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Facts
The assessee filed its return of income which was processed. A search was conducted on a third party group, and incriminating materials were seized. Based on these materials, reassessment proceedings were initiated against the assessee under sections 147/148 of the Act.
Held
The Ld. CIT(A) annulled the assessment, holding that since the incriminating material was found during a search on a third party, proceedings should have been initiated under section 153C of the Act, not under sections 147/148.
Key Issues
Whether reassessment proceedings initiated under Section 147/148 based on incriminating material found during a third-party search are valid, or if Section 153C should have been invoked.
Sections Cited
143(1), 147, 143(3), 69A, 148A, 148, 153C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH,KOLKATA
Date of concluding the hearing : 25.02.2026 Date of pronouncing the order : 06.03.2026 O R D E R Per Rajesh Kumar, AM
The present appeal filed by the revenue arises from order dated 12.04.2025passed u/s 250of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals)-Kolkata- 27[hereafter “the Ld.CIT(A)].
The issue raised in Ground No. 1 is against the order of Ld.CIT(A) annulling the assessment framed u/s 147/143(3) of the Act dated 29.03.2024 by treating the same as void-ab-initio without properly appreciate that the facts of the case and the legal validity of the reassessment proceedings.
Nawal Kumar Kanodia 3. The facts in brief are that the assessee filed its return of income on 30.07.2019 declaring total income at Rs. 67,44,290/- which was processed u/s 143(1) of the Act on 22.10.2019. Thereafter, a search was conducted at Kasera and Sanwaria Group on 30.11.2018 and certain incriminating materials were found and seized. The search/ investigation revealed some entries which were found from such seized evidences indicating transactions in cash between the assessee and Kasera and Sanwria Group meaning thereby that these incriminating materials were seized from the search on the third party. Accordingly, notice u/s 148A(b) of the Act was issued and after following the procedure laid down under the Act order u/s 148A(d) of the Act was passed on 27.03.2023. Finally, notice was issued u/s 148 of the Act was issued on 30.03.2023. Thereafter, statutory notices along with questionnaire were issued and served upon the assessee. The assessee also filed full details in compliance. Finally, assessment was framed u/s 147/143(3) on 29.03.2024 making an addition of Rs. 2,08,00,000/- in the hands of the assessee as unexplained money u/s 69A of the Act.
In the appellate proceedings, the Ld. CIT(A) annulled assessment framed by the AO on the ground that re-assessment was based upon the incriminating material found and seized during the course of search on Kasera and Sanwaria Group. The Ld. CIT(A) held that since the incriminating material was found during the course of search on 3rd party, therefore, the right course would have been to initiate the proceedings u/s 153C of the Act. The Ld. CIT(A) while passing the order relied on the decision of Sri Dinakara Suvarna v. Dy. CIT [2022] 143 taxmann.com 362 (Karnataka), where the SLP filed by the revenue in the Apex Court was dismissed vide order in 2023 151 taxman.com 489 (SC), in the case of Shyam Sunder Khandelwal Vs. ACIT reported in [2024] 161 taxmann.com 255 (Rajasthan) and Sejal Jewellary Vs. UOI [2025] 171 taxman.com 846 (Bombay HC).
Nawal Kumar Kanodia 5. After hearing the rival contention and perusing the material available on record, we find that incriminating material on the basis of which proceeding u/s 147/148 of the Act were initiated apparently on the basis of said incriminating material found and seized during the course of search on Kasera and Sanwaria Group on 30.11.2018. Therefore proceeding have been initiated to assess the escaped income u/s 153C of the Act which is the special provisons provided under the Act as it overrides the other provisions of the Act. Therefore, the Ld. CIT(A) has rightly annulled the assessment framed by the AO. The case of the assessee is squarely covered by the decision as discussed by the Ld. CIT(A) in the appellate order. Beside the case is squarely covered by decision in the case of Shyam Sunder Khandelwal Vs. ACIT (supra) which was duly approved by the Hon’ble Apex Court in the case of ACIT Vs. Promod Jain (2025) 163 taxman.com 762 (SC). Thus we do not find any infirmity in the appellate order which a very reasoned and speaking order. We are inclined to uphold the order of CIT(A) and dismissed the appeal of the revenue. The appeal of the revenue is dismissed.
In the result, the appeal of the revenue is dismissed.