INCOME TAX OFFICER, PUNE vs. SAGAR CONSTRUCTION COMPANY, PUNE

During the course of assessment proceedings the Assessing Officer asked the assessee to explain as to why the said amount not be made taxable on account of violation of provisions of section 269SS and 269T of the Act. The assessee in response to the same gave the details of 16 parties from whom it had taken loan through proper banking channel. The Assessing Officer thereafter asked the assessee to furnish the documentary evidence substantiating the said loans which have been arranged through Sri Sachin Nahar. From the reply submitted by the assessee, he noted that during the course of search proceedings certain documents / loose sheets were seized wherein it has been found that the assessee had taken unsecured loans in cash through Sri Sachin Nahar. He reproduced some of the scanned sheets wherein it is clearly found that the loans have been made in cash. He, therefore, asked the assessee to explain as to why addition of the same should not be made to the total income of the assessee.

The assessee submitted that the total outstanding unsecured loan during the year under consideration was Rs.12,85,03,100/- which has already been disclosed in the financials submitted. The assessee during the year under consideration has taken loan of Rs.1,61,00,000/- from 16 parties through Sri Sachin Nahar. However, in absence of any details furnished by the assessee to prove the genuineness and creditworthiness of the loan creditors amounting to Rs.1,61,00,000/- which were received through Sri Sachin Nahar, the Assessing Officer, invoking the provisions of section 68 r.w.s. 115BBE of the Act, made addition of the same to the total income of the assessee. Since the assessee has also paid interest amounting to Rs.17,80,059/-, the Assessing Officer disallowed the same u/s 37 of the Act. Thus, the Assessing Officer computed the total income of the assessee at Rs.2,22,86,304/-.

Before the Ld. CIT(A) / NFAC the assessee submitted that the reasons for reopening were communited to the assessee after 11 months of issue of notice u/s 148 of the Act although the assessee had filed the return in response to the notice u/s 148 of the Act within prescribed time and requested the Assessing Officer for supply of the reasons vide submissions dated 17.07.2021 and 24.01.2022. It was submitted that the assessee received notices u/s 142(1) of the Act dated 10.02.2022 and 07.03.2022 in which the objections raised by the assessee were disposed of mechanically without any speaking order. Referring to the decision of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs ITO (supra) it was submitted that the Assessing Officer has violated the guidelines issued by the Hon’ble Supreme Court, therefore, such reopening of the assessment should be quashed on account of violation of the directions of Hon’ble Supreme Court. It was further submitted that the Assessing Officer should have issued notice u/s 153C of the Act instead of notice u/s 148 of the Act since the reopening was based on incriminating material found during the course of search at the premises of Sri Sachin Nahar. For the above proposition, the assessee relied on various decisions.

So far as the merit of the case is concerned, it was submitted that as per the reasons for reopening the assessment it is the allegation of the Assessing Officer that the assessee has taken unsecured loan from Sri Sachin Nahar in cash. However, no such unsecured loan has been received by the assessee in cash but all the loans were received through proper banking channel. The Assessing Officer in the order has accepted and satisfied that all the loans were taken through banking channel which has been mentioned at para 20 of the assessment order. The assessee submitted that to prove the identity, genuineness and creditworthiness of the persons from whom the said loans were received the assessee had submitted the confirmation letters, PAN numbers, bank statements of the lenders, return of acknowledgement of ITR V of the lenders and TDS certificates / 15G forms for verification. The assessee filed an application for admission of additional evidences under Rule 46A before the Ld. CIT(A) / NFAC. The invocation of provisions of section 115BBE of the Act was also challenged before the Ld. CIT(A) / NFAC.

Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC deleted the addition by observing as under:

So far as the validity of the assessment u/s 147 of the Act is concerned, the Ld. CIT(A) / NFAC did not adjudicate the same since he has deleted the addition on merit by observing as under:

Aggrieved with such order of the Ld. CIT(A) / NFAC the Revenue is in appeal before the Tribunal by raising the following grounds:

The Ld. DR on the other hand filed a detailed written submission stating that section 153C of the Act does not bar the jurisdiction of the Assessing Officer to reopen the assessment u/s 147 of the Act when information against the assessee is received from the search conducted on another person. He submitted that section 153C of the Act does not by itself preclude an Assessing Officer from reopening the assessment u/s 147 / 148 of the Act on the basis of information found during a search conducted u/s 132 of the Act or the requisition made u/s 132A of the Act in respect of another person. He submitted that in a case where pursuant to search conducted u/s 132 of the Act or the requisition made u/s 132A of the Act in respect of another person (searched person), assets, documents or books of account, which either belong to the assessee or contain information pertaining to the said assessee are found and the same are handed over to the Assessing Officer of the assessee, he would subject to satisfaction of the other jurisdictional conditions stipulated under Section 153C of the Act, having the jurisdiction to make a reassessment/assessment of the income of the assessee under Section 153C of the Act. However, the same cannot mean that he is bound to exercise the said jurisdiction. In the event, the AO does not assume the jurisdiction to proceed with making an assessment / reassessment under Section 153C of the Act, for want of the necessary ingredients thereto that the recourse to Section 147/148 is not ousted. He submitted that the non-obstante clause u/s 153C of the Act does not override the provisions of section 147 of the Act.

Referring to the decision of Hon’ble Gujarat High Court in the case of Amar Jewellers Ltd. Vs. ACIT reported in (2022) 444 ITR 97 (Guj), he submitted that the Hon’ble High Court in the said decision has held that non obstante clause of section 153A(1) relating to normal assessment procedure is to be understood as merely dispensing with procedural aspect; search assessment can be reopened under section 147.

Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs. Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del), he submitted that the Hon’ble High Court in the said decision has held that post search reassessment in respect of all 6 years can be made even if original returns are already processed u/s 143(1)(a) and the Assessing Officer has power u/s 153A to make assessment for all six years and compute total income of assessee, including undisclosed income, notwithstanding that returns for these years have already been processed u/s 143(1)(a) of the Act.

So far as the argument of the Ld. Counsel for the assessee that the Assessing Officer has violated the procedure laid down in the decision of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs ITO (supra) by rejecting the objections through a non-speaking order is concerned, he submitted that the Assessing Officer has passed the rejection order addressing the specific objections categorically as per the directions laid down in the case of GKN Driveshafts (India) Ltd vs ITO (supra), therefore, the argument of the Ld. Counsel for the assessee is not tenable.

So far as the argument of the Ld. Counsel for the assessee that 4 weeks time has not been provided after disposing of the objections and passing of the order is concerned, he submitted that the assessment was getting barred by limitation by 31.03.2022 and the Assessing Officer has passed the order on 30.03.2022 and therefore, the same cannot be held to be invalid.

Coming to the merits of the case, the Ld. DR submitted that the assessee has not filed any details before the Assessing Officer except the PAN details of the so- called creditors and has filed the details for the first time before the Ld. CIT(A) / NFAC which was in violation of Rule 46A. The Ld. CIT(A) / NFAC has not called for any remand report from the Assessing Officer nor gave any opportunity to the Assessing Officer to verify the same. Further, the assessee is filing certain additional evidences before the Tribunal for the first time. This itself shows that full details were even not filed before the Ld. CIT(A) / NFAC. Therefore, under these circumstances, the order of the Ld. CIT(A) / NFAC be reversed and that of the Assessing Officer be restored.

The Ld. Counsel for the assessee in his rejoinder submitted that the argument of the Ld. DR that section 153C of the Act does not bar reopening of the assessment u/s 147 when information received from a search on another person is factually incorrect and contrary to the decision of the Hon’ble Jurisdictional High Court. He submitted that the Hon’ble Bombay High Court in the case of Sejal Jewellery & Anr. Vs. Union of India & Ors (supra) has clearly held that if the information arises from a search on another person, then the only procedure available is section 153C and not 147 / 148 of the Act. He submitted that this is not an obiter and it is the ratio decidendi based on jurisdictional binding precedents in various cases such as Continental Warehousing and Murli Agro etc. He submitted that the Ld. DR’s attempt to term this a ‘writ’ with ‘no ratio’ is legally invalid because Writ decisions are also binding judicial precedents unless explicitly limited. Further, the decision was rendered after examining the statutory scheme of 153A/153C, and therefore squarely applies. Further, the decisions relied on by the Ld. DR in the case of Hon’ble Delhi High Court and the Hon’ble Gujarat High Court are of non-jurisdictional High Courts whereas the decision of Hon’ble Bombay High Court in the case of Sejal Jewellery & Anr. Vs. Union of India & Ors (supra) is the decision of jurisdictional High Court which is binding on the Tribunal. He submitted that the information on the basis of which the case of the assessee was reopened and notice u/s 148 of the Act was issued arises solely out of search on another person which triggers section 153C of the Act as a matter of legislative mandate and not the administrative discretion.

Referring to the decision of the Hon’ble Supreme Court in the case of CIT vs. M/s Calcutta Knitwears reported in (2014) 362 ITR 673 (SC), he submitted that the Hon’ble Supreme Court in the said decision has held that the ‘satisfaction’ and the ‘forwarding of material’ u/s 153C is mandatory and not optional. He submitted that even the decision of Hon’ble Delhi High Court in the case of PCIT vs. Naveen Kumar Gupta (supra) is not applicable since in that case the Hon’ble Delhi High Court has dealt with the reopening of completed assessment u/s 153A and whether abated or non-abated years can be reopened. They did not deal with the situation where the Assessing Officer received search based information of a third person but issued notice straight u/s 148 instead of 153C of the Act.

So far as the argument of the Ld. DR that the decision in the case of Sejal Jewellery & Anr. Vs. Union of India & Ors (supra) does not apply because there was no search in the case of the assessee is concerned, he submitted that the same is contrary to the provisions of section 153C of the Act itself. He submitted that the provisions of section 153C of the Act applies precisely when search is on another person but material “pertains to” or ‘relates to’ the assessee are found from the premises of the searched person. Therefore, the argument of the Ld. DR actually reinforces that the provisions of section 153C and not 147 should have been invoked.

So far as the argument of the Ld. DR that the Assessing Officer has passed a speaking order while disposing of the objections is concerned, he submitted that the rejection order is mechanical, non-reasoned and does not deal with each of the objections. He submitted that the said order shows zero independent application of mind and does not address mandatory applicability of provisions of section 153C of the Act.

So far as the argument of the Ld. DR that no satisfaction note exists u/s 153C and therefore the Assessing Officer has rightly invoked the provisions of section 147 of the Act is concerned, he submitted that there is no satisfaction recorded by the Assessing Officer of the searched person and the Assessing Officer of the assessee. However, this is mandatory as per the decisions of Hon’ble Supreme Court in the case of CIT vs. Calcutta Knitwears (supra) and Sinhgad Technical Education and the decision of Hon’ble Delhi High Court in the case of Pepsi Foods. He accordingly submitted that the legal grounds raised by the assessee in the CO are to be decided in favour of the assessee.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case reopened the assessment u/s 147 of the Act on the ground that the assessee has received cash loan of Rs.1,62,00,000/- through Sri Sachin Nahar in violation of provisions of section 269SS and interest amount paid by the assessee in cash is unaccounted income which has not been offered to tax while filing the ITR for assessment year 2017-18. The reasons for such reopening have already been reproduced in the preceding paragraphs. We find the Assessing Officer, rejecting the various explanations given by the assessee, made addition of Rs.1,62,00,000/- by invoking the provisions of section 68 r.w.s. 115BBE of the Act and also made further addition of the interest paid of Rs.17,80,059/- by invoking the provisions of section 37 of the Act. We find before the Ld. CIT(A) / NFAC the assessee, apart from challenging the addition on merit, challenged the validity of reopening of the assessment on the ground that only notice u/s 153C could have been issued instead of notice u/s 148 of the Act. Further, the Assessing Officer has not followed the due procedure laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs ITO (supra) by not disposing of the objections by passing a speaking order. It was also argued that the time gap between the disposal of objections and passing of the final order was less than 4 weeks and therefore, such order passed u/s 147 r.w.s. 143(3) of the Act is not in accordance with law.

We find the Ld. CIT(A) / NFAC deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. He, however, did not adjudicate the legal grounds raised by the assessee before him holding that since he has deleted the addition on merit, the same need not be adjudicated. Against this backdrop, we have to decide the appeal filed by the Revenue as well as the grounds raised in the CO by the assessee. A perusal of the assessment order shows that the Assessing Officer reopened the assessment on the basis of information received from the Insite portal according to which search and seizure action u/s 132 of the Act was carried out in the case of Sri Sachin Nahar on 01.08.2007 during which it was found that the assessee company has taken loan from Sri Sachin Nahar amounting to Rs.1,62,00,000/- in cash and has also paid interest which remains unaccounted. We find the Assessing Officer in the assessment order at para 6 page 4 has observed as under:

This clearly shows that during the course of search proceedings certain documents / loose sheets were seized which contain the information that the assessee had taken unsecured loan in cash through Sri Sachin Nahar.

We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of ITO vs. Narendra Sampatlal Bafna (supra). In that case also, the case of the assessee was reopened on the basis of search on Sri Sachin Nahar during which it was gathered that Shri Bafna had received cash loan of Rs.6,20,000/- throush Sri Sachin Nahar. The Assessing Officer made the addition and when the assessee challenged the validity of re-assessment proceedings by issuing notice u/s 148 instead of 153C, the Ld. CIT(A) / NFAC allowed the appeal of the assessee both on legal grounds as well as on merit. When the Revenue challenged the order of the Ld. CIT(A) / NFAC, the Tribunal vide order dated 19.08.2024 dismissed the appeal filed by the Revenue by observing as under:

So far as the first issue raised by the Revenue in the grounds of appeal challenging the order of the CIT(A) / NFAC in quashing the re-assessment proceedings are concerned, we find that the case of the assessee was reopened on the basis of information received from the DCIT, Central Circle – 1, Pune according to which details emerged during the statement recorded u/s 132(4) of the Act of Shri Sachin Nahar and during search and post search enquiries by the Investigation wing and also during the course of enquiries conducted during search proceedings by the Central Circle – 1(1), Pune that the assessee has received cash loan of Rs.6,20,00,000/- through Shri Sachin Nahar. Further, the various documents, note books, note pads and loose sheets found during the course of search contained the business details of Shri Sachin Nahar. The provisions of section 153C of the Act read as under: “153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A : ……………..”

Similar view has been taken by the Co-ordinate Bench of the Tribunal in the case of Vijaykumar Mangilalji Chordiya vs. NFAC, Delhi vide order dated 19.09.2024 for assessment year 2013-14. We find the Mumbai Bench of the Tribunal in the case of Nilesh Bharani vs. DCIT (supra) has also decided the similar issue holding that the best course of action in such cases is provisions of section 153C and not 147 of the Act. The relevant observations of the Tribunal from para 50 onwards read as under: “50. On a careful perusal of the provisions as referred to above, we find that, there was a vast difference in the application of provisions of the section 153C of the Act prior to 01/06/2015 and thereafter. Substantial amendment was made in the said section in two phases: i) W.e.f. 01/06/2015- when no simultaneous amendment was made in the section 153A of the Act; and ii) W.e.f. 01/04/2017- when the amendment was made parallel to the amendment u/s 153A of the Act.

Thus, a) The section 153C was amended w.e.f. 01/06/2015 when the following additional amendments were made and this led to construction of the said section as below: "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person……….” b) Thereafter, the following amendments were made in the said section w.e.f. 01/04/2017 and, the section shaped and which remained in the statute till 31/03/2021 mentioned above. c) The amendments brought in section 153C was only to protect the revenue and not to resort to rigours of section 148 and whenever in cases of search in case of a person, any material or information pertaining to such other person is found AO can initiate 153C and can make addition or assessment for the relevant assessment year or years.

On perusal of the above section amended from time to time, it is clear that the provisions of the said section could only be applied till 31/05/2015 when from the premises of the searched person, some books of account and/or valuables or documents seized or requisitioned belongs to a person other than the person searched. Which meant that a document or books of account, valuables or asset seized etc belonging to the other person not searched should have been found in a physical form from the premises of the person searched. Any information contained in the material so seized from the premises of the person searched which did not belong to the non-searched person but contained therein any information relating to the non- searched person did not authorize the revenue to take an action u/s 153C of the Act. In that case, the only course available to the revenue till 31/05/2015 was to issue a notice u/s 148 of the Act because the information/ material seized did not belong to the non-searched person. There was a specific emphasis to the words BELONGS OR BELONG TO A PERSON other than the person searched. In this case, admittedly, during the course of the said searches in the premises of share brokers or others, no material in physical form of the assessee was found. Therefore, upto 31/05/2015, in absence of any physical seizure belonging to a nonsearched person, no assessment proceedings could be initiated by taking recourse to the provision u/s 153C of the Act.

Now, after the amendment therein w.e.f. 01/06/2015, we find that, the concept of belonging was just restricted to the valuables found in any form u/s 153C(1)(a) of the Act, but a new sub clause (b) has been inserted as above, where the requirement in physical form of books of account, documents, etc. of a person not searched to have been seized from the premises of the person searched was dispensed with and the word „belonging‟ was removed by substituting the same with pertains or pertain to besides making an addition of the words there in for any information contained therein pertains or relates to a person not searched. Thus, the scope of application of the said section was widened, particularly to overcome the judicial interpretation against the revenue whose officers were applying the said section 153C of the Act considering any information in the seized material as pertaining or relating to the person not searched as against the term belonging to. Therefore, the said amendment w.e.f. 01/06/2015 actually clarified as to what was the mind of the revenue even as per the said section 153C of the Act as it existed earlier.

The concept of assessments/ reassessments of income u/s 153A and also with the section 153C of the Act was introduced by the Finance Act 2003 w.e.f. 01/06/2003 and the said amendment in the section 153C of the Act was made w.e.f. 01/06/2015. The purpose of the same was explained in the para 36 to the Notes to Clauses of the Finance Bill 2015 as below: Clause 36 of the Bill seeks to amend section 153C of the Income-tax Act relating to assessment of income of any other person.

Thus, on a bare perusal of the plain language of the above explanation in respect of the amendment introduced in the section 153C of the Act w.e.f. 01/06/2015, we find that it mandates that in case any information is found during the course of any search anywhere in respect of a person not searched, then for the purpose of reassessment of income on the basis of the same, it can only be considered by taking recourse to the provisions of the section 153C to make a reassessment of income u/s 153A of the Act and not under section 148 of the Act to make an assessment u/s 147 of the Act.

Before us, Ld. A.R. submitted that, here the revenue used some information was gathered from the seized material from the premises of the persons searched as has been mentioned by the CIT (A) in his appellate order and also in reasons recorded in para 2 (supra) that the fact that assessee taken accommodation entry of bogus LTCG was found from the search of Evergreen Enterprises, then the only course available to the revenue was to take the route of the section 153C of the Act and not u/s 148 of the Act. It is because that there was a definite information of escapement of the income, its quantification, the nature of the transactions, the scrip transacted, the person who assisted etc. etc. found from the person searched u/s132 of the Act by the revenue through the investigation unit and accordingly directly passed on the AO of the assessee as against the mandate as per the provisions of the section 153C of the Act. The investigation unit was legally obliged to send the same to the AO of the person searched may be with a recommendation to send the same to the AOs of all those concerned persons as has been done by the investigation unit directly but definitely in an illegal manner beyond the prescribed jurisdiction for the purpose by the law. This is the precise information to be used by the revenue to initiate proceedings of reassessment by issuing a notice u/s 153C of the Act instead erroneously u/s 148 of the Act.

We agree with the contention of the assessee that, since, section 153C of the Act overrides the provisions of the sections 147, 148,149, 151 and 153 of the Act, it was absolutely mandatory for the Assessing Officer of the person searched to send the same to the AO of the non-searched person and thereafter, the concept of verification of it being incriminating or not is in the sole domain of the Assessing officer of the person not searched who if after verification finds that the information received by him from the AO of the person searched is incriminating and contains details of some escaped income for one or more assessment years, he will record a satisfaction to the said effect and proceed to reassess the same u/s 153A of the Act which is clear by the words – if that AO (of the non-searched assessee) is satisfied that the information so received has a bearing on the determination of total income of the said person for the relevant year or years, which means that a satisfaction to the effect of escapement of such income may be for one year or more after verification of the material received, because in some cases it may be that the person searched may not be recording the relevant transaction in his books of account leading to an incrimination but the non- searched person might have properly disclosed the said transaction in his books of account, where it can no more remain incriminating in his hands. In such case, no reassessment proceedings can be initiated under the provisions of the section 153C of the Act of the non-searched person. Here in this case as noted above the information of alleged bogus LTCG was gathered from the search of Evergreen Enterprises and other searches of entry operators. Thus, the only recourse for the AO was to initiate 153C of the Act qua this addition, and even rope into this issue or addition in the assessment made u/s 153A for that year by recording the satisfaction that this information was gathered from a search.”

We further find that the Co-ordinate Bench of the Tribunal in the case of Ashok Dhanraj Chordia vs. PCIT vide order dated 30.07.2025 for assessment year 2017-18, following the decision of Hon’ble Bombay High Court in the case of Sejal Jewellery & Anr. Vs. Union of India & Ors. (supra) and distinguishing the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Naveen Kumar Gupta (supra), has observed as under:

We find some force in the above arguments of the Ld. Counsel for the assessee. We find an identical issue had come up before the Hon’ble Bombay High Court in the case of Sejal Jewellery & Anr. Vs. Union of India & Ors. (supra). In that case a search action was carried out in the case of one Shilpi Jewellers Pvt. Ltd. during which materials were seized and such materials were further explored and enquired. Such enquiry revealed significant information in regard to M/s. Green Valley Gems Pvt. Ltd. which according to the Revenue had provided accommodation entries to the petitioner, in which it was also revealed that M/s. Green Valley Gems Pvt. Ltd. was a shell company. Accordingly reopening proceedings u/s 147 were initiated and notice u/s 148 of the Act was issued. When the petitioner challenged such reopening of assessment on the ground that the assessment could have been only made u/s 153C and not u/s 147 of the Act, the Hon’ble Bombay High Court accepted the contention of the petitioner and quashed the re-assessment proceedings by observing as under: “12. We have heard learned counsel for the parties and with their assistance, we have perused the record. At the outset, we may observe that the (2023) 149 taxmann.com 399 (SC) (1993) 69 Taxman 627 (SC) 18 February, 2025 WP3057_2019.DOC jurisdiction of the Assessing Officer to issue the impugned notice would be required to be considered on the basis of the departmental record and on such basis, the relevant provisions of law which would govern the facts and circumstances of the case in the hands of the Assessing Officer. In the present case, the impugned notice under Section 148 of the I.T, Act was issued to the petitioner on 29 March, 2019. The petitioner received a copy of 'reasons to believe' furnished by respondent no. 3 on 11 September, 2019, which were objected by the petitioner. On such objection, an order was passed by the Assessing officer rejecting the objections as raised by the petitioners, so as to proceed to reassess the income of the petitioner under Section 147 of the Act.

As clearly seen from the record, to which, we have made a reference in the aforesaid paragraphs, it appears to be quite clear that there was a search and seizure action on 4 October, 2018 on the business premises of one 'Shilpi Jewellers Pvt. Ltd.', which has been the basis for the reopening of the petitioner's assessment, as also recorded in the reasons for reopening, which inter alia state that there were certain incriminating evidences, in the form of various loose papers and data back-ups of various electronic devices, as found and seized. The search action was against Shilpi Jewellers Pvt. Ltd., its associate concerns, as well as the key individuals of the Group. The 18 February, 2025 WP3057_2019.DOC department asserts that the materials elicited during the search action revealed, that all these persons had accepted large unsecured loans from various shell/paper companies/entities during the year ended on 31 March 2012. On further enquiries being made, the profiling of the loan creditor companies in ITD application, indicated that the loan creditor companies/entities who advanced huge loans to Shilpi Jewellers Pvt. Ltd. and its associate concerns, as well as the key individuals of this group, did not have any creditworthiness for extending such huge loans. It was, particularly, recorded that the petitioner/ assessee was part of said group, which had shown loan receipts during the year ended on 31 March, 2012 from a company, viz. M/s. Green Valley Gems Pvt. Ltd., which was reported to be a shell/paper company, engaged in providing accommodation entries to the beneficiary parties. The reasons for reopening of the assessment were set out in detail, referring to such material and further enquiry which was undertaken in that regard, including materials being gathered in regard to M/s.Green Valley Gems Pvt. Ltd. from whom the petitioners had alleged to have taken accommodation entries. It is on the basis of such information, which was certainly not the information borne out or gathered from the return of income, which was filed and/or any material thereunder, the Assessing Officer reached to a conclusion to reopen the assessment, on the ground that the assessee had not explained such loan receipt 18 February, 2025 WP3057_2019.DOC transactions. Such opinion was formed by the Assessing Officer on the basis that M/s. Green Valley Gems Pvt. Ltd. was a shell/paper company. It is on such premise that the Assessing Officer was of the view that income had escaped assessment within the purview of Clause (c) of Explanation 2 of Section 147 of the I.T. Act and such escapement had occurred due to the assessee's failure to disclose true, proper and complete facts in the return of income, filed for the subject assessment year. Accordingly, notice under Section 148 was issued.

Thus, on the perusal of such reasons, it is quite clear that the provisions of Section 153A providing for "Assessment in case of search or requisition" and the provisions of Section 153C, which provide for "Assessment of income of any other person", which ordain that recourse be taken to the provisions of Section 153A stand attracted for an assessment to be undertaken.

As the controversy revolves around the applicability of Section 153A and more particularly, as to whether Section 153A read with Section 153C vis- a-vis the provisions of Section 147 of the I.T. Act, it will be appropriate to extract the said provisions, which reads thus: "147. Income escaping assessment.--If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss 18 February, 2025 WP3057_2019.DOC or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;] (c) where an assessment has been made, but-- (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;

On a plain reading of Section 153A, it is clear that it begins with a 'non- obstante' clause, when it provides that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 but on or before 31 March, 2021, the Assessing Officer shall have jurisdiction to issue notice to such person to furnish the return of income as specified in the notice or assess or reassess the total income as provided by the provision. Section 153C also begins with a non-obstante 18 February, 2025 WP3057_2019.DOC clause, when it provides that notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, to provide that, in a situation which may fall under Section 153C insofar as assessment of income of any other person is concerned, the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other persons in accordance with the provisions of Section 153A, if he is satisfied that the books of account or document or assets seized or requisitioned have a bearing on the determination of the total income of such person for a period as specified in the said provision and after compliance of other provisions as mandated. On the other hand, Section 147 provides for "Income escaping assessment", can be invoked when any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year. In such situation, the Assessing Officer may subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year and for which a prior notice under Section 148 would be required to be issued. Section 147 does not contemplate an eventuality which Section 153A or Section 153C contemplates, the basis of which is inter alia a search action under Section 132 being resorted as noted hereinabove. Thus, both these provisions are quite compartmentalized although the deeming effect 18 February, 2025 WP3057_2019.DOC of both the provisions, may be the same. However, the situations in which such provisions operate are required to be invoked are completely different. This is clear from the bare reading of the provisions, hence would not warrant any elaborate discussion.

The Supreme Court held that it was in complete agreement with the view taken by the Delhi High Court in Kabul Chawla (supra) and of the Gujarat High Court in Principal Commissioner of Income Tax-4 vs. Saumya Construction7 taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.

If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during 18 February, 2025 WP3057_2019.DOC the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or re- writing the said provisions, which is not permissible under the law."

The language of explanation 2 to new Section 148 is akin to Section 153A and Section 153C. Corollary being that after seizing of operational 18 February, 2025 WP3057_2019.DOC period of Section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted Section 148." We are in complete agreement with the view taken by the Division Bench of Rajasthan High Court in the aforesaid decision.

We further find the Co-ordinate Bench of the Tribunal in the case of ITO vs. Narendra Sampatlal Bafna (supra) while deciding an identical issue where the re-assessment proceedings were initiated on the basis of search at the premises of Shri Sachin Nahar has held that the only course of action available with the Revenue was under section 153C proceedings and accordingly the order of Ld. CIT(A) quashing the re-assessment proceedings was upheld. The relevant observations of the Tribunal from para 17 to 22 read as under: “17. So far as the first issue raised by the Revenue in the grounds of appeal challenging the order of the CIT(A) / NFAC in quashing the re-assessment proceedings are concerned, we find that the case of the assessee was reopened on the basis of information received from the DCIT, Central Circle – 1, Pune according to which details emerged during the statement recorded u/s 132(4) of the Act of Shri Sachin Nahar and during search and post search enquiries by the Investigation wing and also during the course of enquiries conducted during search proceedings by the Central Circle – 1(1), Pune that the assessee has received cash loan of Rs.6,20,00,000/- through Shri Sachin Nahar. Further, the various documents, note books, note pads and loose sheets found during the course of search contained the business details of Shri Sachin Nahar. The provisions of section 153C of the Act read as under: “153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub- section (1) of section 153A : ……………..”

In the instant case, the reopening of the assessment was based on the basis of information that emerged from the statement of Shri Sachin Nahar u/s 132(4) and on the basis of details of notings in his money lending business which contained the name of the assessee as stated by the Assessing Officer. We find the letter No.Pn/DCIT/Cen.Cir.1(1)/Sharing of lnfo./2020-21/dated 05.03.2021 of ACIT Central Circle 1(1), Pune addressed to the Income Tax Officer, Ward 1, Ahmednagar which reads as under: "To The Income Tax Officer, Ward 1, Ahmednagar Sub: Sharing of Information in the case of Shri Sachin Nahar -reg. Ref: This office letter No. Pn/DCIT/CC 1(1)/Info./2019-20 dated 10.06.2019 Reference may kindly be made to this office letter No. Pn/DCIT/CC 1(1)/Info./2019-20 dated 10.06.2019 vide which information about the cash loan was provided to you. In the case of Shri Sachin Nahar, Search was carried out on 04/08/2017, wherein Shri Sachin Nahar has admitted that various parties have taken cash loans from other parties through him, since he was a broker between these two parties, Shri Sachin Nahar has received commission for this transaction. The details of the parties who have taken cash loans have been obtained from Shri Sachin Nahar. There is also a mention of these persons in the seized documents (copy enclosed).

We find the Assessing Officer at para 2 of the reasons recorded has mentioned as under: “During search at his residence, various notebooks, notepad and loose papers were found and seized as Bundle No 1 to 28. In his statement recorded u/s. 132(4) of the Act at his residence on 02.08.2017, Shri Sachin Nahar stated that this seized material contain details of his money lending business in Cash and the Notings therein are related to Principal amount lent by lenders & borrowed by borrowers, names of lenders & borrowers, interest component etc. In the said seized registers, there are two types of notings, one which contains the accounts of borrowers and other registers contain notings of names of investors (depositors) in coded words. Here it is important to mention that Sachin Nahar used to write the name of investors and borrowers in certain coded words. Further the amounts mentioned in the seized documents are short by three zeros. For example for amount 100000, the noting is made 100 in seized registers.”

From the above it is clear that certain documents were seized from the premises of Shri Sachin Nahar which contained information relating to the present assessee. Therefore, the provisions of section 153C are applicable as according to the said section, it is applicable if any information contained in the seized document relates to the assessee.

So far as the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Naveen Kumar Gupta (supra) relied upon by the Ld. DR is concerned, the same is not applicable to the facts of the present case in view of the binding decision of jurisdictional Hon’ble High Court in the case of Sejal Jewellery & Anr. Vs. Union of India (supra). We, therefore, hold that the proper course of action in the instant case should have been issue of notice u/s 153C of the Act and not u/s 148 of the Act. Since the assessment is held to be invalid on account of issue of notice u/s 148 of the Act as against 153C of the Act, therefore, the order of the Ld. PCIT invoking jurisdiction u/s 263 of the Act becomes infructuous. We, therefore, quash the 263 proceedings initiated by the Ld. PCIT. Since the assessee succeeds on this legal ground, the other grounds are not being adjudicated being academic in nature. The appeal of the assessee is accordingly allowed.”

In view of the above discussion, we hold that the Assessing Officer instead of issuing notice u/s 153C, has issued notice u/s 147 of the Act which is not in accordance with law. Therefore, the same is liable to be quashed. We hold and direct accordingly. The grounds raised by the assessee in the CO on this issue are accordingly allowed.

So far as the other legal grounds raised by the assessee in the CO are concerned i.e. passing a cryptic and non-speaking order is concerned, we find the Assessing Officer has passed an order as per his wisdom and the assessee cannot say that the same is cryptic and non-speaking one. Therefore, the same is dismissed.

Similarly, so far as the ground that the mandatory period of 4 weeks has not been given and the order has been passed in haste is concerned, we find the assessment was getting barred by limitation by 31.03.2022 and the Assessing Officer has passed the order on 30.03.2022 and undisputedly there was a gap of 23 days from the date of disposal of the objections and passing of the final order. However, we find the Assessing Officer issued notice u/s 148 of the Act on 29.03.2021 asking the assessee to file the return within 30 days, the assessee should have filed its return of income on or before 28.04.2021. However, the assessee filed the return on 11.05.2021 i.e. after the due date. Further, instead of asking for reasons immediately, the assessee took more than 2 months for asking for reasons. Therefore, when the assessee has made delay in filing the return and asking for reasons, he should not have any grievance for disposal of the appeal after a gap of 23 days from the date of the objections especially when the assessment was getting barred by limitation. We, therefore, do not find any merit in the grounds challenging the passing of the order in haste. In any case, since the assessee succeeds on the first legal issue raised by it i.e. validity of re-assessment proceedings by issue of notice u/s 148 of the Act instead of 153C of the Act, therefore, the 1st legal issue raised in the CO filed by the assessee is allowed. Since we are allowing the legal ground raised in the CO challenging the validity of re- opening, therefore, the other grounds raised by the assessee as well as the appeal of the Revenue become academic and are not being adjudicated.

In the result, the appeal filed by the Revenue is dismissed and the CO filed by the assessee is allowed.