ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, JAIPUR vs. GOPAL PRASAD GUPTA, JAIPUR

Both the present appeals have been preferred by revenue against the order of Ld. Commissioner of Income Tax Appeal (hereinafter referred to as “Ld. CIT(A)”) dated 08.09.2025 u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “Act”).

Facts of the case in brief are that the information was received from the DDIT (Inv.)-II, Jaipur who had carried out substantial inquiries during the course of search proceedings and post search proceedings, in the case of Shri Ramesh Maihar Group, conducted at various premises. During the proceedings, certain incriminating documents (Pen drives) found and seized from the premises were examined during post search proceedings. It was further gathered that the key persons of Ramesh Manihar Group, being Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla were engaged as finance brokers for P a g e | Gopal Prasad Gupta arranging cash loans between various borrowers and lenders, which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transactions was also not offered for taxation by the group. The assessee has advanced unaccounted loan through the Ramesh Manihar Group and also earned unaccounted interest thereon, which is required to be brought to tax.

The Assessing Officer (AO) after having recorded reasons in detail, finally, initiated reopening proceedings u/s 147 of the Act on the ground as under:- “Thus, Shri Gopal Prasad Gupta, mentioned in the above mentioned table as in the column FROM has provided advances of Rs.3,80,00,000/- in cash during FY 2015-16 relevant to AY 2016-17 through the Ramesh Manihar Group. The said person has also earned unaccounted interest on the advanced cash loan of Rs.3,80,00,000/- given to various persons/concerns. The same is also unrecorded. Hence, it is a fit case for initiation of assessment proceedings for escapement of income.”

The AO, thereafter, mentioned that on the basis of information available with the AO, the A.O. had reason to believe that in this case income is escaped to the tune of Rs.3,80,00,000/-. Accordingly, the notice u/s 148 was duly issued to the assessee on 30.06.2021 after obtaining approval from the competent authority. Aggrieved by the said notice issued u/s 148 of the Act by the AO, the assessee filed a writ petition before the Hon'ble High Court. In the meantime, this issue had attained finality through the decision of Hon'ble Supreme Court dated 04.05.2022 in the case of UOI Vs Ashish Agarwal. Thereafter, in view of the decision of Hon'ble Supreme Court, the CBDT issued Instructions No. 01/2022/F.No.279/Misc./M-51/2022-ITJ dated 11.05.2022, and accordingly, an opportunity of being heard as per the P a g e | Gopal Prasad Gupta provision of section 148A(b) of the Income Tax Act, 1961 was provided to the assessee wherein the assessee was given a show-cause on 01.06.2022 as to why said transactions shall not be treated as unexplained as income chargeable to tax has escaped assessment within the meaning of provision of section 147 of the Act, 1961 for the assessment year 2016-17. Order u/s 148A(d) was passed on 30.07.2022 after obtaining the prior approval of the Pr. Commissioner of Income Tax (Central), Jaipur and notice u/s 148 was also issued on 30.07.2022. Statutory notices u/s 142(1) and 143(2) were issued to the assessee and the response received in compliance of that were duly considered by the AO and finally, additions were made as under:- 1. Addition u/s 69A of the Act on the ground that the assessee had shown unsecured loan of Rs.8,60,28,741/- out of which the assessee and filed confirmations to the extent of Rs.3,31,47,438/-. Therefore a sum of Rs.5,28,81,303/-(8,60,28,741- 3,31,47,438) on the ground that the assessee has failed to explain the source of the said unsecured loan.

A further sum of Rs.3,80,00,000/- advanced by the assessee in cash was not recorded in its book of accounts and therefore, the same is liable to be added to the total income of the assessee u/s 69A of the Act.

A sum of Rs.63,000/- was also added to the total income of the assessee on the ground on account of interest earned on the money advanced to various parties on various dates as recorded in the excel sheet taken out of the seized pen drives.

Aggrieved by the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A) challenging the issuance of notice u/s 148 of the Act and consequently the assessment order passed u/s 143(3) r.w.s. 147 of the Act on the ground that the seized documents in question were seized from a third party and therefore, proceeding u/s 153C of the Act should have been initiated against the assessee and not u/s 148 of the Act. The Ld. CIT(A) vide the impugned order duly considered the facts and P a g e | Gopal Prasad Gupta circumstances of the case and also the legal issues raised and involved in this case and allowed the appeal of the assessee and quashed the proceedings u/s 147 on the ground that the Hon’ble High Court of Rajasthan in DB Civil Writ Petition No.18363/2019 dated 19.03.2024 has quashed the notice issued u/s 147 and the resultant assessment order. The findings of the Hon’ble High Court of Rajasthan (Supra) is given as under:- “23. The reasons supplied in case in hand for initiation of proceedings under Section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group.

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 jurisdiction 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 jurisdiction 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 years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A.

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 153D have prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148.

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.

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.

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 Section 148 does not enhance the case of respondent to initiate the proceedings under Section 148. On fulfillment of two conditions for invoking Section 153C the proceeding in accordance with Section 153A are to be initiated. The operating field of and Section 153A to 153D and Section 148 are different. Applicability of Section 153C in cases where the seized material related to or belonged to person other than on whom search is conducted or requisition made does not render Section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition.

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 153C 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.

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 returns for relevant preceding years and thereupon proceed to assessee or reassessee 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.

Following the order of Hon’ble Rajasthan High Court, the Ld. CIT(A) quashed all the proceedings initiated u/s 147/148 of the Act and thereby all the additions made by the AO were deleted.

Aggrieved by the impugned order, the revenue has filed appeal before this Tribunal. 10 We have carefully considered the facts and circumstances of the case and also considered the decision of the Hon’ble Rajasthan High Court and respectfully following the same, confirm the said order passed by the Ld. CIT(A) as there is no infirmity in the impugned order. 11 In effect, both the appeals of the revenue are dismissed. Order pronounced in the open court on 23.03.2026 Sd/- Sd/- (Sanjay Garg) (Ratnesh Nandan Sahay) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 23.03.2026 Mittali, Sr. PS