TaxTMI 
TaxTMI 
2026 (9) TMI 787
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the IT Act. 4. Thereafter, the Respondent issued a notice dated 18th March 2023 under Section 148A(b) of the IT Act. The notice stated that information had been received from the Investigation Wing concerning a search and seizure operation conducted in the case of the Ramesh Manihar Group. During the search and post-search proceedings, certain electronic data, including data contained in pen drives and Excel sheets, was stated to have been found and seized. According to the Revenue, the Ramesh Manihar Group was engaged in arranging unaccounted cash loans between various borrowers and lenders. 5. The material relied upon by the Respondent referred, inter alia, to certain transactions allegedly recorded against the code/name of "S. TOTUKA". On the basis of the material supplied with the notice, the Respondent alleged that the Petitioner had advanced unaccounted cash loans aggregating to Rs. 9,75,00,000/- during Financial Year 2015-16 and had earned unaccounted interest thereon. The Respondent further relied upon the statement of one of the key persons of the Ramesh Manihar Group, as well as the alleged analysis of the electronic material seized during the search. 6. The Pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... permissible in law, could only have been initiated under Section 153C read with Section 153A of the IT Act and not under the general provisions of Sections 147 and 148. 11. The learned Counsel appearing for the Petitioner submitted that there is no dispute as to the source of the material on the basis of which the impugned proceedings have been initiated. The departmental record itself shows that the information relied upon by the Assessing Officer originated from the search and seizure operation conducted in the case of the Ramesh Manihar Group. The Respondent has expressly relied upon the pen drives, electronic data, Excel sheets and statements obtained during and pursuant to that search. 12. It was submitted that the question before the Court is therefore not whether the material relied upon by the Revenue is ultimately sufficient to sustain an addition, nor whether the Petitioner has satisfactorily explained the alleged transactions. The question is one of jurisdiction, namely, whether the Assessing Officer could invoke the general reassessment mechanism under Sections 147 and 148 of the IT Act when the material forming the foundation of the proceedings was found during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ision Bench of the Rajasthan High Court in Shyam Sunder Khandelwal (supra). This Court, after examining the statutory scheme and the non-obstante clauses contained in Sections 153A and 153C, recorded that it was in complete agreement with the view taken by the Rajasthan High Court. Applying the said principle, this Court held that where the foundation of the proceedings was a search action in which material was seized, and such material was thereafter further explored and enquired into, the provisions of Section 153C read with Section 153A would be applicable and the invocation of Sections 147 and 148 would be without jurisdiction. 17. The learned Counsel further submitted that without prejudice to the foregoing, the impugned proceedings are vitiated on multiple independent grounds, including limitation, non-supply of the material relied upon, absence of any cogent nexus between the alleged third-party material and the Petitioner, and failure to consider the objections duly raised by the Petitioner. It was further contended that the entire proceedings rest solely on an unverified abbreviation, which has been erroneously treated as information pertaining to the Petitioner. It was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case of a third party that is Ramesh Manihar Group. 23. In our view, the answer to this question is governed by the nature and source of the material forming the foundation of the proceedings. The impugned order itself makes it clear that the information relied upon by the Assessing Officer was received from the DDIT (Investigation)-II, Jaipur pursuant to the search and post-search proceedings conducted in the case of the Ramesh Manihar Group. The Assessing Officer specifically refers to the pen drives and electronic data seized during such search, the Excel sheets found therein, the statements of the key persons of the searched group and the subsequent analysis of such material. 24. Thus, this is not a case where the Assessing Officer independently came into possession of information from a source unconnected with the search and thereafter exercised the ordinary power of reassessment under Section 148. The search action is the starting point of the entire chain of information relied upon by the Revenue. The alleged transactions attributed to the Petitioner, the identification of "S. TOTUKA", the computation of Rs. 9,75,00,000/- and the allegation of unaccounted interest ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Thereafter, the satisfaction of AO receiving the seized material that the material handed over has a bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of section 153A. 26. Special procedure is prescribed under section 153A to 153D for assessment in cases of search and requisition. There cannot be a quibble with the proposition that the special provision shall prevail over the general provision. To say it differently the provisions of section 153A to 153D have prevalence over the regular provisions for assessment or reassessment under section 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 reassessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....record would indicate something which is not on the basis of such new materials gathered under the search and seizure action under Section 132. If this be the case, then certainly the provisions of Section 153C read with Section 153A would be applicable, as held by the Supreme Court in Abhisar Buildwell (P) Ltd. (supra) when the Court interpreted the effect and purport of Section 153C and 153A, as also held by the Rajasthan High Court in Shyam Sunder Khandelwal (supra). 23. Insofar as Mr. Suresh Kumar's contention supporting the proceedings under Section 147 and 148 of I.T. Act are concerned, for the aforesaid reasons, such contention would in fact go contrary to the intention of the legislature as depicted by the provisions of Section 153A and 153C of the I.T. Act. There would not be any difficulty in accepting the proposition as canvassed by Mr. Suresh Kumar, referring to the decision of the Supreme Court in Phool Chand Bajrang Lal (supra), however, the facts in the present case are distinct. There cannot be any doubt on the position in law when the Revenue intends to proceed purely on materials relevant for an action under Section 148 read with Section 147. We have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asthan High Court in Shyam Sunder Khandelwal (supra) considered and rejected a substantially similar contention. It held that permitting the Revenue to separate the alleged derived conclusion from the seized material would defeat the concept of a single assessment order for the relevant preceding year and the statutory scheme governing assessment on the basis of incriminating material found during the search. 33. In the present case, the Respondent's own order demonstrates that the alleged loan transactions, the identity attributed to "S. TOTUKA", the aggregate amount of Rs. 9,75,00,000/- and the alleged unaccounted interest all emanate from the material seized during the search of the Ramesh Manihar Group. The proceedings are consequently founded upon the search material relating to a person other than the person searched. Once that position is established from the departmental record, the fact that the Respondent has sought to additionally invoke Section 149(1)(b), relying upon the concept of "asset", or obtaining approval/sanction under Section 151, cannot cure the fundamental defect in the assumption of jurisdiction. Those considerations may become relevant only after th....