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Issues: (i) Whether reassessment notices issued after three years were invalid for want of satisfaction of the conditions in section 149(1)(b) of the Income-tax Act, 1961, including that the alleged escaped income was represented in the form of an asset or expenditure; (ii) Whether the notices under section 148 were vitiated for ambiguity and non-application of mind in not clearly stating whether the assessee was the person searched or a person other than the searched person; (iii) Whether assessment orders framed under section 143(3) without issuing notice under section 148 and without approval under section 148B, despite a search action, were sustainable.
Issue (i): Whether reassessment notices issued after three years were invalid for want of satisfaction of the conditions in section 149(1)(b) of the Income-tax Act, 1961, including that the alleged escaped income was represented in the form of an asset or expenditure.
Analysis: For the earlier years, the notices were issued beyond three years from the end of the relevant assessment years. In such cases, the statutory gateway under section 149(1)(b) applies only if the Assessing Officer possesses material revealing that the escaped income is represented in the form of an asset, expenditure, or an entry in the books of account, and the amount is fifty lakh rupees or more. The recorded reasons and the reassessment orders showed estimation of profit on alleged undisclosed receipts, but did not establish that the income was represented in the form of an asset or qualifying expenditure. The mandatory jurisdictional condition was therefore not demonstrated.
Conclusion: The reassessment notices and the consequential reassessments for the years covered by this issue were held invalid, in favour of the assessee.
Issue (ii): Whether the notices under section 148 were vitiated for ambiguity and non-application of mind in not clearly stating whether the assessee was the person searched or a person other than the searched person.
Analysis: For the later years, the notices used alternative and uncertain language about whether the assessee was searched or whether the material pertained to another person. The statutory scheme requires the Assessing Officer to apply his mind to the correct jurisdictional basis before issuing notice. Ambiguous drafting on such a foundational jurisdictional fact reflected casualness and non-application of mind. The notice was therefore treated as legally defective.
Conclusion: The notices under section 148 for these years were held invalid, in favour of the assessee.
Issue (iii): Whether assessment orders framed under section 143(3) without issuing notice under section 148 and without approval under section 148B, despite a search action, were sustainable.
Analysis: For the search-related assessment years, the statutory scheme after the Finance Act, 2021 required proceedings to be taken under section 147 read with section 148, and, where applicable, with prior approval under section 148B. A regular assessment under section 143(3) could not be sustained where the case was required to be dealt with under the special reassessment framework arising from search-related information. The assessments were therefore passed without following the correct statutory route.
Conclusion: The section 143(3) assessments for these years were quashed, in favour of the assessee.
Final Conclusion: The reassessments for the earlier years were annulled for failure to satisfy the limitation-based jurisdictional conditions, the reassessments for the later years were struck down for defective and non-speaking jurisdictional notices, and the search-related section 143(3) assessments were set aside for non-compliance with the mandatory reassessment procedure.
Ratio Decidendi: Where reassessment is initiated beyond three years, the revenue must strictly show that the escaped income is represented in the statutory forms prescribed by section 149(1)(b); and where search-based reassessment is invoked, the jurisdictional notice and the assessment must conform to the correct statutory channel with clear application of mind and the required prior approval.
Reassessment jurisdiction fails without statutory satisfaction, clear notice, and correct search-based procedure under income-tax law.
Reassessment notices issued after three years require strict satisfaction of section 149(1)(b), including material showing escaped income in the form of an asset, expenditure, or qualifying book entry, and the notices were invalid where only alleged undisclosed receipts and estimated profit were recorded. Notices under section 148 were also defective where they ambiguously failed to identify whether the assessee was the searched person or another person, reflecting non-application of mind, and were invalid. Search-related assessments framed under section 143(3) without following the reassessment route under sections 147 and 148, and without the required approval under section 148B, were unsustainable and were quashed.
Reopening beyond three years - Mandatory conditions u/s 149(1)(b) - Non-application of mind in notice u/s 148 - Search assessments under post-2021 regime - Assessment u/s 143(3) vis-a-vis section 148 - Prior approval u/s 148B Reopening beyond three years - Mandatory conditions under section 149(1)(b) - unrecorded receipts from scrap sales - statutory pre-condition governing extended limitation - HELD THAT: - The Tribunal held that where notice u/s 148 is issued beyond three years from the end of the relevant assessment year, the extended period can be invoked only if the material in possession of the AO reveals escaped income of the prescribed amount represented in the form specified by law. In the present case, the reasons recorded only referred to unrecorded receipts from scrap sales, while the assessment itself proceeded on an estimated profit on such receipts. Neither the reasons nor the reassessment order identified any escaped income represented in the form of an asset or expenditure so as to attract section 149(1)(b). Applying the principle stated in M/s ACE Tyres (P) Ltd. Hyderabad[2025 (10) TMI 936 - ITAT HYDERABAD] Tribunal held that the mandatory condition for reopening beyond three years was not fulfilled. [Paras 14, 18] The reopening u/s147/148 for AYs 2019-20 and 2020-21 was held bad in law and the reassessment orders were quashed. Non-application of mind in notice u/s 148 - Ambiguous reassessment notice - HELD THAT: - The Tribunal found from the text of the notice that the Assessing Officer recorded satisfaction in a mutually inconsistent manner by stating that search was initiated in the assessee's case or in the case of another person in respect of whom the assessee was assessable, and also that documents seized in the case of the assessee pertained to the assessee. Since the assessee's premises had itself been covered in search, the notice ought to have clearly reflected the jurisdictional basis adopted. This ambiguity showed that the notice was issued casually and without independent application of mind. Following Optus Developers Pvt. Ltd. [2026 (1) TMI 1037 - ITAT DELHI] Tribunal held the notice to be invalid. [Paras 24, 25, 28] The notices issued under section 148 for AYs 2021-22 and 2022-23 were quashed, and the reassessment orders were consequently held invalid. Search assessments under post-2021 regime - Assessment u/s 143(3) vis-a-vis section 148 - Prior approval u/s 148B - Special procedure overriding regular assessment - assessments framed under section 143(3) on the basis of search material - HELD THAT: - The Tribunal held that under the post-2021 statutory scheme, where a search is conducted on or after 1 April 2021, the Assessing Officer is deemed to have information suggesting escapement of income for the relevant preceding years and must proceed through the special mechanism of sections 147 and 148. Section 148B further requires prior approval before passing the assessment or reassessment order in such cases. Since the search in the present case took place on 11.05.2024 and the years under appeal preceded the search year, the assessments could not validly be completed under section 143(3). Relying on Montage Enterprises Pvt. Ltd. [2025 (12) TMI 1815 - ITAT DELHI] and Homelife Buildcon (P.) Ltd.[2025 (7) TMI 1231 - ITAT CHANDIGARH] Tribunal applied the principle that the special search-triggered route prevails over the general regular assessment procedure. [Paras 36, 39, 40, 42] The assessment orders for AYs 2023-24 and 2024-25 passed under section 143(3), without issuance of notice under section 148 and without the approval contemplated by section 148B, were quashed. Final Conclusion: The Tribunal allowed all six appeals of the assessee for AYs 2019-20 to 2024-25 by quashing the impugned reassessment or assessment orders on the respective legal grounds. Consequently, the Revenue's appeals for AYs 2021-22 and 2022-23, directed only against the relief on merits, were dismissed as infructuous.