TaxTMI 
TaxTMI 
2025 (2) TMI 870
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.... raise common issues of law and fact, hence they are being disposed of by this common judgment. 2. The question which falls for consideration is whether in the facts and circumstances of the case, respondent no. 3 was correct in law in issuing a notice to the petitioner under Section 148 of the Income-tax Act, 1961 (for short "I.T. Act") on the basis of a search action under section 132 of the I.T. Act, which is relevant to the entire group of these petitioners. The assessment years in question in all these cases are A.Y. 2012-13. 3. The learned counsel for the parties have argued Writ Petition No. 3057 of 2019 (Sejal Jewellery & Anr. vs. Union of India & Ors.) as the lead petition, hence we refer to the facts of this case. 4. Petitioner no. 1 is a partnership firm (for convenience referred as 'petitioner') inter alia engaged in the business of manufacturing and trading in gold and diamond jewellery. For the assessment year in question, petitioner filed its return of income on 28 September, 2012 declaring a total income of Rs. 25,52,692/-. After about six years, on 4 October, 2018, a search action was taken against the petitioner under Section 132 of the I.T. Act at the pr....
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....editworthiness to extend such huge loans. The issue of loss receipts by this assessee, from shell/paper companies/entities has been taken up for investigation during the course of search proceedings at the premises of the group and relevant questions have been posed to the concerned persons at various premises in the statements recorded u/s. 132 (4) of the Act. 2.2 This assessee i.e. M/s. Sejal Jewellery (PAN: AAPFS3483A), one of the group concerns this aforesaid group, has shown loan receipts of Rs. 25,00,000/- during the year ended on 31.03.2012 from a company viz. M/s. Green Valley Gems Pvt. Ltd. which is reported to be a shell paper company engaged in providing accommodation entries to the beneficiary parties. The analysis and reasons for suspecting the above Loan creditor company/entity as accommodation entry providers are as under: "The company viz. M/s. Green Valley Gems Pvt. Ltd is based in Surat. The office of DIT(Inv.), Mumbai has conducted enquiries at Surat so as to verify the existence of this entity and to examine the genuineness of the transactions, but he could not found any existence of the company at the address' On analysis of retur....
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....taxed for A.Y 2012-13." 7. The petitioner objected to the aforesaid reasons by its letter dated 27 September, 2019 submitted to the Assessing Officer. The primary objection raised by the petitioner was to the effect that the assessment could have been made only under Section 153C and not under Section 147. The petitioner also dealt with each of the reasons on merits, to contend that no case was made out for reopening of the assessment on such materials. The relevant extract of the petitioner's letter reads thus: "In view of above, it is evident that Section 153C overrides all other sections, including Section 147, 148, 149 & 151 of the Act. The assessment procedure for search proceedings is specifically provided in Section 153C of the Act. Also the time limit for completion and the approval to be obtained is provided in Section 153B & 153D of the Act. As such, the reopening notice under section 148 of the Act is bad in law and not sustainable in law." 8. On such backdrop, the Assessing Officer passed an order dated 11 October, 2019 disposing of the objections to reopen the proceedings, as per the requirement of the provisions of Section 147 of the I.T. Act. The Asses....
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....f the I.T. Act was the search action under Section 132 taken at the premises of the petitioner(s) on 4 October, 2018. It is his submission that once the entire basis of reopening was on the search action, what is material to be seen, is not what the petitioner would contend and what the petitioner would set up as a defence, but what is borne out by the record of the department, which would be determinative of the very jurisdiction of the Assessing officer, to take recourse to the provisions of Section 148. It is his submission that once the foundation of the impugned notice itself was based on a search action and the alleged material, then necessarily, the only option available to the respondents was to take recourse to the provisions of Section 153A of the I.T. Act, which provides for assessment in case of a search or requisition, and not to take recourse to the provisions of Sections 147 and 148 of the I.T. Act. It is next submitted that in any case Section 153A would have an overriding effect on the provisions of Section 147 and Section 148, as sub-section (1) of Section 153A clearly implies. It is, therefore, his submission that the impugned action of issuance of a notice under....
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....99 (SC) (supra) and in Phool Chand Bajrang Lal vs. Income-tax Officer (1993) 69 Taxman 627 (SC). Analysis 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 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. 13. 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 o....
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....essee'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. 14. 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. 15. 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 subs....
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...., 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; (d) where a person is found to have any asset (including financial interest in a....
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....rs referred to in this subsection pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income 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: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregat....
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.... 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 subsection (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as re....
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....ned 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 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 ....
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....) inter alia held that the provisions of Section 153A (1) need to be mandatorily resorted once a search takes place. The Supreme Court held as under: "7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under Summary of the legal position 38. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the sea....
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....nd 148 of the I.T. Act need to be noted: "11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention....
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....ng 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." 20. It is thus clear that in the event any incriminating material is found during the search, the Revenue necessarily would be required to take recourse to the provisions of Section 153A and in the event no incriminating material found during the search, then the power of the Revenue to have the reassessment under Sections 147/148 of the I.T. Act stands saved, failin....
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.... been initiated under Section 153C of the I.T. Act. The Division Bench referring to the decision of Supreme Court in Abhisar Buildwell P. Ltd. (supra) as also the decision of Karnataka High Court in Sri Dinakara Suvarna (supra) allowed the petitions observing that the department had not set up a case, that for initiating proceedings under Section 148, it had material other than the material seized during the search of a related party. The relevant observations of the Division Bench are required to be noted, which reads thus: "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. 24. In the case where search or requisition is made, the AO under Section 153A man....
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....rther 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 Green Valley Gems Pvt. Ltd. was a shell company. We do not find that the record would indicate something which is not on the basis of such new materials gathered under the search and seizure action under Section 132. If this be the case, then certainly the provisions of Section 153C read with Section 153A would be applicable, as held by the Supreme Court in Abhisar Buildwell P. Ltd. (supra) when the Court interpreted the effect and purport of Section 153C and 153A, as also held by the Rajasthan High Court in Shyam Sunder Khandelwal (supra). 23. Insofar as Mr. Suresh Kumar's contention supporting the proceedings under Section 147 and 148 of I.T. Act are concerned, for the aforesaid reasons, such contention would in fact go contrary to the intention of the legislature as depicted by the provisions of Section 153A and 153C of the I.T. Act. There would not be any difficulty in accepting the proposition as canvassed by Mr. Suresh Kumar, referring....