DEPUTY COMMISSIONER OF INCOME TAX, AMBEDKAR CIRCLE vs. SHWETA CHORDIA, C-SCHEME JAIPUR

Feeling dissatisfied with the two impugned orders, two separate appeals were filed by the assessee challenging the assessment order dated 29.09.2021 passed u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), relating to the assessment year 2013-14, and the other assessment order dated 31.03.2022, relating to the assessment year 2014-15, passed u/s 147 of the Act.

Vide two impugned orders, Learned CIT(A) has set aside both the assessment orders, while relying on the 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. Learned CIT(A) has held that as per decision in the above cited case, notices u/s 148 of the Act was quashed and the assessment orders had become ineffective. 5. On the other hand, Learned AR for the assessee has stood by the findings recorded by Learned CIT(A) in allowing the appeals filed by the assessee, and prayed for dismissal of these two appeals in view of the decision by our own Hon’ble High Court in Shyam Sunder Khandelwal’s case (supra). 6. In the impugned orders, Learned CIT(A) extracted findings recorded by the Hon’ble High Court. Relevant portion of the decision reads as under:-

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 juri iction 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 juri iction 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 26. 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 prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148. 27. 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. 28. 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. 29. 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 31. 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 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. 32. 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."

Undisputably, notices u/s 148 of the Act were issued by the department to the assessee on the basis of information received by initiating reassessment proceedings u/s 147 of the Act. 8. Case of the department is that as a result of search and seizure action by DDUIT(Investigation)-II, jaipur, incriminating documents in the Form of Pen drive , seized from the premises of Shri Ramesh Manihar Group, Johari Bazar, Jaipur, revealed that two persons of the said group were engaged as finance broker to arrange cash loan between various borrowers/ lenders, which was not reflected in the books of account. The assessee was also found to be one of the said beneficiaries. Proceedings u/s 153A of the Act are stated to have been conducted as regards the above said two persons of the above named Group. Ultimately, in case of the assessee-respondent herein, two assessment orders, pertaining to the two assessment years under consideration were passed, making additions reflected therein. 9. Having regard to the decision in Shyam Sunder Khandelwal’s case (supra), we find that Learned CIT(E) was fully justified in applying the said decision to the facts of present two matters, and in holding that the Assessing Officer, as regards the assessee, should have taken action as per section 153C of the Act instead of resorting to notices u/s 148 of the Act. Tk;iqj@Jaipur fnukad@Dated:- 03/04/2025 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant-.DCIT, Central Circle-3, Jaipur. 2. izR;FkhZ@ The Respondent- Shweta Chordia, Jaipur. 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File ITA No. 102 & 285/JPR/2025) vkns'kkuqlkj@ By order,