TaxTMI 
TaxTMI 
2026 (2) TMI 1294
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....r referred to as 'the Act'). Subsequently on the basis of information obtained that the assessee has taken unsecured loan of Rs. 1.62 crores in cash through Shri Sachin Nahar, the Assessing Officer reopened the assessment by recording the following reasons, copy of which is placed at page 15 of the paper book: 01. The assessee is a Firm and filed original Return of Income for AY 2017-18 declaring total income of Rs. 44,06,250/- on 28/10/2017. The assessee has derived income from business etc. The said return has been processed u/s 143(1) of the Income Tax Act. 02. An information has been received from Insight Portal on 15/03/2021 in the case of Sagar Construction Company for A.Y. 2017-18. As per the information, a search and seizure action u/s 132 of the Act was carried out in the case of Shri Sachin Nahar on 01/08/2017 by the DDIT (Inv.), Shri Sachin Nahar is working as finance broker. He is working as middleman who provides a platform for those investors who are having surplus fund and the borrowers who are in the need of funds. As per the information, the assessee Sagar Construction Company had taken loan through Sachin Nahar amounting Rs. 1,62,00,000/....
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....e 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. 5. 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/-....
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.... / NFAC. 8. Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC deleted the addition by observing as under: 5.2 Ground No. 2 :- Vide this ground, the appellant has challenged the addition of Rs. 1,61,00,000/- made u/s 68 and that of Rs. 17,80,059/- claimed as payment of interest to the said 16 persons, disallowed. 5.2.1 As stated by the AO in the first part of the assessment order, the AO was in receipt of information, unearthed by the investigation wing, during the search and seizure action u/s 132 undertaken on Sh. Sachin Nahar. The information on the basis of which the assessment was reopened and which is the genesis of this litigation is that the said Sh. Nahar was a middle man and through him the appellant took loans amounting to Rs. 1,62,00,000/- in cash. The quoted information in para 2 of the assessment order makes it clear that the information about loan contained the following crucial details :- i. That the loan was taken in cash. ii. That the total cash loan amount, obtained-through Sh. Sachin Nahar was Rs. 1,62,00,000/-. iii. The information that the transactions were in cash is further reinforced by the....
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....ellant, in contrast with the information based on which the assessment was reopened. However, the AO went on to make the addition u/s 68 and disallowed the claim of interest payment, only on the ground that because the appellant failed to provide the confirmations from the said parties from whom the loan was taken, any ITR to prove the credit worthiness and identity and bank statement the genuineness, identity, credit worthiness was not proved and hence made the addition of Rs. 1,61,00,000/- u/s section 68. 5.2.5 The AO has further reproduced the reply of the appellant submitted on 30.03.2022. As per the appellant's submission, reproduced on the last para of page 19 and 20 of the assessment order, the appellant has stated that ledger extract of all these parties was submitted on 16.02.2022, the bank statement of all banks was submitted on 24.01.2022 and copy of confirmations of unsecured loans was provided as annexure 4 of the reply dated 30.03.2022. The appellant also reiterated that from the confirmations submitted, it was clear that all the transactions were done through banking channels. From the above submission, it is clear that the appellant did provide the conf....
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....ime ends up adding the entire loan u/s 68 on the premise that the appellant was unable to prove the genuineness of the same. Once the AO accepts that the said loans were arranged by Sh. Sachin Nahar then automatically the source of loans stands explained and he cannot swing back and forth to conclude that genuineness, identity and creditworthiness of the loan transaction & lenders was questionable. It is also relevant to note that in the entire 23-page assessment order, there is not even a whisper of allegation about the fact that loans were not arranged or that the appellant paid cash in lieu of book entries by Sh. Nahar. Once the fact of receipt of loan from the source entities controlled by Sh. Nahar remains unquestioned, its genuineness cannot be questioned and added back u/s 68. The AO cannot, in the same breath, embrace and espouse two contradictory facts. If the source of loan through the entities controlled by Sh. Nahar is accepted, as is the case here, then the genuineness, identity and creditworthiness of transactions and lenders stands explained and cannot be added u/s 68. 5.2.8 Once the appellant has submitted the Confirmation letter, Bank Statements and shown ....
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.... mechanically and not by any speaking order on 07-03-2022 and the fact that the AO passed the Assessment order u/s 147 r.w.s 144B of Income Tax Act on 30-03-2022 (i.e. within a period of four weeks from the date of service of rejection order) and claims that the above action of the AO violates the procedure laid down by the Hon'ble Supreme court in GKN Driveshafts (India) Ltd vs ITO (2003) 259 ITR 19 (SC) and doesn't provide sufficient time to take remedial action to challenge the order of rejection which is against Natural Justice. These technical grounds regarding violation of principals of natural justice and regarding non adherence with the provisions laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts, raised by the appellant are not being adjudicated, as the addition made by the AO has been deleted on merits. 10. Aggrieved with such order of the Ld. CIT(A) / NFAC the Revenue is in appeal before the Tribunal by raising the following grounds: 1. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) was justified in deleting the addition of Rs. 1,61,00,000/- made on account of unsecured loan u/s 68 of the ....
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....ther before or during the hearing of this appeal. 6) In view of the above, the assessee respectfully prays that the Hon'ble Tribunal may be pleased to: a) Admit and allow the above Cross Objections; b) Hold that the assessment framed u/s 143(3) r.w.s. 147 is bad in law and void ab initio for want of jurisdiction; c) Dismiss the Department's appeal and confirm the order passed by the CIT(A); and d) Pass such other and further order(s) as may be deemed fit in the interest of justice. 12. The Ld. Counsel for the assessee at the outset submitted that the basis of reopening was the information obtained and the notings in the seized material from a search u/s 132 of the Act in the case of Sri Sachin Nahar. Referring to para 6 page 4 of assessment order, the Ld. Counsel for the assessee drew the attention of the Bench to the same which reads as under: 6. As stated above, it is crystal clear that the assessee is having business transaction with Shri Sachin Nahra. In this regard, it is pertinent to mention here that during the course of search proceedings, certain documents/loose sheets were seized, wherein it has been found t....
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.... 02.02.2022 Objections filed by the assessee 22 to 31 17.02.2022 Objections disposed vide notice 43, 44 07.03.2022 Show cause notice 50 24.03.2022 Assessment Order 86 to 110 30.03.2022 16. He submitted that when the Assessing Officer rejected the objections by passing a non-speaking order by simply mentioning that the objections raised by the assessee have been disposed off in terms of directions of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO, such order has to be quashed since the Assessing Officer has not followed the due procedure. Since the Assessing Officer has not passed a speaking order while disposing of the objections raised by the assessee, therefore, such order should be quashed. For the above proposition, he relied on the following decisions: i) Vilas B. Rukari (HUF) vs. ITO vide ITA No.2197/PUN/2017 order dated 19.11.2019 for assessment year 2006-07 ii) DCIT vs. P3 Properties vide ITA Nos.391 & 392/PUN/2016 order dated 04.05.2018 for assessment years 2008-09 & 2009-10 iii) Avinash R. Mahamuni vs. ITO vide ITA No.1582/PUN/2018 order dated 30.04.2019 for assessment year....
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....e assessee submitted that the assessee has provided the names, addresses, PANs of creditors confirmations and bank trails, the proof of repayment of interest through proper banking channel, therefore, the assessee has discharged the primary onus cast on it. However, the Assessing Officer has not brought any contrary evidence. He has not conducted any enquiry or verification, therefore, such addition made by the Assessing Officer is not in accordance with law and since the Ld. CIT(A) / NFAC, after considering the submissions made by the assessee has deleted the addition, therefore, the same should be upheld and the grounds raised by the Revenue be dismissed. 21. He further submitted that the Ld. CIT(A) / NFAC has not relied on any fresh evidence as the confirmation and bank statements were part of the assessment record. He submitted that even assuming that any document was filed subsequently it was only clarificatory covered by Rule 46A(1)(c) of the IT Rules, 1962 which is evident from the application made u/s 46A by the assessee, copy of which is placed at pages 131 to 135 of the paper book. He submitted that since the Ld. CIT(A) / NFAC has not violated any of the provisions of ....
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....ade by the AO and grounds of appeal of the appellant. These documents are utmost important evidences required to be considered because without marshalling of these documents, there will be total injustice to appellant. The appellant submits that there was reasonable cause for not submitting these documents and accordingly, the same may kindly be admitted as additional evidences. In this context, the appellant relies upon the following decisions. Smt. Prabhavati S Shah v/s. CIT [231 ITR 1 (Bom)] In this case, the H.C. held that the information sought to be produced by the appellant was necessary to decide the controversy in regard to the genuineness of the loan taken by the Assessee and therefore, the first appellate authority should have exercised the powers conferred upon it u/s. 250(4) and taken on record such information and considered the same for deciding the issue. Keshav Mills Co Ltd. v/s. CIT [56 ITR 365 (SC)] SC held that the first appellate authority does not exceed his jurisdiction if he asks or allows the Assessee to produce or file additional evidence. In view of the foregoing and in view of the fact that the above-mentioned....
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....d that where jurisdictional conditions to initiate further steps under section 153C were not satisfied, non obstante clause as used in section 153C could not be read to completely exclude provisions of section 147 and thus the Assessing Officer could initiate reassessment proceedings under section 147 even if proceedings under section 153C could have been initiated. 26. 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. 27. 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 si....
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....he same cannot be held to be invalid. 31. 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. 32. 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 ....
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....trary 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. 35. 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. 36. 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 ....
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....kdrop, 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: 6. As stated above, it is crystal clear that the assessee is having business transaction with Shri Sachin Nahra. In this regard, it is pertinent to mention here 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 Shri Sachin Nahra. Some of the scanned sheets, wherein it is clearly found that the transactions have been made in cash as reproduced below: 39. This clearly shows that during the cour....
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....nce was available with the Assessing Officer. Further, despite two reminders, the Assessing Officer could not supply any evidence to the CIT(A) / NFAC regarding the existence of such material before him based on which the addition was made. 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 contain....
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....al 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). 2. The case of NARENDRA BAFNA (PAN: AAVPB7561N), who has taken cash loan from various parties through Shri Sachin Nahar, pertains to your charge. The copy of statement recorded u/s. 132(4) of the IT Act, 19....
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....-ordinate Bench of the Tribunal in the case of Vijaykumar Mangilalji Chordiya vs. NFAC, Delhi vide ITA No.1075/PUN/2024 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. 51. 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 ....
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....f 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. 53. 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 pertainin....
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.... requisitioned, have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A. This amendment will take effect from 1st June, 2015. 55. 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. 56. 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 ....
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....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." 42. We further find that the Co-ordinate Bench of the Tribunal in the case of Ashok Dhanraj Chordia vs. PCIT vide ITA No.977/PUN/2024 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: "21. We have heard the rival arguments mad....
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....ey 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,....
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....ed 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. 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 Se....
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....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 ....
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.... six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub- section 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 assessme....
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....made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 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,-- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or 18 February, 2025 WP3057_2019.DOC (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 Office....
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....nts or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. (3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021. 16. 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 wi....
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....sitions. However, the assessee had contended that there were also decisions of the High Courts to the effect that if assessment proceedings were not pending on the date of initiation of the search, the Assessing Officer needs to consider only the incriminating material found during the search, and was precluded from considering any other material derived from any other source. It is in such context, the Supreme Court considering the purport of the provisions of Section 153A of the I.T. Act, vis a vis its applicability qua the provisions of Section 147, and the applicability of Section 132, 132A and notably the 18 February, 2025 WP3057_2019.DOC decision of the Delhi High Court in Commissioner of Income Tax, Central-III vs. Kabul Chawla 6 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, re....
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....sment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 18. 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 Construction 7 taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 19. Insofar as the present proceedings are concerned, the following observations made by the Supreme Court in the context of Section 147 and 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 pro....
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.... assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under Sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. 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....
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....ents can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs." 21. The Rajasthan High Court in Shyam Sunder Khandelwal s/o. Late Damodar Lal Khandelwal vs. Assistant Commissioner of Income Tax, Central Circle-2, Jaipur 8 (supra) also had taken a similar view when the issue which had arisen before the Court was in regard to the notice issued under Section 148 of the I. T. Act, the basis of issuance of such notice was the material seized during search. The contention of the assessee was to the effect that in the said circumstances, the proceedings ought to have 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 obse....
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....ction 143 & 147/148. 27. 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. 28. 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. 22. Applying the principles of law as discussed hereinabove, we are of the clear opinion that the foundation of the present case was certainly a search action which was undertaken by the Revenue against one Shilpi Jewellers Pvt. Ltd. and in such search and seizure action, materials were seized and such materials were further explored and enquired. Such enquiry revealed significant information in regard to M/s. Green Vall....
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....ized 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 : ................." 18. A perusal of the above provisions shows that the same is applicable if any money, bullion, jewellery or other valuable art....
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....e Assessment Years in which the transactions were made are enclosed herewith for reference and necessary action at your end." 20. 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. " 21. From the above it ....