DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, KITCHLU NAGAR, LUDHIANA vs. SH. PUNEET BATRA, HAIBOWAL KALAN, LUDHIANA

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

of Ludhiana. The group was subjected to search action on 24-11-2022 and accordingly, impugned assessment has been framed against the assessee. The case was centralized u/s 127 and picked up for scrutiny. During the course of assessment proceedings, notices were issued by Ld. AO u/s 142(1) from time to time. After considering assessee’s submissions, Ld. AO made various additions u/s 69 & 69A and assessed returned income of Rs.8.28 Lacs at Rs.839.08 Lacs. Aggrieved, the assessee preferred further appeal. 4. During first appeal, the assessee filed detailed written submissions assailing the impugned additions. After due consideration thereof, Ld. CIT(A) deleted quantum additions on merits. The legal issue of mechanical approval u/s 153D was dismissed and finally, the appeal was partly allowed. Aggrieved, the revenue is in further appeal before us against deletion of quantum additions. The assessee, in its cross-objections, has raised legal issues and contended that the assessment so framed u/s 143(3) stood vitiated which makes the assessment bad-in-law. 5. The undisputed position that emerges is that the impugned assessment has been framed on the assessee pursuant to search action on Mani Ram Balwant Rai Group of cases on 24-11-2022. The cases of the group were centralized u/s 127 on 01-02-2023. The Ld. AO, before passing the assessment order u/s 143(3), sought approval of Ld. Addl. CIT, Central Range vide letter No.1124 dated 28-03-2024. The requisite approval to pass the assessment order u/s 143(3) has been granted by competent authority on 29-03-2024 (Page Nos.91-92

of the paper-book). Considering the same, impugned assessment has been framed by Ld. AO u/s 143(3) on 29-03-2024. 6. As rightly pointed out by Ld. AR, the legal issues as raised by Ld. AR have been decided by Tribunal in assessee’s favor in the cited connected cases of Mani Ram Balwant Rai HUF (supra). The bench has considered its earlier decision passed in the case of Jamnadas Nikkamal Jain (ITA No.403/Chd/2025 dated 04-11-2025) and followed the same. The findings of the bench were as under: - 7. We have carefully considered the rival submissions and perused the material available on record. We find that the controversy involved in the present appeal and the Cross Objection is squarely covered by the decisions of the Coordinate Bench of this Tribunal in the cases of Jamnadas Nikkamal Jain in ITA No. 403/Chd/2025 dt. 04/11/2025, particularly in paras 13.6 to 13.10 of its order, has laid down as under: 13.6 This position finds substantial support from the ratio of various decisions of Hon'ble High Court and Hon'ble Supreme Court. The Courts unanimously held that once a search has been conducted and proceedings are triggered under section 153A, the Assessing Officer cannot continue parallel proceedings under section 143(3) or section 147 for the same assessment year, because the entire assessment for that year stands merged in the search assessment. The Courts emphasized that the existence of a special procedure for assessment consequent to a search is a complete code in itself; therefore, ordinary assessments abate and cannot coexist with the search- based assessment. 13.7 Drawing this analogy to the current regime, it is evident that when a search takes place and information is unearthed suggesting escapement of income, the Assessing Officer must act under section 148 (which now performs the role formerly assigned to section 153A) rather than continuing with a pending section 143(3) proceeding. The legislative intent remains the same — to prevent multiplicity of proceedings and ensure that only one comprehensive order is passed, factoring in both the pre-search and post-search materials. 13.8 The rationale is further reinforced by the well-settled principle of generalia specialibus non derogant — the special provision overrides the general. Section 148 (as a special provision triggered by search information) must prevail over section 143 (the general provision for regular scrutiny). Allowing the Assessing Officer to continue and conclude proceedings under section 143(3) after a search would defeat this legislative scheme and render the safeguards, such as prior approval of the Principal Commissioner, redundant. 13.9 Accordingly, we hold that once a search is initiated under section 132 and material is found relating to the assessee, the pending assessment under section 143(3)cannot validly continue, as the time for issuing the 143(2) in response to original return of income had already expired, therefore the Assessing Officer must necessarily proceed in accordance with the special provisions contained in section 148 of the Act. 13.10 We also draw the strength from the reasoning given by the Coordinate Bench in Homelife Buildcon Pvt. Ltd. (supra), faced with identical facts (search on 16.11.2021 and assessment u/s 143(3) for A.Y. 2021-22), held that:

assessee for the three assessment years immediately preceding the assessment year relevant to the previous year, in which, the search is initiated or requisition is made or any material is seized or requisitioned or survey is conducted.” 27. The notice issued under section 143(2) was also produced by the AR. Upon perusal of the said notice, it is evident that the assessment under section 143(3) was initiated solely for the purpose of verifying the return of income filed by the assessee. In such circumstances, the importing and reliance upon material seized from third-party searches, namely, those conducted on Sh. Ajay Kumar Prabhakar and Sh. Ravi Kapoor, goes beyond the jurisdiction conferred under section 143(3). Particularly, where the applicable law— Explanation 2 to section 148 (as amended by the Finance Act, 2021) mandates prior approval from the Principal Commissioner of Income Tax (PCIT) before initiating reassessment proceedings on the basis of such material, the failure to comply with that requirement renders the assessment legally untenable.28. In the present case, the AO did not issue a notice under section 148, nor did he follow the due process of law under the new reassessment framework, including recording of satisfaction and obtaining prior sanction from the PCIT. Therefore, the assessment framed under section 143(3), because of being based on third-party material without adhering to statutory safeguards, is bad in law. The AO was only empowered to verify the return of income and restrict his scope of inquiry accordingly; he was not permitted to expand the assessment by importing and relying upon third party seized material without following the mandatory procedure laid down under the law. 29. Furthermore, there exists a mandatory statutory requirement that in all cases involving search-related assessments falling within the assessment year, immediately preceding the year of the search, the prior approval of the Joint Commissioner is required under section 148B of the Income-tax Act, 1961. In the present case, the Assessing Officer (AO) has proceeded without obtaining such approval, which is a clear violation of the procedural safeguards envisaged under the law and, as such, vitiates the assessment proceedings. In the present case, approval has been granted for assessment framed u/s 143(3) only. The relevant provision of section 148B reads as under: Prior approval for assessment, reassessment or recompilation in certain cass. 148B. No order of assessment or reassessment or recompilation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iti) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director. 30. A comparison of the requirement of approval under section 153D and section 148B is drawn, from which it is evident that approval under section 153D was earlier required only in cases where assessments were completed under section 153A/153C and also for search year. However, under the amended provisions, approval under section 148B is now required in all cases where proceedings are initiated pursuant to a search, requisition, or survey, or where asset/material/documents found during such search pertain to or relate to another person. In such cases, the Assessing Officer must take the approval under section 148B from the specified higher authority. ……… 31. This requirement has also been explicitly discussed in the Explanatory Memorandum to the Finance Bill, 2022, which emphasizes the need to protect taxpayer rights by ensuring that no reassessment is carried out without proper sanction and due process. It is

further seen that the Joint Commissioner has not even been supplied seized material relied upon as seized from third-party in the present assessment. There exists a prescribed procedure under which such seized material (including material found from third-party premises) is to be forwarded to the approving authority at least 30 days in advance of granting approval. This procedural safeguard is crucial to prevent arbitrary and unregulated use of third-party material. 32. In the present case, there is no evidence to demonstrate that the prescribed procedure was followed, or that the Joint Commissioner was apprised of the seized material by forwarding copies of the documents found from the third party prior to framing the assessment. The complete failure to comply with the mandatory provisions of section 148B renders the reassessment not only. procedurally defective but also without jurisdiction. 33. Even we find while framing the assessment under section 143(3), the Assessing Officer (AO) has, on the last page of the assessment order, referred to an approval obtained from the supervisory authority. However, a bare perusal of this approval shows that it was obtained in reference to F. No. 299/36/2020/1DAR/INV3(3)/577 dated 15.07.2022, i.e., in accordance with the CBDT Circular dated 15th July 2022, and not under the mandatory provisions of section 148B of the Income-tax Act, 1961. At the outset, it is important to note that the approval so obtained does not mention or consider any of the seized materials sourced from the third-party. searches conducted on Sh. Ajay Kumar Prabhakar and Sh. Ravi Kapoor, despite the AO having heavily. relied on those materials in framing the additions. The approval merely states that the appraisal report was considered, without any reference to the original documents seized or to the statutory procedure outlined under section 148B. It is pertinent to refer to the Manual of Office Procedure in February 2003, which lays down a mandatory protocol: that in all search cases, especially where material pertains to persons other than the one searched, such material is to be forwarded in original to the approving authority, and a draft order is required to be submitted for approval at least 30 days in advance. In the present case, the approval letter was issued by the DCIT only on 22nd August 2023, which clearly contravenes this procedural requirement. This procedural lapse is further compounded by the judgment of the Hon'ble Supreme Court in Serajuddin and Co. case, [2024] 163 taxmann.com 118 10 (SC) wherein it was held that in search cases, strict adherence to the approval protocol as laid down in the departmental Manual of Office Procedure in February 2003 and law is essential to uphold the validity of the assessment. 34. Thus, from the above, it is quite evident from the approval granted by the Addl.CIT(Central), there is no mention or consideration of the seized material sourced from the third party, namely Sh. Ajay Prabhakar and Sh. Ravi Kapoor, though, we find that in the assessment order and in the order of CIT(A), both the authorities have heavily relied upon on such seized material and it only states that the appraisal report have been considered without any reference to any original documents seized for statutory procedure outlined u/s 148. Thus, in view of above, the assessment as framed by Assessing Officer vide order dated 24.08.2023 is quashed.” 8. Respectfully following the decision of Coordinate Bench, we are of the considered opinion that the assessment order passed under section 143(3) is not sustainable as it was required to be passed under section 148 r.w. 143(3) of the Act. 9. Further, we are also of the opinion that the identical issue have been adjudicated by the Coordinate Bench in the case of Aman Batra (supra) and therefore we do not find any reason take

a different view as taken by us in the case of Aman Batra(supra). Therefore the appeal of the Revenue is not maintainable and is required to be dismissed. 10. Therefore, respectfully following the decision in the case of Aman Batra (supra) the appeal of the Revenue is not maintainable and is liable to be dismissed and we dismiss the same. 11. In the light of the above discussion the C.O of the assessee is allowed and the appeal of the Revenue is dismissed.

The bench held that the assessment for this year ought to have been framed u/s 148 r.w.s. 143(3) and not u/s 143(3) considering Explanation-2 to Sec.148. Facts being pari-materia the same, we would hold that impugned assessment as framed u/s 143(3) is not sustainable since it was required to be framed u/s 148 r.w.s. 143(3). No change in facts has been demonstrated before us and no contrary decision has been shown to us. Therefore, we see no reason to take a different view. The assessment proceeding, therefore, fails which render adjudication on merits merely academic in nature. The assessee succeeds in its respective legal grounds. The appeal of the revenue has become infructuous. 7. The revenue’s appeal in ITA No.842/Chandi/2025 stand dismissed. The assessee’s cross-objection CO. No. 06/Chandi/2026 stands partly allowed. Order pronounced on 07th May, 2026.

-Sd- -Sd- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER AS Dated: 07-05-2026

आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

ASSISTANT REGISTRAR

ITAT CHANDIGARH