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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 ..... of the Revenue to have the reassessment u/s 147/148 stands saved, failing which, the Revenue would be left without remedy. Rajasthan High Court in Shyam Sunder Khandelwal s/o. Late Damodar Lal Khandelwal [2024 (4) TMI 196 - RAJASTHAN HIGH COURT] also had taken a similar view when the issue which had arisen before the Court was in regard to the notice issued u/s 148 the basis of issuance of such notice was the material seized during search. The contention of the assessee was to the effect that in the said circumstances, the proceedings ought to have been initiated u/s 153C. The Division Bench referring to the decision of Supreme Court in Abhisar Buildwell P. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] as also the decision of Sri Dinakara Suvarna [2022 (7) TMI 800 - KARNATAKA HIGH COURT] allowed the petitions observing that the department had not set up a case, that for initiating proceedings under Section 148, it had material other than the material seized during the search of a related party. We are of the clear opinion that the foundation of the present case was certainly a search action which was undertaken by the Revenue against one Shilpi Jewellers Pvt. Ltd. and in such search a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 material was found in relation to any bogus loan/accommodation entry in such search. However, for the Revenue, it was otherwise, as discussed hereafter. 5. Consequent to the search action, respondent no. 3 has issued the impugned notice to the petitioner dated 29 March, 2019 under section 148 of the I.T. Act inter alia stating that there are reasons to believe, that income chargeable to tax for the assessment year 2012-13 had escaped assessment, within the meaning of Section 147 of the I.T. Act. Hence, it was proposed to assess/reassess the income of the petitioner for the assessment year. The petitioner was called upon to file a return in the prescribed form within 30 days. 6. The petitioner respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for the year under consideration. It is further seen that the company has claimed TDS of Rs. 23,05,962/- end an amount of Rs.22,67,000/- has been claimed as refund. This is one of the key Ingredient to Identify the transaction as suspicious for the reason that although no Income has been offered to tax but the entire TDS claimed has been traversed back in the books the company as a refund. Similar is the situation in preceding year and subsequent years wherein the same kind of method has been followed by the company. Further, it is seen form the balance sheet for A.Y. 2016-17 that the liabilities of the company stood at Rs. 29,39,60,435/- and the 'loans and advances' advanced by the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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 Financial year 2018-19 (AY 2019-20), hence applicable only for AY 2019-20 and not for any previous year. He also recorded that no assessment or reassessment has been made for AY 2012-13 in the petitioner's case and therefore, the petitioner's contention that the assessment could have been made only under Section 153A and not under Section 147 of the I.T. Act did not have any merit. It was further observed that there was no requirement under Section 151 (1) so as to give the petitioner, an opportunity of being heard, before giving sanction. We need not delve on the other reasons which are set out in rejecting the petitioner's objections, suffice it to observe that the question of law as noted by us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 support of his contention, Mr. Jain has placed reliance on the decision of the Supreme Court in Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell Pvt. Ltd. 2023 LiveLaw (SC) 346; decision of Division Bench of Rajasthan High Court in Shyam Sunder Khandelwal s/o. Late Damodar Lal Khandelwal vs. Assistant Commissioner of Income Tax Civil Writ Petition No. 18363 of 2019 dated 19.03.2024, decision of Karnataka High Court in Sri Dinakara Suvarna vs. Deputy Commissioner of Income-tax (2022) 143 taxmann.com 362 (Karnataka). 11. On the other hand, Mr. Suresh Kumar, learned counsel for the revenue would pray for dismissal of this petition on the ground that the petitioner's case of bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessment, as also recorded in the reasons for reopening, which inter alia state that there were certain incriminating evidences, in the form of various loose papers and data back-ups of various electronic devices, as found and seized. The search action was against Shilpi Jewellers Pvt. Ltd., its associate concerns, as well as the key individuals of the Group. The department asserts that the materials elicited during the search action revealed, that all these persons had accepted large unsecured loans from various shell/paper companies/entities during the year ended on 31 March 2012. On further enquiries being made, the profiling of the loan creditor companies in ITD application, indicated that the loan cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt.-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 the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable 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 his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148. Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012 (23 of 2012), shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 153A. Assessment in case of search or requisition. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 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 as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal 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 depreciation allowance or any other allowance or deduction for such assessment year and for which a prior notice under Section 148 would be required to be issued. Section 147 does not contemplate an eventuality which Section 153A or Section 153C contemplates, the basis of which is inter alia a search action under Section 132 being resorted as noted hereinabove. Thus, both these provisions are quite compartmentalized although the deeming effect of both the provisions, may be the same. However, the situations in which such provisions operate are required to be invoked are completely different. This is clear from the bare reading of the provisions, hence would not warrant any elaborate discussion. 17. The pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout 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; 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 thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 read with Section 153C by incorporating the "non-obstante" clause, in these provisions, which carves out an exception to any normal/regular action being resorted under Section 147. 24. In this view of the matter, we are of the clear opinion that the impugned notice under Section 147 of the I.T. Act and all actions consequent thereto are required to be held to be without jurisdiction and bad in law. The petition is accordingly allowed in terms of prayer clauses (a) and (b). 25. Learned counsel for the parties are ad idem that the aforesaid observations would cover the other companion matters, which also stand allowed in terms of our aforesaid reasoning and the operative order passed in Writ Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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