SIDDHARTH TOTUKA S/O LATE SHRI ANIL TOTUKA vs. ASSISTANT COMMISSIONER OF INCOME TAX

Facts

The petitioner, Siddharth Totuka, challenged a notice dated March 24, 2020, issued under Section 147/148 of the Income Tax Act, 1961, for assessment year 2013-14, and subsequent orders, including the assessment order dated September 23, 2021. The reopening was based on a search conducted in the premises of Shri Ramesh Manihar. The petitioner contended that if the basis for reopening is material collected during a search, rather than independent material, proceedings should be under Section 153C, not Section 148. The judgment notes that an appeal against the assessment order was pending. The petitioner's counsel stated that the issue was concluded by a previous order of a Coordinate Bench.

Held

The Tribunal allowed the petition, setting aside the notice dated March 24, 2020, and all consequential orders, including the assessment order dated September 23, 2021. The Tribunal relied on the decision of a Coordinate Bench in Shyam Sunder Khandelwal vs. Assistant Commissioner of Income Tax, which held that proceedings initiated under Section 148, when based on material collected during a search of a third party, are not permissible, and the AO must proceed under Section 153C. The reasoning is that Section 153C specifically deals with the assessment of income of any other person based on seized material, whereas Section 148 is a general provision for reopening assessments. The ratio decidendi is that the AO cannot circumvent the specific procedure laid down in Section 153C for cases involving seized material from third parties by resorting to the general provisions of Section 147/148. The operative direction was to set aside the notice and consequential orders and for the petitioner to submit this order before the Appellate Authority for closure of the appeal.

Key Issues

1. Whether the reopening of assessment under Section 148 of the Income Tax Act, 1961, is permissible when the basis for reopening is material collected during a search conducted in the premises of a third party, or if such proceedings should be initiated under Section 153C of the Act? Assessee's contention: The assessee argued that if the reopening is based on material seized during a search of another person's premises, the procedure prescribed under Section 153C of the Income Tax Act, 1961, must be followed, and recourse to Section 148 is impermissible. The assessee relied on the principle that specific provisions override general provisions. Revenue's contention: The judgment does not record any specific contentions made by the revenue on this issue. However, the revenue was represented by counsel.