TaxTMI 
TaxTMI 
2026 (5) TMI 1047
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....ical issue raised by the assessee in all these appeals is challenging the validity of assumption of jurisdiction u/s. 147 of the Act and consequently framing of assessment by the ld A.O. u/s. 147 of the Act for various assessment orders instead of framing the assessment u/s 153C of the Act. 4. We have heard the rival submissions and perused the materials available on record. A search and seizure operation was conducted on P N Group, Guna on 09.01.2020. During the course of search and seizure operations, various incriminating documents regarding unsecured loans were seized. From the seized documents and enquiries revealed that cash has been deposited in assessee's bank account and immediately transferred to Shri. Vinod Rathore of PN Group in the sum of Rs 20,00,000/- as unsecured loan. Since the assessee did not have the credit worthiness for advancing such unsecured loan, the genuineness of the transaction together with the credit worthiness was doubted. Accordingly, proceedings stood initiated on the assessee u/s. 148A of the Act and notice u/s. 148 of the Act was issued to the assessee. The assessee filed his return on 06.06.2022 declaring total income of Rs. 4,54,316/- which ....
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....son does not vest jurisdiction in the AO of the third person to directly invoke the provisions of s. 147/148 of the Act on the incriminating material found during search, more particularly when the provisions of s. 153C of the Act are not followed. Such satisfaction is a statutory requirement and a jurisdictional precondition, and not a mere procedural formality. This position stands fortified by binding judicial precedents and the clarificatory Circular issued by the CBDT, which is binding on the Department. Scope of the proceedings under ss. 147/148, 153A & 153C r/w s. 132 of the Act. 51. Before we further delve into the issue raised before us, we may succinctly mention that in view of the Finance Act, 2021, the provisions of s. 153A (pertaining to the searched person) and s. 153C (pertaining to the other than the searched person) are not made applicable w.e.f. searches conducted after 31st March, 2021. This procedure has now been deleted from the statute in relation to searches conducted on or after 1st April, 2021. The Finance Act, 2021 has introduced a pari materia provision in s. 148 of the Act in respect of searches conducted after 1st April, 2021. 52. Sec.....
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.... 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under s. 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. ..... 14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under s. 132 or requisition under s. 132A, the AO assumes the jurisdiction for block assessment under s. 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning the....
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....ilable other than the incriminating material, which can suggest that the income has escaped assessment. 56. In the case of an "other person", the substratum of the reassessment/ assessment is the material supplied by the AO of the "searched person" only. Thus, the upshot of the discussion is that the jurisdictional AO of the "other person", in a search proceeding under s. 132/132A of the Act of a "searched person", does not have the privilege to assume jurisdiction under s. 147/148 of the Act on the basis of the incriminating material sent to him. Thus, there are twin conditions which restrict the jurisdictional AO from exercising powers under s. 147/148 in the case of an "other person", i.e., firstly, by relying on incriminating material bereft of a satisfaction note, and secondly, by placing reliance exclusively on such incriminating material. 57. In the case of most of the petitioners, it is noticed by us that the AO has not recorded satisfaction on the material recovered from the entities, i.e., the searched persons, and without recording such satisfaction on the incriminating material, proceedings under s. 147/148 of the Act have been resorted to, which, in o....
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....no right is created to the petitioner for getting the notice under s. 148 quashed. Moreover, learned Single Judge was not having the benefit of the decision of the Supreme Court in the case of Abhisar Buildwell (P) Ltd. (supra). The appeal against the order was dismissed having rendered infructuous in view of the subsequent developments that the assessment order was passed. 37. The decision of the Madras High Court in the case of Saloni Prakash Kumar (supra) is of no help to the respondents. The High Court held that s. 153C does not preclude issuance of notice under s. 148. The field of applicability of two sections was not the issue before the Court. 38. The petitioner relied upon the decision of the Karnataka High Court in the case of Sri Dinakara Suvarna (supra). It would be relevant to quote para 10: "10. Admittedly no proceedings were initiated under s. 153C of the Act. Thus, there is patent non-application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. It was argued on behalf of the Revenue that Shri. Ashok Kumar Chowta had offered tax on lump-sum income." 39. Fur....
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....open to the AO to invoke the provisions of s. 147/148 of the Act on the basis of material received which does not form part of the incriminating material sent to him by the AO of the searched person. This is precisely the case of the petitioners before us. 64. As recorded hereinabove, it is a settled legal precedent and a statutory obligation upon the jurisdictional AO of the third person, i.e., the assessees/ petitioners, to record his satisfaction, and there is no escape from recording satisfaction on the incriminating material sent to him by the AO of the searched person, who was subjected to search under s. 132 of the Act. 65. Reliance is also placed by the respondent-department on the decision in the case of Heval Naveenbhai Patel (supra). The facts of the said case suggest that in a search undertaken of a searched person, the AO of the third person came to know that the assessee had not filed any return of income, and hence an opinion was formed that where no return of income has been furnished by the assessee, though his total income or the total income of any other person in respect of which he is assessable under the Act exceeds the maximum amount not cha....
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....of ss. 147 and 148 respectively of the Act. We are in agreement with the submission of Mr. Bhatt, the learned senior counsel appearing for the revenue that the non obstante clause in s. 153A should be understood as merely dispensing with the procedural aspect of s. 147 of the Act. 84. ...... (c) To say that the assessment undertaken under s. 153A of the Act can never be reopened under s. 147 of the Act, would be an incorrect statement of law. 67. As recorded by the Division Bench of this Court in the case of Amar Jewellers Ltd. (supra), it is noted that a search was undertaken under s. 132 of the Act on a searched person, i.e., the Amar Group, and proceedings under s. 153A of the Act were initiated, as it was found by the AO of the searched person that there were some bogus purchases made by the assessee. Such information was received from the Investigation Wing, Mumbai, as well as the Investigation Wing, Surat. Thus, initially, after the search was undertaken, a notice under s. 153A of the Act was issued by the AO to the searched person, and thereafter, on receiving information from the Investigation Wings, proceedings under s. 148 of the Act were invoke....
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....he captioned writ petitions: 70. Having discussed the contours of ss. 132, 147, 148, 153A and 153C of the Act, we shall now examine the facet of recording of satisfaction notes and the invocation of reassessment proceedings under s. 147/148 of the Act in the respective petitions. 71. The captioned petitions can be divided in to four groups, whose petitioners are subjected to reassessment as under: (A) The petitioners in whose case the information has emerged from the search/raid conducted at Navratna Group (NODPL). (B) The petitioners in whose case the information has emerged from the search/ raid conducted at K-Star Group. (C) The petitioners in whose case the information has emerged from the search/raid conducted at Flamingo (Sanjay Govindram Agarwal). (D) The petitioners in whose case the search was conducted during the search/raid conducted at Affluence Commodities (P) Ltd. 72. Group-A: Since most of the writ petitions belong to Group-A (Navratna Group), we are analyzing the legality of reassessment under s. 147/148 of the Act. In these writ petitions, the facts suggest that pursuant to the warrant issued i....
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....sh was received post-search on the basis of the admission, since during the search the names of the petitioners were never revealed from the incriminating material (Excel sheet). Only when the data supplied by the Navratna Group was compared with the Excel sheet, the exact details emerged. In such circumstances, there was no occasion for the AO of the searched entity to record satisfaction and forward it to the jurisdictional AO of the petitioners. The proceedings under s. 147/148 of the Act were initiated subsequently on the directions issued by the Dy. CIT, Central Circle-1(1), Ahmedabad, vide communication dt. 5th March, 2021. Thus, the material information of names and cash transactions unearthed by the Jurisdictional AOs (JAOs) subsequently on the basis of data supplied by the Navratna Group before the settlement commission constitutes an independent source, and hence such information/material is sufficient to trigger action under s. 147/148 of the Act. Therefore, the Revenue is justified in reopening the assessment under s. 147/148 of the Act on the information received subsequently. 73. Group B: The petitioners of this group are subjected to reassessment under s. 14....
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....hibits him from switching over or resorting to the provisions of s. 148 of the Act from s. 153A unless there is material gathered from an independent source. Hence, such action is held to be illegal and without jurisdiction. However, as held by the Supreme Court and the Division Bench of this Court in the aforesaid decisions, it is always open for the Revenue to resort to the provisions of s. 147/148 of the Act, subject to fulfilment of the conditions mentioned therein and availability of material from an independent source from which the AO has "reason to believe" that income has escaped assessment 76. We answer the issues by summarizing the observations as under: (A) It is mandatory for the AO of a "searched person" (s. 153A of the Act) to record satisfaction on the incriminating material found during the search under s. 132/132A of the Act and communicate the same to the jurisdictional AO of the "other/third person". (B) In the absence of any satisfaction note recorded by the AO of the searched person, the jurisdictional AO of the other person cannot assume jurisdiction under s. 153C of the Act solely on the basis of material sent to him by the AO of t....