ABHAY KUMAR PARAKH S/O LATE SHRI SHIV LAL PARAKH vs. ASSISTANT COMMISSIONER OF INCOME TAX

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CW/6300/2022HC RajasthanRJHC02031221202222 May 2024Bench: AVNEESH JHINGAN,BHUWAN GOYAL4 pages
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What did the High Court hold?

The High Court held that the petitions are squarely covered by the decision in Shyam Sunder Khandelwal. It reiterated the principle laid down by the Supreme Court in Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P. Ltd., stating that if the reasons for initiating proceedings under Section 147/148 are based on incriminating material and documents seized during a search, and statements recorded during such proceedings, the Assessing Officer is mandatorily required to issue a notice under Section 153-A. For persons other than the searched individual, where material belonging to them is seized, proceedings under Section 153-C are to be initiated. The Court found that the basis for reopening in the present case was incriminating material collected during the search and statements recorded post-search, which were related to the search material. Consequently, the notices of reopening and reassessment orders were set aside. The revenue was granted liberty to proceed under Section 153-C and other applicable provisions.

What were the facts?

The petitioner, Abhay Kumar Parakh, filed multiple writ petitions challenging the reopening of assessment and consequent reassessment orders issued by the Assistant Commissioner of Income Tax. The primary contention was that the basis for reopening was solely material collected during a search operation, and no other incriminating material or information existed to justify the reopening under Section 148 of the Income Tax Act, 1961. The revenue argued that the reopening was not solely based on search material but also on post-search statements. The petitions were connected and heard together.

What were the issues?

1. Whether the reopening of assessment under Section 148 of the Income Tax Act, 1961, is valid when the sole basis for reopening is material collected during a search operation, and not other incriminating material or information. Assessee's Contention: The reopening is invalid as it relies solely on search material, and the correct procedure would be Section 153-C and Section 153-A of the Act. The assessee relies on the Division Bench judgment in D.B. Civil Writ Petition No. 18363/2019 (Shyam Sunder Khandelwal vs. Assistant Commissioner of Income Tax). Revenue's Contention: The reopening is valid because the basis is not confined to search material but also includes post-search statements. The revenue argues that the impugned order (Para 6) indicates this broader basis.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 153-A,Section 153-C

AI-generated summary — verify with the full judgment below

[2024:RJ-JP:24400-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 6301/2022 Abhay Kumar Parakh S/o Late Shri Shiv Lal Parakh, Aged About 78 Years, Resident Of 201, Haldiyon Ka Rasta, Johari Bazar, Jaipur - 302003, Rajasthan, India. ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Central Circle, -4, Jaipur, Having Office At Room No. 416, 4Th Floor, Jeevan Nidhi-2, Ambedkar Cirlce, Jaipur - 302005, Rajasthan, India. 2. Central Board Of Direct Taxes (Cbdt), Ministry Of Finance, North Block, New Delhi - 110011, Through Its Chairman. ----Respondents Connected With D.B. Civil Writ Petition No. 6300/2022 Abhay Kumar Parakh S/o Late Shri Shiv Lal Parakh, Aged About 78 Years, Resident Of 201, Haldiyon Ka Rasta, Johari Bazar, Jaipur - 302003, Rajasthan, India. ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Central Circle, -4, Jaipur, Having Office At Room No. 416, 4Th Floor, Jeevan Nidhi-2, Ambedkar Cirlce, Jaipur - 302005, Rajasthan, India. 2. Central Board Of Direct Taxes (Cbdt), Ministry Of Finance, North Block, New Delhi - 110011, Through Its Chairman. ----Respondents D.B. Civil Writ Petition No. 6302/2022 Abhay Kumar Parakh S/o Late Shri Shiv Lal Parakh, Aged About 78 Years, Resident Of 201, Haldiyon Ka Rasta, Johari Bazar, Jaipur - 302003, Rajasthan, India. ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Central Circle, -4, Jaipur, Having Office At Room No. 416, 4Th Floor, Jeevan

[2024:RJ-JP:24400-DB] (2 of 4) [CW-6301/2022] Nidhi-2, Ambedkar Cirlce, Jaipur - 302005, Rajasthan, India. 2. Central Board Of Direct Taxes (Cbdt), Ministry Of Finance, North Block, New Delhi - 110011, Through Its Chairman. ----Respondents D.B. Civil Writ Petition No. 6303/2022 Abhay Kumar Parakh S/o Late Shri Shiv Lal Parakh, Aged About 78 Years, Resident Of 201, Haldiyon Ka Rasta, Johari Bazar, Jaipur - 302003, Rajasthan, India. ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Central Circle, -4, Jaipur, Having Office At Room No. 416, 4Th Floor, Jeevan Nidhi-2, Ambedkar Cirlce, Jaipur - 302005, Rajasthan, India. 2. Central Board Of Direct Taxes (Cbdt), Ministry Of Finance, North Block, New Delhi - 110011, Through Its Chairman. ----Respondents For Petitioner(s) : Mr. Prateek Kedawat For Respondent(s) : Mr. Siddharth Bapna with Mr. Meyhul Mittal HON'BLE THE CHIEF JUSTICE MR. MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE BHUWAN GOYAL Order 22/05/2024 In all these petitions, the reopening of assessment as also consequent reassessment orders are under challenge mainly on the ground that basis of reopening assessment is only material collected during search and there is no other incriminating material or information except search to reopen assessment, therefore, the present case is identical to batch of petitions led by D. B. Civil Writ Petition No. 18363/2019 (Shyam Sunder

[2024:RJ-JP:24400-DB] (3 of 4) [CW-6301/2022] Khandelwal vs. Assistant Commissioner of Income Tax), whereby a Division Bench of this Court vide its order dated 19.03.2024 has held that in case, where the basis for reopening assessment is material collected during search, the course legally open is initiation of proceedings under Section 153-C of the Income Tax Act, 1961 (for short ‘Act of 1961’) and reassessment under Section 153-A of the Act of 1961 and not under Section 148 of the Act of 1961. Learned counsel for the respondents would submit that in the present petition, the order of reopening assessment and reassessment has not been challenged on the aforesaid ground but on other grounds. He would further submit that in any case, what has been stated in Para 6 of the impugned order shows that the basis for reopening assessment is not merely confined to any incriminating material or information collected during search but other statements, which were recorded post search. A Division Bench of this Court in the case of Shyam Sunder Khandelwal and batch of petitions (supra), relying upon the Hon’ble Supreme Court decision in the case of Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P. Ltd. reported in (2023) 454 ITR 212 (SC), has held that where reasons supplied for initiation of proceedings under Section 147/148 of the Act of 1961 are based on incriminating material and documents seized during the search and the statements recorded during the proceedings, the A.O. under Section 153-A mandatorily is required to be issued to assessee for filing of income tax return for the relevant preceding years. The A.O. assumes jurisdiction to assess/reassess ‘total

[2024:RJ-JP:24400-DB] (4 of 4) [CW-6301/2022] income’ by passing separate order for each assessment and it has also been held that in case of person other than on whom search was conducted but material belonging or relating to such person was seized or requisitioned, A.O. has to proceed under Section 153-C. Applying the aforesaid law, if we look in the impugned order, we are of the view that the basis for reopening was incriminating material collected during search and the statements which were recorded. The statements which are said to be recorded after the search proceedings are nothing but statements with relation to the material, which were collected during the search. That being so, in our view, these petitions are squarely covered by the order passed by this Court in the case of Shyam Sunder Khandelwal (supra). All these petitions are accordingly allowed. Notices of reopening as also reassessment orders are set aside, however, with a liberty to the respondent department to proceed in accordance with law under Section 153-C of the Act of 1961 and other applicable provisions of the Act of 1961. (BHUWAN GOYAL),J (MANINDRA MOHAN SHRIVASTAVA),CJ PAYAL/INDER/173-176

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