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Facts
A search was conducted on the Ramesh Manihar Group, leading to the seizure of data indicating the assessee as a lender of undisclosed cash loans. The Assessing Officer initiated reassessment proceedings under Section 147/148, making significant additions, which the CIT(A) subsequently deleted based on a Rajasthan High Court judgment quashing similar Section 148 notices for search-related material. The revenue appealed the CIT(A)'s order.
Held
The Tribunal noted that the Rajasthan High Court had quashed Section 148 notices in connected cases where incriminating material was seized during a search, directing the department to proceed under Section 153C. Consequently, the Department issued fresh notices to the assessee under Section 153C read with Section 153A. This rendered the original reassessment order and the CIT(A)'s appellate order non-existent. Therefore, the revenue's appeals were dismissed as infructuous.
Key Issues
1. Whether the CIT(A) was justified in quashing reassessment proceedings initiated under Section 148 based on a High Court judgment, where incriminating material was seized during a search. 2. Whether the appropriate course of action for the department should be under Section 153C/153A when material belonging or relatable to the assessee is found during a third-party search.
Sections Cited
250, 148, 153C, 132, 147, 143(2), 142(1), 143(3), 153A
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Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
These two appeals by the revenue are directed against the order of the Ld. CIT(A) Jaipur-05 dated 11.11.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’).The revenue has raised the following grounds of appeal vide for A.Y 2012-13 as under:
(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.
(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.
(iv) The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appellate proceeding.
(i) Whether the Learned CITIA) 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.
(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.
(iv) The appellant craves leave to add, amend or withdraw any of the ground of appeal during appellate proceedings.
The present set of appeals filed by the Revenue pertain to Assessment Years 2012–13, 2013–14, Since the issues involved in both the appeals are identical and arise out of a common search action in the case of Ramesh Manihar Group, they are being disposed of by this consolidated order for the sake of convenience. The facts relating to Assessment Year 2012–13 are being taken as the lead case and the decision rendered therein shall apply mutatis mutandis to the AY 2013-14 also.
A search and seizure operation under Section 132 of the Income-tax Act, 1961 was carried out in the case of the Ramesh Manihar Group on 07.01.2016. During the search, voluminous data in the form of Excel sheets stored in 18 pen drives was seized from the main office of the group situated at 303, Raina Sagar, MSB Ka Rasta, Johari Bazar, Jaipur. The seized data contained extensive details of cash loans advanced by the group.
The investigation further revealed that Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla of the said group were acting as finance brokers, arranging unaccounted cash loans between various lenders and borrowers. The brokerage income earned there from was also found to be undisclosed. Based on such seized material, the Investigation Wing identified names of certain lenders, including the present assessee, who was alleged to have advanced cash loans out of undisclosed income and to have earned interest thereon.
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 had escaped assessment within the meaning of Section 147 of the Act and, accordingly, issued a notice under Section 148 of the Act on 28.03.2019 after obtaining requisite approval from the competent authority.
In response to the said notice, the assessee filed his return of income. Subsequent notices under Sections 143(2) and 142(1) were also issued. After due proceedings, the AO completed the reassessment under Section 147 read with Section 143(3) of the Act vide order dated 10.12.2019, assessing total income at Rs.3,19,57,570/–by making additions of Rs.2,84,00,000/– towards
alleged cash loans and Rs.31,24,000/– towards interest income on such loans.
Aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(A), vide order dated 11.11.2024, allowed the appeal of the assessee and deleted the additions made by the AO. While appellate proceedings were in progress in connected cases, the Hon’ble Rajasthan High Court, vide common order dated 19.03.2024 passed in D.B. Civil Writ Petition No. 18363/2019 and other connected matters, quashed the notices issued under Section 148 and the consequential assessment orders in cases re-opened based on documents seized during the search in the Ramesh Manihar Group. However, liberty was granted to the Department to proceed afresh in accordance with law.
Pursuant to the aforesaid judgment, the Department issued notice under Section 153C read with Section 153A of the Act to the assessee on 29.01.2025. As a result, the reassessment order dated 10.12.2019 passed under Section 147 read with Section 143(3) ceased to have any legal existence and became non est. Consequently, the appellate order of the CIT(A) dated 11.11.2024, which itself arose from such non est assessment order, also lost its relevance.
In view of the above legal position, the present departmental appeal against the order of the CIT(A) is rendered infructuous and is accordingly dismissed.
In the result, both the appeals of the revenue are dismissed in above terms.
The Order is pronounced in the open court on7thDay of August 2025.