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Facts
A search operation uncovered information about the assessee being a lender of unaccounted cash loans. The Assessing Officer issued a notice under Section 148 and completed reassessment, adding the loan amount and interest. Penalty proceedings were also initiated. Subsequently, the Rajasthan High Court quashed similar notices and reassessment orders.
Held
The CIT(A) held that the reassessment order lacked legal validity due to the High Court's judgment, and consequently deleted the penalty. The Tribunal noted that the CIT(A)'s order was based on a binding precedent, rendering the revenue's appeal infructuous.
Key Issues
Whether the reassessment notice under Section 148 was validly issued in light of the High Court's judgment quashing similar notices, and if the subsequent penalty was sustainable.
Sections Cited
250, 148, 153C, 147, 143(3), 271(1)(c), 132, 153A
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Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
This appeal by the revenue is directed against the order of the Ld. CIT(A) Jaipur-05 dated 17.09.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The revenue has raised the following grounds of appeal:
1. 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. Since, quashing of notice u/s. 148, itself is not justified hence, on the basis of the same, CIT (A) has wrongly deleted the penalty in this case.
Whether on facts and in circumstances of the case, the Ld. CIT(A) is justified holding the decision in favour of the assessee disregarding the pronouncement of the Hon. Supreme Court of India in the matter of Deputy Commissioner of Income Tax, Central circle (2) V/s. M/s. M.R. Shah Logistics Private Limited reported in (2022) 14 SCC 101. In the identical facts And circumstances, the Hon. Apex Court has also upheld issuance of notice to the assessee under section 148 of the Act.
the appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appellate proceeding.
2. A search and seizure operation under Section 132 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") was carried out in the case of the Ramesh Manihar Group on 07.01.2016. During the course of search, voluminous digital data in the form of Excel sheets stored in 18 pen drives was seized from the group’s main office at 303, Raina Sagar, MSB Ka Rasta, Johari Bazar, Jaipur. The seized material allegedly contained extensive details of cash loans advanced by the group. The investigation further revealed that Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla were engaged as finance brokers, arranging unaccounted cash loans between various lenders and borrowers. Brokerage income earned there from was also found to be undisclosed. Based on such seized material, the Investigation Wing identified the present assessee as one of the alleged lenders who had advanced cash loans out of undisclosed income and earned interest thereon.
3. The information in respect of the assessee was forwarded by the DCIT, Central Circle–3, Jaipur to the jurisdictional Assessing Officer. On receipt of such information, the AO recorded reasons to believe that income chargeable to tax had escaped assessment within the meaning of Section 147 of the Act and accordingly issued notice under Section 148 of the Act after obtaining requisite approval from the competent authority. In response, the assessee did not file his return of income. The AO, therefore, completed reassessment under Section 147 read with Section 143(3) of the Act vide order dated 25.05.2023 assessing total income at Rs. 4,92,91,900/–, which included addition of Rs. 4,80,00,000/– towards alleged cash loans and Rs. 1,69,000/– towards interest income thereon.
4. Penalty proceedings under Section 271(1) (c) of the Act were initiated in the assessment order itself, and by separate order dated 23.11.2023, penalty of Rs. 1, 63, 72,643/– was levied. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). During the pendency of the appellate proceedings, the Hon’ble Rajasthan High Court, vide common judgment dated 19.03.2024 in D.B. Civil Writ Petition No. 18363/2019 and other connected matters, quashed the notices issued under Section 148 of the Act and the consequential reassessment orders in cases reopened on the basis of documents seized during the search of the Ramesh Manihar Group. Liberty, however, was granted to the Department to initiate proceedings afresh in accordance with law.
5. Taking due cognizance of the aforesaid binding judgment, the Ld. CIT(A) held that the reassessment order dated 25.05.2023 passed under Section 147 r.w.s. 143(3) of the Act had no legal validity. Consequently, the penalty order passed under Section 271(1) (c) of the Act levying a sum of Rs. 1, 63, 72,643/–, being dependent upon such invalid reassessment, was also deleted by order dated 17.09.2024. Pursuant to the liberty granted by the Hon’ble High Court, the Department issued notice to the assessee under Section 153C r.w.s. 153A of the Act on 16.01.2025. Consequently, the earlier reassessment order dated 25.05.2023 became non-est in the eyes of law. As a corollary, the penalty order dated 23.11.2023, which stemmed solely from such invalid reassessment, also ceased to survive.
In view of the fact that the Ld. CIT (A)’s order is squarely based on the binding precedent of the Hon’ble Rajasthan High Court, and that the very foundation of the impugned assessment no longer exists, the present appeal filed by the Revenue has become infructuous.
In the result, the appeal of the revenue is dismissed.
The Order is pronounced in the open court on 15th Day of September 2025.