DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-3, JAIPUR vs. SAPNA KARNANI, TONK PHATAK

CO. Nos. 28 to 31 /JP/2025 (Arising out of to 712/JP/2025) fu/kZkj.k o"kZ@Assessment Year : 2013-14, 2014-15, 2016-17 & 2017-18 cuke Sapna Karnani Deputy Commissioner of Vs. M-8, Mahesh Colony Tonk Income-Tax, Phatak, Jaipur Central Circle-03, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AEFPB5035B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Deepak Sharma, CA jktLo dh vksj ls@ Revenue by : Ms. Alka Gautam, CIT, DR lquokbZ dh rkjh[k@ Date of Hearing : 11/09/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 14/10/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM objections to those appeals so filed by the revenue were preferred by the assessee. Since the issue raised by the revenue and that of the assessee in cross objection are similar in all the assessment year and since we have heard these bunch appeals and cross objections together with the consent of parties we considered to dispose these bunch together with this common order.

2. As agreed by the parties the lead case of revenue is considered in for assessment year 2013-14 and the connected cross objection of assessee on it numbered as CO no. 28/JP/2025 is taken up for discussion as lead case and the finding shall apply mutatis mutandis on the similar issue in the subsequent assessment year.

3. Revenue feeling dissatisfied with the order of Commissioner of Income Tax, Appeal, Jaipur – 4 [ for short CIT(A) ] dated 21.02.2025 preferred the present appeal and thereby the assessee preferred the cross objection which arise from that order of the ld. CIT(A). The dispute relates to the assessment year 2013-14. That order of the ld. CIT(A) arise because the assessee has challenged the order of assessment passed on for short Act ] by ACIT, Central Circle-3, Jaipur [ for short AO].

Ground 1. Whether on the facts and in the circumstances of the case, the Id. CIT(A) is justified in deleting the addition of Rs. 78,50,000/- made u/s 68 on account of unexplained cash credits 1 disregarding the fact that it was an accommodation entry in the nature of bogus unsecured loan obtained from Kolkata based companies which are of no means and thus is nothing but a sham transaction. Ground 2. Whether on the facts and in the circumstances of the case, the Id. CIT(A) is justified in deleting the addition of Rs. 1,96,250/-made by the AO u/s 69C on account of unexplained expenditure i.e. commission expenses incurred for acquiring accommodation entry. Ground 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of Rs. 3,79,776/-made by the AO u/s 69C on account of unexplained interest expenses incurred for obtaining accommodation entry in the form of unsecured loan. Ground 4. The appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.

4.1 In the connected cross objection no. 28/JP/2025 the assessee has raised the following ground:-

“1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in giving directions to AO to proceed as per section 153C of the Act. The action of the ld. CIT(A) is illegal, unjustified arbitrary, and against the facts of the case and deserves to be quashed. original return of income was e-filed u/s 139(1) of the Income Tax Act, 1961 on 07.12.2013, declaring total income at Rs. 74,460/- for A.Y 2013-14.

Action of search & seizure action were conducted on 01.10.2018 in the case of “Karnani Group” Jaipur to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search. On account of search the jurisdiction over the case was assigned to ACIT, Central Circle – 3, Jaipur vide order u/s 127 of the Act dated 29.11.2018 by the Pr. Commissioner of Income tax-2, Jaipur.

Accordingly, notice u/s 153A of the IT Act, 1961 for this year was issued on 29.05.2019 which was duly served upon the assessee. In compliance to the notice u/s 153A of the Act, return of income was e-filed on 25.06.2019 declaring total income of Rs. 74,460/- for the year under consideration. The assessee has shown income from salary, business income. Statutory notices as required u/s 143(2) & 142(1) of the Act were issued along with questionnaire requiring certain details/information, which was duly served upon the assessee and the assessee placed on record the details / information as called. taken unsecured loan from the Kolkata based companies and the same has been repaid during the year under consideration for an amount of Rs.

78,50,226/-. As there was search and seizure action were also carried out on 21.05.2018 in the case of Banka Group, Kolkata. During the search and post search proceedings, it was noticed that various paper/shell companies controlled and managed by Shri Mukesh Banka were identified. All these companies were categorically accepted that Shri Mukesh Banka as paper/shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Following the lead as obtained from the statement of Shri Mukesh Banka and the material seized during the course of search operation, the bank accounts of the paper/shell companies, controlled and managed by Shri Mukesh Banka was requisitioned from respective banks and analyzed.

On verification of the bank accounts of paper/shell companies of Banka group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogus unsecured loan or in other forms, from the paper/shell companies of Banka Group. Furthermore, the financial analysis of such paper/shell companies of Banka Group from ascertain their financial creditworthiness. From the above analysis, it was detected that (i) No profit accumulation in the company(s) across various financial year. (ii) No actual business done by the company(s) being zero turnover reported in various financial years. (iii) Most of the companies have shown income under the head 'Other income' which shows that these companies have no actual business activities and only getting interest income under the head 'other income' for providing bogus unsecured loan to different beneficiaries (iv) The admission of Shri Mukesh Bank vide his statement recorded u/s 131 & 132(4) of the Act on 30.05.2018 & 19.07.2018 that these companies are paper/shell companies, controlled and managed by Shri Mukesh Banka. (v) The directions of these companies are dummy directors of Shri Mukesh Banka as per the statement of Shri Mukesh Banka recorded u/s 132(4) of the Income tax Act, 1961 on 19.07.2018 (vi) These companies were found to be non-existent as per enquiry made by the Director of Income Tax. More, during the course of analysis and examination of the bank statement of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various account of paper/shell companies of Shri Mukesh Bank was clearly established and substantiated. These Banka regarding the pattern of cash withdrawals from his various companies. Huge withdrawal of cash from the bank accounts of paper/shell companies of Banks Group clearly established the fact that withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group. In respect to the above, statement of Shri Mukesh Banka, Key person of Banka Group recorded u/s 131 & 132(4) of the Act, were placed on record. Based on those facts ld. AO noted that the company M/s Kalyankari Exports Pvt. Ltd. Rs. 31,00,056, Mangalvani Infrabuild Pvt. Ltd.

Rs. 20,50,055/-, Telequip Marketing Pvt. Ltd. Rs. 27,00,115/- were shell company of Kolkata based from which the assessee have taken accommodation entry in the nature of bogus unsecured loan and also paid commission and also claimed interest expenses in the return of income.

Considering that facts a show cause notice dated 27.03.2021 was issued to the assessee through which the assessee was asked to furnish explanation with establishing the creditworthiness and genuineness of these loan creditors on or before 30.03.2021 failing which it was proposed that the whole scheme would be treated as an attempt to introduce undisclosed income by way of bogus unsecured loans amounting to Rs. 84,26,026/- (78,50,000 (unsecured loan) + 196250 (commission) + 379776 (interest undisclosed income accordingly. In response to the above show cause, assessee filed his written submission on 19.04.2021 which was placed on record. The ld. AO noted that the written submission of the assessee has been duly consideration and not found acceptable for the reasons that:-

During the search in Banka Group, Kolkata, various documents were found wherein data of various shell companies recorded. On examination of the details and Balance sheets it is seen that above companies from whom the loans were taken by the assessee are declaring very low income or declared loss in their return of income filed for the year under consideration, which raised doubts about the creditworthiness of these companies which evident from the following data:-

1.

1. It has been claimed by the assessee that all these companies are having sufficient share capital and reserves & surpluses which can be verified from their Balance sheet filed by assessee. This contention of the assessee is considered but also not found satisfactory from the fact that all these companies have very nominal business activities during the year and merely engaged in providing loans. This fact clearly proves that this company is merely Jamakharchi company engaged in providing bogus accommodation entries in the shape of unsecured loans.

2. On perusal of the bank accounts provided by assessee, it is seen that prior to the issue of cheques to the assessee there are transfer entries of similar amounts, source of which is neither explained nor acceptable in the absence of necessary details.

3. Department has carried out investigations in case of various such type of Kolkatta based companies. Investigation revealed that these lender companies are of no means and had been filing income on very low or negligible income. The high value banking transactions could not be co- related with any actual or tangible business activity It was found that merely completing the paper formalities and using banking channels to route the money does not make these transactions ipso facto genuine. At best it qualifies them to be a paper/ shell companies attempting to cloak the accommodation entries as genuine business transactions. The modus operandi followed by all these companies is that they issued share capital at a large premium which is subscribed by other companies of similar nature. After receiving the funds, companies started distributing accommodation entries in the form of unsecured loans to various beneficiaries and assessee is one of such beneficiary who has received the unsecured loans from these DCIT vs. Sapna Karnani companies. It is also contended by the assessee that the loans were repaid in the year and thus real and genuine one, also not dissolve the assessee from its liability of establishing the creditworthiness of the loan creditors whose credentials are doubtful in view of the facts as narrated above. The assessee has failed to establish the creditworthiness and genuineness of the transactions made with these companies and as such assessee has failed to comply all the conditions as enumerated in section 68 of the Income tax Act, 1961 in respect to these loan transactions.

4. Taking all the facts into consideration, it is clear that unsecured loans received from the above Kolkatta based company is nothing but a sham transaction. It is also clear that above unsecured loan represents the unaccounted income of the assessee. It is clear that the assessee in connivance with a Jamakharchi tries to convert its unaccounted money under the grab of unsecured loans.

To support the above view the ld. AO relied upon the decision as referred I the assessment order and thereby he relying on the provision of section 68 of the Act ld. AO made the addition of Rs. 78,50,000/- being the amount of the loan taken by the assessee. Rs. 1,96,250/- being the amount of the commission calculated @ 2.5% of that loan amount. The interest on that amount so paid by the assessee and as claimed was also disallowed for an amount of Rs. 3,79,776/- and thereby he completed the assessment determining the income of the assessee at Rs. 85,00,486/-.

6. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

4.5 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the order, the report and the rejoinder submitted by the appellant. The contentions/submissions of the appellant are being discussed and decided as under:-

DCIT vs. Sapna Karnani The brief facts as per the assessment order are that a Search & Seizure action were conducted on 01.10.2018 in the case of "Karnani Group" Jaipur to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search. Notice u/s 153A of the IT Act, 1961 for this year was issued on 29.05.2019 and in compliance to the notice u/s 153A of the IT Act, 1961, return of income was e- filed on 25.06.2019 declaring total income of Rs.74,460/- for the year under consideration. Earlier the original return of income was e-filed u/s 139(1) of the Income tax Act, 1961 on 07.12.2013, declaring total income at Rs.74,460.

In the assessment order of the following additions have been made:-

Category of addition Amount (Rs.) Nature of addition Unexplained income u/s 68 78,50,000 Unsecured loans found explained and found as accommodation entries Undisclosed expenditure u/s 69C 1,96,250 Commission on acquiring accommodation entries for Bogus unsecured loan Unexplained interest expenditure 3,79,776 Interest expenses on such u/s 69C loan as claimed in ITR

On the issue of additions the learned AO has noted in the assessment order that during the course of assessment proceedings, it is noticed that the assessee has taken unsecured loan from the Kolkata based companies and the same has been repaid during the year under consideration. the search and seizure action were carried out on 21.05.2018 in the case of Banka Group, Kolkata. During the search and post search proceedings, it was noticed that various paper/shell companies controlled and managed by Sh. Mukesh Banka were identified. All these companies were categorically accepted by Sh. Mukesh Banka as paper/shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Following the lead as obtained from the statement of Sh. Mukesh Banka and the material seized during the course of search operation, the bank accounts of the paper/shell companies, controlled and managed by Sh. Mukesh Banka was requisitioned from respective banks and analyzed. On verification of the bank accounts of paper/shell companies of Banka group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogus unsecured loan or in other forms, from the paper/shell companies of Banka Group. Furthermore, the financial analysis of such paper/shell companies of Banka Group from which such beneficiaries have been identified, has been DCIT vs. Sapna Karnani carried out to ascertain their financial creditworthiness. From the above analysis, it was detected that (i) No profit accumulation in the company(s) across various financial year. (ii) No actual business done by the company(s) being zero turnover reported in various financial years. (iii) Most of the companies have shown income under the head 'Other income' which shows that these companies have no actual business activities and only getting interest income under the head 'other income' for providing bougs unsecured loan to different beneficiaries (iv) The admission of Sh. Mukesh Bank vide his statement recorded u/s 131 & 132(4) of the Income tax Act, 1961 on 30.05.2018 & 19.07.2018 that these companies are paper/shell companies, controlled and managed by Sh. Mukesh Bank. (v) The directions of these companies are dummy directors of Sh. Mukesh Banka as per the statement of Sh. Mukesh Banka recorded u/s 132(4) of the Income tax Act, 1961 on 19.07.2018. (vi) These companies were found to be non-existent as per enquiry made by the Director of Income Tax. More, during the course of analysis and examination of the bank statement of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various account of paper/shell companies of Sh. Mukesh Bank was clearly established and substantiated. These findings got further authenticated from the statements of Sh. Mukesh Banka regarding the pattern of cash withdrawals from his various companies. Huge withdrawal of cash from the bank accounts of paper/shell companies of Banks Group clearly established the fact that withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group. Further the learned AO has added the consequent commission payment expenditure and also consequently added back and disallowed the deduction of interest payment claimed by the appellant

In this ground of appeal the appellant has contended that a perusal of Page-3 of assessment order reveals that addition with respect to unsecured loans taken by the assessee has been prompted on the basis of a search and seizure action carried out at "Banka Group of Kolkata. The impugned addition u/s 68 was made in AY 2013-14, and the search was done on 01/10/2018, nearly five years after the appellant took out the loans. The entries were recorded in the appellant's accounts during the fiscal year 2012-13. The original return of income was filed on 07.12.2013, thus as on the date of search, time limit for issuance of notice u/s 143(2) was already expired and no scrutiny assessment was possible, in other words it was a concluded assessment

Appellant has also contended that during the course of search, no incriminating documents concerning these loans and relating to the assessee for impugned assessment year were found. It is important to note that the validity of DCIT vs. Sapna Karnani proceedings u/s 153A hinges critically on the presence of incriminating evidence obtained during a search. In the present case, it is essential to highlight that assessment year under question comes under the definition of concluded assessment, therefore, assessment is to be made strictly on the basis of incriminating material found during the course of search at the assessee. The information received from other source cannot be equated with material found in the course of search. The lack of incriminating material not only undermines the proceedings but also raises questions about the procedural fairness and integrity of the assessment process. Given the absence of any incriminating evidence discovered during the search, it is evident that the proceedings initiated u/s 153A are invalid and unjustified. Appellant has also relied upon judgement in the case of PCIT, Central-3 VsAbhisharBuildwell P Ltd in Civil Appeal No.6580 of 2021

From the notings in the assessment order as briefly discussed in the earlier paragraphs it is noted that prima facie the additions have been made on the basis of incriminating material unearthed during the course of search and seizure action Mukesh Banka group which took place before the search and seizure action of the appellant. Further in this regard a letter was issued to the learned AO calling for the incriminating material unearthed during the course of search and seizure action on the appellant with respect to the additions made in the assessment order under appeal. In this regard in the remand report the learned AO has stated as under:-

4 During the course of search, information was received from DDIT(Inv.) Unit-1(3), Vide his letter No. 6428 dated 18.12.2018. On perusal of the said information, it was noticed that assessee had taken unsecured loans from Kolkata based shell companies, which were detected in search of Banka Group, Kolkata and accordingly after considering the facts and issues discussed in the report of DDIT (Inv.), Kolkata, necessary additions were made. Thus, the incriminating material in the form of information disseminated by office of DDIT(Inv.), Unit-1(3), Kolkata is being forwarded for your kind perusal along with Statements of Shri Mukesh Banka (Key person of Banka Group) recorded during the course of search at Banka Group on 19.07.2018."

In response to the remand report rejoinder comments the appellant has submitted that a perusal of the remand report shows that information was received from DDIT (Inv.) Unit-1(3), Kolkata vide letter No.6428 dated 18.12.2018. Thus, this information was received subsequent to the search at assessee, which is 01.10.2018. Which means during the course of search, no such incriminating document or material was found. In the remand report, Ld.AO has stated tha incriminating document in the form of information disseminated by office of DDI (Inv.) Unit-1(3), Kolkata is being forwarded for your kind perusal along wit statements of Shri Banka. This implies that the only information Ld.AO is possession of is information received from Investigation Wing, Kolkata. Admitted such information was not found during the course of search at assessee. In view the above, it is clear that during the course of search, no incriminating documents material were found from the assessee. Subsequent to conclusion of search, some other information was received from Investigation Wing, Kolkata and considering same as incriminating in nature, additions has been made in the assessment proceedings concluded u/s 153A

As per the remand report the incriminating material is in the form of information disseminated by office of DDIT(Inv.), Unit-1(3), Kolkata along with Statements of ShriMukesh Banka. However this material was not found in the course of search and seizure action of the appellant and was received from DDIT(Inv.). Unit-1(3), Kolkata Accordingly, the addition in the assessment order is without basis of incriminating material unearthed during the search action on the appellant

In the judgement in the case of Principal Commissioner of Income-tax, Central-3 v. AbhisarBuildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)(24-04-2023], the Hon'ble Supreme Court in para 14 has held as under.-

"14. In view of the above and for the reasons stated above, is concluded as under (1).....

(ii)

(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns, and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabiated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961 However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved."

(emphasis supplied)

On the issue there is similar judgement of Hon'ble Supreme Court in the case of Deputy Commissioner of Income-tax v. U. K. Paints (Overseas) Ltd. [2023] 150 Maxmann.com 108 (SC)/[2023] 454 ITR 441 (SC)[25-04-2023] The judgement has been carefully considered. In para 1 and 3 the Hon'ble Supreme Court has held as under:-

1. In this batch of appeals, the assessments in case of each assessee were under section 153-C of the Income-tax Act, 1961 (for short, the Act'). As found by the High Court in none of the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of the matter, as such, the assessments under section 153-C of the Act are rightly set aside by the High Court However, Shri N Venkataraman, leamed ASG appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in the case of Pr. CIT v AbhisarBuildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC), more particularly, paragraphs 11 and 13, has prayed to observe that the Revenue may be permitted to initiate re-assessment proceedings under section 147/148 of the Act as in the aforesaid decision, the powers of the re-assessment of the Revenue even in case of the block assessment under section 153-A of the Act have been saved.

3. However, so far as the prayer made on behalf of the Revenue to permit them to initiate the reassessment proceedings is concemed, it is observed that it will be open for the Revenue to initiate the re-assessment proceedings in accordance with law and if it is permissible under the law.

(emphasis supplied)

In para 11 of the order in case of Principal Commissioner of Income-tax, Central-3 v. AbhisarBuildwell (P.) Ltd. (Supra), the Hon'ble Supreme Court inter-alia has held as under:-

“11. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy.

Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy."

DCIT vs. Sapna Karnani The assessment order and submissions of the appellant in the appeal and the remand report on the issue and the rejoinder reply of the appellant on the remand report, all have been duly and carefully considered. Neither in the assessment order nor in the remand report there is any reference to incriminating material unearthed during the course of search and seizure action in the case of the assessee appellant for the year under appeal w.r.t. the addition made in the assessment order. There was no pending/abated assessment on the date search and seizure action took place and the time to issue notice u/s 143(2) of the Act had expired already.

Accordingly, the judgement of Hon'ble Supreme Court in the case of AbhisarBuildwell (supra) and U. K. Paints (supra) are squarely applicable to the facts of the case. Accordingly, following the judgment of honorable Supreme Court it is held that the Id. AO rightly issued notices u/s 153A of the Act and at the same time the impugned addition made in assessment order u/s 153A cannot be sustained and is hereby deleted as the same is without basis of incriminating material unearthed during the search action on the appellant and ordinarily the impugned addition could have been done by the learned assessing officer in re- assessment proceedings by issuance of notice under section 147/148 and a direction would have been issued to the Id. AO is directed to take necessary action in this regard for issuance of notice u/s 148 of the Act in accordance with section 150 of the Act. However in the present case the action should have been taken u/s 153C of the Act and not u/s 148 of the Act, in view of the ratio of the judgements of Hon'ble High Court in the cases of Shyam Sunder Khandelwal v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 255 (Rajasthan) [19-03-2024] and Tirupati Construction Company v. Income-tax Officer [2024] 165 taxmann.com 176 (Rajasthan)/[2024] 465 ITR 611 (Rajasthan)[21-03 2024].

It is held in the case of Shyam Sunder Khandelwal v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 255 (Rajasthan) [19-03-2024] as under:-

32 The argument that Section 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise Section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassessee the total income It is not obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But 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.

Further, in the case of Tirupati Construction Company v. Income-tax Officer [2024] 165 taxmann.com 176 (Rajasthan)/[2024] 465 ITR 611 (Rajasthan) [21-03 2024] it is held by the Hon'ble Rajasthan High Court as under:-

14. In view of above, it is clear that the entire basis for reopening the assessment is nothing but the material and information collected during search conducted in the premises of another assessee Collection of details relating to search would not mean collection of new incriminating material and information, independent of the incriminating material and information collected during search proceedings

15 Learned counsel for the petitioner is correct in submitting that in fact search was carried out in the year 2016 and the respondents had the authority to reopen the assessment by invoking the powers under section 1530 of the Act of 1961 and draw reassessment proceedings under section 1534 of the Act of 1961 That was not done within the period of limitation prescribed under section 153B of the Act of 1961. The respondent authority was fully aware of the fact that proceedings under section 153C of the Act of 1961 would be barred by limitation, therefore, recourse was taken to the provisions contained in Section 148 and Section 148A of the Act of 1961 which has no application in the present cases.

DCIT vs. Sapna Karnani 16. Learned counsel for the revenue does not dispute the legal position that where the basis for reassessment is incriminating material and information collected during search, the only legally permissible course of action is the one provided under section 153C of the Act of 1961 and not under section 148 of the Act of 1961. Admittedly, present are not the cases where search was carried out after 1-4-2021, ie, after coming into force the Finance Act, 2021. Present are the cases of search of prior period.”

As per the ratio of the above judgement in the case of Tirupati Construction (supra). collection of further additional details relating to search would not mean collection of new incriminating material and information, independent of the incriminating material and information collected during search proceedings. Respectfully following the judgement of Hon'ble High Court, the right course of action for the AO of the searched assessee and AO of the appellant would have been to take action as per section 153C of the Act. In the judgement of Hon'ble High Court in the case of Shyam Sunder Khandelwal (supra), it has also been held that "However, the respondents shall be at liberty to proceed against the petitioners in accordance with law". In view of the totality of the facts and circumstances and the applicable law and the ratio of the judgements, in the present case, the Id. AOs of the searched person and of the appellant shall proceed as per section 153C of the Act in accordance with law after independent examination and recording of satisfaction as required as per this section.

This ground of appeal is adjudicated in above terms and is treated as allowed for statistical purposes.

5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

In the earlier part of this order it has already been held that the additions done by the learned assessing officer in the assessment order are not sustainable on the technical ground that the addition is not based on any incriminating material unearthed during the search and seizure action on the appellant. Since the additions do not survive on technical ground, the other grounds of appeal on the merits of such addition are rendered only academic and do not warrant detailed adjudication. In view of this discussion, the subject grounds of appeal raised by the appellant are treated as disposed off.

6.1 The ground is general in nature. The grounds are pre-mature as these are against mere initiation of penalty proceedings. Penalty proceedings are DCIT vs. Sapna Karnani independent proceedings and the appellant is required to make his submissions before the appropriate authority during the penalty proceedings. Accordingly, the ground of appeal raised by the appellant on this issue is treated as disposed off.

7. Ground of Appeal No. 6 is as under:

Ground No. 6: That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing.

7.1 The appellant has not added and altered any of the above mentioned ground of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off.

8. In the result, the appeal of the appellant is allowed.

7. Feeling dissatisfied with the finding so recorded herein above in the order of the ld. CIT(A), revenue preferred the present appeal on the grounds as raised herein above contending that the ld. CIT(A) was not justified in directing the ld. AO to delete the addition so made which are based on the detailed investigation carried out by the revenue while conducing search at the premises of Shri Mukesh Banka who accepted that he was operating various shell companies for arranging the bogus loan or entry to the various assessee and the assessee was in benefit of the entry taken from such shell companies as operated by Shri Mukesh Banka and therefore, ld. DR supported the finding recorded in the assessment order and prayed that the considering the reasons recorded in the order of the restored.

8. On the other hand, ld. AR of the assessee supported the finding recorded in the order of the ld. CIT(A). He also in furtherance the contention so raised also filed a detailed written submission before us which reads as under:

2. During the assessment proceedings, it was noticed that the assessee had taken unsecured loans from certain entities as listed in the AO`s order, which allegedly belonged to “Banka Group, Kolkata”, which was subject to search operation u/s 132(4) of the Act on 21.05.2018.

Assessment Year Returned Income Assessed Income 2013-14 74,460 85,00,490 2014-15 11,11,400 50,30,320 2016-17 5,31,550 56,56,550 2017-18 11,27,400 42,02,400

6. Being severely, assessee preferred an appeal before CIT(A)-4, Jaipur, who vide its order dated 21.02.2025, quashed the assessment order passed u/s 153A, thereby deleting the additions. However, while deciding the appeal, Ld.CIT(A) had issued the following directions to AO to take action u/s 153C of the Act, against which assessee has preferred a cross objection.

Written Submissions on appeal of Revenue: No valid Jurisdiction u/s 153A: 1 The impugned addition u/s 68 was made in AY 2013-14, 2014-15, 2016- 17 and 2017-18 and the search was done on 01/10/2018, nearly five years after the appellant took out the loans. The entries were recorded in the appellant's accounts during the fiscal year 2012-13 and as on the date of search, time limit for issuance of notice u/s 143(2) was already expired in all the assessment years and no scrutiny assessment was possible, in other words it these were concluded assessments.

2 A perusal of the assessment order clearly shows that during the course of search, no incriminating documents concerning these loans and relating to the assessee for impugned assessment year were found. It is important to note that the validity of proceedings u/s 153A hinges critically on the presence of incriminating evidence obtained during a search. In the present case, it is essential to highlight that assessment year under question comes under the definition of concluded assessment, therefore, assessment is to be made strictly on the basis of incriminating material found during the course of search at the assessee. The information received from other source cannot be equated with material found in the course of search. Therefore, being the concluded assessment, addition on the basis of information received from other source is not permissible as the same is not falling under the category of incriminating material found during the course of search at the assessee. .This absence of incriminating evidence fundamentally undermines the jurisdictional basis for proceeding under Section 153A and resultantly the addition so made deserves to be deleted in full.

3 The issue, whether any incrimination material was found during the course of search or not was duly investigated by Ld.CIT(A) by calling a remand report from Ld.AO and Ld.AO vide its remand report dated 03.02.2025, with respect to the incriminating material found, stated as under:

4 Thus, it is evident that, during the course of search, no such incriminating Thus, it is evident that, during the course of search, no such incriminating Thus, it is evident that, during the course of search, no such incriminating material was found. In t material was found. In this regards, Ld.CIT(A) has also given a categorical finding his regards, Ld.CIT(A) has also given a categorical finding at Page-27, which is being relied upon and reproduced hereunder: 27, which is being relied upon and reproduced hereunder: 27, which is being relied upon and reproduced hereunder:

“In response to the remand report in the rejoinder comments the appellant has “In response to the remand report in the rejoinder comments the appellant has “In response to the remand report in the rejoinder comments the appellant has submitted that a perusal of the remand report shows submitted that a perusal of the remand report shows that information was that information was received from DDIT (Inv.) Unit received from DDIT (Inv.) Unit-1(3), Kolkata vide letter No.6428 dated 1(3), Kolkata vide letter No.6428 dated 18.12.2018. Thus, this information was received subsequent to the search at 18.12.2018. Thus, this information was received subsequent to the search at 18.12.2018. Thus, this information was received subsequent to the search at assessee, which is 01.10.2018. Which means during the course of search, no assessee, which is 01.10.2018. Which means during the course of search, no assessee, which is 01.10.2018. Which means during the course of search, no such incriminating document or material was found. In the remand report, Ld.AO ating document or material was found. In the remand report, Ld.AO ating document or material was found. In the remand report, Ld.AO has stated that incriminating document in the form of information disseminated by has stated that incriminating document in the form of information disseminated by has stated that incriminating document in the form of information disseminated by office of DDIT (Inv.) Unit office of DDIT (Inv.) Unit-1(3), Kolkata is being forwarded for your kind perusal 1(3), Kolkata is being forwarded for your kind perusal along with statements of S along with statements of Shri Banka. This implies that the only information Ld.AO hri Banka. This implies that the only information Ld.AO is in possession of is information received from Investigation Wing, Kolkata. is in possession of is information received from Investigation Wing, Kolkata. is in possession of is information received from Investigation Wing, Kolkata. Admittedly such information was not found during the course of search at Admittedly such information was not found during the course of search at Admittedly such information was not found during the course of search at assessee. In view of the above, it is clear that assessee. In view of the above, it is clear that during the course of search, no during the course of search, no incriminating documents or material were found from the assessee. Subsequent incriminating documents or material were found from the assessee. Subsequent incriminating documents or material were found from the assessee. Subsequent to conclusion of search, some other information was received from Investigation to conclusion of search, some other information was received from Investigation to conclusion of search, some other information was received from Investigation Wing, Kolkata and considering the same as incriminating in nature, Wing, Kolkata and considering the same as incriminating in nature, Wing, Kolkata and considering the same as incriminating in nature, additions has been made in the assessment proceedings concluded u/s 153A. been made in the assessment proceedings concluded u/s 153A. been made in the assessment proceedings concluded u/s 153A.

As per the remand report the incriminating material is in the form of information As per the remand report the incriminating material is in the form of information As per the remand report the incriminating material is in the form of information disseminated by office of DDIT(Inv.), Unit disseminated by office of DDIT(Inv.), Unit-1(3), Kolkata along with Statements of 1(3), Kolkata along with Statements of ShriMukesh Banka. However this material was not found in the course of search However this material was not found in the course of search and seizure action of the appellant and was received from DDIT(Inv.), Unit and seizure action of the appellant and was received from DDIT(Inv.), Unit and seizure action of the appellant and was received from DDIT(Inv.), Unit-1(3), Kolkata. Accordingly, the addition in the assessment order is without basis of Kolkata. Accordingly, the addition in the assessment order is without basis of Kolkata. Accordingly, the addition in the assessment order is without basis of incriminating material unearthed du incriminating material unearthed during the search action on the appellant” ring the search action on the appellant”

DCIT vs. Sapna Karnani 5 The ruling in CIT v. Kalpataru Colours and Chemicals, (2010) 328 ITR 451 (Bom), is particularly instructive in this context. The Bombay High Court held that for assessments made u/s 153A to be valid, they must be based on material that has been specifically unearthed during the search on assessee. The court emphasized that the absence of any incriminating evidence negates the justification for conducting assessments under this section.

6 In the present case, the search did not yield any incriminating material. Therefore, the case of assessee is squarely covered by the decision of Apex Court in the case of PCIT, Central-3 Vs Abhishar Buildwell P Ltd in Civil Appeal No.6580 of 2021 vide order dated 24.04.2023 holding as under: “iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. ”

7 With these uncontested facts and established principles of law in mind, it is abundantly evident that an abated assessment cannot be reopened u/S.153A if no incriminating material for the relevant assessment year is found during the course of search, thus order passed u/s 153A is erroneous, bad in law and rightly quashed by CIT(A) vide order dated 21.02.2025 by holding as under:

“The assessment order and submissions of the appellant in the appeal and the remand report on the issue and the rejoinder reply of the appellant on the remand report, all have been duly and carefully considered. Neither in the assessment order nor in the remand report there is any reference to incriminating material unearthed during the course of search and seizure action in the case of the assesse appellant for the year under appeal w.r.t. the addition made in the assessment order. There was no pending/abated assessment on the date search and seizure action took place and the time to issue notice u/s 143(2) of the Act had expired already

Accordingly, the judgement of Hon’ble Supreme Court in the case of AbhisarBuildwell (supra) and U. K. Paints (supra) are squarely applicable to the facts of the case. Accordingly, following the judgment of honorable Supreme Court it is held that the ld. AO rightly issued notices u/s 153A of the Act and at the same time the impugned addition made in assessment order u/s 153A cannot be sustained and is hereby deleted as the same is without basis of incriminating material unearthed during the search action on the appellant and ordinarily the impugned addition could have been done by the learned assessing officer in re- DCIT vs. Sapna Karnani assessment proceedings by issuance of notice under section 147/148 and a direction would have been issued to the ld. AO is directed to take necessary action in this regard for issuance of notice u/s 148 of the Act in accordance with section 150 of the Act. However in the present case the action should have been taken u/s 153C of the Act and not u/s 148 of the Act, in view of the ratio of the judgements of Hon’ble High Court in the cases of Shyam Sunder Khandelwal v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 255 (Rajasthan)[19-03-2024] and Tirupati Construction Company v. Income-tax Officer [2024] 165 taxmann.com 176 (Rajasthan)/[2024] 465 ITR 611 (Rajasthan)[21-03 2024].

It is held in the case of Shyam Sunder Khandelwal v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 255 (Rajasthan)[19-03-2024] as under: ****** Further, in the case of Tirupati Construction Company v. Income-tax Officer [2024] 165 taxmann.com 176 (Rajasthan)/[2024] 465 ITR 611 (Rajasthan)[21-03 2024] it is held by the Hon’ble Rajasthan High Court as under ********

As per the ratio of the above judgement in the case of Tirupati Construction (supra), collection of further additional details relating to search would not mean collection of new incriminating material and information, independent of the incriminating material and information collected during search proceedings. Respectfully following the judgement of Hon’ble High Court, the right course of action for the AO of the searched assessee and AO of the appellant would have been to take action as per section 153C of the Act. In the judgement of Hon’ble High Court in the case of Shyam Sunder Khandelwal (supra), it has also been held that “However, the respondents shall be at liberty to proceed against the petitioners in accordance with law”. In view of the totality of the facts and circumstances and the applicable law and the ratio of the judgements, in the present case, the ld. AOs of the searched person and of the appellant shall proceed as per section 153C of the Act in accordance with law after independent examination and recording of satisfaction as required as per this section. This ground of appeal is adjudicated in above terms and is treated as allowed for statistical purposes. ”

8 The following judicial pronouncements elucidate this principle: i. The Hon’ble High court of Delhi in the case of PCIT Vs Bhadani Financiers Pvt. Ltd. (Delhi High Court) [ITA 81/2020] on 09/09/2021 held that “Completed assessments could be interfered with by AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. No addition could be made under Section 153A as the cases of respondents were of DCIT vs. Sapna Karnani non-abated assessments. Held: Revenue contended that ITAT had erred in confirming the orders of CIT (Appeal) and directing AO to delete the additions made under Section 68 on account of unexplained credits and under Section 69C on account of unexplained expenses. Revenue further contended that incriminating documents or materials had been found during the course of the searches and consequently by virtue of Section 153A, AO had to assess the total income of six years under Section 153A. Since the assessments were not completed under Section 143(3), consequently, prior to the date of search i.e. 18th June, 2013, the assessment of the respondents had not attained finality and ITAT had erred in restricting the applicability of the section u/s 153A in respect of completed assessment, only to undisclosed income and assets detected during search u/s 132. It was held that in the case of CIT vs Kabul Chawla, (2016) 380 ITR 573, the Court held that the completed assessments could be interfered with by AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Since assessment of the respondents had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search. Consequently, no addition could be made under Section 153A as the cases of respondents were of non-abated assessments.” ii. The Hon’ble Supreme Court Of India in the case of Principal Commissioner of Income-tax v. Gaurav Arora [2021] 133 taxmann.com 293 (SC) on 17.09.2021 held that “Notice issued in SLP against order of High Court holding that completed assessments can be interfered with by Assessing Officer while making assessment under section 153A only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment and since there was no incriminating material or facts/circumstances justifying additions made under section 2(22)(e), Tribunal was justified in deleting addition. After hearing counsel for the parties and considering the grounds urged in support of the Revenue's appeal, this Court is of the opinion that there is no infirmity with the decision of the ITAT. In Kabul Chawla (supra), the Court had clearly indicated that the AO cannot arbitrarily complete the block assessment under section 153A without any relevance or nexus with the seized material. The Court also held that an assessment in such circumstances has to be made under the provision only on the basis of seized material. Furthermore, it was held that in the absence of any incriminating material, the completed assessment can be reiterated and abetted assessment or re-assessment can be made. In the present case, the Revenue does not urge that it discovered any new material justifying the addition under section 2(22)(e). Rather, there was no material to connect the additions made under that head. Clearly, there was no incriminating material or facts and circumstances justifying the addition of Rs.17,19,14,701/- .” iii. The Hon’ble Delhi High Court in the case of Pr. CIT Vs Meeta Gutgutia Prop. Ferns ‘N’ Petals [2017] 395 ITR 526 (Del) : 152 DTR 153 (Del) held “that it is only if during the course of search under section 132, incriminating material justifying the reopening of the assessments for six previous years is found that the invocation of section 153A qua each of the assessment years would be justified. If no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under sections 153A / 153C. It was also held in this case that section 153A is titled “Assessment in the case of search or requisition”. It is connected to section 132, which deals with “search and seizure”. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to reopen at least six years of preceding assessment year of search. It is not to be exercised lightly. It is only if during the course of search under section 132, incriminating material justifying the reopening of the assessments for six previous years is found that the invocation of section 153A qua each of the assessment year would be justified. If no incriminating material was found during the course of search in respect of an issue, then no additions in respect of such an issue can be made to the total income in the assessment under sections 153A and 153C of the Act.” iv. The Hon’ble Delhi High Court in the case of PCIT (Central) vs Agson Global Pvt Ltd “dismissed a bunch of appeals against deletion of addition u/s 68 towards Share capital/ share premium, bogus purchases and deposit in bank account vide judgment delivered on 19.01.2022. It has held that where the ITAT decided the matter based on appreciation of evidences placed on record and the order of ITAT not being challenged on ground of perversity, no substantial question of law arises. It also held that the investigation wing directed the A O to frame the assessment in a manner that would protect the revenue’s interest. The A O performs a quasi-judicial function while framing an assessment. The revenue cannot dictate the manner, in which, the AO frames the assessment order. The Tribunal records a finding of fact that “no unaccounted income of the assessee” had been introduced in its books of accounts in the form of share capital. Based on this, the Tribunal concluded that there was “no confession” made by Mr Arpesh Garg that unaccounted income had been introduced by the assessee in the form of share capital. Therefore, according to the Tribunal, the statement made under Section 132(4) of the Act did not constitute incriminating material. the Tribunal concluded that the assessee had been able to prove the identity of the investors, their creditworthiness and genuineness, which are the ingredients of Section 68 of the Act. The relevant observations made in paragraph 86 by the Tribunal read as follows : 86. Considering the facts of the case in the light of material on record in voluminous paper books and confirmations of the parties and the summary of transfer of funds reproduced above, it is clear that assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share DCIT vs. Sapna Karnani capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of Section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. We may also note that during the course of hearing of these appeals, A.O. was present in the Court, but, did not make any adverse comment upon the documentary evidences filed in the paper book filed by the assessee. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Companies and the assessee company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties. Considering the totality of the facts and circumstances of the case and material on record, we are of the view that assessee has been able to prove that it has received genuine amounts which is routed through various companies. Therefore, there was no justification to make any addition under section 68 of the I.T. Act. The moot point which the Tribunal, thus, dealt with, as noted by us hereinabove, was- that as long as there was no material on record which established that unaccounted money (i.e., income generated which was not recorded in the books of accounts) had been funnelled in the form of investment by way of share capital/share premium, it could not be made the basis for making addition under Section 68 of the Act.”

9. As far as merits of the case are concerned, it is important to note that extensive details with respect to each borrower were submitted before ld.AO as well as Ld.CIT(A), which were examined in detail by Ld.CIT(A), however since the issue was already answered in favour of assessee on legal ground, therefore, no detailed adjudication was given, however, it is important to note that the facts of the case along with findings of Ld.AO and details submitted in respect of each borrower were checked in detail. Below details were submitted before CIT(A) in respect of borrowing so made to prove identity, creditworthiness and genuineness:

10. Initial Onus Discharged:

At the outset, it is submitted that S.68 mandates that if any sum is credited in the books of an assessee, and the explanation regarding its nature and source is either not provided or deemed unsatisfactory by the AO, then such sum may be treated as income of the assessee for that previous year.

In this case, the assessee has provided comprehensive documentation, including PAN details, Complete addresses, confirmations of accounts, audited financial statements, and confirmations from lenders. All documents included the complete addresses and PAN numbers of the lenders. Furthermore, all lenders confirmed DCIT vs. Sapna Karnani the balances reported in the assessee’s accounts. The assessee also demonstrated repayment of the loans during the assessment year and in subsequent years. Hence, the evidence presented clearly satisfies the requirements of Sec.68.

11. Establishing Key Elements: Identity Established: 11.1 During the year under consideration, the identity of the lenders has been clearly established through comprehensive documentation such as Confirmations, PAN, Forms filed with the ROC, Audited Financial Statement.

11.2 From the PAN details provided, the AO could have obtain the ITRs of the lenders through the Income Tax Portal, which offers a comprehensive database of taxpayer information, including complete names, addresses, and other pertinent details. This access to official records allows for a thorough corroboration of the lenders' identities with credible sources, reinforcing the assertion of their existence. However, the AO failed to discharge the onus that lay upon him to substantiate any doubts regarding the authenticity of these lenders. Rather than providing evidence to dispute their legitimacy, the AO's conclusions were based on mere reiteration of investigation wing report, which was never provided to the assessee.

11.3 This comprehensive establishment of lender identities is underscored by the ruling of the Rajasthan High Court in Ramesh Chandra Daga v. State of Rajasthan, (2002) 246 ITR 370. In this landmark decision, the court emphasized the critical nature of establishing the identity of creditors to fulfill the requirements stipulated u/s 68. The court ruled that without concrete evidence to establish the identities of the creditors, any addition to the income of the assessee based on unexplained cash credits is unwarranted.

11.4 Moreover, in the Supreme Court decision of CIT v. Lovely Exports (P) Ltd., (2008) 216 CTR (SC) 195, the court clarified that once the identities of creditors are established and the loans are received through banking channels, the onus shifts to the revenue to disprove the authenticity of the transactions. The court held that it is not sufficient for the AO to merely question the legitimacy of the lenders without providing evidence to substantiate such claims.

12. Genuineness of Transactions: 12.1 The transactions in question were characterized by clear, traceable flows of funds received and repaid exclusively through recognized banking channels. All relevant amounts were documented as having been transferred via cheques or bank transfers, ensuring a transparent audit trail. Importantly, these loans were duly repaid in subsequent years. This factor is pivotal in establishing the genuineness of the transactions, as it reflects a legitimate business practice rather than an attempt to camouflage undisclosed income.

DCIT vs. Sapna Karnani 12.2 The importance of conducting transactions through banking channels is underscored by the Supreme Court in the landmark case CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC). In this ruling, the Court affirmed that transactions that are executed through formal banking channels can be regarded as genuine, provided that there is a clear record of such transactions. The judgment elucidates that the mere existence of a transaction in the books of accounts, supported by bank statements, is sufficient to establish its legitimacy.

12.3 Moreover, the AO's conclusion to disregard these banking transactions does not align with the established judicial precedent. The AO has not provided any contrary evidence or reasonable grounds to question the integrity of these transactions. In fact, the absence of outstanding balances coupled with the documentary evidence of repayments strengthens the position that these transactions were executed in good faith.

12.4 Furthermore, all relevant documentation, including confirmations, audited financials, forms submitted with ROC have been submitted for review. These documents substantiate that the transactions were not only genuine but also conducted in accordance with regulatory norms.

13. Capacity Proved: 13.1 The lenders, being regular taxpayers, demonstrate the capacity to extend loans to the assessee has been thoroughly demonstrated through a comprehensive review of their financial standing and taxpayer status. Each lender in this case is a regular taxpayer, actively filing ITRs and complying with all applicable tax obligations. This status not only affirms their legitimacy as lenders but also indicates their financial capability to provide the funds in question.

Crucially, the funds were transferred from the lenders' respective bank accounts, which is a significant factor in establishing their capacity to lend.

13.2 The Income Tax Appellate Tribunal (ITAT) in Gopal Krishan v. ACIT, underscores this principle by affirming that when the source of funds can be traced back to the bank accounts of the lenders, the onus of proving their capacity to lend is sufficiently met. In this case, the Tribunal recognized that the mere existence of funds in the bank accounts, along with the lenders' status as taxpayers, is adequate to establish their capacity to provide loans.

13.3 In addition to the above, the assessee also provided Audited Financial Statements, Confirmations etc. Given this substantial body of evidence, it is clear that the lenders possess both the identity and financial capacity to extend the loans to the assessee. The AO's assertion of the lenders' incapacity is unsubstantiated and does not align with the presented documentation. Therefore,

14. Lender-wise Submissions: It is further submitted that the AO alleged that the assesse failed to prove all the three limbs of S.68 satisfactorily i.e. identity, genuineness and credit worthiness. Therefore, the said transactions are bogus and are unexplained income under the provisions of S.68. However, the allegation made by the AO is contrary to the facts available on record in as much as the assessee explained each and every point raised by the AO, providing detailed explanations and supporting documentation. Everstrong Enclave Pvt. Ltd: The loan was taken from this lender initially in AY 2014-15 (totalling to Rs.35,00,000) and certain more amounts in AY 2016-17 (totalling to Rs. 50,00,000) and AY 2017-18 (totalling to Rs.30,00,000). These amounts got repaid as Rs.50,00,000/- in AY 2017-18 and Rs.30,00,000/- in AY 2018-19 and after that closing balance of unsecured loan taken from said lender stood at Rs.36,06,767 (including interest) as on 31.03.2018. In this regards, copy of confirmations of accounts for AY 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 was submitted before Ld.AO. The said confirmations of accounts are containing PAN details as well as full address of the lender to prove its identity and genuineness. To further prove the identity of lender company, copy of Form-INC-22 filed with Ministry of Corporate Affairs was also filed. Moreover, the compliance certificate filed with ROC for the period ending on 31.03.2014 (AY 2014-15) were also filed. The aforesaid documents are establishing the identity and genuineness of lender beyond any doubt and duly admitted by Ld.AO without recording anything contrary. To substantiate the credit worthiness of the company, Balance Sheet filed with Registrar of Companies in the Form-23AC for AY 2014-15 was submitted before Ld.AO. A perusal of the same would reveal that the company is having huge reserves and surpluses of Rs.19,74,71,423/ whereas during the year the amount of loan given to the assessee company was mere Rs.50,00,000/- only. Thus, looking at the reserves and surpluses of the company, there cannot be any doubt that the lender company was in a position to given loan of Rs.50,00,000/-. In view of these facts and circumstances, the identity, and creditworthiness of the lender company and geniuneness of transaction is well established and resultantly the addition made for the same may kindly be deleted in full. Kalyankari Exports P Ltd: From the said lender, an amount of Rs.31,00,000/- was taken in AY 2013-14. The amount got repaid along with interest in AY 2014-15 (Rs.1,47,781) and AY 2015-16 (Rs. 31,00,000/-). The copy of confirmations of accounts for AY 2013- 14, 2014-15 and 2015-16 containing relevant details was submitted before Ld.AO to prove the identity and genuineness of lender. To further prove the identity of lender company, copy of Form-INC-22 filed with Ministry of Corporate Affairs was filed.

DCIT vs. Sapna Karnani Subsequent to the incorporation, change in address of the company was also intimated to ROC vide INC-22. Copy of the same was also submitted before Ld.AO, thus the former address as well as the current address of the company was well within the knowledge of AO to make the verification.

To substantiate the credit worthiness of the company, Balance Sheet filed with Registrar of Companies in the Form-23AC for the period ending on 31.03.2013 (AY 2013-14) was filed. A perusal of the same would reveal that the company is having huge reserves and surpluses of Rs.11,25,34,689/ whereas during the year the amount of loan given to the assessee company was mere Rs.31,00,000/- only. Thus, looking at the reserves and surplus of the company there cannot be any doubt that the lender company was in a position to given loan of Rs.31,00,000/-.

More importantly, the lender company has been assessed u/s 143(3) for AY 2012-13, wherein the total income of the company has been assessed at Rs.4,71,00,235/-. Thus, once department itself has admitted that total income of the lender company for the preceding assessment year has been Rs.4,71,00,235/-, identity and creditworthiness of the lender stood established.

In view of these facts and circumstances, the identity, and creditworthiness of the lender company and genuineness of transaction is well established and resultantly the addition made for the same may kindly be deleted in full. Mangalvani Infrabuild P Ltd: (a) From the said lender, an amount of Rs.20,50,000/- was taken in AY 2013- 14. The amount got repaid along with interest in AY 2014-15 (Rs.97,726) and AY 2015-16 (Rs. 20,50,000/-). The copy of confirmations of accounts containing relevant was submitted before Ld.AO to prove the identity and genuineness of lender, which was duly admitted without recording anything contrary.

(b) To substantiate the credit worthiness of the company, Balance Sheet filed with Registrar of Companies in the Form-23AC for the period ending on 31.03.2013 (AY 2013-14) was also filed. A perusal of the same would reveal that the company is having huge reserves and surpluses of Rs.13,03,38,767/ whereas, during the year the amount of loan given to the assessee company was mere Rs.20,50,000/- only. Thus, looking at the reserves and surplus of the company there cannot be any doubt that the lender company was in a position to given loan of Rs.20,50,000/-.

(c) In view of these facts and circumstances, the identity, and creditworthiness of the lender company and geniuneness of transaction is well established and resultantly the addition so made by Ld.AO may kindly be deleted. Telequip Marketing Pvt. Ltd:

DCIT vs. Sapna Karnani (a) The loan was taken from this lender in AY 2013-14 (totalling to Rs.27,00,000). The said amount was repaid along with interest as Rs.1,34,269/- in AY 2014-15 and Rs.27,00,000/- in AY 2015-16. Thus, the entire amount has been repaid in AY 2015-16 itself. In this regard, copy of confirmations of accounts for AY 2013-14, 2014-15 and 2015-16 was submitted before Ld. AO. The said confirmations of accounts are containing PAN details as well as full address of the lender to prove its identity and genuineness.

(b) To further prove the identity of lender company, copy of Form-INC-22 filed with Ministry of Corporate Affairs was also filed.

(c) To substantiate the credit worthiness of the company, Balance Sheet filed with Registrar of Companies in the Form-23AC for the period ending on 31.03.2013 (AY 2013-14) was submitted. A perusal of the same would reveal that the company is having huge reserves and surpluses of Rs.9,84,82,956/ whereas, during the year the amount of loan given to the assessee company was mere Rs.27,00,000/- only. Thus, looking at the reserves and surplus of the company there cannot be any doubt that the lender company was in a position to given loan of Rs.27,00,000/-.

(d) More importantly, the lender company has been assessed u/s 143(3) for AY 2012-13, wherein the total income of the company has been assessed at Rs.4,76,00,210/-. Thus, once department itself has admitted that total income of the lender company for the preceding assessment year has been Rs.4,76,00,210/-, identity and creditworthiness of the lender stood established.

(e) In view of these facts and circumstances, the identity, and creditworthiness of the lender company and geniuneness of transaction is well established and resultantly no addition for the same is warranted.

(f) Moreover, it is being bring into kind notice of your goodself that the amount of loans have been taken through banking channels and more importantly the certain loan amount have been repaid. The loan taken from Telequip Marketing Private Limited has been fully repaid. The loan of Rs. 20,50,000/- taken from Mangalvani Ifrabuild has also been fully repaid and only interest of Rs. 1,87,150/- is outstanding. Similarly, the loan of Rs.31,00,000/- taken from Kalyankarni Exports P Ltd has also been repaid. Further in case of loan of Rs.1,15,00,000/- taken from Everstrong Encalve P Ltd, the amount to the extent of Rs. 80,00,000/- has already been repaid. Under these facts and circumstances, once it is evident that the loan amounts have been repaid, no adverse inference may kindly be taken. In this regard we place our reliance on the decision of Hon’ble Delhi ITAT in the case of ITO Vs Habitat Infrastructure Limited in vide order dated 11.07.2019 holding as under: “In-fact, from the records it emerges that the unaccounted money as alleged by the Assessing Officer was the loan which was repaid subsequently by the DCIT vs. Sapna Karnani assessee. Therefore, there is no need to interfere with the findings of the CIT(A). The appeal of the Revenue is dismissed.” The aforementioned information clearly sums up as to how all the 3 elements of a transaction i.e identity of the creditors, genuineness of the transaction and the credit-worthiness of said creditors have been sufficiently fulfilled by the appellant by providing all the requisite information and documents, and it is enough to establish that all of the transactions are bona fide and no addition can be made on account of classifying them as bogus loans in the absence of any evidence to call them so. If the AO had any doubt or suspicion regarding the lenders, he could have enquired from the banks as to how the money travelled to the appellant company's account, and any other information she believed was necessary in order to verify the veracity of the transactions. Nothing has been brought on record by the Ld. AO or CIT(A) to dispute the loan transactions of the appellant and yet, a huge addition was made in a routine and mechanical manner, which has been rightly deleted by CIT(A) looking into these evidences.

12. We wish to further emphasise that no cash or other incriminating evidence was uncovered during the search operations. Ld.AO has observed that it was assessee’s undisclosed income, which was brought in the garb of these loans, however, no such evidence was brought on record to show that assessee was having cash to this extent and at the time of repayment in subsequent years, assessee received the cash back. If the loans obtained by the appellant are believed to be fraudulent, there should have been proof of the appellant's corresponding undisclosed income that he attempted to route via this channels.

13. In keeping with the aforementioned grounds of submission, it is apparent beyond any reasonable doubt that the impugned additions u/S.68 and the order passed u/S.153A is bad in law, unjustified and is liable to be deleted, and the assessment order is liable to be quashed, and the same has rightly been quashed by Ld.CIT(A) vide its order dated 21.02.2025

Written Submissions with regard CO. 28,29,30 and 31/JPR/2025:

1. The appeal of the assessee was allowed by Ld.CIT(A) on technical ground but while allowing the appeal, he has directed the ld. AO to take the action u/s 153C of the Act by placing its reliance on the decision of Hon’ble Rajasthan High Court in the cases of Shyam Sunder Khandelwal v. Assistant Commissioner of Income- tax [2024] 161 taxmann.com 255 (Rajasthan)[19-03-2024] and Tirupati Construction Company v. Income-tax Officer [2024] 165 taxmann.com 176 (Rajasthan)/[2024] 465 ITR 611 (Rajasthan)[21-03 2024].

2. Direction given beyond jurisdiction: 2.1 The provisions concerning the jurisdiction and power of Ld.CIT(A)/JCIT(A) are contained in section 250 and 251 which reads as follows:

DCIT vs. Sapna Karnani 150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.

(2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or re computation may be taken.

(1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;]

(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit.

(1A) In disposing of an appeal, the Joint Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit.] DCIT vs. Sapna Karnani (2) The Joint Commissioner (Appeals) or the] Commissioner (Appeals), as the case may be,] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.

Explanation.—In disposing of an appeal, the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals), may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals) 72[, as the case may be,] by the appellant

2.2 A perusal of the above clearly shows that the power vested with Ld. CIT(A) are limited wherein he may confirm, reduce, enhance or annual the assessment, thus he has no power to issue directions to initiate a new assessment or reassessment for a different year or under a different provision.

2.3 The appellate jurisdiction is circumscribed by the assessment year under appeal and the issues arising out of the impugned assessment order. By issuing a direction to the Ld. AO to initiate the proceedings u/s 153C—whether for the very same year under an altogether different provision or for some other assessment year—the CIT(A) has travelled far beyond the scope of the appeal and has acted in excess of the powers expressly vested in him under Section 251 of the Act.

2.4 It is trite law that the jurisdiction and powers of the CIT(A) are creatures of the statute and strictly controlled by Section 251. Prior to the amendment of 2001, the CIT(A) was statutorily empowered to set aside assessments and remit matters back to the Assessing Officer in specified circumstances. However, with effect from 01.06.2001, the legislature, in its wisdom, consciously withdrew the “set-aside” powers, compelling the appellate authority to adjudicate appeals conclusively without remand. While a narrow and partial restoration of this power was made vide Finance Act (No.2) of 2024, effective 01.10.2024, it was confined exclusively to cases of best judgment assessments under Section 144. This careful legislative design leaves no manner of doubt that except in such limited cases, the CIT(A) cannot remand or direct reassessment.

2.5 Any direction beyond these statutory boundaries—particularly a mandate to initiate proceedings under Sections 153C—is wholly without authority of law. The appellate authority is bound to operate within the confines of Section 251, and any attempt to traverse beyond those limits renders the action ultra vires, void, and legally unsustainable.

2.6 In the present case, the conduct of the Ld. CIT(A) betrays an impermissible attempt to do indirectly what he is precluded from doing directly. Having himself deleted the addition made in the Section 153A proceedings, the CIT(A) has DCIT vs. Sapna Karnani sought to substitute a fresh route of taxation by way of Section 153C—a course of action that is entirely outside his jurisdiction under Sections 250/251.

2.7 Further, the present case of assessee squarely falls within the ratio of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (CLC 111-128) wherein Hon’ble Supreme Court underscored that the appellate provisions (Section 33(4) of the 1922 Act, analogous to Section 250/254 of the 1961 Act) do not confer on the appellate authority a power to make any direction on matters not arising in the appeal, especially as the Act provides separate mechanisms to deal with escaped income. Accordingly, the Apex Court held that:

“It was not contended, nor was it possible to contend, that by reason of the reference to the said provisions the powers and jurisdiction conferred on the respective authorities, tribunals or courts referred to therein were enlarged or modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions.”

2.8 In other words, a CIT(A) cannot broaden the scope of the appeal decision to “advise” or “compel” the AO to take actions in a different proceeding. Thus, applying these principles in the present case, the ld. CIT(A) was tasked with deciding whether the addition under Section 153A was sustainable given the specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue. By proceeding to direct the AO to consider re-opening under Section 147, the ld. CIT(A) acted ultra vires. This extraneous direction was not part of adjudicating the appeal but an attempt to influence future proceedings, which is beyond the scope of Section 250.

2.9 The power to issue directions in the manner exercised by the ld. CIT(A) in the present case is clearly unwarranted and impermissible under the scheme of Act. If such power to issue binding directions for assessment under Sections 153C read with Section 150 were to be vested in the hands of the CIT(A), it would lead to a situation where, irrespective of statutory time limits prescribed under Section 149 or any other provision the ld. AO could indefinitely reopen completed assessments.

2.10 In other words, any jurisdictional error committed by an AO in issuing a notice under a wrong section or due to incorrect invocation of powers could not be subsequently rectified through a direction from the ld. CIT(A) at any future point in time—without any statutory limitation whatsoever.

DCIT vs. Sapna Karnani 2.11 Therefore, the impugned direction not only exceeds statutory authority but also fundamentally undermines the core principles of certainty, finality, and predictability that form the bedrock of the taxation framework. Such construction is impermissible and must be struck down by the Hon’ble Tribunal.

2.12 In light of the detailed legal submissions hereinabove, it is most respectfully submitted that the direction issued by the ld. CIT(A) to initiate proceedings under Section 153C of the Act—by invoking Section 150 is ex-facie without jurisdiction, contrary to binding judicial precedent, and violative of the appellate framework under Sections 250/251 of the Act. It is therefore humbly prayed that this Hon’ble Tribunal, in exercise of its plenary powers under Section 254, be pleased to expunge/quash the said direction from the appellate order, and thereby uphold the relief granted to the assessee without permitting any overreach or illegal consequence to flow from an otherwise just appellate decision.

2.13 It is of utmost importance to underscore said direction has been given by relying upon the decision of Hon’ble High Rajasthan High Court given under the writ jurisdiction of Hon’ble High Court. It is respectfully submitted that the powers of the Learned Commissioner of Income Tax (Appeals) are circumscribed and confined strictly within the four corners of Section 251 of the Income Tax Act, 1961, whereas The Hon’ble High Courts, while exercising writ jurisdiction under Article 226/227 of the Constitution are empowered to issue directions, writs, and orders to subordinate authorities, including the Assessing Officer. Such plenary constitutional jurisdiction is not vested in the CIT(A).

2.14 It is important to refer the decision of Hon’ble Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra) and DCIT v. U.K. Paints (Overseas) Ltd. (supra)—wherein in the similar situations, the possibility of resorting to reassessment under Sections 147/148 (in cases where additions under Sections 153A/153C failed on account of absence of incriminating material) were expressly circumscribed by the Hon’ble Court itself.

The Apex Court categorically emphasised that such reassessment proceedings can only be undertaken subject to the rigorous fulfilment of the jurisdictional conditions and statutory safeguards prescribed under Sections 147 and 148 of the Act. This explicit caveat is not ornamental but a substantive rider, intended to ensure that the Assessing Officer independently applies his mind and scrupulously complies with all statutory preconditions before invoking reassessment.

2.15 Without prejudice the above and without admitting anything contrary, even otherwise, the direction of Ld.CIT(A) for initiating the proceedings u/s 153C of the act is beyond the limitation. The time limit for concluding the assessment u/s 153C is provided u/s 153B of the Act, which reads as follows:

DCIT vs. Sapna Karnani 153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,— (a) in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed: Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred to in clause (a) or clause (b) of this sub-section or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later: Provided further that in the case where the last of the authorisations for search under section 132 or for requisition under section 132A was executed during the financial year commencing on the 1st day of April, 2018,— (i) the provisions of clause (a) or clause (b) of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted; (ii) the period of limitation for making the assessment or reassessment in case of other person referred to in section 153C, shall be the period of eighteen months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed or twelve months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later:

2.16 In the instant case, the search at Banka Group was carried out on 19.07.2018 and relevant (any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A ) were handed over to the AO of appellant assessee vide Letter No.6428 dated 18.12.2018. Therefore, the assessment was required to be completed on or before 1st October 2020 (18 Months from end of 2019) or 31 March, 2020 whichever is later i.e. 1st October, 2020. However, despite passage of a significant time, neither any satisfaction has been recorded by AO of appellant nor there is any specific information the remand report or copy of report of investigation wing shared by AO. Thus, any action taken for initiating the proceedings u/s 153C is beyond the limitation and deserves to be quashed.

2.17 Even otherwise, the decision so relied upon by Ld.CIT(A) are completely distinguishable and does not apply in the given facts of the case on the following grounds:

(i) In those cases, the question to be decided before the Hon’ble Court was about the validity of action taken u/s 148 on the basis of material found during the course of search pertaining to person other than the person referred u/s 153A of the act. Therefore, the question was pertaining to validity of action u/s 148. However, in the instant case, the assessee himself is a person referred u/s 153A of the Act, therefore, Ld.AO was mandatorily required to complete the assessment u/s 153A.

(ii) Moreover, in that case, during the course of search at Manihar Group, details pertaining other persons were found in the form of various pen drives containing details of alleged unrecorded loans given, whereas in the case of assessee, Ld.AO has failed to bring any evidence to show that during the course of search at Banka Group, any material was found relating to the assessee.

(iii) It is further important to note that in the said judgement, Hon’ble High Court has not given any direction to proceed u/s 153C of the Act. Hon’ble Court at 50, Para-40, merely stated as under: “40. In view of above discussion the notices issued under Section 148 and the impugned orders are quashed. However, the respondents shall be at liberty to proceed against the petitioners in accordance with law.”

In view of the above finding, the observation of Ld.CIT(A), that proceedings are to be initiated u/s 153C is misconceived and under incorrect assumption of finding of Hon’ble Court.

2.18 Covered issue: The issue of assessee is squarely covered by the decision of Hon’ble Bench in the case of DCIT Vs Vaibhav Banka in vide order dated 08.07.2025 holding as under: “We also take note of the facts that CBDT’s instructions is an internal administrative directive intended solely for operational guidance of Assessing Officers. It attempts to clarify the post-Abhisar Buildwell (supra) reassessment landscape, specifically in situations where additions under Section 153A/153C were struck down due to absence of incriminating material. This administrative instructions are not binding on quasi-judicial authorities like the CIT(A). It is a settled principle of law, as held by the Hon’ble Supreme Court in UCO Bank v. CIT [(1999) 237 ITR 889 (SC)] (CLC 41-49), that CBDT circulars or instructions cannot override, supplement, or expand the scope of statutory provisions. Thus, taking shelter of Instruction No. 1/2023 as enabling or empowering appellate authorities to direct initiation of reassessment proceedings is a fundamental misapplication of the Instruction, which neither authorizes appellate intervention DCIT vs. Sapna Karnani in reassessment matters nor vests any such power in the ld. CIT(A). Even other wise the Instruction cannot substitute the independent statutory preconditions under Sections 147/148 read with Section 149, which provides the timelines for issuance of notice of reopening. Provision of such section must be satisfied by the ld. AO at any given point of time, when the jurisdiction is assumed for reopening a particular assessment year. Even the power vested with ld. CIT(A) are limited wherein he may i.) confirm, or ii.) reduce, or iii.) enhance, or iv.) annul the assessment;

Thus, he has no power to give any direction that what is prescribed in law. The issue related to the power of the commissioner of income has already been dealt with in a decision in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (CLC 111-128) wherein Hon’ble Supreme Court underscored that the appellate provisions (Section 33(4) of the 1922 Act, analogous to Section 250/254 of the 1961 Act) do not confer on the appellate authority a power to make any direction on matters not arising in the appeal, especially as the Act provides separate mechanisms (like Section 34 of 1922 Act, now Section 147) to deal with escaped income. Accordingly, the Apex Court held that;

“It was not contended, nor was it possible to contend, that by reason of the reference to the said provisions the powers and jurisdiction conferred on the respective authorities, tribunals or courts referred to therein were enlarged or modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions.”

We also take note that the apex court has dealt with the provision of section 150 i.e. Provision for cases where assessment is in pursuance of an order on appeal and section 149 i.e. Time limit for notices under section148 of the Act. While dealing with that provision the apex court in the case of K. M. Sharma Vs. Income Tax Officer [122 Taxmann 426 (SC) ] while dealing with the judgment of the land revenue case and thereby the reopening of the case has in detailed analysis the provision for cases where assessment is in pursuance of an order of an appeal and time limit. The relevant finding is reproduced in full because this will clarify the issue on hand with that of the case decided by apex court;

In this appeal, which is filed after obtaining special leave, the order dated 24-5 1996 of the Delhi High Court has been assailed. The main question involved is on the application and interpretation of the provisions of section 150 of the Income-tax Act, 1961 ('the Act'). The relevant facts necessary for deciding the legal question raised are as under : 1. The appellant's lands were acquired under section 6 of the Land Acquisition Act, 1894, and an award was passed on 2-12- DCIT vs. Sapna Karnani 1967 by the Chief Commissioner of Delhi granting compensation in favour of the appellant. The Additional District Judge by the judgment dated 20-5-1980 held the appellant entitled to 1/32 share of the compensation awarded under various awards and the appellant was granted total compensation in the sum of Rs. 1,18,810 approximately in the year 1981.

3. Since the lands acquired were agricultural lands and were acquired prior to 1-4 1970, capital gains tax was not leviable but tax was leviable on interest earned on the amount awarded on year to year basis.

4. The appellant through counsel sent a letter dated 17-9- 1993 informing the ITO that he had received interest amount of Rs. 76,84,829 and interest accrued from year to year was assessable in each year. Year-wise break up of the interest was also given in the letter. According to the appellant, no tax was leviable on interest accruing up to 31-3-1982 as assessment for it had become barred by time. The appellant, therefore, requested that necessary action be taken under section 147 of the Act to enable the appellant as assessee to file his income-tax return and pay tax accordingly.

7. The High Court by the impugned judgment accepted the contention of the department that the provisions of section 150(1) of the Act, as amended with effect from 1-4-1989, could be resorted to for reassessment to levy tax on the increased amount of interest earned by the appellant in the relevant assessment years. It was held that bar of limitation prescribed under section 149 of the Act was not attracted by virtue of the provisions of section 150(1) because notices for such reassessments are based on the awards passed in the land acquisition proceedings by the Court of the Additional District Judge on a reference under section 18 of the Land Acquisition Act. Upholding the validity of the assessment proceedings initiated by the department under section 148, the High Court rejected the contention of the assessee that sub-section (2) of section 150 is an Explanation to sub-section (1) and proceedings for reassessment, which had already become barred by time under section 149 before 1-4-1989, could not have been commenced on the amended provisions of sub-section (1) of section 150.

8. To appreciate the contentions advanced by the learned counsels for the DCIT vs. Sapna Karnani parties and the decision of the High Court, it is necessary to reproduce for critical examination the provisions of section 150(1) and (2). The provisions read as under : "Provision for cases where assessment is in pursuance of an order on appeal, etc.—(1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law]. [The portion bracketed and italicised above is inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989].

(2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken."

9. Section 149 prescribes maximum period of four or seven years depending upon the quantum of tax as mentioned in the said section for initiating reassessment proceedings. Section 150(1) states that the period of limitation prescribed in section 149 is not applicable, if the reassessment is proposed on the basis of any order passed by any 'authority in any proceedings under the Act by way of appeal, reference or revision' or 'by Court in proceedings under any other law'. Sub-section (2) of section 150, however, makes it clear that reassessment permissible under sub- section (1) of section 150 would not be available to the department where the period of limitation for such assessment or reassessment has expired at the time it is proposed to be reopened. In sub-section (1) of section 150, by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989, the words 'or by a Court in any proceeding under any other law' were inserted which are shown in bracket with underline in the section reproduced above.

10. The main question that has been raised on behalf of the learned counsels appearing for the parties is whether the provisions of sub-section (1) of section 150 as amended can be availed for reopening assessments, which have attained finality and could not be reopened due to bar of limitation, that was attracted at the relevant time to the proposed reassessment proceedings under the provisions of section 149.

11. The submission made on behalf of the appellant is that neither the provisions of sub-section (1) nor sub-section (2) can be read as giving more than intended operation to the said provision. The provisions, it is argued, do not permit the authorities to reopen assessments, which have become final and reassessment of which had become barred by time before 1-4-1989 when section 150(1) was amended. Reliance is placed on the decision of this Court in S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 .

12. The learned counsel appearing on behalf of the department has made an effort to persuade this Court to accept his construction of the provisions of section 150(1) and (2). It is argued that it is for the specific DCIT vs. Sapna Karnani purpose of assessing income, which might accrue on the basis of any decision of any Court in any proceeding in any other law, that the provision has been amended to lift bar of limitation for reassessment.

13. Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to sub-section (1) of section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub-section (1) of section 150 which intends to lift embargo of period of limitation under section 149 to enable authorities to reopen assessments not only on the basis of orders passed in proceedings under the Act but also on order of a Court in any proceedings under any law, has to be applied prospectively on or after 1-4-1989 when the said amendment was introduced to sub-section (1). The provision in sub-section (1), therefore, can have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under section 149.

14. To hold that the amendment to sub-section (1) would enable the authorities to reopen assessments, which had already attained finality due to bar of limitation prescribed under section 149 as applicable prior to 1-4-1989, would amount to give sub-section (1) a retrospective operation which is neither expressly nor impliedly intended by the amended sub-section.

15. On behalf of the assessee before the High Court and in this Court reliance has been placed on the provisions contained in sub-section (2) of section 150. It is submitted that the provision contained in sub-section (2) of section 150 is in the nature of clarification or Explanation to sub-section (1). Sub-section (2) makes it clear that the embargo of period of limitation lifted under sub-section (1) for proposed reassessments based on order in proceedings under appeal, reference or revision, as the case may be, would not apply to assessments which have attained finality due to bar of limitation applicable at the relevant time.

16. The High Court rejected the above contention of the assessee on the ground that on the amendment introduced with effect from 1-4-1989 in sub-section (1), which enables reopening of assessment based on any order of 'Court in any proceedings in any law', there is no corresponding amendment made in sub section (2) of section 150 to bar reassessment based on order of court passed in any proceedings in any law in cases where prescribed period of limitation for reassessment had already expired.

17. We do not find that the above reasoning of the High Court is sound. The plain language of sub-section (2) of section 150 clearly restricts application of sub section (1) to enable the authority to reopen assessments which have not already become final on the expiry of prescribed period of limitation under section 149. As is sought to be done by the High Court, sub-section (2) of section 150 cannot be held applicable only to reassessments DCIT vs. Sapna Karnani based on orders 'in proceedings under the Act' and not to orders of Court 'in proceedings under any other law'. Such an interpretation would make the whole provision under section 150 discriminatory in its application to assessments sought to be reopened on the basis of orders under the Act and other assessments proposed to be reopened on the basis of orders under any other law. Interpretation, which creates such unjust and discriminatory situation, has to be avoided. We do not find that sub-section (2) of section 150 has that result. Sub-section (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to sub-section (1), as is the reasoning adopted by the High Court.

18. Sub-section (2) aims at putting embargo on reopening assessments, which have attained finality on expiry of prescribed period of limitation. Sub-section (2) in putting such embargo refers to whole of sub-section (1) meaning thereby to insulate all assessments, which have become final and may have been found liable to reassessments or recomputation either on the basis of orders in proceedings under the Act or orders of courts passed under any other law. The High Court, therefore, was in error in not reading whole of amended sub-section (1) into sub-section (2) and coming to the conclusion that reassessment proposed on the basis of order of the court in proceedings under the Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on expiry of period of limitation under section 149. On a combined reading of sub-section (1) as amended with effect from 1-4-1989 and sub-section (2) of section 150 as it stands, in our view, a fair and just interpretation would be that the authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section 149.

19. This Court took similar view in the case of S.S. Gadgil (supra) in somewhat comparable situation arising from the retrospective operation given to section 34(1) of the Indian Income-tax Act, 1922 as amended with retrospective effect from 1-4-1956 by the Finance Act, 1956. In the case of S.S. Gadgil ( supra) admittedly under clause (iii) of the proviso to section 34(I), as it then stood, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident under section 43, after the expiry of one year from the end of the year of assessment. The section was amended by section 18 of the Finance Act, 1956, extending this period of limitation to two years from the end of the assessment year. The amendment was given retrospective effect from 1-4-1956. On 12-3-1957, the ITO issued a notice calling upon the assessee to show cause as to why, in respect of the assessment year 1954-55, the assessee should not be treated as an agent under section 43 in respect of certain non-residents. The case of the assessee, inter alia, was that the proposed action was barred by limitation as right to commence proceedings of assessment against the assessee as an agent of non-resident for the assessment year 1954-55 ended on 31-3-1956, under the Act before it was amended in 1956. This Court in the case of S.S. Gadgil (supra) accepted the contention of the assessee and held as under : ". . . The Legislature has given to DCIT vs. Sapna Karnani section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., up to April 1, 1956 only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred." (p. 240) 20. On a proper construction of the provisions of section 150(1) and the effect of its operation from 1-4-1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1-4-1989 for assessments which have already become final due to bar of limitation prior to 1-4-1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub- section (1) of section 150, as amended with effect from 1-4 1989, does not enable the authorities to reopen assessments, which have become final due to bar of limitation prior to 1-4-1989 and this position is applicable equally to reassessments proposed on the basis of orders passed under the Act or under any other law.

The above view is also get support by a decision of Nagpur Bench of this ITAT in the case of M B Traders Vs. ACIT [ 132 TTJ 490 ] wherein the co ordinate bench held that ;

9. After an in-depth study of the entire case record, on a patient hearing of both the sides and after reading the case law cited at length, our observations and findings on the matter are as follows. Before giving our observation and finding, it has been deemed proper to quote ss. 150 and 151 as it is, as under : "150. (1) Notwithstanding anything contained in s. 149 the notice under s. 148 may be issued at any time of the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the lime the order DCIT vs. Sapna Karnani which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 151. (1) In a case where an assessment under sub-s. (3) of s. 143 or s. 147 has been made for relevant assessment year, no notice shall be issued under s. 148 by an AO, who is below the rank of Asstt. CIT or Dy. CIT unless the Jt. CIT is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice. Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice. Explanation : For the removal of doubts, it is hereby declared that the Jt. CIT, the CIT or the Chief CIT, as the case may be, being satisfied on the reasons recorded by the AO about fitness of a case for the issue of notice under s. 148, need not issue such notice himself." Sec. 149 deals as quoted above with regard to time-limit for notice. Sec. 150 deals with regard to provision for cases where assessment is in pursuance of an order on appeal. In our considered view there is no bar for issuing notice under s. 148 by the AO on the direction of the first appellate authority. At the same time, reassessment proceeding must be based on the belief of the AO and not of the CIT or appellate authority or that of the Tribunal as had been meant and interpreted from a perusal of s. 147 of the IT Act. The direction of higher authority should not be interpreted as a blanket direction by the AO. But that should be accompanied by the direct satisfaction of the AO with regard to the escapement of income. The appellate authorities or higher authorities cannot interfere on this power of the AO. It means the direction of the higher authorities and that of the appellate authorities must be acted upon by the AO with utter satisfaction. Taking initiation of reassessment proceeding without satisfaction of the AO, simply on the basis of the blanket direction, will not justify the action of initiation of reopening proceeding. In this particular case as has been rightly pointed out by the learned Authorised Representative from p. 13 of the paper book filed, the AO has simply acted upon, i.e., initiated reopening proceeding on the basis of the direction of the CIT(A) and has totally ignored his part of the job i.e., his satisfaction, as is evident from p. 13 of the paper book filed by the learned counsel which is quoted below for better appraisal of facts : "Assessee filed the return of income of Rs. 39,720 on 25th Jan., 1993. Assessment under s. 143(3) was completed on a total income of Rs. 15,55,579 on 29th March, 1996 making addition of Rs. 15,15,859. The order under s. 143(3) was contested before CIT(A) who cancelled the order of the AO and directed as under : 'It is held that assessment proceedings are bad in law and hence cancelled. The AO should take remedial action under s. 147 or any other provisions of the Act to tax the income escaping assessment.' Accordingly notice under s. 148 of the IT Act, 1961 was issued and sent by RPAD on 27th March, 1998, but assessee denied about the receipt of notice vide DCIT vs. Sapna Karnani his letter dt. 12th Jan., 1999. Considering the legal aspect at the initial stage and considering the large amount of income to be taxed, an approval under s. 147 may kindly be granted. Sd/- Asstt. CIT, Circle-1(3), Nagpur."

10. Direction of the higher authority including that of the CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. With this considered view, on a total in-depth study of the case laws and considering the rival submissions, we allow the assessee's appeal and cancel the order of the CIT(A). Before parting with the order it is to be pointed out that the notice issued under s. 143(2) was also barred by time in this case and since the root of the matter had been dealt at length as above, we did not feel it proper to again deal with ground No. 5 in detail. Howsoever it is treated to have been considered and decided in favour of the assessee.

11. In the result, the assessee's appeal is allowed. Even the co-ordinate bench of Kolkata vide dealing with the appeal of the revenue in the case of ITO Vs. Sri Biswajit Chatterjee has also held that “ CIT(A) has not power under the provision of law for giving any direction to AO for re-opening of assessment”. Respectfully following the finding as discussed herein above we are of the considered view that ld. CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. Even otherwise the apex court has also while dealing with the provision of section 147/148 of the Act in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1 held that;

“According to section 148 of the Act of 1961, before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. The Income-tax Officer has also, before issuing such notice, to record his reasons for doing so. Section 149 prescribes the time limit for the notice. The time limit in a case not falling under clause (ii) of sub-section (1) of section 149, with which we are not concerned, shall be eight years from the end of the relevant assessment year. Incases falling under clause (b) of section 147, however, the time limit for the notice is four years from the end of the relevant assessment year. Clause (a) of section 147 of the Act of 1961 corresponds to clause (a) of sub-section (1) of section 34 of the Act of 1922. The language of clause (a) of section 147 read with sections 148 and 149 of the Act of 1961 as also the corresponding provisions of the Act of 1922 makes it plain that two conditions have to be satisfied before the Income-tax Officer acquires jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return DCIT vs. Sapna Karnani under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments: See Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The words "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year" postulate a duty on the assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR 191 , 201 (SC). As further observed in that case: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative, Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else—far less the assessee—to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences—whether of facts or law—he would draw from the primary facts."

Keeping in view the principles enunciated above, we may deal with the contention advanced on behalf of the appellant that the present is not a case in which action could be taken under section 147(a) of the Act of 1961. This contention has been controverted by the learned counsel for the respondent who has canvassed for the correctness of the view taken by the High Court in the judgment under appeal. It would appear from what has been discussed above that one of the essential requisites for proceeding under clause (a) of section 147 of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee appellant the particulars given were not correct. Form C under rule 19 of the Indian Income-tax Rules, 1922, at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled in by the assessee. It has not been suggested that any of the information furnished or any of the particulars given in those columns by the appellant-company were factually incorrect. Nor is it the case of the revenue that the appellant failed to furnish the particulars required to be inserted in those columns. Indeed, the copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us. Part V of the form no doubt requires the assessee to state the written down value in column No. (2). Such written down value had to be specified without taking into account the initial depreciation because such depreciation in terms of clause (vi) of section 10(2) of the Act of 1922 could not be deducted in determining the written down value for the purpose of that clause. The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March, 1945, and before the 1st day of April, 1956, is normally claimed and allowed. It seems that the Income-tax Officer in working the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As section 34(1)(a) of the Act of 1922 (corresponding to section 147(a) of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law. It may also be mentioned that so far as the assessment for the assessment year 1957-58 is concerned, the assessment order was once rectified and at another time revised. Despite such rectification and revision, the above mistake in the calculation of the depreciation remained undetected. It was only in October, 1965, that the Income-tax Officer realised that higher amount of depreciation had been allowed to the appellant than was actually due. A letter to that effect was consequently sent to the assessee on October 5, 1965. It was, however, nowhere mentioned in that letter that the higher amount of depreciation had been allowed and the income as such had escaped assessment because of the omission or failure on the part of the assessee to disclose truly and fully all material facts. Reference to such omission or failure came only in a subsequent communication. The submission made on behalf of the appellant is not without force that reference was made to the assessee's omission or failure to disclose truly and fully all material facts because it was realised that after the expiry of four years from the end of the relevant assessment year, no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of the omission or failure of the appellant to disclose fully and truly material facts. Looking to all the facts, we are of the opinion that it cannot be said that the excess depreciation was allowed to the appellant-company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts. It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed, the judgment of the High Court is set aside and the impugned notices are quashed.”

Thus, what is not permitted directly cannot be permitted indirectly and therefore, the ld. CIT(A) cannot broaden the scope of the appeal decision to “advise” or DCIT vs. Sapna Karnani “compel” another round of litigation again and again and as held by the apex court that we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage. Thus, looking to the provision of the law, decided case and facts of the present case we are of the considered view that ld. CIT(A) was tasked with deciding whether the addition under Section 153A was sustainable given the specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue. By proceeding to direct the AO to consider re-opening under Section 147, the ld. CIT(A) acted ultra vires and thereby we allow the cross objection of the assessee. In the result, the appeals of the revenue in stands dismissed and the cross objection in CO No. 02/JP/2025 of the assessee is allowed.”

Prayer: In light of the detailed legal submissions hereinabove, it is most respectfully submitted that: (i) Appeal of revenue, challenging the order of CIT(A) dated 21.02.2025 on the issue of deletion of addition u/s 68 may kindly be dismissed and findings of Ld.CIT(A) in this regards may kindly be upheld.

(ii) The direction issued by the ld. CIT(A) to initiate reassessment proceedings under Section 153C of the Act—by invoking Section 150 and relying on judgements of Hon’ble High Court in the cases of Shyam Sunder Khandelwal v. Assistant Commissioner of Income-tax [2024] 161 taxmann.com 255 (Rajasthan)[19-03-2024] and Tirupati Construction Company v. Income-tax Officer [2024] 165 taxmann.com 176 (Rajasthan)/[2024] 465 ITR 611 (Rajasthan)[21-03 2024] is ex-facie without jurisdiction, contrary to binding judicial precedent, and violative of the appellate framework under Sections 250/251 of the Act. It is therefore humbly prayed that this Hon’ble Tribunal, in exercise of its plenary powers under Section 254, be pleased to expunge/quash the said direction from the appellate order dated 21.02.2025, and thereby uphold the relief granted to the assessee without permitting any overreach or illegal consequence to flow from an otherwise just appellate decision.

9. To support the contention so raised in the written submission reliance was placed on the following evidence / records:

S.No. Particular Page Nos. 1. Notice u/s 153A dated 29-05-2019 for AY 2013-14, 2014-15, 2016- 1-4 17, 2017-18

2. Reply filed before Ld.AO on 15-02-2021 5-8 3. Reply filed before Ld.AO on 19-04-2021 9-14 4. Confirmation of Accounts given by Everstrong Enclave P Ltd 15-19 5. Form INC-22 filed with ROC by Everstrong Enclave P Ltd 20-22 6. Form 66 (compliance certificate) filed with ROC by Everstrong 23-23 Enclave P Ltd 7. Form 23AC (Annual Financial Statements) filed with ROC by 24-34 Everstrong Enclave P Ltd 8. Confirmation of accounts given by Kalyankari Exports P Ltd 35-35 9. Form INC-22 filed with ROC by Kalyankari Exports P Ltd 36-41 10. Form 23AC filed with ROC by Kalyankari Exports P Ltd 42-51 11. Confirmation of Accounts given by Mangalvani Infrabuild P Ltd 52-54 12. Form 23AC filed with ROC by Mangalvani Infrabuild P Ltd 55-63 13. Confirmation of accounts given by Telequip Marketing P Ltd 64-66 14. Form INC-22 filed with ROC by Telequip Marketing P Ltd 67-69 15. Form 23AC filed with ROC by Telequip Marketing P Ltd 70-75 16. Annual Return in Form-20B filed with ROC by Everstrong P Ltd 76-96 17. Annual Return in Form-20B filed with ROC by Mangalvani Infrabuild 97-117 P Ltd 18. Annual Return in Form-20B filed with ROC by Kalyankari Exports P 118-124 Ltd 19. Annual Return in Form-20B filed with ROC by Telequip Marketing P 125-144 Ltd 20. Copy of Paper Book (Index thereof) filed before CIT(A) 145-147 21. Copy of written submissions filed before 148-166 CIT(A) for AY 2013-14 on 24-12-2024 22. Copy of additional written submissions filed before 167-184 CIT(A) for AY 2013-14 on 13-02-2025 23. Copy of written submissions filed before 185-203 CIT(A) for AY 2014-15 on 24-12-2024 24. Copy of additional written submissions filed before 204-217 CIT(A) for AY 2014-15 on 13-02-2025 25. Copy of written submissions filed before 218-236 CIT(A) for AY 2016-17 on 24-12-2024 26. Copy of additional written submissions filed before 237-250 CIT(A) for AY 2016-17 on 13-02-2025 27. Copy of written submissions filed before 251-269 CIT(A) for AY 2017-18 on 24-12-2024 28. Copy of additional written submissions filed before 270-281 CIT(A) for AY 2017-18 on 13-02-2025 29. Copy of Remand report of AO dated 03.02.2025 282-284 30. Rejoinder to Remand Report of AO filed before CIT(A) on 06-02- 285-300 2025 for AY 2014-15 31. Rejoinder to Remand Report of AO filed before CIT(A) on 06-02- 301-316 2025 for AY 2013-14 32. Rejoinder to Remand Report of AO filed before CIT(A) on 06-02- 317-332 2025 for AY 2016-17

10. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee the year under consideration being 2013-14 and as on the date of search i.e. 01.10.2018 the assessment of the year under consideration was not pending and therefore, in the proceeding u/s. 153A of the Act the addition can only be made qua incriminating material. As is evidence that except of the statement of Shri Mukesh Banka no incriminating material was found at the premises of the assessee and even at the premises of Shri Banka which was also not a case. Ld. AR of the assessee also submitted that the statements taken during the course of survey/search proceedings from Mr. Mukesh Banka was retracted. Hence no evidentiary value of that statement be relied upon and thereby relied upon the finding of the Apex Court in the case of Abhishar Buildweel (Supra) the addition has rightly been directed to be deleted by the ld. CIT(A).

As regards the cross objection raised by the assessee he has relied upon the decision of the co-ordination bench decision in the case of Vaibhav Banka as placed on record thereby challenging the direction of the ld. CIT(A). direction were given by the ld. CIT(A) based on the circular issued by the board in compliance to the direction of the judgment of the Apex Court and therefore submitted that the cross objection raised by the assessee is required to be dismissed.

Action of search & seizure action were conducted on 01.10.2018 in the case of “Karnani Group” Jaipur to which the assessee belongs.

Accordingly, notice u/s 153A of the IT Act, 1961 for this year was issued on 29.05.2019 which was duly served upon the assessee. In on 25.06.2019 declaring total income of Rs. 74,460/- for the year under consideration. The assessee has shown income from salary, business income. Statutory notices as required u/s 143(2) & 142(1) of the Act were issued along with questionnaire requiring certain details/information, which was duly served upon the assessee and the assessee placed on record the details / information as called.

While assessment proceeding ld. AO noted that the assessee has taken unsecured loan from the Kolkata based companies and the same has been repaid during the year under consideration for an amount of Rs.

78,50,226/-. As there was search and seizure action were also carried out on 21.05.2018 in the case of Banka Group, Kolkata. During the search and post search proceedings, it was noticed that various paper/shell companies controlled and managed by Shri Mukesh Banka were identified. All these companies were categorically accepted that Shri Mukesh Banka as paper/shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Following the lead as obtained from the statement of Shri Mukesh Banka and the material seized during the course of search operation, the bank accounts of the paper/shell companies, controlled and and analyzed.

On verification of the bank accounts of paper/shell companies of Banka group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogus unsecured loan or in other forms, from the paper/shell companies of Banka Group. Furthermore, the financial analysis of such paper/shell companies of Banka Group from which such beneficiaries have been identified, has been carried out to ascertain their financial creditworthiness. From the above analysis, it was detected that (i) No profit accumulation in the company(s) across various financial year. (ii) No actual business done by the company(s) being zero turnover reported in various financial years. (iii) Most of the companies have shown income under the head 'Other income' which shows that these companies have no actual business activities and only getting interest income under the head 'other income' for providing bogus unsecured loan to different beneficiaries (iv) The admission of Shri Mukesh Bank vide his statement recorded u/s 131 & 132(4) of the Act on 30.05.2018 & 19.07.2018 that these companies are paper/shell companies, controlled and managed by Shri Mukesh Banka. (v) The directions of these companies are dummy directors of Shri Mukesh Banka as per the 1961 on 19.07.2018 (vi) These companies were found to be non-existent as per enquiry made by the Director of Income Tax. More, during the course of analysis and examination of the bank statement of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various account of paper/shell companies of Shri Mukesh Bank was clearly established and substantiated. These findings got further authenticated from the statements of Shri Mukesh Banka regarding the pattern of cash withdrawals from his various companies. Huge withdrawal of cash from the bank accounts of paper/shell companies of Banks Group clearly established the fact that withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group. In respect to the above, statement of Shri Mukesh Banka, Key person of Banka Group recorded u/s 131 & 132(4) of the Act, were placed on record. Based on those facts ld. AO noted that the company M/s Kalyankari Exports Pvt. Ltd. Rs. 31,00,056, Mangalvani Infrabuild Pvt. Ltd.

Rs. 20,50,055/-, Telequip Marketing Pvt. Ltd. Rs. 27,00,115/- were shell company of Kolkata based from which the assessee have taken accommodation entry in the nature of bogus unsecured loan and also paid commission and also claimed interest expenses in the return of income. the assessee through which the assessee was asked to furnish explanation with establishing the creditworthiness and genuineness of these loan creditors on or before 30.03.2021 failing which it was proposed that the whole scheme would be treated as an attempt to introduce undisclosed income by way of bogus unsecured loans amounting to Rs. 84,26,026/- (78,50,000 (unsecured loan) + 196250 (commission) + 379776 (interest expenses as claimed in ITR)] was proposed to be added on account of undisclosed income accordingly. In response to the above show cause, assessee filed his written submission on 19.04.2021 which was placed on record. The ld. AO noted that the written submission of the assessee has been duly consideration and not found acceptable for the reasons that:-

During the search in Banka Group, Kolkata, various documents were found wherein data of various shell companies recorded. On examination of the details and Balance sheets it is seen that above companies from whom the loans were taken by the assessee are declaring very low income or declared loss in their return of income filed for the year under consideration, which raised doubts about the creditworthiness of these companies which evident from the following data:- 5. It has been claimed by the assessee that all these companies are having sufficient share capital and reserves & surpluses which can be verified from their Balance sheet filed by assessee. This contention of the assessee is considered but also not found satisfactory from the fact that all these companies have very nominal business activities during the year and merely engaged in providing loans. This fact clearly proves that this company is merely Jamakharchi company engaged in providing bogus accommodation entries in the shape of unsecured loans.

6. On perusal of the bank accounts provided by assessee, it is seen that prior to the issue of cheques to the assessee there are transfer entries of similar DCIT vs. Sapna Karnani amounts, source of which is neither explained nor acceptable in the absence of necessary details.

8. Taking all the facts into consideration, it is clear that unsecured loans received from the above Kolkatta based company is nothing but a sham transaction. It is also clear that above unsecured loan represents the unaccounted income of the assessee. It is clear that the assessee in connivance with a Jamakharchi tries to convert its unaccounted money under the grab of unsecured loans.

To support the above view the ld. AO relied upon the decision as referred I the assessment order and thereby he relying on the provision of section 68 of the Act ld. AO made the addition of Rs. 78,50,000/- being the amount of the loan taken by the assessee. Rs. 1,96,250/- being the amount of the commission calculated @ 2.5% of that loan amount. The interest on that amount so paid by the assessee and as claimed was also disallowed for an determining the income of the assessee at Rs. 85,00,486/-.

The assessee challenged that order of the assessing officer before the ld. CIT(A) who has considered the submission of the assessee and has allowed the appeal of the assessee. Aggrieved with order of the ld. CIT(A) the assessee preferred the present appeal before this tribunal. On the issue raised in the present appeal having heard the contentions and submission placed on record we note that ld. AO made the addition of Rs. 78,50,000 being the amount of the loan taken from the company named M/s Kalyankari Exports Pvt. Ltd., Mangalvani Infrabuild Pvt. Ltd., Telequip Marketing Pvt. Ltd. Ld. AO estimated commission @ 2.5 % for Rs. 1,96,250 on such loan for taking this accommodation loan and he also disallowed the interest on it for Rs. 3,79,776/-. Ld. AO noted that these loans were taken from the Kolkata based companies and the same has been repaid during the year under consideration. As there was search and seizure action were carried out on 21.05.2018 in the case of Banka Group, Kolkata. During the search and post search proceedings, it was noticed that various paper/shell companies controlled and managed by Shri Mukesh Banka were identified.

All these companies were categorically accepted by Shri Mukesh Banka as paper/shell companies controlled and managed by him for the purpose of in other forms. In that search revenue upon verification of the bank accounts of paper/shell companies of Banka group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogus unsecured loan or in other forms, from the paper/shell companies of Banka Group. Furthermore, the financial analysis of such paper/shell companies of Banka Group from which such beneficiaries have been identified, has been carried out to ascertain their financial creditworthiness.

In that procees it was noted that those companies have No profit accumulation in the company(s) across various financial year. Those companies has no actual business and their turnover are not material or inoperative. Those company shows income under the head Other income suggest that these companies have no actual business activities and only getting interest income under the head 'other income' for providing bougs unsecured loan to different beneficiaries. In the search Shri Mukesh Bank vide his statement recorded u/s 131 & 132(4) of the Income tax Act, 1961 on 30.05.2018 & 19.07.2018 admitted that these companies are paper/shell companies, controlled and managed by him. The person who serve as director on these companies are dummy directors .These companies were found to be non-existent as per enquiry made by the Director of Income companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various account of paper/shell companies clearly established and substantiated that they are paper companies and engaged for accommodation entry as confirmed by Shri Banka in his statement. Huge withdrawal of cash from the bank accounts of paper/shell companies of Banks Group clearly established the fact that withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group. Further the learned AO has added the consequent commission payment expenditure and also consequently added back and disallowed the deduction of interest payment claimed by the appellant considering that facts available on record.

Having noted these facts which was unearthed from the search of Banka group, the assessee noted that no incriminating material was found in the search conducted in the case of the assessee or that of the Banka Group. Therefore, considering the date of search of the assessee and year under consideration being not abated assessment the addition can only be made qua incriminating material and the transaction thus so recorded and reflected in the books of accounts without any incriminating material cannot be doubted upon. Thus, the proceedings u/s 153A can only be conducted In the present case, it is essential to highlight that assessment year under question comes under the definition of concluded assessment, therefore, assessment is to be made strictly on the basis of incriminating material found during the course of search at the assessee. The information received from other source cannot be equated with material found in the course of search. The lack of incriminating material not only undermines the proceedings but also raises questions about the procedural fairness and integrity of the assessment process. Given the absence of any incriminating evidence discovered during the search, it is evident that the proceedings- initiated u/s 153A are invalid and unjustified. This view is upheld by the Apex Court while dealing with the case of PCIT, Central-3 Vs AbhisharBuildwell P Ltd (Supra). While conducting the appellate proceeding we note from the order of the ld. CIT(A) that he has issued a letter to the learned AO calling for the incriminating material unearthed during the course of search and seizure action on the appellant with respect to the additions made in the assessment order under appeal. In this regard in the remand report the learned AO has stated as under:-

4 During the course of search, information was received from DDIT(Inv.) Unit-1(3), Vide his letter No. 6428 dated 18.12.2018. On perusal of the said information, it was noticed that assessee had taken unsecured loans from Kolkata based shell companies, which DCIT vs. Sapna Karnani were detected in search of Banka Group, Kolkata and accordingly after considering the facts and issues discussed in the report of DDIT (Inv.), Kolkata, necessary additions were made. Thus, the incriminating material in the form of information disseminated by office of DDIT(Inv.), Unit-1(3), Kolkata is being forwarded for your kind perusal along with Statements of Shri Mukesh Banka (Key person of Banka Group) recorded during the course of search at Banka Group on 19.07.2018."

Thus, as is evident from the above remand report of the ld. AO it is categorically clear that while making the addition the ld. AO merely relied upon the statement of Shri Mukesh Baka, even that statement so made by him was subsequently retracted and as held by our Jurisdictional High Court in the case of PCIT Vs. Esspal International P. Ltd [ 166 taxmann.com 722 (Rajasthan) ] holding that no addition can be made on the retracted statement. Be that it may so on this issue the assessee submitted that during the search proceedings, it was noticed that the assessee had taken unsecured loans from various entities as listed in the AO's order. The assessee was required to prove the identity, creditworthiness, and genuineness of these unsecured loans. In response, the assessee submitted documents on 15.02.2021 and 19.04.2021 [ as per the detailed paper book containing 347 pages record ] including copies of Income Tax Returns (ITRs), audited financial statements, and bank statements of the lender companies. The assessee contended that it had discharged the primary onus casted under them as per provision of section acted upon and has not brought on record any adverse material and merely relied upon the statement given. The ld. AR of the assessee submitted that the assessment had already been completed and was no longer pending at the time of the search. There would be no abatement of proceedings if routine assessment processes were completed and are not pending. Thus, it is evident that the assessee provided detailed responses, including confirmations from lenders, financial statements, and other relevant documentation to substantiate the genuineness of the transactions. The assessee also contended that the genuineness of these transactions was beyond any doubt. The assessee also contended that these loans have already been repaid and therefore, now issuing doubt on their genuineness is beyond doubt. The Gujarat High Court in the case of Rohini Builders 256 ITR 306 held that "The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques." As a result, the scope of the assessment proceeding pursuant to the provision of section 153A would be limited to incriminating evidence discovered while the search. As a result, even in the instant case, merely be made. The question as to whether the statement recorded while search can be considered as incriminating material without any supporting incriminating in nature can be considered as incriminating in nature or not.

The ld. CIT(A) has sought the remand report from the AO and has discussed at length as to the contention made in the statement is considered to have any incriminating in nature and there is no contrary material placed on record as to what has been stated in the remand report and therefore, it was clear that except the statement there were no adverse material placed on record. As is evident from the following judgment that statement recorded u/s 132 of the Act does not constitute incriminating material in the absence of any other corroborative evidence as held in following judicial pronouncements:

A. “PCIT vs. Best Infrastructure Pvt. Ltd., 397 ITR 82 (Delhi) affirmed by the Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax 2 Delhi Versus M/S Best Infrastructure (India) Pvt. Ltd. 2018 (6) TMI 971 - SC ORDER, Dated: 14-5-2018 B. CIT vs. Harjeev Aggarwal, 2016 (3) TMI 329 - DELHI HIGH COURT, Dated: - 10-3-2016 • PCIT (Central) - 3 Versus Anand Kumar Jain (HUF), SatishDev Jain, Sajan Kumar Jain, 2021 (3) TMI 8 – DELHIHIGH COURT, Dated: 12-2- 2021 C. Principal Commissioner of Income Tax (Central) -3 Versus Pavitra Realcon Pvt. Ltd. Design Infracon Pvt. Ltd., And Delicate Realtors Pvt. Ltd., 2024 (5) TMI 1408 - DELHI HIGH COURT, Dated: - 29-5-2024 Further neither in the assessment order u/s 153A nor in the material placed on record by both the parties it was contended that the assessment was pending as on date of search action. Thus the present year is unabated/completed category year and therefore, as decided in the following the judgement in the case of Principal Commissioner of Income- tax, Central-3 v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023], wherein the Hon'ble Supreme Court decided this issue as under:-

10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: "153A. Assessment in case of search or requisition - (1) 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 132-A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; DCIT vs. Sapna Karnani b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation.—For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year."

12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law.

13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.

DCIT vs. Sapna Karnani 14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A;

(ii) all pending assessments/reassessments shall stand abated;

(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.

The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.

In view of the above and for the reasons stated above we see no infirmity in the finding so recorded by the ld. CIT(A) in holding that when no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961 as held by decision of the Apex Court as referred herein above we see no merits in the grounds of appeal raised by the revenue and thereby the same are dismissed.

In the result, the appeal of the revenue in stands dismissed.

13. Now we take up the cross objection filed by the assessee numbered as CO/28/JP/2025 wherein the assessee has taken following ground against the appeal so filed by the revenue;

“1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in giving directions to AO to proceed as per section 153C of the Act. The action of the ld. CIT(A) is illegal, unjustified arbitrary, and against the facts of the case and deserves to be quashed.

14. The above ground being legal in nature the ld. AR of the assessee in support of the above ground of objection cited upon the following judicial precedent ;

S. No. Particular Page Nos 1 ITAT Jaipur in DCIT, Central Circle-01, Jaipur vs. Sh. Vaibhav Banka in ITA 1-68 No. 301/JP/2025 vide order dated 08.07.2025 DCIT vs. Sapna Karnani 2 Hon’ble Rajasthan High Court in Shyam Sunder Khandelwal vs. ACIT, 69-118 Central Circle-02, Jaipur in DB Civil Writ Petition No. 18363/2019 vide order dated 19.03.2024 3 Hon’ble Rajasthan High Court in Tirupati Construction Company vs. ITO 119-128 Ward-01, Chittorgarh in DB Civil Writ Petition No. 17523/2022 vide order dated 21.03.2024

15. This ground being legal ld. DR relied upon the decision of the ld. CIT(A) and that of the instruction issued by the board while implementing the decision of the Apex Court as referred in the order of the ld. CIT(A).

16. The issue raised by the assessee has already been decided by the co-ordinate bench of Jaipur while dealing with the bunch of appeal DCIT Vs. Shri Vaibhav Banka in and CO. No 02/JP/2025 wherein the co-ordinate bench has decided the above issue by holding that;

13. Now coming to the cross objection filed by the assessee against the appeal filed by the revenue. As the appeal of the assessee was allowed by the ld. CIT(A) on technical ground but while allowing that appeal of the assessee on technical ground he directed the ld. AO to implement judgment of Hon’ble Supreme Court in the case of Abhisar Buildwell 2023 149 taxmann.com and the CBDT Instruction No. 1 of 2023 dated 23.8.2023. This direction is challenged by the assessee in cross objection filed stating that the action of the ld. CIT(A) is illegal, unjustified, arbitrary, and against the facts of the case. As is evident from the order of the ld. CIT(A) that after granting relief on technical ground ld. CIT(A) further directed the ld. AO to initiate appropriate proceedings under Section 147/148 of the Act, relying on the same judgment of Abhisar Buildwell (supra), CBDT Instruction No. 1/2023 (CLC 35-40), and the provisions of Section 150 of the Act. The assessee, while supporting the ultimate relief granted, is aggrieved by the directions given by the ld. CIT(A) in his order suggesting the AO initiate proceedings under Section 147/148 of the Act. The assessee therefore before us

by preferring the present Cross-Objection to challenge the directions and to raise other legal and factual grounds in support of the deletion of the addition. Record reveals that ld. CIT(A) vide page 36 while dealing with the appeal of the assessee has issued direction to the ld. AO which reads as under : “Accordingly, the judgement of Hon’ble Supreme Court in the case of Abhisar Buildwell (supra) and U. K. Paints (supra) are squarely applicable to the facts of the case. Accordingly, following the judgment of honorable Supreme Court it is held that the ld. AO rightly issued notices u/s 153A of the Act and at the same time the impugned addition made in assessment order u/s 153A cannot be sustained and is hereby deleted as the same is without basis of incriminating material unearthed during the search action on the appellant and impugned addition could have been done by the learned assessing officer in re-assessment proceedings by issuance of notice under section 147/148. The ld. AO is directed to take necessary action in this regard. Further, the CBDT (ITJ Section) has issued Instruction No. 1 of 2023 dated 23-08- 2023 vide F.No. 279/Misc./M-54/2023-ITJ on the subject “Implementation of the judgment of the Hon’ble Supreme Court in the case of Pr.CIT (Central-3) v/s AbhisarBuildwell Pvt. Ltd. (Civil Appeal No. 6580 of 2021)- Instruction regarding”. The learned assessing officer is directed to implement the law and ratio of the judgement of AbhisarBuildwell (supra) and the said Instruction No. 1 of 2023 dated 23-08-2023 and section 150 of the Act, in the case of the appellant appropriately as per the facts of the case and as per above findings.

Accordingly this ground of appeal is adjudicated in above terms. For statistical purposes this ground is hereby treated as allowed” [Emphasis Supplied]

Before us the ld. AR of the assessee submitted that the appeal of the assessee has decided considering the two landmark judgment of apex court in the case of Abhishar Buildwell and U. K. Paints. Thus, the issue before us is to be decided considering the following records placed on record:

1. 1. Decision of the apex court in the case of Abhisar Buildwell & U. K. Paints.

2. Miscellaneous Application filed by Revenue before the apex court 3. CBDT’s Instruction No. 1 of 2023 dated 23-08-2023 As is evident the cross objection of the assessee hinges on the provision of section 150, 251, Miscellaneous application filed by the revenue before the apex court and CBDT’s instructions. The provision of section 150 deals as under : Provision for cases where assessment is in pursuance of an order on appeal, etc. 150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. Section 251 reads as follows :

Powers of the70[Joint Commissioner (Appeals) or the] Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: 71[Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;]

(aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment;

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit. 70[(1A) In disposing of an appeal, the Joint Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit.] (2) The 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals) 72[, as the case may be,] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals), may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals) 72[, as the case may be,] by the appellant. The law is settled by the decision of the apex court in the case of Abhishar Buildwell and U. K. Paints and the revenue’s Miscellaneous application was disposed off by observing as under 1.1.i. Against the judgment dated 24.04.2023 passed by the Hon’ble Supreme Court in Abhisar Buildwell Pvt. Ltd. (supra) the revenue filed Misc. Application before the Hon’ble Supreme Court on 26.04.2023 seeking following reliefs: “(a) This Hon’ble Court may clarify that the waiver of limitation as stipulated in section 150(2) is to be read in respect of the date of issue of notice for reassessment under section 148 (i.e.) if as on the date the assessment under section 153A or section 153C was passed, a notice under section 148 could have been issued as per the law then in force, then fresh proceedings for reassessment of such income not arising from the incriminating material found in searchcan now be initiated pursuant to the findings of this Hon’ble Court in the present appeals/application and may further clarify as follows: (i) That the findings in para 11 and 14 would apply to all the proceedings pending in all the forums including before this Hon’ble Court. (ii) That even though the appeals of the Revenue are dismissed in respect of assessments passed under 153A and 153C, in the absence of incriminating material found during the search, in respect of such income which was found to have escaped assessment other than through incriminating material, the assessing officers would be entitled to reassess such income in terms of Section 147/148 read with section 150. (iii) That the Assessing Officer, may if found necessary initiate fresh proceedings within 60 days from date of disposal of this application following the procedure stipulated in section 147-151 of the Act as is in force now.”

1.1.ii. The Hon’ble Supreme Court vide its order dated 12.05.2023 titled as PCIT v. Abhisar Buildwell Pvt. Ltd. [2023] 294 Taxman 70 (SC) (CLC 32-34) dismissed the Revenue’s Misc. Application by observing as under: “2. Having gone through the averments made in the application and the prayers, we are of the opinion that the prayers sought can be said to be in the form of review which requires detail consideration at length looking into the importance of the matter. Therefore, the present application in the form of clarification is not entertained and we relegate the Revenue to file an appropriate review application for the relief sought in the present application and as and when such review application is filed the same can be heard in the open court.

3. In view of the above and without further entering into the merits of the application and/or expressing anything on merits on the prayers sought in the present application, the present application is not entertained and we relegate the Revenue to file an appropriate review application seeking the reliefs which are sought in the present application and as and when such review application is filed the same be heard and decided and disposed of in the open court. At the cost of repetition, we observe that as we have not entered into the merits of the present application and we relegate the Revenue to file an appropriate review application, the review application be decided and disposed of in accordance with law and on its own merits.” 1.1.iii. Following the dismissal of the Revenue’s Miscellaneous Application in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra), wherein the Hon’ble Supreme Court expressly relegated the Department to file a formal review petition—no such review was pursued. Instead, the CBDT issued Instruction No. 1/2023 dated 23.08.2023, which provided internal guidance to Assessing Officers regarding the course of action in cases where assessments under Section 153A/153C have failed due to lack of incriminating material.

1.1.iv. The instruction outlines procedural steps for invoking reassessment under Sections 147/148 read with Section 150. However, the nature, scope, and legal force of this instruction remain subject to statutory limitations and judicial precedent, as discussed below.

We also take note of the facts that CBDT’s instructions is an internal administrative directive intended solely for operational guidance of Assessing Officers. It attempts to clarify the post-Abhisar Buildwell (supra) reassessment landscape, specifically in situations where additions under Section 153A/153C were struck down due to absence of incriminating material. This administrative instructions are not binding DCIT vs. Sapna Karnani on quasi-judicial authorities like the CIT(A). It is a settled principle of law, as held by the Hon’ble Supreme Court in UCO Bank v. CIT [(1999) 237 ITR 889 (SC)] (CLC 41-49), that CBDT circulars or instructions cannot override, supplement, or expand the scope of statutory provisions. Thus, taking shelter of Instruction No. 1/2023 as enabling or empowering appellate authorities to direct initiation of reassessment proceedings is a fundamental misapplication of the Instruction, which neither authorizes appellate intervention in reassessment matters nor vests any such power in the ld. CIT(A). Even other wise the Instruction cannot substitute the independent statutory preconditions under Sections 147/148 read with Section 149, which provides the timelines for issuance of notice of reopening. Provision of such section must be satisfied by the ld. AO at any given point of time, when the jurisdiction is assumed for reopening a particular assessment year. Even the power vested with ld. CIT(A) are limited wherein he may i.) confirm, or ii.) reduce, or iii.) enhance, or iv.) annul the assessment; Thus, he has no power to give any direction that what is prescribed in law. The issue related to the power of the commissioner of income has already been dealt with in a decision in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (CLC 111-128) wherein Hon’ble Supreme Court underscored that the appellate provisions (Section 33(4) of the 1922 Act, analogous to Section 250/254 of the 1961 Act) do not confer on the appellate authority a power to make any direction on matters not arising in the appeal, especially as the Act provides separate mechanisms (like Section 34 of 1922 Act, now Section 147) to deal with escaped income. Accordingly, the Apex Court held that; “It was not contended, nor was it possible to contend, that by reason of the reference to the said provisions the powers and jurisdiction conferred on the respective authorities, tribunals or courts referred to therein were enlarged or modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions.” We also take note that the apex court has dealt with the provision of section 150 i.e. Provision for cases where assessment is in pursuance of an order on appeal and section 149 i.e. Time limit for notices undersection 148 of the Act. While DCIT vs. Sapna Karnani dealing with that provision the apex court in the case of K. M. Sharma Vs. Income Tax Officer [122 Taxmann 426 (SC) ] while dealing with the judgment of the land revenue case and thereby the reopening of the case has in detailed analysis the provision for cases where assessment is in pursuance of an order of an appeal and time limit. The relevant finding is reproduced in full because this will clarify the issue on hand with that of the case decided by apex court; In this appeal, which is filed after obtaining special leave, the order dated 24-5- 1996 of the Delhi High Court has been assailed. The main question involved is on the application and interpretation of the provisions of section 150 of the Income-tax Act, 1961 ('the Act'). The relevant facts necessary for deciding the legal question raised are as under :

1. 1. The appellant's lands were acquired under section 6 of the Land Acquisition Act, 1894, and an award was passed on 2-12-1967 by the Chief Commissioner of Delhi granting compensation in favour of the appellant. The Additional District Judge by the judgment dated 20-5-1980 held the appellant entitled to 1/32 share of the compensation awarded under various awards and the appellant was granted total compensation in the sum of Rs. 1,18,810 approximately in the year 1981.

2. On a reference under section 18 of the Land Acquisition Act, the learned Additional District Judge, Delhi vide his judgment dated 31-7-1991 awarded a sum of Rs. 1,10,20,624. The amount was paid to the appellant between 15-10-1992 and 26-5-1993. The amounts paid represented principal sum of compensation of Rs. 41,96,496 and interest in the sum of Rs. 76,84,829 up to 18-5-1992. Before making the above payments, tax was deducted at source amounting to Rs. 8,60,701.

3. Since the lands acquired were agricultural lands and were acquired prior to 1-4- 1970, capital gains tax was not leviable but tax was leviable on interest earned on the amount awarded on year to year basis.

4. The appellant through counsel sent a letter dated 17-9-1993 informing the ITO that he had received interest amount of Rs. 76,84,829 and interest accrued from year to year was assessable in each year. Year-wise break up of the interest was also given in the letter. According to the appellant, no tax was leviable on interest accruing up to 31-3-1982 as assessment for it had become barred by time. The appellant, therefore, requested that necessary action be taken under section 147 of the Act to enable the appellant as assessee to file his income-tax return and pay tax accordingly.

5. On 31-3-1994, the appellant was served with impugned notices under section 148 of the Act for 16 assessment years, i.e., 1968-69 to 1971-72 and the assessment years 1981-82 to 1992-93.

DCIT vs. Sapna Karnani 6. The appellant, in the High Court, assailed the notices issued under section 148 for reassessment for the assessment years 1968-69 to 1971-72 and for the year 1982-83 on the ground that the proposed reassessment for those assessment years had already become barred by time under section 149 of the Act, for which in the relevant periods maximum period of four years or seven years limitation was prescribed depending upon the quantum of liability towards tax.

7. The High Court by the impugned judgment accepted the contention of the department that the provisions of section 150(1) of the Act, as amended with effect from 1-4-1989, could be resorted to for reassessment to levy tax on the increased amount of interest earned by the appellant in the relevant assessment years. It was held that bar of limitation prescribed under section 149 of the Act was not attracted by virtue of the provisions of section 150(1) because notices for such reassessments are based on the awards passed in the land acquisition proceedings by the Court of the Additional District Judge on a reference under section 18 of the Land Acquisition Act. Upholding the validity of the assessment proceedings initiated by the department under section 148, the High Court rejected the contention of the assessee that sub-section (2) of section 150 is an Explanation to sub-section (1) and proceedings for reassessment, which had already become barred by time under section 149 before 1-4-1989, could not have been commenced on the amended provisions of sub-section (1) of section 150.

11. The submission made on behalf of the appellant is that neither the provisions of sub-section (1) nor sub-section (2) can be read as giving more than intended operation to the said provision. The provisions, it is argued, do not permit the authorities to reopen assessments, which have become final and reassessment of which had become barred by time before 1-4-1989 when section 150(1) was amended. Reliance is placed on the decision of this Court in S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 .

12. The learned counsel appearing on behalf of the department has made an effort to persuade this Court to accept his construction of the provisions of section 150(1) and (2). It is argued that it is for the specific purpose of assessing income, which might accrue on the basis of any decision of any Court in any proceeding in any other law, that the provision has been amended to lift bar of limitation for reassessment.

17. We do not find that the above reasoning of the High Court is sound. The plain language of sub-section (2) of section 150 clearly restricts application of sub- section (1) to enable the authority to reopen assessments which have not already become final on the expiry of prescribed period of limitation under section 149. As is sought to be done by the High Court, sub-section (2) of section 150 cannot be held applicable only to reassessments based on orders 'in proceedings under the Act' and not to orders of Court 'in proceedings under any other law'. Such an interpretation would make the whole provision under section 150 discriminatory in its application to assessments sought to be reopened on the basis of orders under the Act and other assessments proposed to be reopened on the basis of orders under any other law. Interpretation, which creates such unjust and discriminatory situation, has to be avoided. We do not find that sub-section (2) of section 150 has that result. Sub-section (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to sub-section (1), as is the reasoning adopted by the High Court.

21. As a result of the discussion aforesaid, the appeal is allowed. The judgment of the Delhi High Court dated 24-5-1996 is hereby set aside. As prayed in the petition, the impugned notices issued by the respondent of the Income-tax Department under sections 148 and 142 against the appellant for the assessment years 1968-69 to 1971-72 and 1981-82 are hereby quashed. The appeal stands allowed with costs. The above view is also get support by a decision of Nagpur Bench of this ITAT in the case of M B Traders Vs. ACIT [ 132 TTJ 490 ] wherein the co-ordinate bench held that ; 9. After an in-depth study of the entire case record, on a patient hearing of both the sides and after reading the case law cited at length, our observations and findings on the matter are as follows. Before giving our observation and finding, it has been deemed proper to quote ss. 150 and 151 as it is, as under : "150. (1) Notwithstanding anything contained in s. 149 the notice under s. 148 may be issued at any time of the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the lime the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 151. (1) In a case where an assessment under sub-s. (3) of s. 143 or s. 147 has been made for relevant assessment year, no notice shall be issued under s. 148 by an AO, who is below the rank of Asstt. CIT or Dy. CIT unless the Jt. CIT is DCIT vs. Sapna Karnani satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice. Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice. Explanation : For the removal of doubts, it is hereby declared that the Jt. CIT, the CIT or the Chief CIT, as the case may be, being satisfied on the reasons recorded by the AO about fitness of a case for the issue of notice under s. 148, need not issue such notice himself." Sec. 149 deals as quoted above with regard to time-limit for notice. Sec. 150 deals with regard to provision for cases where assessment is in pursuance of an order on appeal. In our considered view there is no bar for issuing notice under s. 148 by the AO on the direction of the first appellate authority. At the same time, reassessment proceeding must be based on the belief of the AO and not of the CIT or appellate authority or that of the Tribunal as had been meant and interpreted from a perusal of s. 147 of the IT Act. The direction of higher authority should not be interpreted as a blanket direction by the AO. But that should be accompanied by the direct satisfaction of the AO with regard to the escapement of income. The appellate authorities or higher authorities cannot interfere on this power of the AO. It means the direction of the higher authorities and that of the appellate authorities must be acted upon by the AO with utter satisfaction. Taking initiation of reassessment proceeding without satisfaction of the AO, simply on the basis of the blanket direction, will not justify the action of initiation of reopening proceeding. In this particular case as has been rightly pointed out by the learned Authorised Representative from p. 13 of the paper book filed, the AO has simply acted upon, i.e., initiated reopening proceeding on the basis of the direction of the CIT(A) and has totally ignored his part of the job i.e., his satisfaction, as is evident from p. 13 of the paper book filed by the learned counsel which is quoted below for better appraisal of facts : "Assessee filed the return of income of Rs. 39,720 on 25th Jan., 1993. Assessment under s. 143(3) was completed on a total income of Rs. 15,55,579 on 29th March, 1996 making addition of Rs. 15,15,859. The order under s. 143(3) was contested before CIT(A) who cancelled the order of the AO and directed as under :

DCIT vs. Sapna Karnani 'It is held that assessment proceedings are bad in law and hence cancelled. The AO should take remedial action under s. 147 or any other provisions of the Act to tax the income escaping assessment.' Accordingly notice under s. 148 of the IT Act, 1961 was issued and sent by RPAD on 27th March, 1998, but assessee denied about the receipt of notice vide his letter dt. 12th Jan., 1999. Considering the legal aspect at the initial stage and considering the large amount of income to be taxed, an approval under s. 147 may kindly be granted. Sd/- Asstt. CIT, Circle-1(3), Nagpur."

10. Direction of the higher authority including that of the CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. With this considered view, on a total in-depth study of the case laws and considering the rival submissions, we allow the assessee's appeal and cancel the order of the CIT(A). Before parting with the order it is to be pointed out that the notice issued under s. 143(2) was also barred by time in this case and since the root of the matter had been dealt at length as above, we did not feel it proper to again deal with ground No. 5 in detail. Howsoever it is treated to have been considered and decided in favour of the assessee.

11. In the result, the assessee's appeal is allowed. Even the co-ordinate bench of Kolkata vide dealing with the appeal of the revenue in the case of ITO Vs. Sri Biswajit Chatterjee has also held that “ CIT(A) has not power under the provision of law for giving any direction to AO for re-opening of assessment”. Respectfully following the finding as discussed herein above we are of the considered view that ld. CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. Even otherwise the apex court has also while dealing with the provision of section 147/148 of the Act in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1 held that; “According to section 148 of the Act of 1961, before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. The Income-tax Officer has also, before issuing such notice, to record his reasons for doing so. Section 149 prescribes the time limit for the notice. The time limit in a case not falling under DCIT vs. Sapna Karnani clause (ii) of sub-section (1) of section 149, with which we are not concerned, shall be eight years from the end of the relevant assessment year. Incases falling under clause (b) of section 147, however, the time limit for the notice is four years from the end of the relevant assessment year. Clause (a) of section 147 of the Act of 1961 corresponds to clause (a) of sub-section (1) of section 34 of the Act of 1922. The language of clause (a) of section 147 read with sections 148 and 149 of the Act of 1961 as also the corresponding provisions of the Act of 1922 makes it plain that two conditions have to be satisfied before the Income-tax Officer acquires jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments: See Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The words "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year" postulate a duty on the assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and DCIT vs. Sapna Karnani the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR 191 , 201 (SC). As further observed in that case: "Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative, Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else—far less the assessee—to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences—whether of facts or law—he would draw from the primary facts." Keeping in view the principles enunciated above, we may deal with the contention advanced on behalf of the appellant that the present is not a case in which action could be taken under section 147(a) of the Act of 1961. This contention has been controverted by the learned counsel for the respondent who has canvassed for the correctness of the view taken by the High Court in the judgment under appeal. It would appear from what has been discussed above that one of the essential requisites for proceeding under clause (a) of section 147 of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee- appellant the particulars given were not correct. Form C under rule 19 of the Indian Income-tax Rules, 1922, at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled in by the assessee. It has not been suggested that any of the information furnished or any of the particulars given in those columns by the appellant-company were factually incorrect. Nor is it the case of the revenue that the appellant failed to furnish the particulars required to be inserted in those columns. Indeed, the copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us. Part V of the form no doubt requires the assessee to state the written down value in column No. (2). Such written down value had to be specified without taking into account the initial depreciation because such depreciation in terms of clause (vi) of section 10(2) of the Act of 1922 could not be deducted in determining the written down value for the purpose of that clause. The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer DCIT vs. Sapna Karnani relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March, 1945, and before the 1st day of April, 1956, is normally claimed and allowed. It seems that the Income-tax Officer in working the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As observed by Shah J. in Commissioner of Income-tax v. Bhanji Lavji [1971] 79 ITR 582 (SC), section 34(1)(a) of the Act of 1922 (corresponding to section 147(a) of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law. It may also be mentioned that so far as the assessment for the assessment year 1957-58 is concerned, the assessment order was once rectified and at another time revised. Despite such rectification and revision, the above mistake in the calculation of the depreciation remained undetected. It was only in October, 1965, that the Income-tax Officer realised that higher amount of depreciation had been allowed to the appellant than was actually due. A letter to that effect was consequently sent to the assessee on October 5, 1965. It was, however, nowhere mentioned in that letter that the higher amount of depreciation had been allowed and the income as such had escaped assessment because of the omission or failure on the part of the assessee to disclose truly and fully all material facts. Reference to such omission or failure came only in a subsequent communication. The submission made on behalf of the appellant is not without force that reference was made to the assessee's omission or failure to disclose truly and fully all material facts because it was realised that after the expiry of four years from the end of the relevant assessment year, no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of the omission or failure of the appellant to disclose fully and truly material facts. Looking to all the facts, we are of the opinion that it cannot be said that the excess depreciation was allowed to the appellant-company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts. It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of DCIT vs. Sapna Karnani revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed, the judgment of the High Court is set aside and the impugned notices are quashed.”

Thus, what is not permitted directly cannot be permitted indirectly and therefore, the ld. CIT(A) cannot broaden the scope of the appeal decision to “advise” or “compel” another round of litigation again and again and as held by the apex court that we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage. Thus, looking to the provision of the law, decided case and facts of the present case we are of the considered view that ld. CIT(A) was tasked with deciding whether the addition under Section 153A was sustainable given the specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue. By proceeding to direct the AO to consider re-opening under Section 147, the ld. CIT(A) acted ultra vires and thereby we allow the cross objection of the assessee. In the result, the appeals of the revenue in stands dismissed and the cross objection in CO No. 02/JP/2025 of the assessee is allowed. On being consistent to the finding so already recorded we consider the ground raised by the assessee and thereby the cross objection filed by the assessee is allowed. stands dismissed and the cross-objection No. 28/JP/2025 of the assessee is allowed.

In the result, the appeals of the revenue stands dismissed, and the cross objection of the assessee are allowed.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 14/10/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- DCIT, Central Circle-03, Jaipur izR;FkhZ@ The Respondent- Sapna Karnani, Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA Nos. 709 to 712/JP/2025 & CO Nos. 28 to 31/JP/2025) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत