TaxTMI 
TaxTMI 
2026 (7) TMI 501
X X X X Extracts X X X X
X X X X Extracts X X X X
....gal issue by holding that the show cause notice issued u/s 148A(b), order u/s 148A(d), notice u/s 148 and consequent assessment framed are bad in law as the assessee has not been provided material / information gathered during the course of search which were relied upon by the AO for issuing show cause notice and secondly the department has challenged the authority of Ld. CIT(A) to decide the legal issue of validity of order u/s 148A(d) as the order u/s 148A(d) is not appealable before the Ld. CIT(A) as per Section 246A of the Act and therefore the validity cannot be decided by the First Appellate Authority. 2.1. The undisputed facts in brief are that a show cause notice u/s 148A(b) of the Act was issued on 13.03.2023 on the basis of search and seizure action u/s 132 of the Act conducted on third party Shri UmaShankar Kasera and Associates during which credible information/material was gathered by DDIT/ADIT(Inv)-2(4), Kolkata which revealed that the unaccounted cash loan transactions were entered into by the said brokers. The AO concluded that based on the facts and analysis of the Report of the investigation wing, it appears that the assessee has been engaged in taking cash loa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....besides invoking penalty provisions of Section 269AA/269ST of the Act. The additions were also made in respect of the commission @6% on estimated basis on the above transaction and interest at estimated rate @8% which comes to Rs. 77,10,000/- and Rs. 1,02,80,000/- respectively. 2.2. The assessee preferred an appeal before the Ld. CIT(A) challenging the validity of show cause notice issued u/s 148A(b) and also the validity of consequent notices/ orders passed by the AO. The Ld. CIT(A),after taking into consideration the reply of the assessee, allowed the appeal on the legal issue that the assessee has not been provided material/rukkas gathered by the search team during the course of search along with show cause notice issued u/s 148A(b) of the Act despite being pointed out by the assessee. Therefore the Ld. CIT(A) held the show cause notice issued u/s 148A(b), order passed u/s 148A(d), consequent notice u/s 148 and assessment framed were bad in law by observing and holding as under: "6.1. I have gone through the materialistic facts of the case and contentions of the appellant. During the course of appellate proceedings, the appellant has furnished the statement of facts,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he reassessment proceedings proposing addition of Rs. 2,95,00,000/- u/s 69A of the Act treating it as unexplained money. Further, addition was also proposed on account of alleged commission at the rate of 6 percent on estimate basis amounting to Rs. 17,70,000/- and alleged interest at the rate of 8 percent on estimate basis amounting to Rs. 23,60,000/-, In response to SCN, the appellant has filed its reply on 24.03.2025 challenged the entire proceedings to have been initiated without complying to the provisions of the Act and law laid down by several courts and therefore claimed that the entire proceedings were without jurisdiction, arbitrary based on surmises and suspicion and bad in law. Finally, the AO passed assessment order u/s 147 of the Act on 03.04.2025 and made addition of Rs. 2,95,00,000/- u/s 69A of the Act alleging that the assessee has taken cash loan. Further, the addition was also made u/s 69C of the Act alleging that the assessee has paid commission of Rs. 17,70,000/- computed at the rate of 6 percent and interest of Rs. 23,60,000/- computed at the rate of 8 percent. 6.1.1 The appellant has stated that the notice issued u/s 148 along with order under sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as which suggest that the income of the assessee has escaped assessment. The Ld.AO has also not provided dissemination note/final report of investigation/material relied upon for reopening the case of the assessee. The ld. AR submitted that the condition u/s 148A(b) of the Act that the Ld.AO should provide assessee an opportunity with the information which suggests that income chargeable to tax has escaped assessment was not complied with as no information/ material was provided to the assessee. The ld. AR in defense of his arguments relied on the decision of the Hon'ble Supreme Court in the case of Union of India v. Ashish Agarwal [[2022] 444 ITR 1 (SC)[04-05-2022/1. The ld. AR also submitted that the Hon'ble Supreme Court in the case of Union of India v. Rajeev Bansal [[2024] 167 taxmann.com 70 (SC)/ has also held that a show cause notice is effectively issued in terms of Section 148A(b) only if it is supplied along with the relevant information and material by the assessing officer. The ld. AR submitted that similarly, the Hon'ble Bombay High Court in the case of Anurag Gupta vs. ITO& Ors. in [2023] 454 ITR 326 (Bom) has decided the issue laying down the same ratio. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act: or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 1351; or (v) any information which requires action in consequence of the order of a Tribunal or court." 2.4.2. On perusal of aforesaid Explanation 1, it shall be clear that the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means shall be any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time. Other clauses are not applicable in the case of the assessee. 2.4.3. Hence, the very condition for issuance of the notice u/s 148 of the Act that the Ld.AO must have information which suggests that the income chargeable to tax has escaped assessment fails. The condition u/s 148A(b) of the Act that the Ld.AO should provide assessee an opportunity with the information which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vant information or material to the assesses in terms of the direction issued in Ashish Agarwal (supra). To summarize the combined effect of the legal fiction and the directions issued by this Court in Ashish Agarwal (supra) is that the show cause notices that were deemed to have been issued during the period between 1 April 2021 and 30 June 2021 were stayed till the date of supply of the relevant information and material by the assessing officer to the assessee. After the supply of the relevant material and information to the assessee, time begins to run for the assesses to respond to the show cause notices 2.4.5. On perusal of decisions of the Hon'ble Supreme Court in the aforesaid cases, it shall be evident that it was mandatory for the Ld.AO to provide all the information and material relied upon along with notice u/s 148A(b) of the Act. However, no such information and material was provided and it was merely alleged that the assessee has received cash loans on Rukas. Hence notice u/s 148A(b) of the Act issued by the Id.AO without providing any information itself is bad in law and so the entire proceedings u/s 148 of the Ac is bad in law. 2.4.6. Similarly, the Hon'ble....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s urged that the requirement of section 148A(b) of the Act has clearly been spelt out in the direction supra, which envisages that not only information be provided to the petitioner but also the material relied upon by the Revenue for purposes of making it possible to file a reply to the show-cause notice in terms of the said section. In the present case admittedly, no material had been supplied to the petitioner, notwithstanding the fact that there was material available with the Assessing Officer as can be seen from the order passed by the Assessing Officer under section 148A(d) of the Act. - This was in the shape of a statement recorded, during survey action of the partner of BGR Construction LLP. There also appears to be a sale list, which was allegedly found during the search operations containing the names of 72 investors including the petitioner which although referred to in the order under section 148A(d) of the Act as also in the clarification communication dated March 21, 2022 was not provided to the petitioner. Interestingly, while the communication dated March 21, 2022, did say that the list of total sale "was being attached for the ready reference of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sue by dismissing the appeal of the revenue on this issue. 2.5. So far as the next issue raised by the revenue is concerned, undoubtedly the order passed,u/s 148A(d) of the Act is not appealable before the Ld. CIT(A) as per the provision of Section 246A and therefore the Ld. CIT(A) has no jurisdiction to decide the validity of order. But in the instant case there is no appeal filed by the assessee against the order passed u/s 148A(d) and the ld. CIT(A) has not decided the appeal against the said order passed. The Ld. CIT(A) has decided the appeal of the assessee filed in accordance with section 246A. Therefore, we do not find any merit in the contention of the department that the Ld. CIT(A) has no jurisdiction to decide the validity of the show cause notice and consequent proceedings. In our opinion, the Ld. CIT(A) has rightly decided the legal issue in favour of the assessee. Consequently, we uphold the order passed by the ld. CIT(A) and ground no. 1 raised by the revenue is dismissed. 3. Issue raised in ground no. 2 is against the order of Ld. CIT(A) erring to allow the appeal filed by the assessee challenging the validity of show cause notice u/s 148A(b), notice u/s 148 an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing Officer in his reasons for the reopening, does not further investigate the information orcome to an independent assessment connecting the petitioner to the particular transactions specified in the information. The entire notice proceeds on the basis of suspicion that the petitioner has entered into the fictitious transactions of the script of company. The Assessing Officer has not even bothered to compare the information furnished by the petitioner in its reply or go through the income tax return of the petitioner, which was before the Assessment Officer, wherein long-term capital gain transactions of securities were specifically disclosed. [Para 24) The material which the Assessment Officer has considered as "information" for the purpose of arriving at a satisfaction and having reason to believe that income of the petitioner has escaped assessment is not based upon any tangible information in order to proceed with the notice under section 148, beyond the prescribed period of limitation. [Para 26] 3.1.1. Similarly in the case of Similarly, the Hon'ble Gujarat High Court in Vasuki Global Industrial Limited v. PCIT [2025] 180 taxmann.com 16 (Gujarat)/[2026] 308 T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee and iv) following principles of natural justice. We even note that similarly, the CBDT has issued instruction vide Instruction NO. (F NO. 299/10/2022-Dir(Inv.III)/611) dated 22.08.2022 which categorically states any information available on the portal/data base of the dept. shall be verified before drawing A.Y. adverse inference against the tax payers. The same is extracted below for ready reference: "Before initiating proceedings under Section 148/147 of the Act, any information available on data-base/ portal of the Income Tax Department shall be verified before drawing any adverse inference against the taxpayers. It is not out of place to mention here that the information made available / data uploaded by the reporting entities may not be fully accurate due to inter alia, error of human nature/ technical nature etc. Therefore, due verification may be carried out an opportunity of being heard be given to the taxpayer before initiating proceedings under Section 148/147 of the Act." 3.1.5. We also not that the Ld. CIT(A) has appreciated this fact correctly and recorded a finding in the order that the assessee was not provided information / material relied upon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pon by the Ld.AO during proceedings u/s 148A of the Act were not provided to the assessee along with notice u/s 148A(b) of the Act and also during assessment stage. In the said connection, the Hon'ble Supreme Court in the case of Union of India v. Ashish Agarwal [[2022] 444 ITR 1 (SC)(04-05-2022/1, while dealing with the notices issued under old provision of section 148 of the Act has directed the assessing officer to provide to the respective assessee's information and material relied upon by the Revenue, so that the assessee can reply to the show-cause notices within two weeks thereafter. The relevant extracts of the decision of Hon'ble Supreme Court. The Hon'ble Supreme Court in the case of Union of India v. Rajeev Bansal [[2024] 167 taxmann.com 70 (SC) has also laid the same ratio. Both these decisions have been discussed while deciding the ground no. 1 supra. 4.1.2. The AO did not conduct enquiries u/s 133(6) with the lenders/borrowers or finance brokers who never made direct allegations against the instant assessee. The dissemination report referred to names like "Minu, Piyush (Minu), Minu (Piyush). Piyush Agarwala, Minu Saree" without identity documents and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion to the assessee, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the assessee from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted." 4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT" 4.1.5. Applying the ratio of the aforesaid decisions, it is clear that the Assessee should have been provided an opportunity to cross examine the concerned parties whose stateme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the assessee. It is clear that the Ld.AO did not have any such material in his possession and that allegations have been made merely by relying on such third-party documents which is contrary to the decision of the Hon'ble Supreme Court. 4.1.7. The Hon'ble Supreme Court in the case of Central Bureau of Investigation v. V.C. Shukla 1998 taxmann.com 2155 (SC)[02-03-1998/ wherein the Hon'ble Supreme Court held that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of account under section 34 of the Evidence Act. 4.1.8. Therefore, in view of the facts and ratio laid down in the above decisions, we are inclined to uphold the order of ld. CIT(A) by dismissing the ground No.3 raised by the revenue. 5. Issue raised in ground no. 4 is against the deletion of addition of Rs. 12,85,00,000/- as made by the AO on account of unexplained money u/s 69A based on the entries and notings on rukkaand documents seized during the course of search operation onKasera group. 5.1. We have heard the rival submission and perused the material on record. The facts qua the case have already been discussed while deciding the lega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....searched person. Further, it has come to my attention that in the connected group cases arising from Search and Seizure action on Sanwaria and Kasera group, the jurisdictional ITAT Kolkata vide order dated 17.10.2025 in the case of DCIT, Central Circle-1(1), Kolkata vs. Rajesh Kumar Kedia has allowed the appeals in favor of the assessee on similar grounds relying upon the decision of ACIT vs Subhas Kumar Kedia in ITA No. 1648/KOL/2024 dated 24.04.2025 and a catena of decisions including those of Hon'ble High Court of Kolkata, Gujarat, Patna, Mumbai and the Apex Court decisions in the case of CIT vs. V.C. Shukla and Ors. (1998) 75 ECR 48 wherein grounds of appeal of the assessee were allowed by deleting additions made on the basis of search statements and entries and diaries and seized materials seized from third party premises bearing no cogent, live, tangible and direct nexus to the issues on which additions were made in the hands of respective assessee's including assessee's related to the Kasera Group. 8.1 The case of the appellant is squarely covered by the decision of the Jurisdictional ITAT Kolkata in the case of Sobha Chand Bhansali [2025] 181 taxmann.co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....carriage of justice. Besides, the reopening of the assessment has been made on the basis of borrowed satisfaction of investigation wing without any independent application of mind by the AO as there was no enquiry or application of mind by the AO to the information received from the Investigation Wing and thus on this score also the reopening of assessment is invalid and nullity in the eyes of law. Therefore, considering the above facts and circumstances and the various decisions discussed above, we are inclined to uphold the order of the Id. CIT(A) on merit also. Thus, the appeal of the revenue is dismissed. 8.2 The jurisdictional Income Tax Appellate Tribunal Kolkata in the case of DCIT, Central Circle-1(1), Kolkata vs Rajesh Kumar Kedia, Kolkata on 17 October, 2025 has decided the matter on the Cross appeals preferred by the Revenue and assessee against the orders of the Id. Commissioner of Income-tax (Appeals), Kolkata-20 dated 26.09.2024 & 27.09.2024 for the AYs2016-17, 2019-20 on similar issue in favor of the assessee. The ITAT has held that... in this case the learned AO on the basis of dissemination report of the investigation wing noted that the assessee has enter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and the ground no.6 and 7 of the Cross Objections are allowed... The issue raised in ground no. 1 to 4 is a legal issue and is against the invalid reopening of assessment by the learned AO u/s 147 of the Act... We note that there was no material except the general information and jotting down the information by the investigation wing and dissemination report dated 15.11.2022. The said report only stated the potential and probable investors and assessee's name was only as apotential/probable investor. We note that no ruka in the assessee's name was found and were mentioned in the said report as only rukas found were between Vikram Forging and Sunita Agarwal, Suresh Kumar Agarwal and Bajranglal Agarwala and Vikram Forging and Sunita Agarwal. The para no.6 and 7 of the said report has been extracted above which suggests that information requires further verification. However, the Ld. AO instead of doing further verification issued notice u/s 148A(b) of the Act. The learned AO relied on the statement of finance broker Shri Umashankar Kasera. We also note that none of the brokers named the assessee that they ever did any transaction with the assessee. Besides, there was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es: "..I find that the grounds for making additions u/s 69A is the statement of Uma shankarKasera and Praveen Kumar Kasera and the papers found in the search in their cases who were the Finance Brokers. I have looked into the statements of the finance brokers. I find from the recorded statements, the copy of which was filed before me that the finance brokers have not named the assessee anywhere as lender or borrowers. The counter name of any borrower or lender has also not been stated in their statement. In fact the search party has not raised any question with regard to the identity of the assessee. Not a single transaction has been identified which can be related to the assessee. Some names are there in the statement of the brokers but the said names are not in any way connected with the assessee nor any link has been established with the assessee that they were borrowers from the assessee. The statement of the brokers is general statement accepting the mode and system of transaction in finance market. There was no copy of Rukka which can be said to belong to the assessee. It is evident that there is absolutely no evidence whatsoever, to link the assessee with the invest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stainable. It is to be noted that the statement of the Kasera also is of no help to the AO. Though there is no evidence, nor the name of the assessee in the statement, yet the statement alone is not sufficient to make the addition. There should be corroborative material to justify the addition. It can be seen that the AO have relied on the statement of the brokers with regard to the symbols. However apart from the statement of the broker there is no other evidence or Rukka to suggest that particular symbol represents particular amount. The AO has not called any broker or any borrower to bring evidence on record about the actual investment. In this regard, it is to be kept in mind that material seized in the form of some papers were found in the premises of third party. Hence, to draw presumption that the transactions were related to the assessee is not legally permissible in view of non-applicability of the provisions of section132(4A)/292C of the Act to other than the searched person. The presumption as per section132(4A)/292C of the Income tax Act is applicable when documents were found in the possession of the assessee and in that case, such documents and contents recor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... nexus of the assessee with the undated and unsigned printout found during the search and to corroborate the contents of the said printout to arrive at a definite conclusion that the assessee derives such alleged income. The Hon'ble High Court of Bombay in the case of PCIT vs Umesh Israni[2019] 108 Taxmann.com437 held that, the entries of the loose papers which were seized were not corroborated with any other evidence on record and no enquiry or verification was made and thus, no additions can be made u/s. 69A of the Act. It can also be seen that the assessee made specific request to allow cross examination of the finance brokers. The AO has relied on the statements of the finance brokers even though there was no tangible material in respect of the assessee in such statements. Therefore, it was necessary to allow cross examination. Reference can be made to the judgement of Hon'ble High Court of Rajasthan in CIT vs. Smt. Sunita Dhadda (D.B. Income Tax Appeal No. 197/2012) (31.07.2017) where in it was held that cross examination was necessary when statement of third party was relied on. The Hon'ble Supreme Court dismissed special leave petition filed by the Depar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounds become infructuous and are accordingly dismissed by upholding the order of ld. CIT(A). The grounds no. 5 and 6 are dismissed. 7. Ground no. 7 and 8 are supportive to other grounds as decided bus supra and needs no separate adjudication. 8. The appeal of the Revenue is dismissed. AYs 2017-18 & 2019-20 ITA Nos. 620 & 621/Kol/2026 9. The legal issues as well as issues on merits in the above appeals are similar to ones as decided by us in ITA No. 589/Kol/2016 A.Y. 2016-17. Therefore, our decisions on the grounds in ITA NO. 589/KOL/2026 for AY 2016-17 would, mutatis mutandis, apply to these appeals as well. Consequently, the ground nos. 1 and 7 raised by the Revenue in both these appeals are dismissed. 10. The assessee has also moved an application under rule 27 of the ITAT Rules, 1963 challenging the order of Ld. CIT(A) on the issue decided against the assessee on in ground no. 1 raised by the assessee before the Ld. CIT(A) for AY 2017-18 and 2019-20 which is extracted below: "That on the facts and in the circumstances of the case, the notice issued u/s 148 along with Order u/s 148A(d) of the Act dated 23.04.2023 is barred by limitation as per section 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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." 11.1.1. We also note that issue regarding the applicability of Section 148 of the Act as mandated by Finance Act, 2021 and whether the application was prospective or retrospective were examined and decided by the Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal (supra) wherein the Court held that provisions of Section 149(1)(b) apply prospectively. The relevant extract of the said decision is as under: "49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment year in terms of first proviso to section 149(1) and accordingly the same is barred by limitation. 11.1.4. We have also perused the order on this issue and are not in agreement with the conclusion drawn by the Ld. CIT(A) that the time limit available to the AO has to be taken from the date of issuance of last notice issued u/s 148A(b) of the Act. Similarly, decision of The Hon'ble Supreme Court in the case of Union of India vs. Rajeev Bansal [2024] 167 taxmann.com 70 (SC) wherein it has held as under: "a notice under section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This is a binding pronouncement directly governing AY 2017-18. Since the six year period expired on 31.03.2024 and the notice was issued on 23.04.2024, the notice is void." 11.1.5. So far as the AY 2019-20 is concerned the facts in brief are that the 3-year period under Section 149(1)(a) expired on 31.03.2023. Four notices u/s 148A(b) were issued on 13.03.2023, 24.03.2023, 08.04.2023 and 13.04.2023. The Appellant filed replies on 01.04.2023 and 22.04.2023. The Order u/s 148A(d)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is beyond 3 years and is time-barred. If Section 149(1)(b) applies the AO has not established the mandatory conditions and the information on the Insight Portal does not constitute the required 'books of account or other documents or evidence. Either way, the notice u/s 148 for A.Y. 2019-20 is without jurisdiction and void ab initio. 11.1.10. Even if the Fourth Proviso exclusion is applied to the 3-year period, this at best covers the period from the first notice u/s 148A(b) (13.03.2023) to the last compliance date afforded to the Appellant. The Appellant filed his last reply on 22.04.2023. Excluding the period 13.03.2023 to 22.04.2023 (40 days) extends the 3-year limit of 31.03.2023 to approximately 10.05.2023. While arithmetically the notice dated 28.04.2023 may appear to fall within 10.05.2023, it is submitted that this extension is only a procedural window for the AO to complete the 148A proceedings. Crucially, the AO characterized his notice as falling under Section 149(1)(a) and under Section 149(1)(a) the substantive limitation is 3 years. The Fourth Proviso does not convert a notice that is substantively beyond the 3-year period into a notice within time under Sectio....