action. In the search action Chaitali

Patel was who was working with Universal group was also covered. During

search at the residence of Chaitali Patel, a red diary was found and seized.

The said red diary contained various entry of various unsecured loan from

various parties and expenditure. Consequent upon search action the case of

the assessee was centralized. Pursuant to search action, a notice under

Section 148 dated 30.03.2023 was served upon the assessee for filing return

of income for AY 2012-13. The Assessing Officer (‘AO’) at the time of issuing

notice under section 148 was of the view that case of the assessee is covered

under Explanation 2(i) of Section 148 of the Act. Since the information

gathered from search action suggest that income chargeable to tax exceeds

Rs. 50.00 Lakhs which has escape assessment. The AO obtained approval

from Competent Authority under Section 151 and issued notice under Section

148 dated 30.03.2023. In response to the notice under Section 148, the

assessee filed return of income on 29.04.2023 declaring income of Rs. 1.15

Crores. The AO served notice under Section 143(2) and proceeded for

reassessment. The assessee filed objection against reopening vide objection

letter dated 14.04.2023. The objection of the assessee was disposed off by

speaking order. In the objections, the assessee challenged the validity of

notice under Section 148 being barred by limitation on the ground that, A.Y.

2012-13 is beyond the period of 10 years. The AO after rejection of the

objection against the reopening proceeded for reassessment. The AO

recorded certain part of answers of various question from the statement of

Chaitali Patel in the assessment order, wherein she stated that statement recorded in the diary pertains to the transactions of assessee. The AO made

an addition of unexplained money under section 69A, unexplained

expenditure under Section 69C and unexplained unsecured loan under section

69D the basis of a red diary seized from the residence of Ms Chaitali Patel and

her statement recorded by investigation team. The AO, while passing the

assessment order made, an addition under Section 69A on account of

unexplained money of Rs. 72,42,277/-, the addition of unexplained

expenditure under Section 69C of Rs. 1.48 Crores and addition of unsecured

loan received in cash added under Section 69D of Rs. 92,50,400/-. The AO

passed assessment order on 31.03.2024 under section 143(3) rws 147.

before ld. CIT(A). Before ld CIT(A), the assessee challenged the action of AO

in reopening on the legal ground that reopening under section 147 and

issuance on notice under section 148 is based on the documents seized from

the residential premises of third party during the course of search action.

Assessment proceedings were initiated only on the basis of loose papers

found from third party. Assessment proceedings cannot be initiated under the

provisions of section 153C rws 153A, when the AO was not in possession of

books of account/documents/ evidence which reveals any income was

represented in the form of an asset, which has escaped assessment. The

assessee also challenged various additions on merit. The submissions of

assessee on legal issue is recorded on page no. 28 to 32 of order of ld CIT(A).

In the submissions, the assessee contended that as per the provisions of

section 149 of the Act as it stood after the amendment by the Finance Act, 2021, no notice under section 148 of the Act shall be issued for the relevant

assessment year, if three years have elapsed from the end of the relevant

assessment year, unless the case falls under clause (b) of section 149 and if

three years, but not more than ten years, have elapsed from the end of the

relevant assessment year unless, the AO was in his possession books of

account or other documents or evidence which reveal that the income

chargeable to tax, represented in the form of (i) an asset; (ii) expenditure in

respect of a transaction or in relation to an event or occasion; or (iii) an entry

or entries in the books of account, which has escaped assessment amounts to

or is likely to amount to fifty lakhs rupees or more Further, the Proviso-1 to

the said section reads that "that no notice under section 148 shall be issued

at any time in a case for the relevant assessment year beginning on or before

1st day of April, 2021, if a notice under section 148 or section 153A or section

153C could not have been issued at that time on account of being beyond

the time limit specified under the provisions of clause (b) of sub-section (1) of

this section or section 153A or section 153C, as the case may be, as they

stood immediately before the commencement of the Finance Act, 2021.

forth Proviso, "no notice for assessment or reassessment shall be issued by

the AO for the 'relevant assessment year' or years unless (a) the AO has in his

possession books of account or other documents or evidence which reveal

that the income, represented in the form of asset, which has escaped

assessment amounts to or is likely to amount to fifty lakhs rupees or more in

the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped

assessment for such year or years; and (c) the search under section 132 is

initiated or requisition under section 132A is made on or after the 1st day of

April, 2017." Further Explanation 1 to the said section reads that "For the

purposes of this sub-section, the expression "relevant assessment year" shall

mean an assessment year preceding the assessment year relevant to the

previous year in which search is conducted or requisition is made which falls

beyond six assessment years but not later than ten assessment years from

the end of the assessment year relevant to the previous year in which search

is conducted or requisition is made" And as per Explanation 2 to the section

153A "For the purposes of the fourth proviso, "asset" shall include immovable

property being land or building or both, shares and securities, loans and

advances, deposits in bank account". Thus, as per the provisions of section

149, reopening can be made up to ten years if evidence reveals income

escaping assessment, represented in the form of asset, or expenditure in

respect of a transaction or in relation to an event or occasion; or an entry or

entries in the books of account, amounts to or is likely to amount to Rs. 50.00

lacs. Whereas under the provisions of section 153A, reopening is valid only if

income escaping assessment represented in the form of asset only, amounts

to Rs. 50.00 lacs or more. It was stated that a joint reading of all the

provisions, in the present case, since reopening is made as per the erstwhile

provisions of section 153A/153C of the Act, the case could be reopened up to

a period of ten assessment years only when the AO is in possession of books

of accounts / documents / evidence which reveal that income, represented in the form of an “asset”, which has escaped assessment amounts to or is likely

to amount to Rs. 50.00 lacs or more. The Parliament, by specifying the

jurisdictional fact as undisclosed asset valued Rs. 50.00 lacs or more, has

impliedly excluded other items of income viz., liabilities/credit, unexplained

expenditure etc. A reading of the fourth proviso to section 153A of the Act

and Explanation (2) thereof which defines 'Asset' for the purpose of this

proviso, clarify the intention of the Parliament to permit the AO to enlarge the

assessment under section 153A after search action beyond six assessment

years to ten assessment years preceding the searched assessment year,

provided the AO has in his possession the essential jurisdictional fact i.e.

"undisclosed/unaccounted asset" valued Rs. 50 lacs or more of the assessee discovered during search pertaining to 7th to 10th assessment year preceding

the searched assessment year. Since the Parliament has used the expression

'income in the form of asset' and the definition of asset has been spelled out

in the fourth proviso, this itself necessarily implies that the liability/items

falling in the left side of the Balance Sheet stands excluded. It is a

rudimentary accounting concept, that "debit" denotes "asset" and "credit"

denotes "liability". An asset represents an economic resource, either

immovable or movable, having value, such as immovable property viz., land or

building, investment held in shares and securities, loans & advances given

and deposits in bank account. On the other hand, 'Liability' includes items

such as share capital, reserves, loans obtained (secured as well as unsecured)

etc., which cannot be characterized or classified as 'Asset'. Similarly, items of

'expenses' or revenues in form of 'sales'/'turnover' does not constitute "asset".

Explanation 2 to the fourth proviso to section 153A defines 'asset' to include i)

immovable property, ii) shares and securities, iii) loans and advances & iv)

Deposit in bank. It was reiterated that where search action under section 132

of the Act reveals that, (i) the assessee owns an undisclosed immovable

property, or (ii) information has been gathered which shows that the assessee

had given loans or advances outside the regular books or (iii) search has

revealed unaccounted investments made by assessee in shares & securities,

which do not form part of regular books of accounts or (iv) if undisclosed

bank accounts having deposits, have been found in the course of search, pertaining to the 7th to 10th assessment years preceding the search, then

having in his possession this jurisdictional fact, the AO may assume

jurisdiction under the fourth proviso to Section 153A of the Act for the

relevant 7th to 10th assessment year preceding the searched assessment

year. Hence, the most important aspect is that, these 'assets' must have been

found to be undisclosed or unaccounted, in the regular books of account

maintained by the assessee, and discovered during the course of search,

resulting in escapement of income. Hence, the provisions of Section

153A/153C of the Act can be invoked only if the AO comes to a positive

conclusion that he was in his possession documents or information revealing

an undisclosed asset of the assessee qua the assessment year (7th to 10th).

This is a foundational, fundamental or jurisdictional fact. In the present case,

search and seizure action under section 132 of the Act was initiated on

assessee on 14.03.2022 i.e. during F.Y 2021-2022 (Α.Υ 2022-2023). The AO

was of the view that the reopening is valid since the same falls under section 149(1)(b) and is not hit by the first proviso i.e. reopening would be valid

under erstwhile section 153A/153C. In the present case, the AO has merely

relied upon the loose papers/documents / diaries found and seized from the

residential premises of Chaitali Patel and her statement recorded on oath, for

the purpose of alleging income escaping assessment of Rs. 3,05,80,228/-

which is represented in the form of an 'asset'. However, the AO has not gone

through the seized material to gather necessary details /information which

would suggest discovery of undisclosed assets qua the assessee for Α.Υ

2012- 2013. The AO instead, while seeking approval under section 151, has

merely made a blanket statement that "as the loose papers/diaries were

seized during the search proceedings, the undersigned is in possession of

evidence which reveals income chargeable to tax more than fifty lakhs has

escaped assessment. Further, as assessee has done transactions in the form

of cash, the same is in the form of an 'asset’. Therefore, it is clear that the

case of assessee falls under 149(1)(b)(i)." Further, as per letter dated

23.02.2024, the AO has stated that "thus the AO was having information as

well as incriminating material containing details of cash expenditures, cash

receipts and cash loans pertaining to you for the year under consideration."

/diaries do not belong/pertain to him and has no relation with any transaction

undertaken by him. Attention was drawn to the responses given by Chaitali

Patel that as per her statement recorded on oath, for each of the annexure as

relied upon by the AO i.e. Annexure A-3, Annexure A-4, Annexure A-10 and

Annexure A-13 and the additions made by the AO on the basis thereof. Thus, from the above and as per the statement of Chaitali Patel, the cash receipts

are either in the nature of income or cash loans taken i.e. a liability or other

cash receipts and the cash payments are in the nature of repayment of cash

loans (i.e. reduction in liability) or cash expenses. Moreover, even the AO has

made addition on account of cash receipts or receipt of loan in cash or cash

expenses i.e. the information gathered by the AO does not reveal that (i) the

assessee owned any undisclosed immovable property, or (ii) loans or

advances in cash outside regular books or (iii) was holding any unaccounted

investments in shares & securities, outside his regular books or (iv) had any

undisclosed bank accounts having deposits. Further, while seeking approval

under section 151, the AO has stated 'as assessee has done transactions in

the form of cash, the same is in the form of an 'asset' and as per his letter

dated 23.02.2024, the AO has stated that "AO was having information as well

as incriminating material containing details of cash expenditures, cash

receipts and cash loans pertaining to you for the year under consideration.".

However, what is the undisclosed and unaccounted asset has not been

specified. It cannot be assumed that the cash transactions are "cash" and

hence an "asset". It cannot also be assumed that the assessee was holding

cash which was the asset. Moreover, as per the definition of 'asset', cash is

not covered. It is a known fact that the seized material may contain both

disclosed & undisclosed assets, liabilities, expenses & income. So, it is

imperative that before issuance of notice under section 148 r.w.s 153A/153C

(for the extended period up to ten years), the AO sets out his objective

satisfaction from the seized material, the details of the specified/undisclosed assets in his possession qua the assessee for A.Y 2012-2013 and the income

escaping assessment. To support his contentions, the assessee relied on the

decision of Delhi High Court in Smart Chip Private Limited Vs ACIT (2025) 174

taxmann.com 297 (Delhi), wherein it was held that that reopening of

extended period of 10 years under section 153C of the Act can only be on the

ground of any income represented in the form of an 'asset' and not otherwise.

It was held as under; "once it is accepted that a notice under section 148

cannot be issued if such a notice could not be issued under section 153A; it

would be necessary to determine the period of limitation for issuance of a

notice under section 153A. Since a block of six assessment years and a

further period not exceeding the block of ten assessment years is

contemplated under section 153A, it follows that it would be necessary to

determine whether the extended period of ten years is applicable in the facts

of the present case. This necessitates considering the reasons as recorded for

issuance of the impugned notice. It was also held that if there is no allegation

that the income which has escaped assessment was represented in the form

of an asset. The conditions as stipulated in clause (a) of the fourth proviso to

section 153A(1) are not satisfied. The Assessing Officer does not have the

possession of any books of account, other documents or evidence, which

reveals that the assesses income that is represented in the form of an asset

has escaped assessment. In Explanation 2 to section 153A(1), the term

"asset" is defined to include immovable property being land or building or

both, shares and securities, loans and advances, deposits in bank accounts.

submissions of assessee and other material placed before him allowed relief

to the assessee. The ld CIT(A) while allowing relief to the assessee held that

search action under section 132 was carried on assessee and his group on

14.03.2022 following search action notice under section 148 was issued for

AY 2012-13. It was held that as per section 149, notice under section 148 can

be issued beyond three years upto ten years if the AO has in his possession

books of account or other documents or other evidence which reveal that the

income chargeable to tax, represented in the form of an asset or expenditure

in respect of transaction or in relation to an event or occasion or an entry or

entries in the books of account, which has escaped assessment amounts to or

is likely to amount fifty lakhs rupee or more. It was further held that first

proviso to section 149 stipulates that no notice under section 148 can be

issued for an assessment year beginning on or before 01/04/2021, if a notice

under section 148 or 153A or 153C could not have been issued at that time

on account of being beyond the time limit specified under section 149 or 153A

or 153C as they stood immediately before the commencement of Finance Act

2021. The ld CIT(A) also extracted the language of section 149, 153A as

stood prior to 31.03.2021 and held that a valid notice could be issued under

section 148 for AY 2012-13 on 31.03.2021, only if there was an income in

relation to asset (including financial interest in any entity) located outside

India, chargeable to tax, has escaped assessment. It was held that extended

period was exclusively restricted to the cases wherein escaped income was “in

relation to any asset” located outside India. The ld CIT(A) in para 7.8 of his order further held that issue before him for adjudication is whether the

reopening is based on the finding of any asset in the form of immovable

property being land or building or both, shares or securities, loan and

advances and deposits in the bank account for FY 2011-12. There is no

finding in the assessment order about ‘asset’ including financial interest in

asset outside India. There is no undisclosed asset in the form of land or

building, shares or securities, loan and advances and deposits in the bank

pertaining to the FY 2011-12 (AY 2012-13) were found. The ld CIT(A) also

considered the nature of all three additions, which consist of unexplained

money under section 69A of Rs.72,42,277/-, unexplained expenditure of Rs.

1.48 Crore and addition of unsecured loan of Rs.92,50,400/-. On considering

the nature of additions, the ld CIT(A) held that diary found at the residence of

Chaitali Patel contained regular notings of cash transaction and cash interest.

The AO concluded that the assessee has not given any explanation about

nature and source of acquisition of such cash and invoked provisions of

section 69A or 69C. The cash receipt is an item of income and expenditure

and not of balance sheet. The cash cannot be equated with as being an

‘asset’. Thus, none of the additions constitute an asset of specific nature or in

qualifying form which is required to assume jurisdiction beyond six years

period as prescribed in the section 148/153A or 153C. Hence, reopening

beyond a period of six years were clearly in violation of provisions of section

153A /153C as stood on 31.03.2021 and concluded the proceedings to be

invalid. The ld CIT(A) also relied on the decision of Delhi High Court in Smart Chips Private Limited Vs ACIT [2025] 174 taxmann.com 297 (Delhi). Once

reopening was held invalid, the assessment was held as void-ab initio.

before this Tribunal. We have heard the submissions of the ld Senior

departmental representative (Sr DR) for the revenue and the learned

authorised representative (AR) of the assessee. The ld Sr DR for the revenue

supported the order of AO. The ld Sr DR for the revenue submits that during

the course of search proceedings in the assesses case, a statement of Chaitali

Patel was recorded under section 132(4) on 14.03.2022. In her statement,

Chaitali Patel accepted that the loose papers and diaries found at her

premises are pertaining to assessee, his family and the Universal Education

Group entities. The loose papers / diaries were found at premises of Chaitali

Patel which were seized as Annexure A3, A4, A10 and A13. The said seized

documents show cash transactions amounting to Rs.3,05,80,228/-. The AO

during assessment concluded that the said incriminating material seized from

the premises of Chaitali Patel is pertaining to the assessee and the same

suggests that, the income chargeable to tax has escaped assessment for the

A.Y. 2012-13. The AO further noted that on verification of seized material, it

was seen that, the assessee has entered into cash transaction to the tune of

Rs.3,05,80,228/-. Therefore, the assesses case falls under old provisions of

section 153C of the Act. As per Explanation 1 of section 153A of the Act, the

relevant assessment year shall mean an assessment year preceding the

assessment year relevant to the previous year in which search is conducted or

requisition is made which falls beyond six assessment years but not later than ten assessment years from the relevant assessment year relevant to the

previous year in which search is conducted or requisition is made. Thus, it is

clear that a notice under section 153A and 153C for the relevant assessment

year could have been issued under old provisions of section 153A and 153C

up to 10 assessment years. Thus, the notice issued under section 148 dated

30.03.2013 for the A.Y. 2012-13 is within time. The ld CIT(A) misdirected

himself in accepting the contention of the assessee about interpretation of

‘asset’. The ld Sr DR for the revenue prayed to reverse the decision of ld

CIT(A) and to restore the finding of AO.

the assessee filed his return of income on 30.09.2012 declaring income of Rs.

89,78,500/-. The case was selected for scrutiny and assessment was

completed on 31.03.2015 assessing total income at Rs. 1,94,87,350/-.

Subsequently, the case of assessee was reopened by AO by taking a basis of

search action on assessee and his group on 14.03.2022. during search action

no incriminating material was found at the premises of the assessee.

Simultaneously a search action was carried out at the premises of Chaitali

Patel, who was an employee of Universal Education Group, wherein certain

loose papers and diary was found and seized. The AO issued notice under

section 148 dated 30.03.2023. The assessee filed his return of income for AY

2012-13 in response to such notice on 29.04.2023.The AO made baseless

additions on the basis of loose papers and notings in the diary. Before ld

CIT(A), the assessee strongly objected against the additions and also

challenging validity of reopening. The ld AR of the assessee further submits that Ld.CIT(A) has rightly held the notice of reopening issued under section

148 was bad in law and without jurisdiction. The basis for reopening of the

assessment is a search action conducted on 14.03.2022 under section 132(1)

of the Act in the case of assessee and Universal Education Group. Similarly, a

search action was also conducted at the residence of Chaitali Patel and her

statement was recorded under section 132(4) of the Act. The A.O. in his order

has referred to some loose papers and diaries seized from the residence of

Chaitali Patel and alleged that the said material shows cash transactions

amounting to Rs.3,05,80,228/-. The A.O., after relying on the statement of

Chaitali Patel, came to the conclusion that the said cash transactions are done

by the assessee. Therefore, there was an income which escaped assessment

amounting to more than fifty lacs. The assessee strongly objects to the said

conclusion of the A.O. The ld AR of the assessee submits that no notice under

section 148 of the Act can be issued for any assessment year unless the

conditions provided under section 149(1) of the Act are satisfied. Earlier, the

scheme of assessment or reassessment pursuant to the search action was

governed by the provisions of section 153A and 153C of the Act. The Finance

Act, 2021 replaced the said scheme with the new scheme of provided under section 147 to 151 of the Act with effect from 1st April, 2021. Thus, as per

amended provisions of section 147/148 of the Act, the assessments or

reassessments pursuant to the search action conducted under section 132 of the Act on or after 1st April, 2021 fall within the ambit of section 147 and 148

of the Act. However, the conditions provided in the erstwhile provisions for

issuing the notice under section 153A/153C are same even in the amended provisions of section 149 for issuance of the notice under section 148 of the

Act.The notice under section 148 of the Act cannot be issues unless the

conditions provided under section 149(1) of the Act are satisfied. The

language of section 149 of the Act is identical with the language of Forth

proviso to section 153A of the Act. The ld AR of the assessee took us through

the forth proviso to section 153A of the Act and submitted that as per the first

proviso to section 149(1)(b) of the Act, notice under section 148 of the Act cannot be issued pursuant to any search action conducted after 1st April, 2021

if the time limit for issuance of the notice under section 153A/153C as

provided under clause (b) of sub-section (1) of section 153A is expired.

Further, the forth proviso to section 153A(1) of the Act puts some conditions

to be fulfilled as referred herein above before issuance of the notice for

assessment / reassessment. Further, Explanation 1 to section 153A(1) of the

Act provides that, the notice under section 153A can be issued beyond six

years but not more than ten years from the end of the relevant assessment

year relevant to the previous year in which search is conducted or requisition

is made. However, the same is subjected to the fulfilment of the conditions as

provided in forth proviso to section 153A of the Act.

section 148 of the Act is time barred. Assessment year under consideration is

A.Y. 2012-13, the notice for reopening under section 148 of the Act is issued

on 30.03.2023 based on the search action conducted on 14.03.2022 in the

case of assessee and Universal Education Group. A search was also conducted

at the residence of Chaitali Patel, the employee of Universal Education Group.

In the course of a search action, some loose papers and diaries were

impounded from her residence. After, relying on rough noting in the said

seized documents, the A.O. alleged that, the noting pertaining to some cash

transactions amounting to Rs.3,05,80,228/- are related to the assessee. The

A.O. inferred that the assessee has entered in to cash transactions amounting

to Rs.3,05,80,228/-. Therefore, the income chargeable to tax has escaped

assessment. The conclusion drawn by A.O. is erroneous. As provided under

first proviso to section 149(1) of the Act, the notice under section 148 can be issued pursuant to any search action conducted on or after 1st April, 2021

only if the A.O. could issue a notice under section 153A/153C of the Act at the

time of issuance of the notice of reopening in case ‘asset’ was ever found in

the course of search action to show the escapement of any income. The A.O.

merely held the cash transactions amounting to Rs.3,05,80,228/- as

mentioned in the loose papers and diaries as the income which has escaped

assessment. This interpretation of the A.O. is incorrect. In fact, the notice

under section 148 of the Act is issued on the basis of presumption that the

assessee has entered into the cash transactions to the tune of

Rs.3,05,80,228/-. The alleged cash transactions do not fall in the definition of

‘asset’ as provided under Explanation 2 to fourth proviso to section 153A(1) of

the Act. As per the said explanation, "asset" shall include immovable property

being land or building or both, shares and securities, loans and advances,

deposits in bank account. It may be appreciated that the said definition of

‘asset’ is an inclusive definition and it does not include ‘cash’. However, the

A.O. was not in possession of any document which reveal that the income, represented in the form of asset, which has escaped assessment amounts to

or is likely to amount to fifty lakhs rupees or more. The rough entries made in

the loose papers cannot be termed as asset. Thus, the basic conditions as

provided under section 149(1) of the Act to issue a notice under section 148

of the Act do not satisfy in the facts of the present case. Thus, the notice

dated 30.03.2023 issued under section 148 is barred by limitation, without

jurisdiction and bad in law. The consequential assessment order passed under

section 143(3) r.w.s. 147 of the Act is also bad in law. To support his

submissions, the ld AR of the assessee relied on the following case laws; � Delhi High Court in Smart Chip (P.) Ltd. Vs. ACIT [2025] 476 ITR 389 (Delhi), � Viraj Profiles Limited Vs DCIT in ITA No. 1771/Mum/2023dated 26.04.2023. � Chennai Tribunal in DCIT Vs Midas Golden Distilleries Private Limited in ITA No 408,409 & 420/Chny/2023. Dated 20.10.2023. 11. We have considered the rival submissions of both the parties and have gone

through the orders of lower authorities carefully. We have also deliberated on

various case laws relied by ld AR of the assessee. We find that there is no

dispute that search action under section 132 was carried out on 14.03.2022.

Thus, AY 2012-13 is beyond the six year from the year in which search action

was conducted. The AO reopened the case for AY 2012-13 by issuing notice

under section 148 dated 30.03.2023. We find that while issuing notice under

section 148, the AO was of the view that case of the assessee is covered

under Explanation 2(i) of Section 148 of the Act as the information gathered

from search action suggest that income chargeable to tax exceeds Rs. 50.00

Lakhs which has the escaped assessment. The AO obtained approval from

Competent Authority under Section 151 and issued notice under Section 148 21 dated 30.03.2023. Before ld CIT(A), the assessee filed detailed written

submissions which we have recorded above. We find that the ld CIT(A) held

that first proviso to section 149 stipulates that no notice under section 148

can be issued for an assessment year beginning on or before 01/04/2021, if a

notice under section 148 or 153A or 153C could not have been issued at the

time on account of being beyond the time limit specified under section 149 or

153A or 153C as they stood immediately before the commencement of

Finance Act 2021 and held that a valid notice could be issued under section

148 for AY 2012-13 on 31.03.2021, only if there was an income in relation to

‘asset’ (including financial interest in any entity) located outside India,

chargeable to tax, has escaped assessment. It was held that extended period

was exclusively restricted to the cases wherein escaped income was “in

relation to any asset” located outside India. We further find that the ld CIT(A)

categorically held that issue before him for adjudication is whether the

reopening is based on the finding of any asset in the form of immovable

property being land or building or both, shares or securities, loan and

advances and deposits in the bank account for FY 2011-12. There is no

finding in the assessment order about ‘asset’ including financial interest in

asset outside India. There is no undisclosed asset in the form of land or

building, shares or securities, loan and advances and deposits in the bank

pertaining to the FY 2011-12 (AY 2012-13) which were found during the

search.

(2025) 476 ITR 389 (Delhi), while considering the contention of the petitioner (assessee in the said case) held that in terms of the fourth proviso to Section

153A(1) of the Act, no notice for the relevant assessment year or years could

be issued unless the AO had in his possession books of account or other

documents or evidence which revealed that income represented in the form of

an asset has escaped assessment. Thus, the extended period of limitation

beyond the six years preceding the assessment year relevant to previous year

in which a search was conducted, would be applicable only in cases where the

AO had evidence, which discloses that the escaped income was represented

by an asset. It was contended that, in the said case, the income which is

alleged to have escaped assessment is on account of an expenditure, which

the AO had disallowed and not on account of any asset which represent such

income. The Hon’ble High Court after considering factual basis of additions in

para -16 onwards held that the AO believed that the petitioner's income had

escaped assessment for AY 2016-17 on essentially three grounds. First, the

petitioner had deducted expenses relating to amounts paid to certain persons

who had not filed their income tax returns and the AO thus doubted the

genuineness of the said transactions. Second, the petitioner had booked

expenses, which according to the AO, were personal expenses of its directors

and had not been incurred wholly and exclusively for the purpose of the

petitioner's business. And third, that the petitioner had paid certain amounts

as expenses for availing contractual manpower services and the AO doubted

the genuineness of the said payments. It is clear from the above that there is

no allegation that the income which has escaped assessment was represented

in the form of an ‘asset’. Therefore, the conditions as stipulated in Clause (a)

of the fourth proviso to Section 153A(1) of the Act are not satisfied. The AO

does not have the possession any books of account, other documents or

evidence, which reveals that the petitioner's income that is represented in the

form of an asset has escaped assessment. In terms of Explanation 2 to

Section 153A(1) of the Act, the term 'asset' is defined to include immovable

property being land or building or both, shares and securities, loans and

advances, deposits in bank accounts. The AO seeks to disallow expenses on

account of doubting the genuineness for the reason that the same were not

incurred wholly or exclusively for the purpose of the petitioner's business. In

absence of any further material to establish that such expenses had resulted

in the acquisition of any asset, the conditions stipulated in the fourth proviso

to Section 153A(1) of the Act would remain unsatisfied. In the aforesaid view,

the period of limitation for issuing a notice under Section 153A of the Act, in

the given facts of this case, would necessarily have to be confined to a period

of six assessment years immediately preceding the assessment year relevant

to the previous year in which the search under Section 132 of the Act was

conducted. The search in question was conducted in financial year 2022-23;

thus, the relevant block of six assessment years would be the six assessment

years preceding AY 2023-24, being the assessment year relevant to the

previous year in which the search was conducted. Accordingly, the High Court

held that AY 2016-17 falls beyond the block of six years.

considering the similar grounds of appeal against validity of reopening beyond

six year by invoking fourth proviso to section 153A, the bench held as under;

“4.3 We have heard rival contentions on this legal issue and perused the record. We have extracted the fourth proviso to sec. 153A of the Act in the preceding paragraph. A careful perusal of the above said proviso would reveal that, in order to invoke the fourth proviso to sec.153A, it is required to be shown by the AO that (a) the books of account or other documents or evidence in his possession reveal that the income which has escaped assessment for the relevant assessment year is "in the form of asset" (b) the quantum of income so escaped amount to fifty lakhs or more in the relevant assessment year or in aggregate in the relevant assessment years. (c) the said income should have escaped assessment for such year or years. (d) the search is initiated on or after 1st day of April, 2017. (e) the relevant assessment year is the year preceding the year of search which falls beyond six preceding assessment years but not later than ten assessment years. Hence, it is required to be shown by the AO that the escaped income was "in the form of asset" and further the value or aggregate value of assets has exceeded Rs.50.00 lakhs. The corollary is that, if the escaped income is not represented "in the form of asset", the fourth proviso to sec. 153A of the Act cannot be invoked in order to reopen the assessment of a year falling beyond six assessment years preceding the year of search. 4.4 In the instant case, we notice that the AO has not shown that the alleged income escaped for assessment is represented "in the form of an asset". What is assessed in this year u/s 153A of the Act is the addition towards alleged bogus purchases and disallowance of salary/professional fee u/s 37 of the Act. It is not shown that the income, if any, generated out of these two disallowances is represented in the form of asset. Hence, we are of the view that the AO could not have invoked the fourth proviso to sec. 153A of the Act in order to reopen the assessment of AY 2011-12 and accordingly hold that the said reopening is not in accordance with the law and is liable to be quashed. Accordingly, we quash the orders passed by the tax authorities for AY 2011-12.” 14. We further find that Chennai Tribunal in DCIT Vs Midas Golden Distilleries

Private Limited (supra) followed the Mumbai Tribunal on similar issue.

independent appreciation of facts, we find none of the additions constitute an

‘asset’ of specific nature or in qualifying form required to assume jurisdiction

beyond six years period as prescribed in the section 148/153A or 153C.

Hence, reopening beyond period of six years are clearly in violation of

provisions of section 153A /153C as stood on 31.03.2021 and is invalid.

Therefore, reassessment order passed thereto has become void-ab initio.

Thus, we affirm the order of ld CIT(A), with our additional observation. In the

result, the grounds of appeal raised by the revenue are dismissed.

specific adjudication on the grounds raised in Cross Objection have become

academic as the same is also dismissed as infructuous.

Order pronounced in open Court on 16.07.2026 as per Rule 34 of Income Tax (Appellate Tribunal) Rules-1963

Sd/- Sd/- MANOJ KUMAR AGGARWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 16/07/2026 Aditi Pandare PS Aditi Pandare PS Aditi Pandare PS Aditi Pandare PS Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai