ANITA AGARWAL,HOWRAH vs. I.T.O., WARD - 46(1), KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA Nos.1377 & 1378/Kol/2026 (Assessment Year: 2017-18) Anita Agarwal ITO, Ward-46(1), Kolkata Vs 40 Banwari lal Road, Golabari, Howrah 711101. (PAN: BLQPA0895M) (Appellant) (Respondent)

Assessee by : Shri Manoj Kataruka, Advocate Revenue by : Shri Amuldeep Kaur, Addl. CIT, DR Date of Hearing : 16.07.2026 Date of Pronouncement : 16.07.2026

ORDER Per George Mathan, JM: ITA No.1377/Kol/2026 is an appeal filed by the assessee against the order of the ld. CIT(A), NFAC in appeal no.NFAC/2016-17/10409508 in quantum assessment u/s 147 r.w.s 144 and ITA No.1378/Kol/2026 is an appeal filed by the assessee against the order of the ld. CIT(A), NFAC in appeal no.NFAC/2016-17/1041174 both dated 20.03.2026 against the confirmation of penalty levied u/s 271AAC(1) of the Act for assessment year 2017-18. 2. Shri Manoj Kataruka, Advocate represented on behalf of the assessee and Amuldeep Kaur, Addl. CIT, DR represented on behalf of the revenue.

ITA No.1377&1378/Kol/2026 the said group where transactions have been done and notice u/s 148 was issued by the Assessing Officer on 30.03.2021, which reads as follows:

ITA No.1377&1378/Kol/2026

ITA No.1377&1378/Kol/2026 on 21.05.2018, the provisions of section 153C specifically applies in so far as the provisions specifically provides that any search cases where the search has taken place before 01.04.2021, the provisions of section 153C are to apply and not provisions of section 148. He placed reliance on the decision of the Hon’ble High Court of Karnataka in the case of PCIT vs. VSL Mining Company (P) Ltd. reported in 157 taxmann.com 373 (Karnataka) wherein in paras 11 to 16, the Hon’ble Karnataka High Court has held as follows:

“11. It is forthcoming that the assessee has specifically raised additional grounds before the Tribunal by contending that the AO has not followed the procedure as envisaged under Section 153C of the IT Act and that the additions made in regular assessment proceedings are required to be deleted. While considering the said contentions, the Tribunal has held as follows:

"7.6.1 We have carefully considered the legal arguments/contentions put forth by both parties. The facts not in dispute are that the substantive and protective additions were made in the case on hand on the basis of material found and seized from the premises of Shri. Manoj Kumar Jain. It is also amply clear that the AO did not invoke the provisions of Section 153C of the Act on receipt of the material; but rather chose to take cognizance of these materials (i.e., seized in the case of Shri. Manoj Kumar Jain) in the course of pending assessment proceedings under section 143(3) of the Act for Assessment Year 2008- 09 that were before him. It is therefore clearly established that the AO has used seized material/documents found in the course of search conducted in the case of a third party (i.e., search of Shri. Manoj Kumar Jain) for making the additions in the hands of the assessee, although, on protective and substantive basis; which was later on modified as substantive by the CIT(A).

7.6.2 The provisions of Section 153C of the Act enjoins upon the AO of the person searched; that on being satisfied that books of account seized or requisitioned belongs to or pertain to some other persons, to handover the books of account to the AO having jurisdiction over such other person. Thereafter, the second AO, on being satisfied that the books of account and documents received have a bearing on the determination of the total income of the other person, should assume jurisdiction under section 153C of the Act. After assuming jurisdiction under section 153C of the Act, the AO proceeds to carry out an assessment in terms of section 153A r.w.s. 143(3) of the Act. ........

7.6.3 From the above, it is seen that the jurisdictional conditions and circumstances prescribed by the legislature for assumption of jurisdiction and taking action under section 153C of the Act is different when compared to a regular assessment. The jurisdiction to make an assessment under section 153C of the Act arises when satisfaction is reached that the materials found in the course of search of some other person have a bearing on the determination of the income of the assessee. Further, in the first proviso to section 153C of the Act, it is provided that the reference to the date of search in the second proviso to section 153A of the Act; dealing with abatement of pending proceedings on the date of search; shall for the purpose of the persons 4

ITA No.1377&1378/Kol/2026 proceeded under section 153C of the Act be construed as the date on which the seized materials are received by the AO.

7.6.4 In the case on hand, we find that there was a search under section 132 of the Act in the case of the assessee on 26.10.2007. After the regular assessments proceedings under section 143(3) of the Act were taken up by the assessee and during the pendency thereof; the AO received material / information from the AO of Shri. Manoj Kumar Jain. As per the second proviso to section 153C of the Act, the assessment proceedings pending under section 143 of the Act in the case of the assessee before the AO would abate on the date the AO received the seized material from the AO of Shri. Manoj Kumar Jain and fresh proceedings under section 153C of the Act ought to have been initiated. However, it is seen that, upon receipt of the said information / materials, the AO did not assume jurisdiction under section 153C of the Act, but rather chose to use the said materials/information for making additions in the impugned order of assessment for Assessment Year 2008-09 concluded under section 143(3) of the Act. The AO has discussed these additions in the order of assessment under the caption "Unaccounted Transactions with Shri. Manoj Kumar Jain". The AO noted that the assessment proceedings in the case of Shri. Manoj Kumar Jain were 'being concluded at Central Circle-1, Belgaum'. Thereafter, he has gone on to set-out the issues in the case of Shri. Manoj Kumar Jain, relevant to the assessee in the case on hand. But no satisfaction, it appears, has been recorded that these materials have a bearing on the determination of income. Thus, the AO has not followed the procedure laid down in section 153C of the Act for taking cognizance of the material found / seized in the case of Shri. Manoj Kumar Jain and making an assessment with reference to those materials in the case on hand.

7.6.7 Taking into account the aforesaid factual and legal matrix, we are of the considered view that the AO could not have taken cognizance of the seized documents and other material found and seized in the course of search conducted in the premises / case of Shri. Manoj Kumar Jain, while framing the order of assessment under section 143(3) of the Act in the case on hand. As a matter of fact, the ongoing assessment proceedings under section 143(3) of the Act would abate on receipt of these seized materials as per the second proviso to section 153A of the Act. We are of the view that in the event the AO wanted to take cognizance of the seized materials, he ought to have invoked the provisions section 153C of the Act after recording his satisfaction based on material sent by the AO of Shri. Manoj Kumar Jain. This jurisdictional pre-condition laid down by the Legislature of recording of satisfaction for taking action under section 153C of the Act cannot be side- stepped / brushed aside and additions be made in proceedings pending under section 143(3) of the Act as the scope of assessments framed under sections 143(3) and 153C of the Act are quite different. In that view of the matter, we hold that the protective additions made by the AO in the impugned order of assessment for Assessment Year 2008-09 dated 31.12.2009, are contrary to the provisions of the Act and are therefore to be deleted. Similarly, the addition sustained by the CIT(A) of Rs.6,45,000/- on substantive basis as profit from trading in iron-ore based on the material found and seized in the search conducted in the case of Shri. Manoj Kumar Jain is also hereby deleted. It is accordingly ordered. Consequently, the additional grounds raised by the assessee are allowed. " (emphasis supplied)

ITA No.1377&1378/Kol/2026 12. It is relevant to note that Chapter VI of the IT Act contemplates the procedure for assessment, wherein various stipulations are provided in terms of Sections 136 to 153 of the IT Act. Section 153A, 153B and 153C have been inserted by the Finance Act, 2003 w.e.f., 1.6.2003, which specifically contemplates assessments in cases of search or requisition. Section 153A of the IT Act contains various stipulations with regard to the person searched and Section 153C of the IT Act contains various stipulations with regard to such other person, other than the person searched.

"10. Admittedly no proceedings were initiated under Section 153C of the Act. Thus, there is patent non- application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. It was argued on behalf of the Revenue that Shri. Ashok Kumar Chowta had offered tax on lump-sum income.

"24. In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the assessee for filing of income tax return for the relevant preceding years. The AO assumes jurisdiction to assess/reassess 'total income' by passing separate order for each assessment.

ITA No.1377&1378/Kol/2026 32. The argument that Section 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise Section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassessee the 'total income'. It is not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to." (emphasis supplied) 15. In view of the settled position of law as noticed above, once material pursuant to a search is relied upon, the AO is required to follow the procedure as contemplated under Section 153A, 153B and 153C of the IT Act and it is impermissible for the AO to continue the regular assessment. 16. In view of the aforementioned, substantial question of law No.2 is answered in favour of the assessee and against the Revenue.” 6. It was submitted by the ld. AR that as the assessment order has been passed u/s 147 and not u/s 153C, the assessment order is liable to be quashed.

ITA No.1377&1378/Kol/2026 that the evidences found in the course of search on Shri Mukesh Banka has been used for making the assessment in the case of the assessee, in view of the principles laid down by the Hon’ble High Court of Karnataka in the case of PCIT vs. VSL Mining Company (P) Ltd. referred to supra, the provisions of section 153C is liable to be applied and not 147. This being so, respectfully following the principles laid down by the Hon’ble High Court of Karnataka in the case of PCIT vs. VSL Mining Company (P) Ltd. referred to supra and as it is noticed that the assessment order has been passed u/s 147 and not u/s 153C and no notice has been issued to 153C assessment, the impugned assessment order passed u/s 147 in the case of the assessee stands quashed.

Order pronounced in the open court on 16/07/2026.

Sd/- Sd/- [Laxmi Prasad Sahu] [George Mathan] लेखा सदस्य/Accountant Member न्याययक सदस्य/Judicial Member

Dated: 16/07/2026 RS

ITA No.1377&1378/Kol/2026 Copy of the order forwarded to: 1. Appellant - 2. Respondent – 3. CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches