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Facts
The assessee's income was initially accepted by the department. Subsequently, a notice under Section 148 was issued for reassessment based on information that the assessee made a cash payment of Rs. 3,34,000/- for a flat, with incriminating material found during a third-party search. The Assessing Officer made an addition of this amount under Section 69A.
Held
The Tribunal held that since the incriminating material was found in the possession of a third party, proceedings under Section 153C of the Income Tax Act were applicable, not Section 147. The initiation of proceedings under Section 147 was therefore void ab initio.
Key Issues
Whether the reassessment proceedings initiated under Section 147 were valid when the information leading to the reassessment was based on incriminating material found during a search of a third party, for which Section 153C should have been invoked.
Sections Cited
147, 148, 143(3), 69A, 153C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ)
Assessment Year: 2012-2013 Kamalesh Kumar Tripathi,…………….………Appellant Vishwasadan Co-Op. Housing Society, Action Area-1A, Plot No. AL/1/E/3, Flat 2B, Street No. 15, New Town, Kolkata-700156 [PAN:ABJPT4000B] -Vs.- Income Tax Officer,……………………..……...Respondent Ward-52(2), Kolkata, Bamboo Villa, Central Revenue Building, 169, A.J.C. Bose Road, Kolkata-700014 Appearances by: Shri S.K. Tulsian, A.R., appeared on behalf of the assessee Shri L.N. Dash, Addl. CIT (D.R.), appeared on behalf of the Revenue Date of concluding the hearing: March 12, 2025 Date of pronouncing the order: May 29, 2025 O R D E R
The present appeal is directed at the instance of assessee against the order of ld. Addl./JCIT(Appeals)-2, Mumbai dated 5th November 2024 passed for Assessment Year 2012-13.
Brief facts of the case are that the assessee is an individual, who was employed with the Central Government. He filed his (A.Y. 2012-2013) Kamalesh Kumar Tripathi return of income declaring total income of Rs.6,49,200/-, which was accepted by the Department without any modification or alteration. Thereafter the assessee received a notice under section 148 of the Act on 29.03.2019 proposing to reassess the income for the relevant assessment year and directing him to file return under section 148 in the prescribed form. The assessee complied with the notice under section 148 and filed return of income on 30.04.2019. The main allegation as per reasons recorded for reopening of assessment based on which the appellant’s case was reopened was that as per information passed by the DDIT (Inv.), Unit-7(3), Delhi, the appellant had made cash payment of Rs.3,34,000/- to M/s. Grihapravesh Buildtech Pvt. Limited on some unknown date towards purchase considerations of residential flat at Noida. After considering the submissions made by the assessee, the ld. Assessing Officer passed the assessment order under section 143(3) read with section 147 assessing the total income of the assessee at Rs.9,83,200/- after making additions of Rs.3,34,000/- under section 69A of the Income Tax Act, 1961. On being aggrieved, the assessee preferred an appeal before the ld. CIT(Appeals).
After considering the submissions made by the assessee, the ld. Addl./JCIT(Appeals) dismissed the appeal of the assessee.
On being aggrieved, the assessee preferred an appeal before the ITAT and raised the following grounds:- “(1) That on the facts and in the circumstances of the case, the proceedings initiated u/s 147/148 of he Act being devoid of jurisdiction inasmuch as the same was based on (A.Y. 2012-2013) Kamalesh Kumar Tripathi unverified and vague information without po9inting out to any escapement of income in the hands of the appellant, the order so passed by the ld. AO u/s 143(3) r.w.s. 147 of the Act dated 12.12.2019 for the AY 2012-13 and confirmed by the ld. CIT(A) vide appellant order u/s 250 dated 05.11.2024 are illegal and bad in law. (2) That the addition made u/s 69A of the Act of Rs.3,34,000/- in the hands of the appellant is arbitrary and not being based on any material the same is on pure surmises and conjectures and the ld. CIT(A) has erred in having upheld such uncalled for and arbitrary addition to the income without appreciating the case of the appellant in proper perspective. (3) That, as the order of ld. CIT(A) suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief (s) as prayed for.
I have heard both the sides. The ld. Counsel for the assessee has submitted written submission by saying that the ld. Assessing Officer has not valid jurisdiction to reopen the assessment of the assessee under section 147. Since the incriminating material was found during the search of a third party, the ld. Assessing Officer wants to make any assessment on the assessee, the only provision of section 153C of the Act is solely applicable and it excludes the application of sections 147 and 148 of the Act. Ld. Counsel further submitted that as per the reasons recorded for reopening, the ld. Assessing Officer himself categorically mentioned that “an information received from the ADIT (Inv.), Unit-7(3), New Delhi that the assessee has made payment of Rs.3,34,000/- in cash to M/s. Grihapravesh Buildtech Pvt. Limited”. Therefore, the ld. Assessing Officer should initiate the proceedings solely on the provisions of section 153C of the Act, but the ld. Assessing Officer without initiating the proceedings under section 153C of the Act, initiated the proceedings under section 147 of the Act. Therefore, the 3 (A.Y. 2012-2013) Kamalesh Kumar Tripathi assumption of jurisdiction under section 147 of the Act is void ab initio. The ld. Counsel for the assessee also relied on the various decisions of Hon’ble High Court and Coordinate Benches of the Tribunal. He further submitted that this issue is squarely covered by the decision of so many Hon’ble High Courts and Coordinate Bench of Delhi Tribunal in the case of Girish Chandra Sharma - vs.- ITO, Ward-3(1), Bulandshahr in ITA No. 987/Del./2018 passed on November, 2018, wherein it was held that, “if any, incriminating material found during the course of search in the possession of a third person, the only remedy available to the ld. Assessing Officer is to initiate proceedings under section 153 of the Act and not 147 of the Act”. Therefore, he pleaded to set aside the orders passed by the lower authorities.
On the other hand, ld. Departmental Representative relied on the orders passed by the ld. Assessing Officer as well as ld. CIT(Appeals).
I have perused the material available on record. It is an undisputed fact that the ld. Assessing Officer categorically mentioned in the reasons recorded for reopening was that the assessee made cash payment of Rs.3,34,000/- to M/s. Grihapravesh Buildtech Pvt. Limited on some unknown date towards purchase considerations of residential flat at Noida and the incriminating material was found in the premises of the builder. Now the only question before me is that if any incriminating material was found and seized in the premises of a third person; Whether the ld. Assessing Officer can initiate the (A.Y. 2012-2013) Kamalesh Kumar Tripathi proceedings under section 147 of the Act or not? On this aspect, the ld. Counsel for the assessee heavily relied on the decision of the ITAT, Delhi Benches in the case of Girish Chandra Sharma - vs.- ITO, Ward-3(1), Bulandshahr, wherein it was held that – “I also draw my support from the ITAT, New Delhi decision in the case of Rajat Shubra Chatterji vs. ACIT, New Delhi dated 20.5.2016, wherein the reassessment was quashed on the similar facts and circumstances by following the ITAT, Amritsar decision in the case of ITO vs. Arun Kumar Kapoor (supra). In the present case before me, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information available with the AO. I thus respectfully following the decision of Co-ordinate Bench of the ITAT, Amritsar in the case of ACIT vs. Arun Kapur -140 TTJ 249 vs. (Amritsar) and the ITAT, Delhi decision in the case of Rajat Shubra Chatterji vs. ACIT, New Delhi ITA No. 2430/Del/2015 dated 20.5.2016 hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which that the Assessing Officer has initiated reassessment proceedings in the present case on the basis of information received based on the material found excludes the application of sec. 147 of the Act hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. Hence, the reassessment in question is accordingly quashed”.
After considering the ratio laid down by the ITAT Coordinate Bench, Delhi in the case of Girish Chandra Sharma (supra) and so many Coordinate Benches of ITAT have taken the similar view that the provisions of section 153C of the Act is applicable to frame the assessment, if any incriminating material may found and seized in the premises of a third person, then the ld. Assessing Officer ought have to initiate the proceeding under section 153C of the Act, but ld. Assessing Officer has initiated the reassessment proceedings under section 147 of the Act on the basis of information received (A.Y. 2012-2013) Kamalesh Kumar Tripathi on the seized material found. Therefore, I am of the view that notice under section 148 of the Act and the assessment, which was framed under section 143(3) read with section 147 of the Act, are not valid in the eyes of law. Hence, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 29/05/2025.