TaxTMI 
TaxTMI 
2026 (5) TMI 395
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....6438/De/2025 -do- 2022-23 -do- 143(3)/147 5 6439/De/2025 -do- 2023-24 -do- 143(3)/147 6 6440/De/2025 -do- 2024-25 13.08.2025 143(3)/147 7 7701/De/2025 Revenue 2021-22 12.08.2025 143(3)/147 8 7704/De/2025 -do- 2022-23 -do- 143(3)/147 2. First we take assessee's appeal in ITA No. 6435/Del/2025 for AY 2019-20. ITA No. 6435/Del/2025 AY 2019-20 3. Brief facts of are that assessee filed its return of income u/s 139(1) of the Act on 30.09.2019 declaring loss of Rs. 42,58,807/-. A search and seizure action u/s 132 was carried out in the case of i.e., Vintage Group on 11.05.2024 of which the assessee is one of the entity. As a result of search, reassessment proceedings u/s 147 were initiated by issue of notice u/s 148 on 27.11.2024. In response to which, assessee filed its return of income on 22.01.2025 declaring loss of Rs. 42,55,162/-. Thereafter, notice u/s 143(2) followed by notices u/s 142(1) alongwith questionnaires were issued from time to time which were duly replied by the assessee. During the course of search various incriminating loose papers and documents were found and seized indicating....
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....he extent of Rs. 8,42,282/- as alleged business income u/s 28 of the Act. 5. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act, 1961. 6. Grounds of appeal Nos. 1 to 3 are with respect to the reopening of assessment without independent application of mind and in mechanical manner and further on the ground that order is barred by limitation being reopened beyond period of three Years and conditions as provided in section 149(1)(b) of the Act are not satisfied. 7. Before us, Ld. AR of the assessee submits that in the reasons recorded for reopening as well as in the notice issued u/s 148 of the Act, the AO was not clear whether the assessee was the person search or the person other than the person on searched. For this, he drew our attention to approval given u/s 151 wherein the AO observed that the case of the assessee is reopened by stating that the books of account/documents seized on requisition in other case but pertinent to the assessee. For this he placed reliance on the judgment of the Co-ordinate Bench in the case of Optus Developers Pvt.....
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....f person searched or in the case of some other person where documents found relates to the assessee. The notice so issued u/s 148 is reproduced as under: Notice under section 148 of the Income-tax Act, 1961 Sir/Madam/M/s. * I have information that a search was initiated under section 132 of the Act in your case or in the case of the person in respect of which you are the assessable under the Act on the date 11/05/2024. * I am satisfied, with the approval of Principal Commissioner or Commissioner, that books of accounts or documents, seized or requisitioned under section 132 or section 132A of the Act in case of VINTAGE DISTILLERS LIMITED pertains or pertain to, or any information contained therein, relate to you or the person in respect of which you are assessable under the Act. This notice is being issued after obtaining the prior approval of the CCIT (CENTRAL), DELHI accorded on date 27-NOV-24 vide Reference No. 100000066631623 and annexed herewith. 2. 1, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for the Assessment Year 2019-20 a....
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....ve elapsed from the end of the relevant assessment year, unless the case falls under clause (b); [(b) if three Years, but not more than ten Years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of- (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if [a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be], as they stood immediately before the commencement of the Finance Act, 2021: ....
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.... notice u/s 148. The normal time limit as provided u/s 149(1)(a) is 3 Years from the end of the relevant A.Y. However, if the case which fall in the ambit of sub clause (b) of section 149(1) of the Act, the time limit is extended upto 10 Years from the end of the relevant A.Y subject to the condition that material in the possession of the Assessing Officer including the books of account of other documents or evidence reveals that the income chargeable to tax is represented in the form of an asset, expenditure in respect of transaction or in relation to an event or an occasion, or an entry of entries in the books of account and farther such income which has escaped the assessment amount to or likely amounts to fifty lakh rupees or more. In the case in hand, undisputedly the notice issued u/s 148 of the Act for the A.Y 2014-15 to 2018-19 ware issued after 3 Years from the end of the relevant A.Y. Therefore, until and unless the conditions as stipulated in clause (b) of section 149(1) of the Act are satisfied, the notice issued u/s 148 of the Act would be invalid being bartred by limitation provided nis 149(1) of the Act. 23. The Assessing Officer in the reasons recorded for ....
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.... reasons also corroborated by the fact that in the assessment order, the Assessing Officer has determined the different amount of escaped income for each A.Y which is estimated in the ratio of turnover of each of the group companies from the total amount of cash receipts found in the Laptop of Shri Ramesh Kumar Sanaka, pertaining to the entire group. Even if for the sake of argument, it is presumed that the quantum of escaped income for each AY was more than Rs. 50 lakhs and the Assessing Officer at the time of recording the reasons was not supposed to undertake a detailed or depth examination of evidence collected during the search, the prima facie undisputed fact is that the details of unaccounted cash receipts and cash payments found during the course of search & seizure action were not specifically attributed to each of the group companies and further only the receipts found in the said seized material are taken into consideration for arriving to the conclusion that the income of more than Rs. 50 lakhs for each of the companies has escaped assessment. The Assessing Officer has proceeded on the basis of the details provided by the ADIT (Inv) and not proceeded on the basis of the....
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.... income/income escaped assessment was either found or converted into any other asset. Therefore, the Assessing Officer has completely failed to bring the case of the assessee in the ambit of sub clause (i) of clause (b) of section 149(1) of the 1. T. Act. Further, the seized material is not in the nature of books of account, therefore, the details recorded in the seized material would not constitute as entry or entries in the books of account. ------------------- 41. Therefore, in view of the fact that notice issued u/s 148 of the Act in respect of A.Ys 2014-15 to 2018-19 after the expiry of 3 Years from the end of the A.Y. the approval of the specified authority granted in a mechanical wav renders the reopening of the assessment itself bad in law. Accordingly, in view of the facts and circumstances as cited above and various decisions as stated above, we hold that the reopening of the assessment is not valid and liable to be set aside. Apart from the invalid approval/sanction u/s 151 of the Act, the Assessing Officer has also failed to bring the case in the category where mandatory conditions u/s 149(1)(b) of the Act are satisfied for initiation of proceedings u/....
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.... satisfaction of escapement of income of Rs. 50 lacs or more represented in the form of asset. 18. The facts being identical with the facts of AY 2019-20 as fairly admitted by both the parties before us, therefore, by following the observations made herein above in assessee's appeal for AY 2019-20 in ITA No. 6035/Del/2025 which are mutatis mutandis applied to the facts of the present case, the legal grounds of appeal taken by the assessee are allowed. 19. In the result, the appeal of the assessee is allowed. ITA No. 6437/DEL/2025 for AY 2021-22 20. Brief facts of the case are that the assessee has filed its return of income u/s 139(1) on 12.01.2022 declaring total income of Rs. 2,85,46,110/- under normal provisions and book profit was declared at Rs. 6,07,38,445/-. As a result of search case of the assessee was reopened u/s 147 and the assessee has filed the return of income on 22.01.2025 declaring same income as was declared in the return of income filed u/s 139(1) of the Act. Thereafter based on the documents found and seized from the course of search, the AO concluded that assessee has undisclosed receipt of Rs. 10,63,85,181/- on which net profit was estimated @50% r....
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....business premises was also covered under the search u/s 132 of the Act. However, in the notice issued u/s 148, the Assessing Officer was not clear whether the reopening u/s 148 is made in the case of person searched or in case of non-searched person. Thus, the notice u/s 148 of the Act is ambiguous and issued without application of mind and, therefore, the said notice is invalid and be quashed. The Co-ordinate Bench of the Tribunal in the case of Optus Developers Pvt. Ltd. vs. ACIT, CC-32, New Delhi in ITA Nos.4384 & 4385/Del/2025 vide its order dated 17.12.2025 has held as under: "2. Hearing both the sides we find that the assessee now questions the notice u/s 148 dated 31.03.2023 alleging same is outcome of non application of mind and for that as a matter of fact we find that in the notice AO mentioned. "I have information that a search was initiated under section 132 of the Act in your case or in the case of the person in respect of which you are the assessable under the Act on the date 17/09/2021. This notice is being issued after obtaining the prior approval of the PCCIT, Delhi accorded on date vide Reference No. 100000038640175. 3. Undisput....
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....respectfully following the same legal ground taken by the assessee are allowed. 29. Since, we have already allowed the legal grounds raised by the assessee, the other grounds of appeal become academic, thus, not adjudicated. 30. In the result appeal of the assessee is allowed. ITA No. 6439/DEL/2025 for AY 2023-24 31. During the course of hearing vide letter dated 25.02.2026, the assessee has raised additional grounds of appeal wherein the assessee has challenged the assessment order passed u/s 143(3) of the Act dated 31.03.2025 without issue of notice u/s 148 as the assessment in the case of the assessee was solely based on the documents found as a result of search. The additional grounds of appeal so taken are as under: "1. On the facts and circumstances of the case and in law, no notice u/s 148 was issued by the assessing officer and hence, the assessment proceedings initiated and the assessment order passed are liable to be quashed. 2. On the facts and circumstances of the case and in law, the assessment proceedings initiated without complying with the provisions of section 148 of the Act is bad-in-law and without be quashed. jurisdiction and theref....
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....ssessee is that the case of the assessee is taken up for assessment based on the search conducted on 11.05.2024 which fallen in Financial Year 2024-25 relevant to Assessment Year 2025-26 and as per Explanation 2 to section 148 of the Act, the proper course of action would be to reopen the assessment by issue of notice u/s 148 of the Act which has not been done. Before going further, we first examine the provisions as contained in Explanation- 2 to section 148 which reads as under: - Explanation 2. For the purposes of this section, where.- (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in....
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....ced herein under appeal. -Provision of section 148B are as under: - 148B. No order of assessment or reassessment or recomputation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.] 38. The memorandum explanation the provisions of section 148B introduced by Finance Bill 2022 reads as under: -Memorandum explaining the provision of section 148B introduced by Finance Bill 2022 are as under: - "Clause 46 seeks to insert a new section 148B in the Income-tax Act relating to prior approval for assessment, reassessment or recomputation in certain cases. The proposed new section seeks to provide that no order of assessment or reassessment or recomputation under the Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, except with the prior approval of the Additional Commissioner or Additional Director or Joint Commis....
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.... light of Homelife Buildcon (P.) Ltd. Vs. DCIT, (2025) 176 taxmann.com 614 (Chandigarh Trib.) as relied in Jamna Das Nikkamal Jain Saraf Pvt. Ltd. Vs DCIT (ITA No. 403/Chd./2025) decided on 04.11.2025, adjudicating the very issue against the department as under: "11.4 In conclusion, it was submitted that since the year under appeal formed part of the three assessment Years immediately preceding the year in which search was conducted, the assessment ought to have been framed under section 148 with approval u/s 148B. The framing of the assessment u/s 143(3) and approval taken only for the purposes of section 143(3) was thus asserted to be fundamentally defective, non-compliant with statutory mandate, and consequently void ab initio. On these grounds, following the ratio in Homelife Buildcon Put. Ltd., it was prayed that the impugned assessment be quashed. 12. The Ld. CIT-DR Shri Manav Bansal opposed the contention, stating that the return for A.Y. 2022-23 was filed prior to the date of search, and validly selected for scrutiny under CASS. The AO was competent to complete the assessment u/s 143(3). 12.1 He contended that section 148B applies only to "re-asse....
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....t or reassessment under section 147 read with section 148, which is the special mechanism for bringing to tax the income discovered in consequence of a search. 13.5 Although section 148 (inserted w.e.f. 01.04.2021) does not begin with a non obstante clause similar to the erstwhile section 153A, its context and Explanation 2 make it clear that where a search is initiated, the jurisdiction thereafter must flow through this special channel, subject to prior satisfaction and approval of the Principal Commissioner or Commissioner. The legislative intent is to ensure that when a search is carried out, the assessment is framed under the specific provisions meant for such cases and not under the general provision of section 143(3). Further we may mention that no notice under section 143(2) could have been issued after 3 months from the from the end of the financial year in which the return is furnished. In the present case the original return of income was filled on 4/11/2022 for the assessment year 202223 and 143 (2) was issued on 21/6/2023, therefore also the assessment was framed under 143(3) of the Act is not sustainable. In other words the time required for issuing the notice....
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....generalia specialibus non derogant the special provision overrides the general. Section 148 (as a special provision triggered by search information) must prevail over section 143 (the general provision for regular scrutiny). Allowing the Assessing Officer to continue and conclude proceedings under section 143(3) after a search would defeat this legislative scheme and render the safeguards, such as prior approval of the Principal Commissioner, redundant. 13.9 Accordingly, we hold that once a search is initiated under section 132 and material is found relating to the assessee, the pending assessment under section 143(3) cannot validly continue, as the time for issuing the 143(2) in response to original return of income had already expired, therefore the Assessing Officer must necessarily proceed in accordance with the special provisions contained in section 148 of the Act" 4. Learned CIT(DR) representing the Revenue vehemently supports the impugned assessment that the Assessing Officer had rightly finalized the same under the normal provision once the entire issue was pending before him as on the date of search. 5. We have given our thoughtful consideration....