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TMI Blog2025 (2) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... this common judgment. 2. The question which falls for consideration is whether in the facts and circumstances of the case, respondent no. 3 was correct in law in issuing a notice to the petitioner under Section 148 of the Income-tax Act, 1961 (for short "I.T. Act") on the basis of a search action under section 132 of the I.T. Act, which is relevant to the entire group of these petitioners. The assessment years in question in all these cases are A.Y. 2012-13. 3. The learned counsel for the parties have argued Writ Petition No. 3057 of 2019 (Sejal Jewellery & Anr. vs. Union of India & Ors.) as the lead petition, hence we refer to the facts of this case. 4. Petitioner no. 1 is a partnership firm (for convenience referred as 'petitioner') inter alia engaged in the business of manufacturing and trading in gold and diamond jewellery. For the assessment year in question, petitioner filed its return of income on 28 September, 2012 declaring a total income of Rs. 25,52,692/-. After about six years, on 4 October, 2018, a search action was taken against the petitioner under Section 132 of the I.T. Act at the premises of the petitioner. The case of the petitioner is that no incriminating ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shell/paper companies/entities has been taken up for investigation during the course of search proceedings at the premises of the group and relevant questions have been posed to the concerned persons at various premises in the statements recorded u/s. 132 (4) of the Act. 2.2 This assessee i.e. M/s. Sejal Jewellery (PAN: AAPFS3483A), one of the group concerns this aforesaid group, has shown loan receipts of Rs. 25,00,000/- during the year ended on 31.03.2012 from a company viz. M/s. Green Valley Gems Pvt. Ltd. which is reported to be a shell paper company engaged in providing accommodation entries to the beneficiary parties. The analysis and reasons for suspecting the above Loan creditor company/entity as accommodation entry providers are as under: "The company viz. M/s. Green Valley Gems Pvt. Ltd is based in Surat. The office of DIT(Inv.), Mumbai has conducted enquiries at Surat so as to verify the existence of this entity and to examine the genuineness of the transactions, but he could not found any existence of the company at the address' On analysis of return for A. Y. 2016 17 it is noticed that the company has declared an amount Rs. 1,26,100/- as taxable Income fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted to the Assessing Officer. The primary objection raised by the petitioner was to the effect that the assessment could have been made only under Section 153C and not under Section 147. The petitioner also dealt with each of the reasons on merits, to contend that no case was made out for reopening of the assessment on such materials. The relevant extract of the petitioner's letter reads thus: "In view of above, it is evident that Section 153C overrides all other sections, including Section 147, 148, 149 & 151 of the Act. The assessment procedure for search proceedings is specifically provided in Section 153C of the Act. Also the time limit for completion and the approval to be obtained is provided in Section 153B & 153D of the Act. As such, the reopening notice under section 148 of the Act is bad in law and not sustainable in law." 8. On such backdrop, the Assessing Officer passed an order dated 11 October, 2019 disposing of the objections to reopen the proceedings, as per the requirement of the provisions of Section 147 of the I.T. Act. The Assessing Officer observed that in the petitioner's case, search & seizure action was held on 4 October, 2018 which was relevant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the entire basis of reopening was on the search action, what is material to be seen, is not what the petitioner would contend and what the petitioner would set up as a defence, but what is borne out by the record of the department, which would be determinative of the very jurisdiction of the Assessing officer, to take recourse to the provisions of Section 148. It is his submission that once the foundation of the impugned notice itself was based on a search action and the alleged material, then necessarily, the only option available to the respondents was to take recourse to the provisions of Section 153A of the I.T. Act, which provides for assessment in case of a search or requisition, and not to take recourse to the provisions of Sections 147 and 148 of the I.T. Act. It is next submitted that in any case Section 153A would have an overriding effect on the provisions of Section 147 and Section 148, as sub-section (1) of Section 153A clearly implies. It is, therefore, his submission that the impugned action of issuance of a notice under Section 148 of the I.T. Act and to proceed under Section 147 by rejecting the objections as filed by the petitioners was without jurisdiction. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties and with their assistance, we have perused the record. At the outset, we may observe that the 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, 2019, which were objected by the petitioner. On such objection, an order was passed by the Assessing officer rejecting the objections as raised by the petitioners, so as to proceed to reassess the income of the petitioner under Section 147 of the Act. 13. As clearly seen from the record, to which, we have made a reference in the aforesaid paragraphs, it appears to be quite clear that there was a search and seizure action on 4 October, 2018 on the business premises of one 'Shilpi Jewellers Pvt. Ltd.', which has been the basis for the reopening of the petitioner's assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 Section 153A read with Section 153C vis-a-vis the provisions of Section 147 of the I.T. Act, it will be appropriate to extract the said provisions, which reads thus: "147. Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and(c)the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purposes of this sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 subsection (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules30 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess or reassess the total income as provided by the provision. Section 153C also 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, to provide that, in a situation which may fall under Section 153C insofar as assessment of income of any other person is concerned, the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other persons in accordance with the provisions of Section 153A, if he is satisfied that the books of account or document or assets seized or requisitioned have a bearing on the determination of the total income of such person for a period as specified in the said provision and after compliance of other provisions as mandated. On the other hand, Section 147 provides for "Income escaping assessment", can be invoked when any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year. In such situation, the Assessing Officer may subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or re-writing the said provisions, which is not permissible under the law." 20. It is thus clear that in the event any incriminating material is found during the search, the Revenue necessarily would be required to take recourse to the provisions of Section 153A and in the event no incriminating material found during the search, then the power of the Revenue to have the reassessment under Sections 147/148 of the I.T. Act stands saved, failing which, the Revenue would be left without remedy. It is on such observations the conclusions as rendered by the Supreme Court and which are relevant to the case in hand, are required to be noted, which reads thus: "14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in hand for initiation of proceedings under Section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group. 24. In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the assessee for filing of income tax return for the relevant preceding years. The AO assumes jurisdiction to assess/reassess 'total income' by passing separate order for each assessment. 25. In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed under Section 153C. The two 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 already observed that the provisions of Sections 147, 148 vis-a-vis Section 153A and Section 153 are quite compartmentalized. To avoid any overlapping of these provisions, the legislature in its wisdom has thought it appropriate to provide for an independent effect, to be given under Section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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