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TMI Blog2025 (4) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ct by issuing notice u/s 148 of the Act on 31.03.2021, after the ld. AO received information from DDIT (Investigation) Unit, 1 (3), Kolkata vide letter dated 01.03.2019, in which it was stated that during search and seizure action in the case of Banka Group on 21.05.2018, it was found on the basis of the seized material that there are certain shell / bogus companies being controlled and managed by Shri Mukesh Bunka. In the statement recorded during search, it was categorically accepted by Shri Mukesh Bunka that the paper/ shell companies were being controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. The letter stated that the assessee had the transactions worth Rs. 1,00,00172/- through the account of shell company M/s Funidea Promoters Limited, one of the Bunka group of companies. Accordingly, the ld. AO came to the conclusion that income to that extent has escaped assessment. The assessee did not file any return of income. Thereafter, the assessee was issued notice u/s 142(1) of the Act along with questionnaire on various occasions and on few occasions, there was no compliance, however the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r person and issue notice u/s 153C 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. The ld. counsel therefore, prayed that in this case a special provisions have been provided in the statute and therefore, the reopening of assessment in the case of assessee u/s 147 of the Act by issuing notice u/s 148 of the Act is invalid and void ab initio and the assessment was framed by the AO may kindly be quashed. In defense of his argument the ld. AR relied on the decision of Hon'ble Bombay High Court in case of Sejal Jewellary and Anr. Vs. Union & Ors and Others in Writ Petition No. 3057 of 2019 and Others vide order dated 18.02.2025, wherein similar issue has been decided in favour of the assessee by the Hon'ble High Court. The ld. AR also relied on the decision of Rajasthan High Court in case of Shyam Sunder Khandelwal Vs. ACIT Civil Petition No. 18363 of 2019 dated 19.03.2024, decision of Karnataka High Court in case of Sri Dinakara Suva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for 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 IT. 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 reopenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year. Accordingly, notice under Section 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 IT. 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 lossor the depreciation allowance or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 92E] (c) where 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in cases 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 erson 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 sub-section (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 required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the notice or assess 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isos 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. ili. 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, or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per subsection (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been an salted 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 sab section (1), shall stand revived with effect from the dare 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 scriminating 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted/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: iii) in case any incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminating 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 carned 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 AD asumes jurisdiction to assess/reassess 'total income by passing separate order for cach 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 A 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 1.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 read with Section 153C by incorporating the "non-obstante" clause, in these pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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