ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, JAIPUR vs. MAHESH KUMAR KHATORIA, JAIPUR

ITA 1172/JPR/2025Status: DisposedITAT Jaipur29 September 2026AY 2015-169 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that both grounds raised by the Revenue were devoid of merit and liable to be dismissed. The Tribunal noted that the CIT(A) had correctly followed the jurisdictional High Court's decision in Shyam Sunder Khandelwal vs. ACIT. This judgment clarified that when incriminating material seized during a search belongs to or relates to a person other than the one searched, proceedings under Section 153C are to be initiated, not under Section 147/148. The Tribunal found that the AO had not presented any material other than that seized during the search of the Manihar Group to initiate proceedings under Section 148. The argument that Section 148 is not rendered otiose by the enactment of Sections 153A to 153D was considered, but the Tribunal reiterated that on fulfillment of the conditions for invoking Section 153C, the AO must proceed accordingly. The Tribunal also observed that the Hon'ble High Court had distinguished the Supreme Court case of M/s. M.R. Shah Logistics Pvt. Ltd., stating that the issue of interplay between Section 147/148 and Section 153C in cases of seized material belonging to third parties was not before the Supreme Court. Therefore, the CIT(A)'s order quashing the reassessment proceedings was upheld.

What were the facts?

The Revenue filed two appeals against the orders of the CIT(A) for Assessment Years (AY) 2016-17 and 2015-16. The assessee, Mahesh Kumar Khatoria, originally filed returns declaring income of Rs. 11,07,230/- for AY 2016-17. Following a search in the Ramesh Manihar Group on January 7, 2021, incriminating data, including pen drives detailing cash loans, was seized. The assessee was identified as a beneficiary of cash loans from undisclosed income. A notice under Section 148 was issued on March 31, 2021. The Assessing Officer (AO) added Rs. 3,45,00,000/- as undisclosed income and Rs. 42,000/- as interest income, initiating penalty proceedings under Section 271(1)(c). The CIT(A) quashed the reassessment proceedings, relying on the Rajasthan High Court's decision in Shyam Sunder Khandelwal vs. ACIT.

What were the issues?

1. Whether the Learned CIT(A) erred in quashing the assessment proceedings based solely on the High Court judgment in Shyam Sunder Khandelwal vs. ACIT, without considering the unique facts and circumstances of the present case (Question of law and fact). 2. Whether on the facts and circumstances of the case and in law, the Hon. CIT(A) is justified in holding that notice u/s 148 is not sustainable legally relying upon the order of Hon'ble Rajasthan High Court's order dated 19.03.2024 in D.B. Civil Writ Petition No. 18363/2019 and several other linked petitions wherein wrongly held that once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to without giving any finding that issuance of notice under section 148 was incorrect (Question of law and fact). Assessee's Contention: The assessee argued that the CIT(A) correctly quashed the reassessment proceedings based on the Rajasthan High Court's judgment in Shyam Sunder Khandelwal, which held that Section 153C should be invoked when incriminating material belonging to a third party is seized during a search, not Section 147/148. Revenue's Contention: The Revenue argued that the CIT(A) erred in quashing the proceedings solely on the High Court judgment without considering the specific facts. They contended that the High Court wrongly held that Section 153C must be resorted to without determining if the Section 148 notice was incorrect. The Revenue also cited the Supreme Court case of Deputy Commissioner of Income Tax (Central) Circle 1(2) V/s. M/s. M.R. Shah Logistics, suggesting Section 148 could still be applicable.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 153C,Section 271(1)(c),Section 132,Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, JAIPUR

Before: Smt. Annapurna Gupta & Shri T. R. Senthil Kumar

For Appellant: Shri Kapil Khejrolia, CA
For Respondent: Shri Anand Swaroop, CIT

PER : T. R. SENTHIL KUMAR, JUDICIAL MEMBER:- These two appeals are filed by the Revenue as against the separate appellate orders both dated 24.06.2025 passed by the Ld. Commissioner of Income Tax (Appeals), Jaipur-5, arising out of the reassessment orders passed u/s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to A.Y. 2016-17 and 2015-16 respectively. Since the identical issues involved in both the appeals, therefore the same are disposed of by this common order.

I.T.A No. 1171 & 117

The order continues below.

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