ABHUBHAI HIRABHAI DESAI,MUMBAI V. DCIT CIRCLE 19(1), MUMBAI

ITA 4684/MUM/2025

AI Insights

The case involves Abhubhai Hirabhai Desai, the appellant, contesting the validity of a reassessment order passed by the Deputy Commissioner of Income Tax under Sections 143(3) read with 147 of the Income Tax Act, 1961. The reassessment was based on documents seized during a search operation under Section 132 of the Act, which were initially linked to another individual, Shri Kumar Mordani. The Assessing Officer (AO) later issued a notice under Section 148, leading to the addition of income amounting to Rs. 47,58,911 as alleged cash interest received by the appellant. The Tribunal examined whether the AO was correct in proceeding under Section 148 instead of Section 153C, which specifically addresses the situation where seized documents pertain to a person other than the one searched.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 833741 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 23-07-2025
• Other Referred Cases: Sejal Jewellary and others vs. DCIT, Sri Dinaka Suvarana vs. DCIT, Kabul Chawla vs. CIT, Shyam Sunder Khandelwal vs. ACIT, Abhisar Buildwell P. Ltd. vs. DCIT, Principal Commissioner of Income Tax-4 vs. Saumya Construction, Phool Chand Bajrang Lal vs. DCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Reassessment proceedings; Depreciation; Salary income; Document seized; Documents seized; Search and seizure; Accommodation entries; Block assessment; Loose papers
• Section: 148; 143(3); 132; 153A; 133(6)

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 4684/MUM/2025 (A.Y. 2014-15) Abhubhai Hirabhai Desai 26, Anandan Bungalow, Presidency Sons, Road No. 7, Juhu Scheme, Vile Parle West, Mumbai – 400 049, Maharashtra v/s. बनाम Deputy Commissioner of Income Tax, Circle – 19(1), Piramal Chamber, Mumbai – 400012, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAEPD6011A Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Bhupendra Shah, AR Respondent by : Shri Surendra Mohan, (Sr. DR) Date of Hearing 23.12.2025 Date of Pronouncement 02.02.2026 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 09.07.2025 is preferred by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 30.12.2017 for the Assessment Year [A.Y.] 2014-15. Printed from counselvise.com P a g e | 2 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 2. The grounds of appeal are as under: 1. In the facts and circumstances of the case and in law, the AO erred in issuing notice u/s 148 of the Act and passing the Assessment order u/s 143(3) r.w.s 147 is illegal, bad in law and without jurisdiction. 2. In the facts and the circumstances of the case and in law, the learned Assessing Officer erred in reopening the assessment. 3. In the facts and circumstances of the case and in law, the Assessing Officer erred in making unjustified addition of Rs. 47,58,911/- on account of interest allegedly received in cash. 4. In the facts and circumstances of the case and in law, the Assessing Officer erred in charging interest u/s 234A, B, C and D and initiating penalty u/s 271[1][c]. 3. The assessee, an individual derived income from salary, house property, profit and gain from business etc. Fact of the case as narrated in the assessment order reveal that the Assessing Officer of one Shri Jaikishin Rohra handed over the documents which pertained to/related to the assessee, in whose case search action u/s.132 of the Act was conducted on 24.02.2014.Loose papers and other documents were seized. It was found that page nos. 118 and 119 of Annexure A-1 contained financial transaction in cash and cheque which belonged to one Shri Kumar Mordani, who was partner in Paramvir Developers LLP. The statement of Shri Jaikishin Rohra was recorded u/s.131 of the Act in which he stated that the said documents and transactions belonged to Shri Mordani whose name appeared in the said seized page no.118. The Printed from counselvise.com P a g e | 3 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai said person was summoned and his statement was recorded in which he admitted that cheque entries appearing on page 118 were accounted for in the books of account of M/s. Paramvir Developers LLP (formerly known as K. Mordani Realtors) in which he was a partner. These amounts were received by the firm from Shri Vasant Parikh, Shri A.H. Desai (AHD), Smt. Ichhhaben H. Desai (IHD) and M/s. D. N. Infrastructure Pvt. Ltd (DNI).After examining and analysing the information that the seized documents mentioned incriminating information that pertained to the assessee, notice u/s.147 for re-opening the assessments was issued. 3.1 The AO observed that the assessee had paid certain amount of loan/capital to Sri K. Mordani, partner of Paramveer Developers. The assessee had taken the stand that the entries of cash in the said sheet did not pertain to him. However, the assessee had given the details/copy of ledger accounts and cheques details of the entries. It was noted by him that when the cheque entries were accepted by the assessee, refusal to accept the cash component recorded therein was not acceptable. He also issued notice u/s 133(6) of the Act to Shri K Mordani. In reply, he stated that \"Further, we would like to inform you that we have paid interest payment @ 6% in cash, which is paid as a part of composite transaction i.e. 12% in cheque and 6% in cash to Mr Abubhai H Desai Printed from counselvise.com P a g e | 4 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai and the same we have accepted with our assessing officer Circle 23(2).After confronting the assessee, the AO finally concluded that he had received interest of Rs 47,68,911/- in cash which was not shown in the return of income. Therefore, the amount was added to his income. In the subsequent appeal, the asssessee inter alia contested the addition claiming that no such cash payment was made and the transactions were made through banking channels and were duly reflected in the bank account and shown in the return filed. The ld.CIT(A) however, upheld the addition so made. 4. We take up ground nos. 1 and 2,being legal in nature in which the assessee has contested the validity of notice u/s 148 of the Act and the consequential assessment order passed. 5. Before us, the ld.AR has claimed that entire reassessment proceeding and the consequential assessment order are non est and invalid since in the facts and the circumstances of the case, no action could have been taken u/s 147/148 of the Act as the assessment order was based on seized materials for which only recourse available to the AO was the provisions of section 153C of the Act and not 148 of the Act. In this regard, our attention has been invited to page 89 of the Paper Book. According to it, the AO initially issued a notice u/s 153C of the Act Printed from counselvise.com P a g e | 5 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai on 24.11.2017.However,as claimed by the ld.AR, the AO withdrew the said notice and proceeding u/s 153C of the Act was dropped and instead proceeding u/s 148 of the Act was initiated vide notice u/s 148 of the Act dated 22.12.2017 for the relevant assessment year, as evident from the response of the assessee dated 26.12.2027 as per page-88 of the PB. Page 90 of the Paper book has also been filed showing recorded reasons. 5.1 In this regard, the ld.AR placed heavy reliance on the jurisdictional High Court order in the case of Sejal Jewellary and others 171 Taxmann.com 846(Bom) and Sri Dinaka Suvarana 454 ITR 21(Kar) and also dismissal of SLP by the hon’ble Supreme Court reported in 151 Taxman.com 489 SC in the later case. 6. The ld.DR however, contested the claim stating that the AO had validly assumed jurisdiction u/s 148 of the Act and there was no infirmity. The assessee did not contest the issue before the AO. It was submitted that there is no infirmity in the action of the AO in taking action u/s 148 of the Act, since no satisfaction was recorded by the authorities concerned in terms of section 153C of the Act. Therefore, the only recourse available to the AO was section 147 of the Act. Printed from counselvise.com P a g e | 6 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 7. We have carefully considered all relevant facts of the case. We have also perused the records and also the Paper book filed by the ld.AR containing 156 pages. It is noticed that the assessee raised the ground of validity of reopening before the ld.CIT(A) also, claiming that the assessment order was wrongly passed u/s 147/148 of the Act and not u/s 153C of the Act. As per page 13-14 of the appellate order, the assessee’s submissions in this regard have been reproduced wherein he contested the validity of notice u/s 148 of the Act, based on a plethora of judicial decision as narrated therein. However, the ld.CIT(A), did not deal with the issue at all. Rather, he upheld the reopening proceedings and the notice u/s 148 of the Act stating that the assessee did not contest the same before AO and also filed return in compliance to the said notice. The AO had followed the provisions of the Act in this regard and there was no infirmity therein. Accordingly, he dismissed the grounds of appeal. 7.1 As stated earlier, the assessee strongly relied upon the latest decision of hon’ble Bombay High Court in the case of Sejal Jewellery (supra) wherein it was held that the use of the non-obstante clause contained in the provisions u/s. 153C of the Act makes it clear that the legislative intent was for the AO to proceed only under section 153C of Printed from counselvise.com P a g e | 7 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai the Act upon receipt of material seized or requisitioned. Hon’ble High Court relied on the judgement of Rajasthan High Court in the case of Shyam Sunder Khandelwal 2024 (4) TMI 196- Rajasthan High Court and concurred with the view taken by it. Further, hon’ble High Court has also relied on judgement of hon’ble Karnataka High Court in case of Sri Dinakara Suvarna us DCIT (2022) 143 taxmann.com 362 (Kar).Although we notice that a contrary decision has been given by the hon’ble Delhi High Court on the same issue in the case of Naveen Kumar Gupta 2024 (11) TMI 1071- Delhi High Court, the decision of the jurisdictional High Court is binding on revenue authorities under its jurisdiction. 7.2 We find that assessee’s case is intrinsically linked to a search and seizure operation in a case and the information received emanated from search proceedings. Seized paper and its contents have been discussed by the AO which evidently pertained to the assessee. The AO even initiated proceedings u/s 153C of the Act which was however, dropped. Since the said paper was seized from the premises of the third party, action u/s 153C of the Act was appropriate on the facts and the circumstances of the case.This section begins with non-obstante clause and therefore, has an overriding effect on sections 147 and 148 of the Act. As per the scheme and object of section 153C r.w.s 153A, the AO has Printed from counselvise.com P a g e | 8 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai no discretion or choice to invoke the provisions of section 147/148 instead of section 153C r.w.s. 153A of the Act. Once the case of reassessment is made out by the AO which falls in the preview of specific provisions of section 153C of the Act, the AO cannot resort to invoke the provisions of section 147/148 of the Act to assess or reassess income of the assessee. The action of the AO to initiate the proceedings under section 147/148 of the Act vitiates the entire reassessment proceedings and the assessment order. Once, the AO is satisfied that the documents seized belong to the persons other than the searched person, the AO shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be assessed or reassessed. 7.3 Exactly identical issue has been adjudicated by hon’ble Bombay High Court in the case of Sejal Jewellary and Anr (supra). The hon’ble Court has duly examined the provisions of section 147 and 153A/153C of the Act in a search and seizure related case.Relevant portions of the order are reproduced as below: Printed from counselvise.com P a g e | 9 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai “16. On a plain reading of Section 153A, it is clear that it 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, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 but on or before 31 March, 2021, the Assessing Officer shall have jurisdiction to issue notice to such person to furnish the return of income as specified 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 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 purport and effect of these provisions had fell for consideration of the Supreme Court in Abhisar Buildwell P. Ltd. (supra), wherein the scope of assessment under Section 153A of the I.T. Act was considered. In this case, the Revenue’s contention was to the effect that the Assessing Officer was competent to consider all the materials which were available on record, including the materials found during search so as to make an assessment of the total income. Some of the High Courts had accepted such propositions. However, the assessee had contended that there were also decisions of the High Courts to the effect that if assessment proceedings were not pending on the date of initiation of the search, the Assessing Officer needs to consider only the incriminating material found during the search, and was precluded from considering any other material derived from any other source. It is in such context, the Supreme Court considering the purport of the provisions of Section 153A of the I.T. Act, vis a vis its applicability qua the provisions of Section 147, and the applicability of Section 132, 132A and notably the decision of the Delhi High Court in Commissioner of Income Tax, Central-III vs. Kabul Chawla6 inter alia held that the provisions of Section 153A(1) need to be mandatorily resorted once a search takes place. The Supreme Court held as under: \"7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under Summary of the legal position Printed from counselvise.com P a g e | 10 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 38. On a conspectus of Section 153A(1) of the Act, read with 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, 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 (2015) 61 taxmann.com 412 (Delhi) 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 jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.\" 18. The Supreme Court held that it was in complete agreement with the view taken by the Delhi High Court in Kabul Chawla (supra) and of the Gujarat High Court in Principal Commissioner of Income Tax-4 vs. Saumya Construction7 taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 19. Insofar as the present proceedings are concerned, the following observations made by the Supreme Court in the context of Section 147 and 148 of the I.T. Act need to be noted: \"11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, (2016) 387 ITR 529 (Guj.) relating to any assessment year falling within the period of six assessment years 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. Printed from counselvise.com P a g e | 11 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 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 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 Sections 147/148 of the Act, subject to fulfillment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under Sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does 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: Printed from counselvise.com P a g e | 12 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai \"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 found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.\" 21. The Rajasthan High Court in Shyam Sunder Khandelwal s/o. Late Damodar Lal Khandelwal vs. Assistant Commissioner of Income Tax, Central Circle-2, Jaipur8 (supra) also had taken a similar view when the issue which had arisen before the Court was in regard to the notice issued under Section 148 of the I. T. Act, 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 under Section 153C of the I.T. Act. The Division Bench referring to the decision of Supreme Court in Abhisar Buildwell P. Ltd. (supra) as also the decision of Karnataka High Court in Sri Dinakara Suvarna (supra) allowed the petitions observing that the department had not set up a case, that for initiating proceedings under Civil Writ Petition No. 18363/2019 dated 19.03.2024 , it had material other than the material seized during the search of a related party. The relevant observations of the Division Bench are required to be noted, which reads thus: \"23. The reasons supplied in case 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 Printed from counselvise.com P a g e | 13 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 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 reassessment under Sections 139, 147, 148, 149, 151 & 153. 28. The language of explanation 2 to new Section 148 is akin to Section 153A and Section 153C. Corollary being that after seizing of operational period of Section 153A to 153D, the cases being dealt thereunder were circumscribed in the scope of newly substituted Section 148.\" We are in complete agreement with the view taken by the Division Bench of Rajasthan High Court in the aforesaid decision. 22. Applying the principles of law as discussed hereinabove, 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 and seizure action, materials were seized and such materials were further explored and enquired. Such enquiry revealed significant information in regard to M/s. Green Valley Gems Pvt. Ltd., which according to the Revenue had provided accommodation entries to the petitioner, in which it was also revealed that Green Valley Gems Pvt. Ltd. was a shell company. We do not find that the 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 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 Printed from counselvise.com P a g e | 14 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 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).” 7.4 We find that the ratio decidendi of the above decision squarely applies to the facts of the case under consideration before us.On perusal of the above provisions, it is clear that the provisions of section 153C of the Act were applicable, which supersede the applicability of provisions of section 147 and 148 of the Act. As we have already noted hereinabove that relevant documents were seized during the search under s. 132 of the Act, in our view only the provision in which any assessment could be made against the assessee in the Act was section 153C r/w s. 153A of the Act. Hence, notice issued under s. 148 of the Act and proceedings under s. 147 of the Act by the AO are illegal and void ab initio. In the instant case, the procedure laid down under section 153C has not been followed by the AO and, therefore, assessment has become invalid. The AO initiated action u/s 147 incorrectly as the on the facts and the circumstances of the case in the presence of incriminating materials found in search action u/s 132 of the Act ,only recourse available with him was section 153C of the Act. Printed from counselvise.com P a g e | 15 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai 7.5 It is worthwhile to mention here that coordinate Benches of Mumbai ITAT in certain recent decisions have taken similar view in the light of the judgement in the case of Sejal Jewls(supra) i.e. Parshwa Investment ,Mumbai in ITA No.1429/Mum/2025 dated 30 June, 2025 and Ghanshaym R. Shah in ITA No.4707/Mum/2024 dated 21.04.2025,the later decision inter alia holding that, “the legal issue is agitated before us whether the initiation of reassessment proceedings under Section 147 of the Act, is not legally sustainable in the present case. The foundation of the reopening rests entirely on documents seized during the search and seizure operation conducted on a third party, namely the xxxxxxxxxx. As per the express scheme of the Act, where documents seized in a search pertain to or belong to a person other than the searched party, the appropriate and mandatory course of action is to proceed under Section 153C and not under Section 147…………….. However, if the pre-conditions of Section 153C were not met, the invocation of Section 147 based solely on the same documents amounts to circumvention of the statutory safeguards embedded in Section 153C. Allowing such a course of action would render Section 153C otiose, defeating the purpose of the special procedure laid down by the legislature.” 6.5 Respectfully following the jurisdictional High Court decision in the case of Sejal Jewellary and coordinate bench decisions(supra) we hold that the impugned notice under section 147 of the Act and all actions consequent thereto are held to be without jurisdiction and bad in law and are, therefore quashed allowing the ground no.1 and 2. 8. In view of quashing of the reopening notice and consequent assessment order in para 6.5 above, rest of the grounds of appeal have Printed from counselvise.com P a g e | 16 ITA No. 4684/Mum/2025 A.Y. 2014-15 Abhubhai Hirabhai Desai become academic and do not need adjudication but are, nevertheless, kept open. 9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 02/02/2026. Sd/- Sd/- SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 02.02.2026 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "