DEPUTY COMMISSIONER OF INCOME TAX ,CIRCLE-13(1),KOLKATA, KOLKATA vs. MAITHAN COAL COMPANY PRIVATE LIMITED, KOLKATA
What did the Tribunal hold?
The Tribunal held that the assessment proceedings initiated under Section 147 were invalid because the information originated from a search, and therefore, Section 153C should have been invoked. Consequently, the assessment order was deemed unsustainable.
What were the facts?
The revenue appealed against the deletion of additions made on account of unsecured loans from shell companies. The assessee filed cross-objections arguing that the assessment should have been under Section 153C, not Section 147, as the information arose from a search.
What were the issues?
Whether the assessment initiated under Section 147 was valid when the information was derived from a search, and if Section 153C was the appropriate provision. The validity of additions made on account of unsecured loans from shell companies was also an issue.
Which sections of the Income-tax Act were involved?
Section 68,Section 147,Section 148,Section 153C,Section 36(1)(iii),Section 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Heard together (4 matters)
Read from the judgment's own cause title. This page is filed under one of them.
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA
SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA No. 1341/KOL/2025 Assessment Year: 2014-15
Deputy Commissioner of Vs. Maithan Coal Company Private Limited, Income Tax, Circle – 13(1), 1st Floor, Shree Varsha Kolkata, Apartment, 49/1, Dobson Road, 7th Floor, NADTRC Building, Howrah - 711101 Aayakar Bhawan Poorva, 110, PAN No. AABCM7760M Shantipally, Kolkata - 700107
APPELLANT RESPONDENT
CO No. 91/KOL/2025 (In ITA No. 1341/Kol/2025) Assessment Year: 2014-15
Maithan Coal Company Private Vs. Deputy Commissioner of Limited, Income Tax, Circle – 13(1), 16, Strand Road, Diamond Kolkata, Heritage, Unit No. -814, Kolkata - 7th Floor, NADTRC Building, 700001 Aayakar Bhawan Poorva, 110, PAN No. AABCM7760M Shantipally, Kolkata - 700107
APPELLANT RESPONDENT
ITA No. 1342/KOL/2025 Assessment Year: 2015-16
2 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 Deputy Commissioner of Vs. Maithan Coal Company Private Limited, Income Tax, Circle – 13(1), 1st Floor, Shree Varsha Kolkata, Apartment, 49/1, Dobson Road, 7th Floor, NADTRC Building, Howrah - 711101 Aayakar Bhawan Poorva, 110, PAN No. AABCM7760M Shantipally, Kolkata - 700107
APPELLANT RESPONDENT
CO No. 92/KOL/2025 (In ITA No. 1342/Kol/2025) Assessment Year: 2015-16
Maithan Coal Company Private Vs. Deputy Commissioner of Limited, Income Tax, Circle – 13(1), 16, Strand Road, Diamond Kolkata, Heritage, Unit No. -814, Kolkata - 7th Floor, NADTRC Building, 700001 Aayakar Bhawan Poorva, 110, PAN No. AABCM7760M Shantipally, Kolkata - 700107
APPELLANT RESPONDENT
Assessee by : Shri Siddharth Kejriwal,CA Shri Sanjay Kejriwal, CA Revenue by : Shri Sandeep Kumar Mehta, Addl. CIT, Sr. DR
Date of hearing : 23.06.2026 Date of Pronouncement : 24.08.2026
3 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 O R D E R PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER These four appeals filed by the revenue and cross objection filed by the assessee against the separate orders passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘the Ld. CIT(A), dated 26.03.2025 and 27.03.2025 respectively, DIN & Order No. ITBA/NFAC/S/250/2024- 25/1075122123(1) and ITBA/NFAC/S/250/2024-25/1075062688(1).
The revenue has raised the following grounds of appeal (ITA No. 1341/Kol/2025):
“1. Whether the Ld. CIT(A) is justified in deleting the addition of Rs. 10,00,056/- made under Section 68 of the Income Tax Act, 1961 on account of unsecured loan taken from a shell company/shell entity, M/s, M.A . financial Services Pvt. Ltd. which has negligible business activity, having usual low account balance and income as per ITR is low as well. 2. Whether the Ld. CTI(A) is justified in deleting the addition of Rs 51,99,944/- on account of unsecured loan taken from other lenders considering their assets only neglecting corresponding liabilities and usual low account balance, negligible business activities, immediate credit and debit of high amount in bank account 3. Whether the Ld. CIT(A) is justified in accepting and relying on the retracted statement made by Shri Mukesh Banka that had not been filed by the assessee during asst. proceedings which is contrary to Rule 46A. 4. Whether the Ld. CIT(A) is justified in ignoring the findings of the Investigation Wing that M/s MA Financial Services Pvt. Ltd. along with several other shell companies controlled by Shr Mukesh Banka were used to provide accommodation entry as clearly admitted by Shri Banka and hence, the case is involved in organized tax evasion through accommodation entries in the form of bogus loan and is thus, falling under clause 3.1(h) of the CBDT Circular No.5/2024, issue from F. No.279/Misc. 142/2007-ITJ(Pt.) dated 15.03.2024 for filing further appeal. 5. Whether the Ld. CIT(A) is justified in deleting the disallowance of interest expenses Rs 6,50,307 u/s 36(1)(iii) and addition of Rs.25,001/- made u/s.69C for commission to arrange accommodation entries.
4 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 6. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the appeal.” 3. The assessee has raised the cross objection on the following grounds of appeal (CO No. 91/Kol/2025)
1.0 “That the Assessing Officer has erred in law and on facts in passing an assessment order under Section 147 of the Income Tax Act, 1961 by issuing an invalid notice under Section 148 of the Act dated 30.03.2021, which is in violation of provisions of Section 153C of the Act when information has arisen out of search proceeding dated 21.05.2018. 2.0 That the respondent craves leave to add, amend, modify, rescind, supplement or alter any of the grounds stated here-in-above either before or at the time of hearing of the appeal.”
3.1 The revenue has raised the following grounds of appeal (ITA No. 1342/Kol/2025):
“1. Whether the Ld. CIT(A) is justified in deleting the additions of Rs.30,00,000/- and Rs.20,00,056/-made under Section 68 of the Income Tax Act, 1961 on account of unsecured loan taken from shell companies/shell entities, M/s. M.A. Financial Services Pvt. Ltd. and M/s. Mahamani Shoppers Pvt. Ltd. respectively, both of which had negligible business activity, having usual low account balance and income as per ITR is low as well. 2. Whether the Ld. CIT(A) is justified in deleting the addition of Rs.1,01,03,738/- on account of unsecured loan taken from other lenders considering their assets only neglecting corresponding liabilities and usual low account balance, negligible business activities, immediate credit and debit of high amount in bank account. 3. Whether Ld. CIT(A) is justified in accepting and relying on the retracted statement made by Shri Mukesh Banka that had not been filed by the assessee during asst. proceedings which is contrary to Rule 46A. 4. Whether the Ld. CIT(A) is justified in ignoring the findings of the Investigation Wing that M/s. M.A Financial Services Pvt. Ltd., Mahamani Shoppers Pvt. Ltd. along with several other shell companies controlled by Shri Mukesh Banka were used to provide accommodation entry as clearly admitted by Shri Banka and hence, the case is involved in organized tax evasion through accommodation entries in the form of bogus loan and is thus, falling under clause 3.1(h) of the CBDT Circular No.5/2024, issued from F. No.279/Misc. 142/2007-ITJ(Pt.) dated 15.03.2024 for filing further appeal.
5 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 5. Whether the Ld. CIT(A) is justified in deleting the disallowance of interest expenses of Rs.15,70,431/- u/s.36(1)(iii) and addition of Rs.1,25,001/- made u/s.69C for commission to arrange accommodation entries. 6. That the appellant craves leave to add/alter any/all grounds of appeal before or at the time of the hearing of the appeal.” 3.2 The assessee has raised the cross objection on the following grounds of appeal (CO No. 92/Kol/2025)
1.0 “That the Assessing Officer has erred in law and on facts in passing an assessment order under Section 147 of the Income Tax Act, 1961 by issuing an invalid notice under Section 148 of the Act dated 30.03.2021, which is in violation of provisions of Section 153C of the Act when information has arisen out of search proceeding dated 21.05.2018. 2.0 That the respondent craves leave to add, amend, modify, rescind, supplement or alter any of the grounds stated here-in-above either before or at the time of hearing of the appeal.”
At the outset of hearing, we noted that the cross objection filed by the assessee is delayed by 78 days for delay in filing the cross objection regarding delay. The assessee has filed an application for condonation of delay stating that wife of the Director of the company was ill health. In this regard, the assessee has filed an affidavit enclosing the medical documents along with affidavit. On going through the same, the assessee has “reasonable cause” for filing delay of the cross objection. We relying on the judgment of Collector, Land Acquisition vs Mst. Katiji, (1987) 167 ITR 171 (SC), we condone the delay and the appeals and Cross Objections are taking up for adjudication.
Since the assessee has raised the legal issue in its cross objection which goes to the root of the matter of the assessment order passed by
6 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the AO challenging as per the above grounds of appeal. The main contention raised by the assessee in its cross objection the assessment should have been completed u/s 153C of the Act instead of section 147 r.w.s. 144B of the Act dated 25.03.2022, therefore, we are taking first to adjudicate the cross objection.
Briefly stated the facts of the case are that the assessee filed its return of income on 21.11.2025 for the AY 2014-15 and for 2015-16 on 30.09.2015 declaring income of Rs. 19,44,900/- and Rs. 33,60,040/- respectively. Later on, income tax department received information regarding tax evasion from DCIT, Circle – 5(1), Kolkata which was received from DDIT (Inv.), Unit-1(3), Kolkata vide letter bearing No. DDIT (Inv.)/Unit-3(3).Kol/Banka/Information/2018-19/5981 dated 11.12.2018 regarding accommodation entry taken by the assessee by way of transactions with the companies controlled by Banka Group. It was found from the information that the assessee received a sum of Rs. 10,00,056/- from M/s Financial Services Ltd. on 21.02.2014, It was stated that M/s M.A Financial Services Pvt. Ltd are paper companies controlled and managed by entry operator Shri Mukesh Banka for providing accommodation entry to the beneficiaries. Accordingly, the AO has reason to believe that income had escaped assessment in case of assessee. Accordingly, notice u/s 148) of the Act was issued to the assessee on 30.03.2021, in response to the same, the assessee filed
7 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 return of income. Subsequently, other statutory notices were issued to the assessee. However, it was seen that as per information received that the assessee has transacted with M/s M.A. Financial Services Pvt. Ltd. During the year as per search operation conducted by the Investigation Wing, Kolkata, it was discovered that M/s M.A. Financial Services Pvt. Ltd. is a shell company operated by Shri Mukesh Banka of Banka Group the said company was involved in the activity of providing accommodation entry to the various entities. Accordingly, notice u/s 142(1) of the Act was issued to the assessee and assessee furnished reply stating that M/s M A Financial Services Ltd. had taken loan on 22.02.2014 and it was repaid on 09.03.2015 the details of unsecured loan taken from M/s M A Financial Services Pvt. Ltd. were submitted. Further, it was seen that the assessee has taken another loan of Rs. 30 lacs on 18.12.2014 from M/s M A Financial Services Pvt. Ltd. Further, it was seen from the financial statement on examination of the financial statement and statement recorded during the course of search in the case of Banka Group. it was held that M/s M A Financial Services Pvt. Ltd. is shell company/paper company and it is transferring the money after leaving small balance in its bank account and creditworthiness is not proved. Accordingly, he made addition u/s 68 of the Act. Furter, it was seen that the assessee has taken Rs. 62 lacs from 10 parties. In this regard, the assessee furnished details as required by the AO but the AO was not satisfied in terms of section 68 of the Act, the assessee furnished
8 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 detail documents like financial statement, bank transactions, bank statement etc. Accordingly, the AO made addition and completed assessment. The AO further made addition u/s 36(1)(ii) as per para 6 and as per para No. 7 u/s 69C of the Act.
Aggrieved from the above order, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) allow the addition made by the AO on merits.
Aggrieved from the above order, the Revenue filed appeal before the ITAT and assessee filed cross objection challenging the legal issue regarding the assessment completed u/s 147 r.w.s. 144B of the Act instead of 153C of the Act noted supra. The Ld. Counsel strongly submitted that the AO should have completed the assessment u/s 153C instead of 147 r.w.s. 144B of the Act. Since the very basis for reopening is on the basis of information received on the search conducted in the case of Banka Group and he referred to the reasons recorded. It is clearly mentioned that the loan given by M/s M A Financial Services Pvt. Ltd. was observed. During the course of search and seizure proceeding. Therefore, it is incriminating material to reopen the case. The AO of the searched person should have been recorded the satisfaction note should have been passed to the jurisdictional AO of the assessee and JAO of the assessee should have issued notice u/s 153C of the Act and he referred to section 153C of the Act:
In support of his arguments, he relied on the following judgments:
9 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 (i) Paras Chandreshbhai Koticah Vs. ITO, reported in (2026) 182 taxmann.com 204 (Gujarat), (ii) PCIT Vs. VSL Mining Company (P) Ltd. (iii) ACIT Vs. Gopal Prasad Gupta reported in (2026) 183 taxmann.com 384 (SC)
He further relied on the judgment of ITAT, Kolkata Bench in ITA No. 1118/Kol/2024 for the AY 2013-14, order dated 01.04.2025 and he further submitted that the coordinate Bench has decided the similar issue where the assessment was completed u/s 147 of the Act on the basis of information received from DDIT (Inv.) towards search conducted in the case of Banka Group or 153C of the Act.
On the other hand, the Ld. DR strongly supported the order of AO and submitted that the case has been completed u/s 147 of the Act correctly because the Jurisdictional Assessing Officer (JAO) of the assessee received information from DDIT (Inv.), DCIT-Circle 5(1), Kolkata received information from DDIT (Inv.) Unit-3, Kolkata as per letter dated 11.12.2018 regarding the assessee is a beneficiary of the accommodation entry given by M/s M.A. Financial Services Pvt. Ltd. which is very much clear from the copy of the reasons recorded. There was no any satisfaction recorded by the AO of the searched person and it was in the information passed and he supported the judgment of PCIT Vs. Naveen Kumar Gupta reported in (2021) 168 taxmann.com 574 (Delhi), dated
10 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 20.11.2024 and in the case of Paras Chandreshbhai Koticha Vs. ITO reported in (2026) 182 taxmann.com 204 (Guajrat). The Ld. DR further relied on the judgment of Hon’ble Apex Court in the case of PCIT Vs. Abhishar Builder Pvt. Ltd. (20230 149 taxmann.com 399/293 taxmann.com (SC) as per the judgement of Hon’ble Apex Court in para No.13, the AO cannot preculated for making assessment u/s 147/148 of the Act instead of 153C if the initiative u/s 153C is not possible. Here in this case there was no satisfaction recorded by the searched person of the AO and information was passed. Therefore, the judgment of the Hon’ble Apex Court is clearly applicable, the AO has completed the assessment is correctly u/s 147 r.w.s. 144B of the Act is correct.
In rejoinder, the Ld. Counsel submitted that the statement recorded during the course of search in which it was clearly stated by the Mukesh Banka Group that he has clearly accepted that the company was engaged to provide accommodation entry to the beneficiaries and in the statement recorded too. During the course of search proceeding the statement recorded of the searched person and other persons has great credential value the statement cannot be brushed aside if the statements are co related with the documents found during the course of search then statement itself is in the nature of incriminating material as held by the Hon’ble Apex Court, therefore, information received on the basis of statement recorded and documents found is incriminating material
11 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 which were applying for the tax assessment of the assessee u/s 147 r.w.s. 143(3) of the Act. Therefore, section 153C could be the correct procedure for complete the assessment proceedings.
Considering the rival submission, the AO has issued notice on the basis of search conducted in the case of Mukesh Banks Group and it was found that the assessee has got accommodation entry of Rs. 10,00,056/- for the AY 2014-15 and Rs. 30 lacs for AY 2015-16 from the paper/shell company M/s M A Financial Services Pvt. Ltd. managed and controlled by the Mukesh Bank Group and notice was issued to the assessee u/s 148 of the Act and assessment was completed u/s 147 r.w.s. 144B of the Act after recording the following reasons for reopening the case.
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The assessee has raised cross objection challenging the legal issue that the assessment should have been completed u/s 153C of the Act instead of 147 r.w.s. 144B of the Act. For the sake of convenience, we are reproducing section 153C and section 147 is also reproduced as under:
“153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the As- sessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requi- sitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,
18 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that As- sessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assess- ment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as ref- erence to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assess- ment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the no- tice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other per- son, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.
“Section 147. (1) Where the following assessee has any income of the nature referred to in sub-section (3), there shall be allowed a deduction equal to 100% of such income:— (a) a scheduled bank, or a bank incorporated under the laws of a country outside India, and having an Offshore Banking Unit in a Special Economic Zone; or (b) a unit of an International Financial Services Centre.
19 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 70 [ (2) Irrespective of anything contained in section 80LA of the Income-tax Act, 1961 (43 of 1961), the deduction shall be allowed,— (a) for an entity mentioned in sub-section (1)( a),— (i) for twenty consecutive tax years beginning from the relevant tax year; and (ii) in a case, where the tenth year, out of the period of ten consecutive years of deduction allowed under section 80LA(1) of the said Act has ended on the 31st March, 2025, for further ten consecutive years from the tax year beginning on the 1st April, 2026; and (b) in the case of an entity mentioned in sub-section (1)( b), for twenty consecutive tax years out of twenty-five years beginning from the relevant tax year, at the option of an assessee.] (3) The income referred to in sub-section (1) shall be the income from— (a) an Offshore Banking Unit located in a Special Economic Zone; or (b) the business activities referred to in section 6(1) of the Banking Regulation Act, 1949 (10 of 1949), with undertakings in a Special Economic Zone or entities that develop, develop and operate, or develop, operate and maintain Special Economic Zone; or (c) the approved business activities of any Unit of an International Financial Services Centre set up in a Special Economic Zone; or (d) transfer of an asset being, an aircraft or a ship, leased by a unit referred to in clause (c) if such unit commenced its business operations by 31st March, 2030. (4) The deduction under this section shall be allowed only if the assessee submits along with the return of income— (a) a report in the form as may be prescribed70a, from an accountant certifying the correctness of claim of deduction; and (b) a copy of the— (i) permission obtained under section 23(1)(a) of the Banking Regulation Act, 1949 (10 of 1949); or (ii) permission or registration obtained under the International Financial Services Centres Authority Act, 2019 (50 of 2019). 71 [ (5) In respect of any Offshore Banking Unit or any other unit referred in sub-section (1), commencing operations on or after the 1st April, 2026, the deduction under sub- section (1) shall be available only if such unit is not formed by splitting up or reconstruction or reorganisation or transfer of a business already in existence in India. (6) For the purposes of this section,— (a) “relevant tax year” shall be,— (i) in case of an entity referred to in sub-section (1)( a), the tax year in which permission under section 23(1)(a) of the Banking Regulation Act, 1949 (10 of 1949), or permission or registration under the Securities and
20 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 Exchange Board of India Act, 1992 (15 of 1992) or any other relevant law in force was obtained; or, (ii) in case of an entity referred to in sub-section (1)( b), the tax year in which permission under section 23(1)(a) of the Banking Regulation Act, 1949 (10 of 1949), or permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992), or permission or registration under the International Financial Services Centres Authority Act, 2019 (50 of 2019) was obtained;, (b) “Unit” shall have the same meaning as assigned to it in section 2( zc) of the Special Economic Zones Act, 2005 (28 of 2005) (c) “aircraft” and “ship” shall have the meanings respectively assigned to them in Schedule VI (Note 3).] © 15. On going through the above reasons recorded at para No. 4 it has been clearly stated that the statement recorded u/s 131/132(4) of Mukesh Banka on 30.05.2018 and 19.07.2018 that companies are shell/paper companies controlled and managed by Shri Mukesh Banka. The directors of this company are dummy director of Shri Mukesh Banka as per the statement recorded u/s 132(4) of the Act on 19.07.2018 and the companies were found to be non-existent as per enquiry made by the Inspector of the Income Tax. Since, the very source is relying on the statements recorded at the time of search conducted u/s 132 of the Act and statement recorded u/s 132 (4) of the Act and statement given by Shri Mukesh Banka are completely corelated with the facts of the case. Therefore, statement recorded u/s 132(4) of the Act has great evidentiary value as held by Hon’ble Rajsthan High Court in the case of PCIT vs Roshanlal Sancheti reported in [2023] 150 taxmann.com 227 (Rajasthan) later on the assessee preferred appeal to the Hon’ble Apex Cort , the Hon’ble Apex Court decided the issue in favour of revenue by
21 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the Hon’ble Apex Court in the case of Roshan Lal Sancheti vs PCIT reported in [2023] 150 taxmann.com 228 (SC) wherein it has been held that the statements recorded during the course of search 132(4) has great evidentiary value and it can be used for the assessment, therefore, the statements can be termed as incriminating material and the assessment should have been completed u/s 153C of the Act as judgment relied by the Ld. Counsel (noted supra). Similar issue has been raised by the Kolkata Bench of the Tribunal as relied by the Ld. Counsel in the case of Aristocrat Residences LLP Vs. ITO, Ward 34(1), ITA No. 1118/Kol/2024, dated 01.04.2025 in which it has been held as under;
The first legal issue raised by the assessee is as under:-
(i) That the assessment order dated 30.03.2022 passed u/s 147/144B of the Income-tax Act, 1961 (the Act) being based on invalid notice issued u/s 148 of the Act dated 31.03.2201, which is in viola- tion of provisions of Section 153C of the Act.
The facts in brief are that the assessee filed the return of income for the impugned assessment year, declaring total income at ₹17,230/-. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021, after the ld. AO received in- formation from DDIT (Investigation) Unit, 1 (3), Kolkata vide letter dated 01.03.2019, in which it was stated that during search and sei- zure action in the case of Banka Group on 21.05.2018, it was found on the basis of the seized material that there are certain shell / bogus companies being controlled and managed by Shri Mukesh Bunka. In the statement recorded during search , it was categorically accepted by Shri Mukesh Bunka that the paper/ shell companies were being controlled and managed by him for the purpose of providing accommo- dation entries in the nature of bogus unsecured loans or in other forms.
22 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 The letter stated that the assessee had the transactions worth ₹1,00,00172/- through the account of shell company M/s Funidea Pro- moters Limited, one of the Bunka group of companies. Accordingly, the ld. AO came to the conclusion that income to that extent has escaped assessment. The assessee did not file any return of income. Thereaf- ter, the assessee was issued notice u/s 142(1) of the Act along with questionnaire on various occasions and on few occasions, there was no compliance, however the assessee filed the details/ evidences as called for by the ld. Assessing Officer. The ld. AO noted that the as- sessee has received unsecured loans from Funidea Promoters Limited of ₹1.00 Cr during the year. Finally, the ld. AO treated the unsecured loan of ₹1.00 Cr as an unexplained cash credit u/s 68 of the Act and added the same to the income of the assessee.
In the appellate proceedings, the appeal was dismissed on legal issue by the ld. CIT (A) by holding that the d AO has received information that assessee has received an unsecured loan of ₹1.00 Cr from the shell company which is paper company and has no real existence and accordingly, the case of the assessee was reopened based on that in- formation and therefore, justified the reopening of assessment.
The ld. AR vehemently submitted before us that the reopening of as- sessment by the ld. AO u/s 147 read with section 148 of the Act is invalid and void ab initio as the source of so-called credible infor- mation was the search action u/s 132 of the Act conducted on Shri Mukesh Banka and his group of companies, which were managed and operated by shri Mukesh Bunka. The ld. AR submitted that it is only on the basis of records/ materials found and seized during the course of search that contained the information qua the assessee having been beneficiary of the bogus unsecured loans of ₹1.00 crores. The ld. AR therefore, prayed that in this case, the special provision has been provided in the Act to initiate the assessment proceedings and to frame the assessment order which is contained in section 153C of the Act. The ld. AR submitted that the provisions of Sections 153C of the of the begins with non-obstante, which provides that notwithstanding any- thing contained in section 139, section 147, section 148, section 149,
23 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 section 151 and section 153, where the AO is satisfied that-(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information con- tained therein relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice u/s 153C and assess or reassess the income of the other person in accord- ance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person. The ld. counsel therefore, prayed that in this case a special provisions have been provided in the statute and therefore, the reopening of assessment in the case of assessee u/s 147 of the Act by issuing notice u/s 148 of the Act is invalid and void ab initio and the assessment was framed by the AO may kindly be quashed. In defense of his argument the ld. AR relied on the decision of Hon'ble Bombay High Court in case of Sejal Jewellary and Anr. Vs. Union & Ors and Others in Writ Petition No. 3057 of 2019 and Others vide order dated 18.02.2025, wherein similar issue has been decided in favour of the assessee by the Hon'ble High Court. The ld. AR also relied on the decision of Rajasthan High Court in case of Shyam Sunder Khandelwal Vs. ACIT Civil Petition No. 18363 of 2019 dated 19.03.2024, decision of Karnataka High Court in case of Sri Dinakara Suvarna Vs. DCIT (2022) 143 taxmann.com 362 (Karnataka).
The ld. DR on the other hand relied on the order of the ld. lower au- thorities by submitting that in this case the credible information was received from the investigation wing that assessee is a beneficiary of bogus unsecured loans, accommodation entries to the tune of ₹1.00 crore and accordingly, the reopening of assessment was made u/s 147 read with section 148 of the Act which is rightly been upheld by
24 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the ld. CIT (A). Therefore, the legal ground raised by the assessee is devoid of any merit and kindly be dismissed.
After hearing the rival contentions and perusing the materials availa- ble on record, we find that undisputedly, the source of information for reopening of assessment of the assessee u/s 147 of the Act was the material seized by the investigation wing during the course of search u/s 132(1) of the Act in case of Mukesh Banka and his related compa- nies, which revealed that assessee was one of the beneficiary of ac- commodation entry in the form of unsecured loan to the extent of ₹1.00 crore. Therefore, we find merit in the contention of the ld. AR that where there is a specific provisions existing in the Act overriding all the provisions then the proceeding should be initiated and culminated in consonance with those specific provisions. In this case, the infor- mation was found during the course of search u/s 132 of the Act on Mukesh Bunka and his group concerns relating to the assessee and therefore, the special provisions as contained in the provisions of Sec- tion 153C of the Act should have been invoked .We have carefully pe- rused the provisions of Section 153C of the Act and find that the said provisions begin with the non-obstante clause , overriding all other provisions and consequently, proceeding should be initiated u/s 153C of the Act after following the procedure laid down in the section itself. Therefore, it is not open to the department to resort to the provisions of Section 147 read with section 148 of the Act to assess the escaped income which has come to the notice of the department during the course of search u/s 132(1) on some other person. The case of the assessee find force from the decision of the Hon'ble Bombay High Court in case of Sejal Jewellary and Anr. Vs. Union & Ors and Others (supra), wherein the Hon'ble court has held as under:-
“12. We have heard learned counsel for the parties and with their assistance, we have perused the record. At the outset, we may observe that the jurisdiction of the Assessing Officer to issue the impugned notice would be required to be considered on the basis of the departmental record and on such basis, the relevant provisions of law which would govern the facts and circumstances of the case in the hands of the Assessing Officer. In the present case, the impugned notice under Section 148 of the IT. Act was
25 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 issued to the petitioner on 29 March, 2019. The petitioner received a copy of 'reasons to believe' furnished by respondent no. 3 on 11 September, 2019, which were objected by the petitioner. On such objection, an order was passed by the Assessing officer rejecting the objections as raised by the petitioners, so as to proceed to re- assess the income of the petitioner under Section 147 of the Act. 13. As clearly seen from the record, to which, we have made a reference in the aforesaid paragraphs, it appears to be quite clear that there was a search and seizure action on 4 October, 2018 on the business premises of one 'Shilpi Jewellers Pvt. Ltd., which has been the basis for the reopening of the petitioner's assessment, as also recorded in the reasons for reopening, which inter alia state that there were certain incriminating evidences, in the form of var- ious loose papers and data back-ups of various electronic devices, as found and seized. The search action was against Shilpi Jew- ellers Pvt. Ltd., its associate concerns, as well as the key individ- uals of the Group. Thedepartment asserts that the materials elic- ited during the search action revealed, that all these persons had accepted large unsecured loans from various shell/paper compa- nies/entities during the year ended on 31 March 2012. On further enquiries being made, the profiling of the loan creditor companies in ITD application, indicated that the loan creditor companies/en- tities who advanced huge loans to Shilpi Jewellers Pvt. Ltd. and its associate concerns, as well as the key individuals of this group, did not have any creditworthiness for extending such huge loans. It was, particularly, recorded that the petitioner/assessee was part of said group, which had shown loan receipts during the year ended on 31 March, 2012 from a company, viz. M/s. Green Valley Gems Pvt. Ltd., which was reported to be a shell/paper company, engaged in providing accommodation entries to the ben- eficiary parties. The reasons for reopening of the assessment were set out in detail, referring to such material and further enquiry which was undertaken in that regard, including materials being gathered in regard to M/s.Green Valley Gems Pvt. Ltd. from whom the petitioners had alleged to have taken accommodation entries. It is on the basis of such information, which was certainly not the information borne out or gathered from the return of income, which was filed and/or any material thereunder, the Assessing Officer reached to a conclusion to reopen the assessment, on the ground that the assessee had not explained such loan receipttransac- tions. Such opinion was formed by the Assessing Officer on the basis that M/s. Green Valley Gems Pvt. Ltd. was a shell/paper company. It is on such premise that the Assessing Officer was of the view that income had escaped assessment within the purview of Clause (c) of Explanation 2 of Section 147 of the LT. Act and such escapement had occurred due to the assessee's failure to
26 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 disclose true, proper and complete facts in the return of income, filed for the subject assessment year. Accordingly, notice under Section 148 was issued. 14. Thus, on the perusal of such reasons, it is quite clear that the provisions of Section 153A providing for "Assessment in case of search or requisition" and the provisions of Section 153C, which provide for "Assessment of income of any other person", which or- dain that recourse be taken to the provisions of Section 153A stand attracted for an assessment to be undertaken. 15. As the controversy revolves around the applicability of Section 153A and more particularly, as to whether Section 153A read with Section 153C vis-a-vis the provisions of Section 147 of the IT. Act, it will be appropriate to extract the said provisions, which reads thus: "147. Income escaping assessment. If the Assessing Officer has reason tobelieve that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the pro- visions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the los- sor the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant as- sessment year): Provided that where an assessment under sub-section (3) of sec- tion 143 or this section has been made for the relevant assess- ment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (includ- ing financial interest in any entity) located outside India, charge- able to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are
27 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2. For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the pre- vious year exceeded the maximum amount which is not chargea- ble to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the As- sessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E] (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief un- der this Act; or (iv) excessive loss or depreciation allowance or any other allow- ance under this Act has been computed; (ca) where a return of income has not been furnished by the as- sessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has
28 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 claimed excessive loss. deduction, allowance or relief in the re- turn; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assess- ment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4. For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012 (23 of 2012), shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 153A. Assessment in case of search or requisition. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021]. the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), inthe prescribed form and verified in the prescribed manner and setting forth such other particulars as may be pre- scribed and the provisions of this Act shall, so far as may be, ap- ply accordingly as if such return were a return required to be fur- nished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previ- ous year in which such search is conducted or requisition is made and for the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years:
29 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assess- ment years and for the relevant assessment year or years re- ferred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second pro- viso). specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reas- sessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the rele- vant assessment year or years: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, rep- resented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant as- sessment 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. Explanation 1. For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year pre- ceding 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. Explanation 2.-For the purposes of the fourth proviso, "asset" shail include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.
30 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 (2) If any proceeding initiated or any order of assessment or reas- sessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or re- assessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation. For the removal of doubts, it is hereby declared that, i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an as- sessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 153C. Assessment of income of any other person. (1) Notwithstanding anything contained in section 139, section 147 section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned. pertains or pertain to, or any information contained therein, re- lates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisi- tioned shall be handed over to the Assessing Officer having juris- diction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and as- sess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person erson for six assessment years im- mediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for
31 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of req- uisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules30 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for as- sessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previ- ous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub- section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or req- uisitioned as referred to in sub-section (1) has or have been re- ceived by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under sec- tion 132A and in respect of such assessment year- Page 19 of 31 18 February, 2025 (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having ju- risdiction over such other person, such Assessing Officer shall is- sue the notice and assess or reassess total income of such other
32 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 person of such assessment year in the manner provided in section 153A (3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other doc- uments or any assets requisitioned under section 132A on or after the 1st day of April. 2021. 16. On a plain reading of Section 153A, it is clear that it begins with a non-obstante' clause, when it provides that notwithstand- ing anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31 May. 2003 but on or before 31 March, 2021, the Assessing Officer shall have jurisdiction to issue notice to such person to furnish the return of income as specified in the notice or assess or reassess the total income as provided by the provision. Section 153C also begins with a non-obstanteclause, when it pro- vides that notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, to provide that, in a situation which may fall under Section 153C insofar as assessment of income of any other person is con- cerned, the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other persons in accordance with the provisions of Section 153A, if he is satisfied that the books of account or document or assets seized or requisitioned have a bearing on the determination of the total income of such person for a period as specified in the said provision and after compliance of other provisions as mandated. On the other hand, Section 147 provides for "Income escaping as- sessment", can be invoked when any income chargeable to tax, in the case of an assessee, has escaped assessment for any assess- ment year. In such situation, the Assessing Officer may subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year and for which a prior notice under Section 148 would be required to be issued. Section 147 does not contemplate an eventuality which Section 153A or Section 153C contemplates, the basis of which is inter alia a search action under Section 132 being resorted as noted hereinabove. Thus. both these provisions are quite compart- mentalized although the deeming effectof both the provisions, may be the same. However, the situations in which such provisions operate are required to be invoked are completely different. This is clear from the bare reading of the provisions, hence would not warrant any elaborate discussion.
33 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 17. The purport and effect of these provisions had fell for consid- eration of the Supreme Court in Abhisar Buildwell P. Ltd. (supra), wherein the scope of assessment under Section 153A of the 1.T. Act was considered. In this case, the Revenue's contention was to the effect that the Assessing Officer was competent to consider all the materials which were available on record. including the mate- rials found during search so as to make an assessment of the total income. Some of the High Courts had accepted such propositions. However, the assessee had contended that there were also deci- sions of the High Courts to the effect that if assessment proceed- ings were not pending on the date of initiation of the search, the Assessing Officer needs to consider only the incriminating mate- rial found during the search, and was precluded from considering any other material derived from any other source. It is in such context, the Supreme Court considering the purport of the provi- sions of Section 153A of the IT. Act, vis a vis its applicability qua the provisions of Section 147, and the applicability of Section 132, 132A and notably thedecision of the Delhi High Court in Commis- sioner of Income Tax, Central-III vs. Kabul Chawla inter alia held that the provisions of Section 153A(1) need to be mandatorily re- sorted once a search takes place. The Supreme Court held as un- der: "7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act. 1961, has summarized the legal position as un- der Summary of the legal position 38. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the afore- mentioned decisions, the legal position that emerges is as under. i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immedi- ately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. ili. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total
34 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 income of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assess- ment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assess- ment can be reiterated and the abated assessment of reassess- ment can bemade. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Sec- tion 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not pro- duced or not already disclosed or made known in the course of original assessment." 18. The Supreme Court held that it was in complete agreement with the view taken by the Delhi High Court in Kabul Chawla (su- pra) and of the Gujarat High Court in Principal Commissioner of Income Tax-4 vs. Saumya Construction taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 19. Insofar as the present proceedings are concerned, the follow- ing observations made by the Supreme Court in the context of Sec- tion 147 and 148 of the IT. Act need to be noted: "11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets
35 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re assessment, if any,relating to any assessment year falling within the period of six assess- ment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any oeder of assessment or reas- sessment made under sub-section (1) has been ansalted in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or re- assessment relating to any assessment year which has abated under the second proviso to sab section (1), shall stand revived with effect from the dare of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assess- ment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assess- ments, unless any scriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act. 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating ma- terial is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the boral income taking into consideration the incriminating material col- lected during the search and other material which would include income declared in the requrns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of com- pleted/anak assessment, the only remedy available to the Reve- nue would be to initiate the reassessment proceedings under Sec- tions 147/148 of the Act, subject to fulfillment of the conditions mentioned in sections 147/148, as in such a situation, the Reve- nue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/com- pleted assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassess- ment under Sections 147/148 of the Act has to be saved, other- wise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed
36 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 assessment, the AO can assess or reassess the income/total in- come taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is ob- served that the assessment under Section 153A of the Act is linked with the search and roquution under Sections 132 and 132A of the Act. The object of Section 1538 a to bring under sax the undisclosed income which is found duringthe course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminat- ing material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assess- ment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assess- ment/reassessment shall stand abated and the AO would as- sume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub section (2) of Section 153A would be redundant and/or re- writing the said pro- visions, which is not permissible under the law." 20. It is thus clear that in the event any incriminating material is found during the search, the Revenue necessarily would be re- quired to take recourse to the provisions of Section 153A and in the event no incriminating material found during the search, then the power of the Revenue to have the reassessment under Sec- tions 147/148 of the I.T. Act stands saved, failing which, the Rev- enue would be left without remedy. It is on such observations the conclusions as rendered by the Supreme Court and which are rel- evant to the case in hand, are required to be noted, which reads thus: "14. In view of the above and for the reasons stated above, it is concluded as under i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assess- ment under section 153A; ii) all pending assessments/reassessments shall stand abated: iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would as- sume the jurisdiction to assess or reassess the 'total income tak- ing into consideration the incriminating material unearthed during
37 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 the search and the other materialavailable with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into considera- tion the other material in respect of completed assessments/una- bated assessments. Meaning thereby, in respect of completed/un- abated assessments, no addition can be made by the AO in ab- sence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as en- visaged/mentioned under Sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." 21. The Rajasthan High Court in Shyam Sunder Khandelwal s/o. Late Damodar Lal Khandelwal vs. Assistant Commissioner of In- come Tax, Central Circle-2, Jaipur (supra) also had taken a similar view when the issue which had arisen before the Court was in regard to the notice issued under Section 148 of the I. T. Act, the basis of issuance of such notice was the material seized during search. The contention of the assessee was to the effect that in the said circumstances, the proceedings ought to have been initi- ated under Section 153C of the IT. Act. The Division Bench refer- ring to the decision of Supreme Court in Abhisar Buildwell P. Ltd. (supra) as also the decision of Karnataka High Court in Sri Dina- kara Suvarna (supra) allowed the petitions observing that the de- partment had not set up a case, that for initiating proceedings un- derSection 148, it had material other than the material seized dur- ing the search of a related party. The relevant observations of the Division Bench are required to be noted, which reads thus: "23. The reasons supplied in case in hand for initiation of proceed- ings under Section 147/148 are based on the incriminating mate- rial 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 carned thereon were unac- counted. In other words the basis for initiation of Section 148 pro- ceedings is the material seized relating to or belonging to the peti- tioner, during the search conducted of Manihar Group.
38 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 24. In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the as- sessee for filing of income tax return for the relevant preceding years. The AD asumes jurisdiction to assess/reassess 'total in- come by passing separate order for cach assessment 25. In cases of the person other than on whom search was con- ducted 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 A 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 provi- sions of Section 153A to 153D have prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148. 27. 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 assessment or 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 operationalperiod of Section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substi- tuted Section 148." We are in complete agreement with the view taken by the Division Bench of Rajasthan High Court in the aforesaid decision. 22. Applying the principles of law as discussed hereinabove, we are of the clear opinion that the foundation of the present case was certainly a search action which was undertaken by the Rev- enue against one Shilpi Jewellers Pvt. Ltd. and in such search and seizure action, materials were seized and such materials were further explored and enquired. Such enquiry revealed significant information in regard to M/s. Green Valley Gems Pvt. Ltd., which
39 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 according to the Revenue had provided accommodation entries to the petitioner, in which it was also revealed that Green Valley Gems Pvt. Ltd. was a shell company. We do not find that the rec- ord would indicate something which is not on the basis of such new materials gathered under the search and seizure action un- der Section 132. If this be the case, then certainly the provisions of Section 153C read with Section 153A would be applicable, as held by the Supreme Court in Abhisar Buildwell P. Ltd. (supra) when the Court interpreted the effect and purport of Section 153C and 153A, as also held by the Rajasthan High Court in Shyam Sunder Khandelwal (supra). 23. Insofar as Mr. Suresh Kumar's contention supporting the pro- ceedings under Section 147 and 148 of 1.T. Act are concerned, for the aforesaid reasons, such contention would in fact go contrary to the intention of the legislature as depicted by the provisions of Section 153A and 153C of the I.T. Act. There would not be any difficulty in accepting the proposition as canvassed by Mr. Suresh Kumar, referring to the decision of the Supreme Court in Phool Chand Bajrang Lal (supra), however, the facts in the present case are distinct. There cannot be any doubt on the position in law when the Revenue intends to proceed purely on materials relevant for an action under Section 148 read with Section 147. We have already observed that the provisions of Sections 147, 148 vis-a- vis Section 153A and Section 153 are quite compartmentalized. To avoid any overlapping of these provisions, the legislature in its wisdom has thought it appropriate to provide for an independent effect, to be given under Section 153A read with Section 153C by incorporating the "non-obstante" clause, in these provisions, which carves out an exception to any normal/regular action being resorted under Section 147. 24. In this view of the matter, we are of the clear opinion that the impugned notice under Section 147 of the IT. Act and all actions consequent thereto are required to be held to be without jurisdic- tion and bad in law. The petition isaccordingly allowed in terms of prayer clauses (a) and (b). 25. Learned counsel for the parties are ad idem that the aforesaid observations would cover the other companion matters, which also stand allowed in terms of our aforesaid reasoning and the operative order passed in Writ Petition No. 3057 of 2019. The said petitions hence stand allowed in terms of prayer clauses (a) and (b) of each of these petitions. 26. Rule is made absolute in the aforesaid terms. No costs.”
40 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 07. The case of the assessee is also squarely covered with various other deci- sions as referred to above. Therefore, we are inclined to quash the proceed- ing-initiated u/s 147 of the Act and consequent order framed by the ld. AO. The appeal of the assessee is allowed on legal issue. 08. The other issues raised by the assessee on legal points as well as on merit are not being adjudicated at this stage and are being left open to be decided if need arises for the same at a later date. 09. In the result, the appeal of the assessee is allowed.” 16. Further, during the course of hearing, the Ld. Counsel has relied on the following judgments:
(i) PCIT Vs. VSL Mining Company (P) Ltd. (ii) ACIT Vs. Gopal Prasad Gupta reported in (2026) 183 taxmann.com 384 (SC)
The Ld. DR strongly relied on the judgment of Hon'ble High Court of Gujarat in the case of Paras Chandreshbhai Koticha Vs. ITO reported in (2026) 182 taxmann.com 204 (Gujarat) will not support the case of the revenue. In this case, since information regarding payment of cash was received post search on the basis of admission, therefore, the Hon'ble Court has held that section 147/144 proceeding relying on the case of the assessee. The relevant para 72 on the judgment is as under:
“68. Both Sections 153A and 153C begin with non-obstante clauses, referring to the provisions of Sections 147 and 148 of the Act. As held by the Rajasthan High Court in the case of Shyam Sunder Khandelwal (supra), these provisions have an overriding effect over the regular provisions of assessment or reassessment. The provisions of Section 147 can be invoked by the Assessing Officer if he has reason to believe that any income has escaped assessment for any assessment year. This facet is different from the knowledge acquired of undisclosed income from the incriminating material collected during search and seizure. Hence, it is not open to the Assessing Officer to invoke the provisions of Sections 147/148 of the Act for
41 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 reopening the assessment on the incriminating material gathered during search and seizure under Sections 132/132B of the Act, when the special provisions beginning with non-obstante clauses are engrafted in the statute. “71. The captioned petitions can be divided in to Four Groups, whose petitioners are subjected to reassessment as under: A) The Petitioners in whose case the information has emerged from the search/raid conducted at Navratna Group (NODPL). B) The petitioners in whose case the information has emerged from the search/raid conducted at K-Star Group. C) The petitioners in whose case the information has emerged from the search/raid conducted at Flamingo (Sanjay Govindram Agarwal). D) The petitioners in whose case the search was conducted during the search/raid conducted at Affluence Commodities Pvt. Ltd
Group-A:- Since most of the writ petitions belong to Group-A (Navratna Group), we are analyzing the legality of reassessment under Sections 147/148 of the Act. In these writ petitions, the facts suggest that pursuant to the warrant issued in the name of one Murlidhar Marutibhai Trivedi, who is a shareholder of Navratna Infrastructure, a search was undertaken at his residence and at Navratna Organisers and Developers Pvt. Ltd. (NODPL) on 11.04.2017. During the search at the residence of Murlidhar Trivedi, backup data was taken from his laptop, and a digital Excel sheet was recovered. This Excel file contained details of the Kalhaar Scheme such as unit number, area of unit, selling price of land, construction cost, amount received from purchasers, etc. Thereafter, during the proceedings before the Income Tax Settlement Commission (ITSC), the Navratna Group submitted a list of purchasers (from F.Y. 2011-12 to 2016-17), wherein the unit number, name of purchaser, date of execution of sale deed, cost of land and construction, etc., were mentioned. The said list was compared with the Excel file recovered from the lap- top of Shri Murlidhar, and it was observed by the authorities that NODPL had main- tained proper records of all receipts in cash as well as through cheque on the sale of units/villas in the Kalhaar Scheme. NODPL, in its application before the ITSC, admitted that it had received "on-money" (cash) for the sale of units/villas at the "Kalhaar Blues and Greens" project, wherein it was disclosed that the purchasers had paid huge amounts in cash. Thereafter, the Deputy Commissioner of Income Tax, Central Circle- 1(1), Ahmedabad, vide communication dated 05.03.2021, conveyed to the respective Jurisdictional Assessing Officers (JAOs) to analyze the data and ascertain the names of the purchasers from the Excel sheet submitted by the Navratna Group, from the sale deed value, registration number and dates, and accordingly to take necessary remedial action to protect the interest of the Revenue. Thus, in the proceedings before the ITSC, and on admission of the Navratna Group post-search, the JAOs were directed to analyze the data of the purchasers, which ultimately disclosed the cash transactions undertaken by the petitioners. Albeit, the original source of incriminating material against the peti- tioners is the Excel sheet recovered during the search from Shri Murlidhar, however, the
42 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 names and the factum of cash transactions were revealed during the proceedings before the ITSC, that too on an application filed by the Navratna Group admitting the cash transactions from the petitioners. Thus, the information regarding payment of cash was received post-search on the basis of the admission, since during the search the names of the petitioners were never revealed from the incriminating material (Excel sheet). Only when the data supplied by the Navratna Group was compared with the Excel sheet, the exact details emerged. In such circumstances, there was no occasion for the Assessing Officer of the searched entity to record satisfaction and forward it to the jurisdictional Assessing Officer of the petitioners. The proceedings under Sections 147/148 of the Act were initiated subsequently on the directions issued by the Deputy Commissioner of Income Tax, Central Circle-1(1), Ahmedabad, vide communication dated 05.03.2021. Thus, the material information of names and cash transactions unearthed by the Juris- dictional Assessing Officers (JAOs) subsequently on the basis of data supplied by the Navratna Group before the Settlement Commission constitutes an independent source, and hence such information/material is sufficient to trigger action under Sections 147/148 of the Act. Therefore, the Revenue is justified in reopening the assessment under Sections 147/148 of the Act on the information received subsequently.”
Respectfully following the judgment relied by the assessee and Ld. Authorised Representative of the co-ordinate bench noted supra and this judgement is also related to search conducted in the case of “BANKA GROUP” . Considering the entire facts of the case and judgements noted supra, we hold that the assessment should have been completed under Section 153C instead of 147/148r.w.s. 143(3) of the Act.
In the result, Cross Objections filed by the assessee are allowed. Since, we have allowed the CO on legal issue and we held that the very basis of initiation under Section 147/148 of the Act is not survive then the assessment order passed by the AO under Section 147/148 of the Act is not survivable.
In the result, appeals filed by the Revenue are dismissed.
43 ITA No.1341 & 1342/KOL/2025 CO No. 91 & 92/KOL/2025 21. To sum up:- Cross Objections filed by the assessee are allowed and appeals filed by the revenue are dismissed.
Order pronounced on 24.08.2026. Sd/- Sd/-
(George Mathan) (Laxmi Prasad Sahu) (Judicial Member) Accountant Member Dated: 24.08.2026 AK, Sr. P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)
//True copy// By order
Deputy Registrar, Kolkata Benches
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