NARESHCHANDRA KAWALE,NAGPUR vs. ACIT CIRCLE 5 NAGPUR, NAGPUR

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ITA 379/NAG/2025Status: DisposedITAT Nagpur27 June 2025AY 2012-133 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the re-opening of the assessment under Section 147 of the Income Tax Act, 1961, was not valid in this case. The Tribunal respectfully followed the decision of the Hon'ble Jurisdictional High Court in Sejal Jewellers v/s Union of India, [2025] ITL-881 (Bom.). In that case, the Hon'ble High Court had dealt with an identical issue where the assessee's case was re-opened based on a search and seizure operation carried out on a third party. The Hon'ble High Court had held that such an assessment should be made under Section 153 of the Act, not under Section 147. Consequently, the Hon'ble High Court had quashed the assessment proceedings and the notice issued under Section 148 of the Act. Applying this precedent, the Tribunal quashed the assessment order itself. The appeal of the assessee was allowed.

What were the facts?

The assessee, Nareshchandra Kawale, is appealing an order dated 08/04/2025 passed by the learned Commissioner of Income Tax (Appeals), Bhubaneswar, for the assessment year 2012-13. The assessee's case was re-opened under Section 147 of the Income Tax Act, 1961, based on a search and seizure action by the Income Tax Department, Investigation-2, Mumbai. This action revealed a syndicate involved in managed stock exchange transactions to generate bogus long-term capital gains or bogus short-term capital losses for beneficiaries. An addition of Rs. 2,87,271 was made. The appeal challenges the validity of the re-opening and the subsequent assessment.

What were the issues?

1. Whether the re-opening of assessment under Section 147 of the Income Tax Act, 1961, is valid when based on a search and seizure operation conducted on a third party, and whether the assessment should have been made under Section 153 of the Act instead. Assessee's Contention: The assessee argued that the re-opening of the assessment under Section 147 was incorrect. They relied on the decision of the Hon'ble Jurisdictional High Court in Sejal Jewellers v/s Union of India, [2025] ITL-881 (Bom.), which held that if an assessment is re-opened based on a search and seizure operation on a third party, the assessment should be made under Section 153, not Section 147. The assessee contended that the assessment order and notice under Section 148 should be quashed. Revenue's Contention: The judgment does not record any specific arguments made by the Revenue.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 153

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, NAGPUR

Before: SHRI NARENDRA KUMAR CHOUDHRY

For Appellant: Shri Shubham Jain, Ld. Adv
For Respondent: Shri Surjit Kumar Saha, Ld. DR

The present appeal has been filed by the assessee challenging the impugned order dated 08/04/2025, passed by the learned Commissioner of Income Tax (Appeals), Bhubaneswar, [for short, “learned CIT(A)”] for the assessment year 2012–13.

2.

The assessee’s case was re–opened under section 147 of the Income Tax Act, 1961 (for short "the Act"), admittedly on the basis of search and seizure action carried out on the assessee, which resulted into making of addition of Rs.2,87,271, on the reason that thorough

Nareshchandra Kawale ITA no.379/Nag./2025 investigation was conducted by the Income Tax Department, Investigation–2, Mumbai, wherein it was found that a syndicate of persons were acting in collusion and executing managed transactions on the stock exchange generating bogus long term capital gain / bogus short term capital loss for various beneficiaries.

3.

This Court find that the Hon’ble Jurisdictional High Court in Sejal Jewellers v/s Union of India, [2025] ITL–881 (Bom.) has also dealt with identical issue, wherein the case of the assessee was re–opened on the basis of search and seizure operation carried out in the premises of third party and, therefore, the Hon’ble Jurisdictional High Court held that the assessment would have been made under section 153 of the Act but not under section 147 of the Act. The Hon’ble Jurisdictional High Court has ultimately quashed the assessment proceedings along with notice issued under section 148 of the Act. Thus, respectfully following the aforesaid decision of the Hon’ble Jurisdictional High Court cited above, the assessment order itself is hereby quashed.

4.

In the result, appeal of the assessee is allowed.

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