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Facts
The appeals related to assessment years 2015-16 and 2016-17, where the CIT(A) had set aside assessment orders. The department had issued notices under Section 153C of the Act, following a High Court decision regarding search and seizure cases.
Held
The Tribunal held that the issuance of notices under Section 153C by the department, in compliance with the High Court's decision, meant the department had given effect to that decision. Consequently, the appeals before the Tribunal were rendered not maintainable.
Key Issues
Whether the appeals are maintainable when the department has already acted upon a High Court decision that formed the basis for setting aside the assessment orders.
Sections Cited
147, 148, 153A, 153C, 139, 149, 151, 153
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B-Bench” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 946 & 947/JPR/2025
ORDER PER: Narinder Kumar, Judicial Member Both the above captioned appeals are being disposed of vide this common order, as same issue in involved and arguments have been advanced in the appeals simultaneously.
Vide impugned orders dated 05.04.2025, Learned CIT(A) allowed two separate appeals filed by the assessee- respondent herein, relating to the & 947/JPR/2025 Kalpana Khatoria, Jaipur. assessment years 2015-16, 2016-17, thereby setting aside the two separate assessment orders dated 28.03.2022.
Arguments heard. File perused.
At the outset, Ld. DR for the department-appellant has candidly brought to our notice that separate notices u/s 153C of the Act, were issued by the department to the assessee, in respect of each said assessment year, even before institution of these two appeals.
Vide impugned order, Ld. CIT(A) allowed the appeals filed by the assessee and as a result of which the assessment orders were set aside on the ground that the assessment orders u/s 147 of the Act did not survive in view of decision by our own Hon’ble High Court in Shyam Sunder Khandelwal v. Assistant Commissioner of Income Tax, (2024) 161 taxmann.com 255 (Rajasthan), D.B. Civil Writ Petition No. 18363/2019. In nut-shell, Learned CIT(A) was of the view that since Hon’ble High Court quashed notice u/s 148 of the Act, for the reasons recorded therein, the assessment order passed by the Assessing Officer had become ineffective. Ld. DR for the department-appellant submits that notices under section 153C of the Act came to be issued in compliance with the decision & 947/JPR/2025 Kalpana Khatoria, Jaipur. by our own Hon’ble High Court in Shyam Sunder Khandelwal’s case (supra).
At this stage, relevant observations and findings recorded by our own Hon’ble High Court in Shyam Sunder Khandelwal case (supra), need to be reproduced. Relevant portion reads as under:- "23. The reasons supplied in case in hand for initiation of proceedings under Section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group.
In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the assessee for filing of income tax return for the relevant preceding years. The AO assumes jurisdiction to assess/reassess 'total income' by passing separate order for each assessment.
In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed under Section 153C. The two pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Thereafter, the satisfaction of AO receiving the seized material that the material handed over has a bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A.
Special procedure is prescribed under Section 153A to 153D for assessment in cases of search and requisition. There cannot be a quibble with the proposition that the special provision shall prevail over the general provision. To say it differently the provisions of Section 153A to 1530 have & 947/JPR/2025 Kalpana Khatoria, Jaipur. prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148.
Section 153A and 153C starts with non-obstante clause. The procedure for assessment reassessment in Section 153A, 153C in cases of search or requisition has an overriding effect to the regular provisions for assessment or reassessment under Sections 139, 147, 148, 149, 151 & 153.
The language of explanation 2 to new Section 148 is akin to Section 153A and Section 153C. Corollary being that after seizing of operational period of Section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted Section 148.
The Department has not set up a case that for initiating proceedings under Section 148 it had material other than the material seized during the search of Manihar Group. The contention was that though the material with regard to unaccounted loan advanced by the petitioner was received, the earning of interest on unaccounted loan was derivation of the AO from the material received. The submission is that the derived conclusion cannot be acted upon under Section 153C. The submission lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing 'total income' in case of incriminating material found during search or requisition.
The argument that by enactment of Section 153A to 153D has not eclipsed Section 148 does not enhance the case of respondent to initiate the proceedings under Section 148. On fulfillment of two conditions for invoking Section 153C the proceeding in accordance with Section 153A are to be initiated. The operating field of and Section 1534 to 153D and Section 148 are different Applicability of Section 153C in cases where the seized material related to or belonged to person other than on whom search is conducted or requisition made does not render Section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition.
The other aspect of the matter is that under Section 153A and 153C, the total income' is to be assessed. The total income includes returned income (if any), undisclosed income unearthed during the search or requisitioning and information possessed from the other sources. For Illustration: An assessee had returned income of Rs.100, undisclosed Income of Rs.200 is unearthed during search and there is information from annual information statement of non-disclosure of income of Rs. 150/-, The AO under Section 153A and 1530 shall pass order dealing with & 947/JPR/2025 Kalpana Khatoria, Jaipur. income of Rs. 100+Rs.200+Rs.150, the total income being Rs.450/-. In cases where there is no unearthing of undisclosed income of Rs.200/-, the department can resort to proceeding under Section 147/148.
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 retums for relevant preceding years and thereupon proceed to assessee or reassesses 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.
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."
Once the department admittedly issued notices u/s 153C of the Act, in compliance with the decision by our own Hon,ble High Court, it can be safely be said that the department gave effect to the said decision. In other words, how these two appeals can be said to be maintainable, when the department accepted and acted upon the said decision by the Hon’ble High Court? Result 8. Consequently, both these appeals are hereby dismissed being not maintainable. Copy of the common order be also placed in the file of connected appeal.