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Facts
A search and seizure action on the Ramesh Manihar Group led to information about cash loan financing. The appellant was found to have paid cash loans from undisclosed income and received interest. The AO initiated reassessment proceedings under Section 147/148 of the Income Tax Act, 1961.
Held
The CIT(A) quashed the assessment proceedings based on a High Court judgment. The Tribunal noted that similar appeals had been decided in favor of the assessee following the High Court's decision and a Supreme Court precedent, rendering the Revenue's appeal infructuous.
Key Issues
Whether the CIT(A) erred in quashing assessment proceedings based on a High Court judgment without considering specific facts, and whether notice under Section 148 was sustainable in light of Supreme Court and High Court precedents regarding Section 153C.
Sections Cited
132, 147, 148, 153C, 271(1)(C)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 967/JPR/2025
fu/kZkj.k o"kZ@Assessment Year : 2015-16 cuke M/s. K.P. Exports Pvt. Ltd. The ACIT Vs. Central Circle-4 ‘Nandan’ D-Block, Janpath, Jaipur Shyam Nagar, Jaipur 302 019 LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACK 7050 P vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksjls@Revenue by: Mrs. Anita Rinesh, JCIT-DR fu/kZkfjrh dh vksjls@Assesseeby : None lquokbZ dh rkjh[k@Date of Hearing : 20/08/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 24/09/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal filed by the Revenue is directed against the order of ld. CIT(A), Jaipur-5 dated 08-04-2025 for the assessment year 2015-16 wherein the Revenue has raised the following grounds of appeal.
‘’(i) Whether the Learned CIT(A) erred in quashing the assessment proceedings based solely on the High Court judgment in DBCWP 18363/2019, without considering the unique facts and circumstances of the present case.
ACIT, CENTRAL CIRCLE-4, JAIPUR VS M/S. K.P. EXPORTS PVT LTD, JAIPUR (ii) Whether on the facts and circumstances of the case and in law, the Hon. CIT (A) is justified in holding that notice u/s 148 is not sustainable legally relying upon the order of Hon'ble Rajasthan High Court's order dated 19.03.2024 in D.B. Civil Writ Petition No. 18363/2019 and several other linked petitions wherein wrongly held that 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 without giving any finding that issuance of notice under section 148 was incorrect. Thus, the CIT (A) is not justified in quashing notice issued u/s 148 of the Act. (iii) Whether the Learned CIT(A) erred in overturning the issuance of a notice under Section 148 of the Income Tax Act, 1961, despite the precedent set by the Hon. Supreme Court of India in Deputy Commissioner of Income Tax (Central) Circle 1(2) V/s. M/s. M.R. Shah Logistics Private Limited (2022) 14 SCC 101. In light of the Supreme Court's ruling in the aforementioned case, the Learned CIT (A) should have upheld the issuance of the notice under Section 148, unless there were compelling reasons to deviate from the established legal precedent. 2.1 During the course of hearing, none appeared on behalf of the assessee when the case was called out for hearing. Hence, the Bench decided to dispose of the appeal ex-parte based on the materials available on record.
3.1 Apropos to grounds of appeal of the Revenue, it is noticed that the ld. CIT(A) has allowed the appeal of the assessee by observing as under:-
‘’4.2 Conclusion: 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 ACIT, CENTRAL CIRCLE-4, JAIPUR VS M/S. K.P. EXPORTS PVT LTD, JAIPUR contentions/submissions of the appellant are being discussed and decided as under:- 4.2.1 A search & seizure action u/s132 of the Income Tax Act. 1961 was carried out in the case of Ramesh Manihar Group on 07.01.2016. The information revealed that the group was indulged in cash loan finance on large scale. During the course of search voluminous data comprising of excel sheets in 18 pen-drives seized from the main office of the Ramesh Manihar Group at 303, Ratna Sagar, MSB Kaa Rasta, Johan Bazar, Jaipur, which consisted details of cash loans financed by the Ramesh Marihar Group. The information further revealed that the persons, of the Ramesh Manihar Group, being Shri Ramesh Chand Maheshwan and Shri Manmohan Krishan Baga were engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transactions was also not offered for taxation by the group. As per the information, investigation wing carried out an investigation and names of lender were identified out of the names which were recorded in the said data and it was established that the appellant was associated with the above group and had paid cash loans from undisclosed Income and received interest income on these loans. 4.2.2 The information in respect of the appellant was forwarded by DCIT, Central Cirde-3, Jaipur to the jurisdictional AO. On receiving the information, AO has recorded reasons for escaped assessment within the meaning of section 147 of the I.T.Act, 1961 for issuance of notice u/s 148 of the IT Act 1961 and notice u/s 148 of the IT Act 1961 was issued to the assessee after taking the necessary approval of the competent authority. 4.2.3 The AO had passed an order u/s 147 of the I.T. Act, 1961 vide order dated 25-03-2022 at a total income of Rs.2,80,34,500/- considering the undisclosed cash loans of Rs.2,80,00,000/- and interest earned of Rs.35,500/- on these loans. 4.2.4 Further AO had passed an order u/s 271(1)© of the I.T. Act, 1961 vide order dated 26-09-2022 and imposed a penalty of Rs.95,28,926/- ACIT, CENTRAL CIRCLE-4, JAIPUR VS M/S. K.P. EXPORTS PVT LTD, JAIPUR 4.2.5 Considering the order of Hon’ble High Court, Rajasthan dated 19-03-2024 in D.B. Civil Writ Petition No. 18363/2019 and several other linked petitions, the appeal of the appellant against the order u/s 147 of the I.T. Act, 1961 dated 25-03-2022 for the A.Y. 2015-16 has been allowed DIN & Order No. ITBA/APL/S/250/2024- 25/1066648973(1) dated 12-07-2024. 4.2.6 In view of the above discussion and the facts of the case, the argument of the appellant is acceptable. 4.2.7 In these circumstances, the penalty order u/s 271(1)(C ) of the I.T. Act, 1961 under challenge in present appeal does not survive, as the assessment order passed by the AO has become infructuous. Thereforee, I delete the order of the AO, for imposing penalty u/s 271(1)© of the I.T. Act, 1961. Thus Ground of apeal1 1 is hereby allowed.
In the result, the appeal is treated as allowed.’’ 3.2 During the course of hearing, the ld. DR objected to the order of the ld. CIT(A) (supra) and also relied upon the penalty order dated 26-09-2022.
3.3 After hearing the ld. DR and perusing the materials available on record, it is noticed that the appeal against assessment order had already been allowed and the assessment order has been quashed following Rajasthan High Court in the case of Manihar Group and thus penalty order does not survive. It is also pertinent to mention that similar type of issue relating to quantum appeal had been decided by the Bench vide order dated 02-07-2025 in the case of JCIT (OSD),Central Circle - 4, Jaipur vs Shri Gordhan Das Maheshwari assessee in for the ACIT, CENTRAL CIRCLE-4, JAIPUR VS M/S. K.P. EXPORTS PVT LTD, JAIPUR assessment year 2013-14. The relevant findings as made by the Bench relating to Shri Gordhan Das Maheshwari appeal ( and other appeals also) is reproduced as under:-
‘’9. While referring to the above said decision by our own Hon’ble High Court, Learned CIT(A) observed that in the case of a person, other than on whom search was conducted, the material belonging or relating to such person was seized or requisitioned, the AO had to proceed u/s 153C of the Act, instead of section 147/148 of the Act, the reason being that the proceedings were initiated on the basis of incriminating material in the form of documents including pen-drives seized during search at the premises of the group, named therein, as well as statements recorded during said proceedings.
It may be mentioned here that today when all these appeals have been taken up for hearing, it has been brought to our notice that notices u/s 153C of the Act have been issued by the department to the above named assessee(s), in respect of the above said respective assessment years, requiring them to prepare true and correct return for their total income of the said assessment years. Ld. DR for the department admits issuance of said notices u/s 153C of the Act to the assesses.
In the given situation, from the factum of issuance of notices under section 153 C of the Act, it can safely be said that the department has given effect to the abovesaid decision by our own Hon’ble High Court, even though the department is stated to have challenged said decision before Hon’ble Apex Court. Result 12. As a result, we find that all these 7 appeals filed by the department have become infructuous. Accordingly, same are hereby dismissed. ‘’ Since the ITAT Jaipur Bench in the case of JCIT (OSD),Central Circle -4, Jaipur vs Shri Gordhan Das Maheshwari (supra) has dismissed the appeal of the ACIT, CENTRAL CIRCLE-4, JAIPUR VS M/S. K.P. EXPORTS PVT LTD, JAIPUR Department, therefore, the penalty appeal raised by the Department suo motu has become infructuous meaning thereby the appeal of the Department is dismissed.
4.0 In the result, the appeal of the Revenue is dismissed as indicated hereinabove.