ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 4, JAIPUR, JAIPUR vs. RANJEET BIRANI, JAIPUR

The revenue has taken the following grounds of appeal: - (i) Whether the Learned CIT(A) erred in quashing the assessment proceedings based solely on the High Court judgment in DBCWP 18363/2019, without considering the unique facts and circumstances of the present case.

Facts of the case, in brief, are that the assessee e-filed his original return of income for the year under consideration on 18.09.2012 declaring a total income at Rs. “NIL”. Subsequently, information was received from the ACIT, Central Circle-3, Jaipur that search & seizure action u/s 132 of the IT Act, 1961 was carried out in the case of Ramesh Manihar Group on 07.01.2016. During the course of search, voluminous data comprising of excel sheets in the 18 pen-drives were seized from main office of the Ramesh Manihar Group at 303, Ratna Sagar, MSB Kaa Rasta, Johari Bazar, Jaipur. On analysis of the above seized documents, it was found that Shri Ramesh Chand Maheshwari

Aggrieved by the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A) and challenged the issuance of notice u/s 148 of the Act on the ground that the seized documents in question were seized from a third party and therefore, proceedings u/s 153C of the Act should have been initiated against the assessee and not u/s 148 of the Act. The Ld. CIT(A) vide the impugned order dated 20/08/2025 allowed the appeal of the assessee and quashed the entire proceedings u/s 147/148 of the Act on the ground that the Hon’ble High Court of Rajasthan in DB Civil Writ Petition No.18363/2019 dated 19.03.2024 has quashed the notice issued u/s 148 of the Act by holding as under: - “23. The reasons supplied in case in hand for initiation of proceedings under Section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group. 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. 25. In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed under Section 153C. The two pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Thereafter, the satisfaction of AO receiving the seized material that the material handed over has a bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A. 26. Special procedure is prescribed under Section 153A to 153D for assessment in cases of search and requisition. There cannot be a quibble with the proposition that the special provision shall prevail over the general provision. To say it differently the provisions of Section 153A to 153D have prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148.

Section 153A and 153C starts with non-obstante clause. The procedure for assessment/reassessment in Section 153A, 153C in cases of search or requisition has an overriding effect to the regular provisions for assessmentor reassessment under Sections 139, 147, 148, 149, 151 & 153. 28. The language of explanation 2 to new Section 148 is akin to Section 153A and Section 153C. Corollary being that after seizing of operational period of Section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted Section 148. 29. The Department has not set up a case that for initiating proceedings under Section 148 it had material other than the material seized during the search of Manihar Group. The contention was that though the material with regard to unaccounted loan advanced by the petitioner was received, the earning of interest on unaccounted loan was derivation of the AO from the material received. The submission is that the derived conclusion cannot be acted upon under Section 153C. The submission lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing ‘total income’ in case of incriminating material found during search or requisition. 30. The argument that by enactment of Section 153A to 153D has not eclipsed Section 148 does not enhance the case of respondent to initiate the proceedings under Section 148. On fulfillment of two conditions for invoking Section 153C the proceeding in accordance with Section 153A are to be initiated. The operating field of and Section 153A to 153D and Section 148 are different. Applicability of Section 153C in cases where the seized material related to or belonged toperson other than on whom search is conducted or requisition made does not render Section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition. 31. The other aspect of the matter is that under Section 153A and 153C, ‘the total income’ is to be assessed. The total income includes returned income (if any), undisclosed income unearthed during the search or requisitioning and information possessed from the other sources. For Illustration:- An assessee had returned income of Rs.100, undisclosed income of Rs.200 is unearthed during search and there is information from annual information statement of non-disclosure of income of Rs.150/-. The AO under Section 153A and 153C shall pass order dealing with income of Rs.100+Rs.200+Rs.150, the total income being Rs.450/-. In cases where there is no unearthing of undisclosed income of Rs.200/-, the department can resort to proceeding under Section 147/148. 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 assess or