DCIT CENTRAL CIRCLE -7(2), MUMBAI, MUMBAI vs. GHANSHYAM BHAGIRATH MUTHA, MUMBAI

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ITA 7550/MUM/2025Status: DisposedITAT Mumbai25 September 20267 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision that the initiation of reassessment proceedings under Section 147 of the Act was bad in law. The Tribunal found no reason to interfere with this finding, as it was covered by the Bombay High Court's decision in Sejal Jewellary (supra). The Tribunal noted that the Bombay High Court, in Sejal Jewellary, had considered decisions from the Delhi High Court (CIT vs. Kabul Chawla) and Gujarat High Court (Pr. CIT vs. Saumya Construction (P.) Ltd.), as well as the Supreme Court (Pr. CIT v. Abhisar Buildwell (P.) Ltd.). The Tribunal highlighted that Section 153A, with its non-obstante clause, overrides Sections 139, 147, 148, 149, 151, and 153, and that Section 153C also begins with a non-obstante clause. The Tribunal found that Section 147 does not contemplate the situation covered by Sections 153A or 153C, which are based on search actions. Regarding the contention that the CIT(A) should have adjudicated on merits as per Section 250(6), the Tribunal observed that while it is advisable, the section does not explicitly mandate addressing all issues if the appeal can be disposed of on one or more preliminary issues. However, in this case, since the final order was in favour of the assessee, the Tribunal refrained from restoring the matter to the CIT(A) for deciding issues on merits.

What were the facts?

The assessee, Shri Ghanshyam Bhagirath Mutha, proprietor of M/s. Bhagirath Mutha & Co., is the subject of appeals by the Revenue and cross-objections by the assessee for Assessment Years (AYs) 2013-14 and 2017-18. For AY 2013-14, the Assessing Officer (AO) reopened the case under Section 148 based on information from a search on the Thakkar & Ashar group, which indicated cash loans of Rs. 3,00,00,000/- and interest of Rs. 97,10,055/- from the assessee. The AO made an addition of Rs. 3,00,00,000/- under Section 69A. For AY 2017-18, based on seized papers from the same search, the AO made an addition of Rs. 1,31,15,355/- under Section 69A, with 'BMC' on seized papers identified as M/s. Bhagirath Mutha & Co. The CIT(A) upheld the assessee's ground regarding the invalidity of reassessment proceedings under Section 147, relying on the Bombay High Court decision in Sejal Jewellary.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, were valid, or whether the AO ought to have taken recourse to Section 153A read with Section 153C of the Act, given that the reopening was based on material recovered during a search on a third-party group (Thakkar & Ashar)? Assessee's contention: The reassessment proceedings under Section 147 are bad in law. Since the reopening was triggered by a search on a third party, the AO should have invoked Section 153C, not Section 147. Reliance was placed on Bombay High Court's decision in Sejal Jewellary vs. Union of India. Revenue's contention: The decision in Sejal Jewellary is distinguishable and not applicable. The CIT(A) erred in accepting a post-search clarification letter from Shri Rajal Narendra Ashar, which contradicted his earlier sworn statement. The CIT(A) also failed to address the merits of the addition. 2. Whether the CIT(A) was obligated to adjudicate on the merits of the additions, even though the appeal could be disposed of on a preliminary/legal issue, as per Section 250(6) of the Act? Assessee's contention: The CIT(A) ought to have adjudicated on the merits as mandated by Section 250(6), which requires a complete adjudication. The additions were also bad on merits due to reliance on third-party statements without cross-examination.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(2),Section 147,Section 148,Section 153A,Section 153C,Section 69A,Section 142(1),Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI

Before: JUSTICE (RETD.) C.V. BHADANG & SHRI PRABHASH SHANKAR

For Appellant: Shri Tanzil Padevekar
For Respondent: Shri Rajgopal K Parthasarthi
Hearing: 18/06/2026Pronounced: 25/09/2026

PER JUSTICE (RETD.) C.V. BHADANG, PRESIDENT :

These are two appeals by the Revenue and two cross objections by the assessee, which can be conveniently disposed of by this common order.

2.

The assessee, Shri Ghanshyam Bhagirath Mutha is the proprietor of M/s. Bhagirath Mutha & Co. The assessee filed his Return of Income (RoI) for assessment

2 Ghanshyam Bhagirath Mutha ITA Nos. 7550 & 7551/Mum/2025 & CO Nos. 391 & 392/Mum/2025 year 2013-14 declaring a total income of Rs.4,89,650/-. In this case, information was received by the Assessing Officer (‘AO’ for short) that a search and seizure action under Section 132 of the Income Tax Act, 1961 (‘Act’ for short) was carried out in the case of Thakkar & Ashar group and its key persons on 05.07.2017. During the course of the search, some loose papers marked as page 79 of Annexure-A1 were seized. Shri Rajal Narendra Ashar, the key person of the Ashar group was confronted with the said page and he is alleged to have admitted that it contained details of cash loans taken from M/s. Bhagirath Mutha & Co. during the relevant year amounting to Rs.3,00,00,000/- and payment of the interest in cash of Rs.97,10,055/- as set out in the assessment order.

3.

A statement of Shri Rajal Narendra Ashar was recorded on oath on 06.07.2017 and 07.07.2017, in which in response to question no. 47, he admitted that page 79 of the loose paper folder marked as Annexure-A1 contained details of cash loans taken from M/s. Bhagirath Mutha & Co. and the cash interest paid.

4.

On the basis of the said information, the case of assessee was reopened by issuing a notice under Section 148 of the Act on 31.03.2021. In response, the assessee filed his RoI declaring income of Rs.4,89,729/- for assessment year 2013- 14. The reasons recorded for reopening were furnished to the appellant. The assessee filed his objection, which was disposed of by speaking order dated 07.07.2021. It appears that the assessee filed yet another objection to the reopening, which was disposed of by a supplementary order dated 25.02.2022. This was followed by statutory notices under Section 143(2) and 142(1) of the Act calling for certain details/clarifications, which were furnished.

5.

The AO by order dated 30.03.2022 made an addition of Rs.3,00,00,000/- under Section 69A of the Act as unexplained money.

3 Ghanshyam Bhagirath Mutha ITA Nos. 7550 & 7551/Mum/2025 & CO Nos. 391 & 392/Mum/2025

6.

The assessee filed his RoI for assessment year 2017-18 declaring a total income of Rs.13,44,740/-. This case was also reopened on the basis of search carried out on Thakkar & Ashar group on 05.07.2017 and the recovery of page 130 & 131 marked as Annexure-A1, which indicated cash expenses paid to various parties by Ashar group. Shri Rajal Narendra Ashar, the key person of Ashar group when confronted with the same, admitted the same to be unaccounted income and offered the amount to tax. Shri Rajal Narendra Ashar in his statement recorded on oath on 06.07.2017 and 07.07.2017 admitted that page 130 and 131 of the loose paper folder marked as Annexure-A1 contained details of the various expenses incurred in cash out of his unaccounted income. Insofar as the present appeal is concerned, Shri Rajal Narendra Ashar in response to question no. 33 stated that the abbreviation ‘BMC’ written on the seized papers stands for M/s. Bhagirath Mutha & Co. and page 79 contains the details of cash loans taken and cash interest paid to M/s. Bhagirath Mutha & Co. The AO made a total addition of Rs.1,31,15,355/- under Section 69A of the Act, for assessment year 2017-18.

7.

Both these orders for assessment years 2013-14 and 2017-18 were challenged before the learned CIT(A). It was contended that the reassessment proceedings were bad, inasmuch as, the AO was required to take recourse to Section 153A r.w.s. 153C of the Act, once the reopening was in pursuance of alleged incriminating material recovered in the search conducted on Thakkar and Ashar group. It was contended that the assessee being a person other than the one searched, appropriate action, if any, ought to be taken under Section 153C of the Act and not under Section 147 of the Act. For this purpose, reliance was placed on the decision of Bombay High Court in the case of Sejal Jewellary vs Union of India, [2025] 171 taxmann.com 846.

4 Ghanshyam Bhagirath Mutha ITA Nos. 7550 & 7551/Mum/2025 & CO Nos. 391 & 392/Mum/2025 8. On merits, it was contended that no opportunity was granted to the assessee to cross-examine Shri Rajal Narendra Ashar, the key person of Ashar group and the impugned addition could not have been made in the hands of the assessee on the basis of a third party material, which was also not tested.

9.

Learned CIT(A) by common order dated 12.09.2025 has upheld the ground based on the invalidity of the proceedings under Section 147 of the Act placing reliance on the decision of Bombay High Court in the case of Sejal Jewellary (supra).

10.

These appeals are filed by the Revenue contending that the decision of Bombay High Court in Sejal Jewellary (supra) is distinguishable and not applicable to the present case. It is contended that the learned CIT(A) was in error in accepting a post-search clarification letter from Shri Rajal Narendra Ashar, which was contrary to his earlier sworn statement. It is also contended that the learned CIT(A) has not adverted to the merits of the addition. The learned DR has supported the assessment orders passed by the AO.

11.

The cross objections are filed by the assessee on the ground that the learned CIT(A) ought to have adjudicated on the merits of the matter also. Reliance is placed on Section 250(6) of the Act in order to submit that the impugned order is contrary to the mandate of the said Section. It is submitted that Section 250(6) of the Act requires a complete adjudication notwithstanding that the matter can also be disposed of on a preliminary/legal issue. It is contended that the impugned addition was otherwise bad as being based on a third party statement and recovery of some material in respect of which no opportunity of cross examination was granted to the assessee.

5 Ghanshyam Bhagirath Mutha ITA Nos. 7550 & 7551/Mum/2025 & CO Nos. 391 & 392/Mum/2025

12.

We have carefully considered the circumstances and the submissions made. We do not find any reason to interfere with the finding recorded by the learned CIT(A) holding that the initiation of reassessment proceedings under Section 147 of the Act was bad in law. The issue is no longer res integra and is covered by the decision of Bombay High Court in Sejal Jewellary (supra). The learned DR has not demonstrated as to how the said decision is distinguishable. The Bombay High Court, has taken note of the decision of Delhi High Court in CIT vs Kabul Chawla, 380 ITR 573 (Delhi) and Gujarat High Court in Pr. CIT vs Saumya Construction (P.) Ltd., 387 ITR 529 (Guj) and that of the Supreme Court in Pr. CIT v. Abhisar Buildwell (P.) Ltd., 454 ITR 212 (SC), and has particularly considered the fact that Section 153A of the Act begins with a ‘non-obstante’ clause giving an overriding effect on Section 139, 147, 148, 149, 151 and 153 of the Act. The following observation in para 16 are relevant for the purpose :-

“16. On a plain reading of Section 153A, it is clear that it begins with a ' non- obstante' clause, when it provides that 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 31st 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-obstante clause, when it provides 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 concerned, 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 assessment", can be invoked when any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year. In such situation, the Assessing Officer may subject to the

6 Ghanshyam Bhagirath Mutha ITA Nos. 7550 & 7551/Mum/2025 & CO Nos. 391 & 392/Mum/2025 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 compartmentalized although the deeming effect of 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.”

We, therefore, do not find any reason to interfere with the order passed by the learned CIT(A).

13.

The next issue is about reliance placed on behalf of the assessee on Section 250(6) of the Act, which reads thus :-

“250(1) to (5) ……………….

(6) The order of the Appellate Assistant Commissioner disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.”

We note that although the section contemplates decision on the points for determination with reasons in support thereof, it explicitly does not require that all the issues should be addressed, notwithstanding that the appeal can be disposed of on one or more issues, preliminary or otherwise. We hasten to add that this is not to suggest that the appellate authority should not advert to all the issues in such a case. Although it would be advisable for the appellate authority (particularly when the decisions are subject to appeal before the Tribunal and thereafter to the constitutional courts), and would be appropriate if such decisions are rendered on all issues notwithstanding the fact that the appeal can be disposed of on one or more points, either preliminary or otherwise, however, in the present case, we do not see any reason to restore the appeals back to the file of the learned CIT(A), more

7 Ghanshyam Bhagirath Mutha ITA Nos. 7550 & 7551/Mum/2025 & CO Nos. 391 & 392/Mum/2025 so, at the instance of the assessee when the final order in the appeals is in his favour. Thus, in the peculiar facts, we refrain from restoring the matter back to the file of the learned CIT(A) for deciding the issues on merits.

14.

In the result, both the appeals filed by the Revenue are hereby dismissed and the cross objections are disposed of in the aforesaid terms.

Order pronounced in the open court on 25.09.2026.

Sd/- Sd/- (PRABHASH SHANKAR) (JUSTICE (RETD.) C.V. BHADANG) ACCOUNTANT MEMBER PRESIDENT

Mumbai; Dated : 25.09.2026 SSL

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The PCIT/CIT concerned 4. DR, ITAT, Mumbai 5. Guard File. BY ORDER, //True Copy//

(Assistant Registrar) ITAT, Mumbai

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