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Facts
The assessee's case was reopened based on information from a search in another case, alleging F&O transactions of Rs. 94,06,544/- with an alleged profit of Rs. 1,52,364/-. The assessee denied these transactions, claiming the ledger was not his and challenging its authenticity. The Assessing Officer (AO) made an addition based on this information without independent verification.
Held
The Tribunal held that the reopening of assessment was bad in law because it was based on information from a third-party search and should have been conducted under Section 153C of the Income Tax Act, not Section 148. The Tribunal also found that the reassessment proceedings were initiated without proper procedure and violated the principles of natural justice. The addition made by the AO was deleted.
Key Issues
Whether the reassessment proceedings initiated solely on the basis of third-party search information, without following Section 153C and principles of natural justice, are valid. Whether the notice u/s 148 was time-barred and issued in violation of faceless assessment procedures.
Sections Cited
147, 144B, 148A, 148, 151A, 153C, 142(1), 69A, 139(4), 149(1), 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 578/JP/2025
Hon’ble Supreme Court in the case of Rajeev Bansal, in order to determine the validity of notice issued u/s 148 of the Act he submitted a table so as to determine the surviving period as held by the court and the same reads as under :
S. Details of Notice issued Date of Notice APB Remark No 1. Notice issued u/s 148 30.06.2021 WS page no 21 2. Notice u/s 148A(b) along 28.05.2022 & 34 – 38 & 43 – In compliance of Hon’ble with material relied upon 27.06.2022 47 Apex Court judgment in issued on UOI Vs Ashish Agarwal).
Reply filed by Assessee 11.06.2022 & 39 – 42 & 48 – 04.07.2022 49 4. Surving period available to 1 Day Day Includes only Revenue 30.06.2021 as per para 108,111 &112 of Judgment of Hon’ble Supreme Court in the case of Rajeev Bansal 6. Date of Issue of notice u/s 26.07.2022 50 – 55 Beyond the Surving Period 148 under new regime * Notice u/s 148 of the Act should have been issued on or before 05.07.2022 in the case of assessee by following the judgement of Hon’ble Supreme Court in the case of Rajeev Bansal.
On perusal of aforesaid table, it is evident that order u/s 148A(d) of the Act & Notice u/s 148 of the Act should be passed/issued by 05.07.2022.
However in the case of assessee order u/s 148A(d) of the Act & Notice u/s 148 of the Act were passed/issued on 26.07.2022 which is beyond the prescribed limit. Thus, the notice issued u/s 148 of the is barred by the limitation and therefore consequential order passed u/s 147 of the Act is void-ab-initio and addition so made deserves to be deleted outrightly.
Now coming to the other issue as raised in the present case is that of the framing the assessment in the present case reopened as well as completed without following provisions of section 151A, which provides procedure for “Faceless assessment of income escaping assessment” by the CBDT notification no.18/2022 dated 29.03.2022 in terms of section 151A, para 3 of which provides that notices for assessment/re assessment/re-computation under Faceless Assessment Scheme shall be issued through “Automated Allocation , in accordance with risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided in section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee.”, i.e. by FAO, whereas, in the case of assessee company notice u/s 148 as well as u/s 148A have been issued by DCIT Circle 1 Jaipur, i.e. Jurisdictional Assessing Officer (JAO). This issued has already been decided by the Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. v.
ACIT, Circle 15(1)(2), Mumbai and others [2024] 162 taxmann.com 225 (Bombay), has held that there is no question of concurrent jurisdiction of JAO and FAO for issuance of reopening notice under section 148 or even for passing assessment or reassessment order and it is only FAO which could issue notice under section 148 and not JAO. Hon’ble Bombay High Court in the above case has went on to hold that when an authority acts contrary to law, the said act of the Authority is required to be quashed and an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessee are entitled to be assessed as
per law and by following the procedure prescribed by law. Therefore, when the Income-tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice. Based on that decision the present case, notice u/s 148 was issued by JAO, i.e. DCIT Circle 1 Jaipur and not through automated allocation as provided in Notification No.
18/2022, dated 29-3-2022 r.w.s. 151A, which is not in accordance with provisions of section 151A of the Act quashed and set aside.
The other legal ground raised by the assessee is that in the present case assessment u/s 147 was re-opened on the basis of documents found during the course of third party search, which was conducted prior to 01.04.2021 and for which a specific mechanism was provided u/s 153C of the Income tax Act and for that he invited our attention to notice issued u/s 148A(b) of the Act (page 34-38). That reasons it self shows that the cae Assessing officer from the ACIT, Central Circle – 2, Jaipur, which was collected during the course of search and seizure action carried out in case of Shri Ajay Gangwal. On the basis of such information ld.AO formed belief that during the course of search and seizure action in case of Shri Ajay Gangwal, an ledger in the name of assessee was found and seized, wherein transaction of Future & Options was mentioned. Further on the perusal of return of income it was observed by ld. AO that F&O transactions are not mentioned in the return of income of the assessee, thus source of same remain unexplained. and accordingly reached to the satisfaction that income to the extent of Rs. 94,06,544/- has escaped assessment. That reasons so recorded are clear that information, based on which notice u/s 148 is issued in the case of assessee, was found during the course of search in case of a third person. Thus in such scenario, the proper course of action is that instead of invoking the provisions of section 148 of the Act, ld.AO should have invoked the provisions of u/s 153C of the Act and thereby the assessment made u/s. 148 is required to be quashed.
In support of that contention ld. AR of the assessee relied upon the decision of our High Court in the case of Shri. Shyam Sunder Khandelwal others dated 19.03.2024 has decided the issue as under:
CONCLUSION:- 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 153D have 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 Sh. Kapil Taneja vs. DCIT 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 153A 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 153C shall pass order dealing with 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 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.
Before concluding, it would be fair to deal with the case law cited by both the parties.
Reliance of respondents on decision of M/s. M.R. Shah Logistics Pvt. Limited (supra) is of no avail. The issue of interplay of provisions of section 147/148 vis-a-vis section 153C in the case of seized material relating or belonging to the person other than on whom the search was conducted or requisition made was not the issue before the Supreme Court.
The Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra) while dealing with the provisions of section 153A held that in case of absence of incriminating material seized during the search, the department is not remediless for reassessing the unabated assessment on the basis of material received from the other sources and can proceed under section 148. The decision does not Sh. Kapil Taneja vs. DCIT support the contentions raised that section 148 is rendered redundant if section 153C is to be resorted to in the facts of the present case.
The Single Bench of this Court in the case of Vijay Kumar Mehta (supra) held that if the Department has chosen not to proceed under section 153C, no right is created to the petitioner for getting the notice under section 148 quashed. Moreover, learned Single Judge was not having the benefit of the decision of the Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra). The appeal against the order was dismissed having rendered infructuous in view of the subsequent developments that the assessment order was passed.
The decision of the Madras High Court in the case of Saloni Prakash Kumar (supra) is of no help to the respondents. The High Court held that section 153C does not preclude issuance of notice under section 148. The field of applicability of two sections was not the issue before the Court.
The petitioner relied upon the decision of the Karnataka High Court in the case of Sri Dinakara Suvarna (supra). It would be relevant to quote Para-10: 10. Admittedly no proceedings were initiated under section 153C of the Act. Thus, there is patent non-application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. It was argued on behalf of the Revenue that Shri. Ashok Kumar Chowta had offered tax on lump-sum income.
Further reliance was placed upon the decision of the Bombay High Court in the case of M/s. Aditi Constructions (supra). The para-9 is quoted:- "9. We find that the jurisdictional conditions for invoking section 147-148 are not satisfied as there is no failure to disclose material facts fully and truly. It is not in dispute that by the letter dated 11th September 2015 (Exhibit H) the Petitioner have submitted all the particulars along with supporting documents to the Respondent No.1. Hence the reasons to believe and a presumption based on the statement of Shri Bhanwarlal Jain (a third party) in the course of a search, that the loans of the entities were bogus or accommodation entries was clearly dispelled. Moreover, the specific provisions of S. 153C would prevail over the general provisions of section 147 in the case of search on 3rd party."
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.
The first ground of challenge to initiation of proceedings under section 148 is being accepted and there is no need to dilate upon other grounds raised
for challenging the notice issued under section 148 of the Act.
42. It would be appropriate to mention that during the pendency of the writ petitions there was interim protection in favour of the petitioners.
43. The writ petitions are allowed accordingly.
Based on the above discussion and respectfully following the decision as cited by the assessee we considered that the assessment is required to be said legal ground raised by the assessee.
On the merits of the case the assessee submitted that he has never undertaken any F&O transaction with Shri Ajay Gangwal and ledger found during the course of search at Shri Ajay Gangwal is not pertaining to him.
Further he also challenged the authenticity of Ledger as same was neither clear nor sealed & signed. However, ld.AO brushed aside the submission made by assessee arbitrarily and completed the assessment vide order dated 24.05.2023, by making addition of Rs. 1,52,364/- by alleging the same as unexplained Net profit earned in F&O transaction by assessee (Rs. 47,62,289/- + 17,165/- -46,27,090/-). In this regard it is reiterated that ld, AO made the addition in the hands of assessee solely on the basis of ledger found & seized during the course of search & seizure carried out at some other party. It is also submitted that assessee during the course of reassessment proceeding repeatedly sought the clear and legitimate copy of the ledger on the basis of which it is alleged that assessee has undertaken alleged F&O Transaction with Shri Ajay Gangwal and same is not yet been provided till date by the ld. AO. It is also submitted that assessee has categorically denied on entering any F&O transaction with Shri Ajay Gangwal and in support of his claim furnished an affidavit at page passed the re-assessment order solely on the basis of information received during the course of search & seizure conducted at some third party by some other officials in some other case, without providing assessee of opportunity of cross examination of the searched party i.e Shri Ajay Gangwal who alleged to undertake F&O transaction jointly with the assessee. Also, ld. AO did not provided completely legible copies of information on which heavy reliance is placed before making such a huge addition in the hands of the assessee. When the assessee on its merits denied and filed affidavit ld. AO did not controvert that fact even before us and therefore, we hold that the facts stated on affidavit cannot be disbelieved considering the decision of apex court in the cae of Mehta Parikh & Co. Vs. CIT [ 30 ITR 181] and thereby we direct to delete the addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11/08/2025.
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 Sh. Kapil Taneja vs. DCIT Tk;iqj@Jaipur fnukad@Dated:- 11/08/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Kapil Taneja, Jaipur 2. izR;FkhZ@ The Respondent- DCIT, Circle-01, Jaipur 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 578/JP/2025) 6. vkns'kkuqlkj@ By order,
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