TaxTMI 
TaxTMI 
2026 (1) TMI 417
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....i, Ms. Maithili Mehta, Mr. Maunil G Yajnik (9346), Senior Standing Counsels. JUDGMENT (PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA) 1. The present group of petitions arise from the proceedings/ notices issued to the respective petitioners under Section 148 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), reopening the assessment under Section 147 of the Act. The issue raised in the instant writ petitions arises prior to the promulgation of the Finance Act, 2021, by which the provisions of Sections 147 to 149 of the Act were substituted with new Sections 147, 148, 148A and 149 of the Act. It also removed Sections 153A to 153C of the Act and merged them under Section 147 of the Act. 2. The proceedings under Sections 147/148 of the Act stem from search actions conducted under Section 132 of the Act or from the requisitions made under Section 132A of the Act. BRIEF FACTS: 3. It is the case of the petitioners that, when the proceedings emanate from a search conducted under Sections 132/132A of the Act, the Assessing Officer having jurisdiction over the respective petitioners is mandatorily required to follow the provisions of Sections 153A or 153C of t....
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....Act for reopening the assessments. SUBMISSIONS ON BEHALF OF THE PETITIONERS: 7. The learned advocates appearing for the respective petitioners have advanced the following submissions:- 8. Section 153C of the Act casts a mandatory obligation upon the Assessing Officer of the searched person to hand over books of account, documents or assets seized or requisitioned during the search, which belong to or pertain to a person other than the searched person, to the Assessing Officer having jurisdiction over such other person. The statutory mandate is evident from the plain language of Section 153C of the Act, which provides that 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 pertain to, or any information contained therein relates to, a person other than the person referred to in Section 153A of the Act, then such material shall be handed over to the Assessing Officer having jurisdiction over such other person. 9. Thus, it is contended that once the Assessing Officer of the searched perso....
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....must be carried out exclusively under Section 153C of the Act. Any contrary interpretation would render the introduction of Section 153C of the Act otiose and defeat the legislative purpose. 14. That the mandatory nature of this special machinery is fortified by Section 153D of the Act, which requires prior approval of an officer not below the rank of Joint Commissioner before passing an assessment order based on searched material. The legislature has thus consciously provided a distinct and self-contained procedural framework for search-based assessments under Sections 153A and 153C. Permitting recourse to Sections 147/148 would bypass these statutory safeguards, which could never have been the legislative intent. 15. Learned counsels further pointed out the provision of Section 153B(1)(ii) of the Act, which prescribes the limitation period for completing assessment in case of a person covered under Section 153C of the Act, and it is submitted that the limitation period commences not from the issuance of notice under Section 153C, but from the date on which the seized material is handed over to the Assessing Officer having jurisdiction over the 'other person'. 16. In view....
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.... Assumption of jurisdiction under Section 153C of the Act is subject to fulfilment of mandatory conditions, namely, recording of two satisfaction notes-first by the Assessing Officer of the searched person and second by the jurisdictional Assessing Officer of the other person; and (ii) Assumption of jurisdiction under Sections 147/148 of the Act is subject to recording of "reasons to believe" regarding escapement of income, obtaining sanction of the competent authority, adherence to limitation, and other statutory safeguards. Thus, it is contended that the mere fact that information or documents emanate from a search does not mandatorily compel the Assessing Officer to invoke Section 153C of the Act. 23. Learned Senior Standing Counsel has further submitted that Sections 147/148 of the Act constitute the general provisions relating to assessment or reassessment of escaped income and are applicable to all cases, including those where information pertaining to the other person has originated from a search or requisition. The non-obstante clause at the beginning of Section 153C(1) of the Act cannot be construed to impliedly exclude the operation of Sections 147/148 of t....
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....ions 147/148 of the Act can always be resorted to. 30. In support of the aforesaid submissions, reliance is placed on the following judicial precedents : (i) In the case of PCIT Vs. Naveen Kumar Gupta (2024) 168 Taxmann.com 574 (Delhi), paragraphs 3, 4, 5, 9, 13, 35 to 48, 53 to 62 and 65; (ii) In the case of PCIT Vs. Agroha Fincap Ltd. (2025) 179 taxmann.com 185(Delhi), paragraphs 4, 5, 10 and 12 to 17. 31. With regard to the decision of the Supreme Court in the case of Abhisar Buildwell (P.) Ltd.(supra), the learned Senior Standing Counsels have clarified as under:- (i) The said decision deals with assessment of the searched person under Section 153A and not with assessment of an "other person" under Section 153C; (ii) As noted in paragraph 5 of the judgment, the question before the Supreme Court was whether, in the case of completed or unabated assessments of the searched person, additions could be made in the absence of incriminating material found during search or requisition; (iii) Reference was made to paragraph Nos. 7, 13 and 14 of the judgment to submit that the Supreme Court has not examined or adjudicated upon the issue ....
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....8,500/-, which formed the basis for recording "reason to believe" and issuance of notice under Section 148 of the Act. 35. Thus, the foundation for reopening is the corroborated admission before the Settlement Commission, and not merely a seized document. Such admission, as it was contended, does not fall within the expression "books of account or documents seized" so as to mandatorily attract Section 153C of the Act. 36. On the aforesaid factual premise, it is submitted that invocation of Section 148 of the Act is: (i) Factually justified, as it is based on post-search information arising from the ITSC proceedings; (ii) Legally sustainable, as Section 153C is not attracted to material or information that comes into existence or is generated after the search; and (iii) Consistent with legislative intent, which preserves Sections 147/148 as a remedial mechanism to bring escaped income to tax where the statutory conditions for invoking search assessment provisions are not strictly satisfied. Thus, it is contended that Section 153C of the Act is confined to seized material belonging to or pertaining to another person, whereas admissions before the I....
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.... SATISFACTION NOTE UNDER SECTION 153C AND ITS IMPACT ON SECTIONS 147/148. 42. Section 132 of the Act empowers the Income-tax authorities to conduct search and seizure operations where the statutory conditions prescribed therein are satisfied. 43. Section 153A of the Act prescribes the procedure to be followed in cases where a search is initiated under Section 132 or a requisition is made under Section 132A. Sections 153A, 153B and 153C were inserted by the Finance Act, 2003 with effect from 01.06.2003, thereby introducing a distinct and special code for assessment and reassessment in search-related cases. 44. Section 153A of the Act opens with a non-obstante clause overriding Sections 139, 147, 148, 149, 151 and 153 of the Act. Further, Section 153C of the Act provides that assessment of income of any other person, i.e. a third party, shall be undertaken thereunder, and all the petitioners fall under this provision. The relevant portions of Sections 153A, 153B and 153C of the Act are as under : "SECTION 153A : Assessment in case of search or requisition. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, sectio....
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....Officer having jurisdiction over such other person, whichever is later.] SECTION 153C : Assessment of income of any other person [(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 any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong 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 such other person notice and assess or reassess income of such other person in accordance with the provisions of [sub-section (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 section 153A shall be construed as reference to the date of receiving the books of account....
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.... u/s. 132A of the Act. xxx xxx xxx 16. Law in this regard is clear and explicit. The only question which arises for our consideration is as to whether the notice dated 06.02.1996 satisfies the requirements of Sec. 158BD of the Act. The said notice does not record any satisfaction on the part of the Assessing Officer. Documents and other assets recovered during search had not been handed over to the Assessing Officer having jurisdiction in the matter. 17. No proceeding u/s. 158BC had been initiated. There is, thus, a patent non-application of mind. A prescribed form had been utilized. Even the status of the assessee had not been specified. It had only been mentioned that the search was conducted in the month of November 1995. No other information had been furnished. The provisions contained in Chapter XIVB are drastic in nature. It has draconian consequences. Such a proceeding can be initiated, it would bear repetition to state, only if a raid is conducted. When the provisions are attracted, legal presumptions are raised against the assessee. The burden shifts on the assessee. Audited accounts for a period of ten years may have to be reopened. 18.....
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....d Circular No. 24/2015 dated 31.12.2015, clarifying the procedure to be followed for initiation of proceedings under Section 153C of the Act. 47. The Supreme Court, in the case of Super Malls Private limited vs. Principal Commissioner of Income Tax, 8, New Delhi, 2020 (4) S.C.C. 581, has reiterated the aforesaid proposition of law. It is held thus: "7.1 It cannot be disputed that the aforesaid requirements are held to be mandatorily complied with. There can be two eventualities. It may so happen that the Assessing Officer of the searched person is different from the Assessing Officer of the other person and in the second eventuality, the Assessing Officer of the searched person and the other person is the same. Where the Assessing Officer of the searched person is different from the Assessing Officer of the other person, there shall be a satisfaction note by the Assessing Officer of the searched person and as observed hereinabove that thereafter the Assessing Officer of the searched person is required to transmit the documents so seized to the Assessing Officer of the other person. The Assessing Officer of the searched person simultaneously while transmitting the docume....
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....d material to the jurisdictional Assessing Officer of the 'other person' before assuming jurisdiction under Section 153C. 49. When incriminating material pertaining to a 'third/other person' is found during the course of a search conducted under Sections 132/132A of the Act and such material is transmitted to the jurisdictional Assessing Officer of such 'other person', the statute obliges the Assessing Officer to record satisfaction on such material before proceeding further. The legislative scheme does not carve out any exception permitting the jurisdictional Assessing Officer of the third person to assume jurisdiction under Section 153C of the Act in the absence of satisfaction recorded by the Assessing Officer of the searched person in the first place, and, as a necessary corollary, unequivocally not under Sections 147/148 of the Act as a second instance on the same material. 50. In other words, the absence of satisfaction recorded by the Assessing Officer of the searched person does not vest jurisdiction in the Assessing Officer of the third person to directly invoke the provisions of Sections 147/148 of the Act on the incriminating material found during search, more part....
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....ted/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in ....
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.... Court has made these observations in relation to the "searched person" under Section 153A of the Act, and has carved out an exception for resorting to the provisions of Sections 147/148 of the Act, subject to fulfillment of the conditions envisaged therein, in cases where no incriminating material is found. 55. "Incriminating material" would mean any evidence or proof which connects the assessee with involvement in a delinquency or any deliberate act of concealment/ misdeclaration/ diversion of funds/income. The Supreme Court has rendered the decision in the context of the provisions of Section 153A of the Act, which does not stipulate recording of a satisfaction note in the case of the searched person, since the incriminating material which directly involves the searched person is recovered, whereas it is mandatory to note the nature/details of incriminating material found having a link with the "other person/third person" for enabling the Assessing Officer of such other person/third person to assume jurisdiction under Section 153C of the Act, which is not a requirement under Section 153A of the Act. The Supreme Court has clarified that the provisions of Sections 147/148 of th....
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.... special circumstances carved out, as discussed hereinabove. DISCUSSION ON CASE LAW:- 59. Albeit, numerous decisions are cited before us, it is noticed by us that the same are repetitive; hence, in order to avoid prolixity, we have dealt with only those which are relevant. The Rajasthan High Court, in the case of Shyam Sundar Khandelwal (supra), after considering the judgment of the Supreme Court in Abishar Buildwell (P.) Limited (supra) and the judgment of the Karnataka High Court in case of Shri Dinkara Suvarna Vs. DCIT, 2023 454 ITR 21 (Karnataka) and also in a decision of the Bombay High Court in case of Aditi Constructions vs. Dy. CIT, 2023 151 taxman.com 513, has held as under : - "35. The Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra) while dealing with the provisions of section 153A held that in case of absence of incriminating material seized during the search, the department is not remediless for reassessing the unabated assessment on the basis of material received from the other sources and can proceed under section 148. The decision does not support the contentions raised that section 148 is rendered redundant if section 153C is to be re....
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....wever, the respondents shall be at liberty to proceed against the petitioners in accordance with law." 60. The aforesaid decision is followed by the Bombay High Court in the case of Sejal Jewellery vs. Union of India, (2025) 171 taxmann.com 846. 61. The respondent has placed reliance on the judgment of the High Court of Delhi in the case of Navin Kumar Gupta (supra). A careful reading of the facts of the judgment in the case of Navin Kumar Gupta (supra), as recorded by the Delhi High Court, would reflect that in the said case, a search was conducted under Section 132 of the Act against the searched person, and the material was forwarded by the Assessing Officer to the Assessing Officer of the third person. The jurisdictional Assessing Officer of the third person also received a report from the Investigation Wing, Mumbai, regarding the assessee purchasing units of a penny stock during the financial year 2010-2011, and based on the said information from the Investigation Wing, Mumbai, the Assessing Officer of the third person issued a notice under Section 148 of the Act. In such facts, the Delhi High Court held that the proceedings under Section 148 of the Act were valid. 62....
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....osed income of a person other than the searched person, he has to transmit such documents/material along with his satisfaction note to the Assessing Officer having jurisdiction over such other person (third person). Ultimately, in paragraph No. 35, the Coordinate Bench has held as under :- "35. Indisputably in the case on hand, the search was undertaken prior to 1-6-2015. If that be so then, it is clear that before issuing the notice under section 153(C) of the Act, the primary condition has to be fulfilled and which is that the money, bullion, documents etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken u/s. 153C of the Act. The seized documents do not belong to the two writ applicants herein but were seized from the premises of the Venus Group. It is not the case of the revenue that the seized documents are in handwriting of the two writ applicants. In such circumstances, the Assessing Officer could not have initiated proceedings under section 153(C) of the Act but based on the information, could be said to be justified in reopening the assessment for the reasons assigned and referred to above" 66. In the....
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....sing Officer if he has reason to believe that any income has escaped assessment for any assessment year. This facet is different from the knowledge acquired of undisclosed income from the incriminating material collected during search and seizure. Hence, it is not open to the Assessing Officer to invoke the provisions of Sections 147/148 of the Act for reopening the assessment on the incriminating material gathered during search and seizure under Sections 132/132B of the Act, when the special provisions beginning with non-obstante clauses are engrafted in the statute. 69. We do not endorse the submission of the Revenue expressing its predicament for bypassing the statutory provisions of Sections 153A and 153C of the Act and directly invoking the provisions of Sections 147/148 of the Act in cases where the names of numerous assessees surface during search. The statute does not provide such shortcuts. Merely because the Revenue faces numerous assessees whose names have been unearthed during search and whom it believes have evaded tax, the statutory provisions cannot be bypassed. The Latin maxim "Quando aliquid prohibetur ex directo, prohibetur et per obliquum" deciphers to mean "W....
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...., the Navratna Group submitted a list of purchasers (from F.Y. 2011-12 to 2016-17), wherein the unit number, name of purchaser, date of execution of sale deed, cost of land and construction, etc., were mentioned. The said list was compared with the Excel file recovered from the laptop of Shri Murlidhar, and it was observed by the authorities that NODPL had maintained proper records of all receipts in cash as well as through cheque on the sale of units/villas in the Kalhaar Scheme. NODPL, in its application before the ITSC, admitted that it had received "on-money" (cash) for the sale of units/villas at the "Kalhaar Blues and Greens" project, wherein it was disclosed that the purchasers had paid huge amounts in cash. Thereafter, the Deputy Commissioner of Income Tax, Central Circle-1(1), Ahmedabad, vide communication dated 05.03.2021, conveyed to the respective Jurisdictional Assessing Officers (JAOs) to analyze the data and ascertain the names of the purchasers from the Excel sheet submitted by the Navratna Group, from the sale deed value, registration number and dates, and accordingly to take necessary remedial action to protect the interest of the Revenue. Thus, in the proceedings....
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....om any other source, apart from the material found during the search at the K-Star Group, pointed out to us. 74. Group-C:-Similar is the position of the petitioners of this group to that of Group-B. The information/incriminating material to the JAO of the petitioners has been transmitted by the Assessing Officer of Flamingo (Sanjay Govindram Agarwal) without recording a satisfaction note. No independent material, or any material gathered post-search apart from the material found during the search, has been pointed out to us. 75. Group-D:-It is interesting to note that in the writ petitions being Special Civil Application Nos. 17933 of 2018, 17935 of 2018, 17938 of 2018, and 17939 of 2018, the assessments for the Assessment Years 2011-12 to 2014-15 are sought to be reopened by resorting to the provisions of Sections 147/148 of the Act on the basis of the search conducted and the panchnama drawn on the petitioners. The contents of the impugned notice and the affidavit-in-reply filed by the Assessing Officer reveal that during the search and survey action conducted on 18.12.2014 covering many commodity traders, where one of them was Affluence Commodities Pvt. Ltd., Dhiren A. Sha....
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.... and liable to be quashed. C) The jurisdictional Assessing Officer of the "other/searched person" (Section 153C) can invoke the provisions of Sections 147/148 of the Act only on the basis of material available to him from other sources, other than the incriminating material sent to him. In case a satisfaction note is recorded on the incriminating material and transmitted to him/her, then the only recourse available to the jurisdictional Assessing Officer is to proceed under Section 153C of the Act and not under Sections 147/148 of the Act. D) In the case of assessees who are subjected to reassessment under the provisions of Section 153A of the Act, the Assessing Officer cannot switch over or invoke the provisions of Sections 147/148 of the Act on the basis of incriminating material found during the search and seizure conducted under Sections 132 or 132A of the Act. However, the Revenue cannot be restricted, barred, or left remediless from invoking the provisions of Sections 147/148 of the Act, subject to fulfillment of the conditions mentioned therein, and the assessment can be reopened on the basis of material collected post-search from any other independent sour....