AI Insights
The case involves an appeal by the Deputy Commissioner of Income-Tax against the order of the Commissioner of Income-Tax (Appeals), which had deleted the addition of Rs. 9,21,07,800 made on account of unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was based on the statement of Shri Sanjay Karnani, Director of Karnani Solvex Private Limited, who during the search and seizure operation, failed to provide satisfactory evidence regarding the identity, creditworthiness, and genuineness of the lenders. The Tribunal examined the legal provisions under sections 153A and 68 of the Act, the judicial precedents, and the facts of the case, including the lack of incriminating material and the completed assessments prior to the search. The Tribunal concluded that the reassessment was not justified and the CIT(A) had rightly deleted the addition.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 779775 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
13-10-2025
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2014-2015
Appeal Filed On
17-08-2025
Judgement Text
"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 480/JP/2025 fu/kZkj.k o\"kZ@Assessment Year : 2014-15 Deputy Commissioner of Income-Tax, Central Circle-03, Jaipur cuke Vs. Karnani Solvex Private Limited M-8, Mahesh Colony, Tonk Phatak, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCK2977N vihykFkhZ@Appellant izR;FkhZ@Respondent CO. Nos. 27/JP/2025 (Arising out of ITA. Nos. 480/JP/2025) fu/kZkj.k o\"kZ@Assessment Year : 2014-15 Karnani Solvex Private Limited M-8, Mahesh Colony, Tonk Phatak, Jaipur cuke Vs. Deputy Commissioner of Income-Tax, Central Circle-03, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCK2977N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Deepak Sharma, CA jktLo dh vksj ls@ Revenue by : MS. Alka Gautam, CIT lquokbZ dh rkjh[k@ Date of Hearing : 11/09/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 13/10/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The present appeal filed by the Revenue and Cross Objection to that appeal was filed by the assessee against the order of the Commissioner of Printed from counselvise.com 2 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Income Tax (Appeal), Jaipur-04 [for short CIT(A)] dated 08.01.2025. This order relates to the assessment year 2014-15. Ld. CIT(A) passed that order because the assessee challenged the assessment order dated 04.08.2021 passed under section 153A of the Income Tax Act, 1961 [ for short “Act” ] by ACIT, Central Circle-03, Jaipur [ for short “AO” ]. 2. Revenue has challenged the order of the ld. CIT(A) on the following grounds ; 1. Ground (i) Whether on the facts and in the circumstances of the case, the ld. CIT(A) is justified in deleting the addition of Rs. 9,21,07,800/-made on account of unexplained cash credit u/s 68 of the Act without appreciating the fact that Sh. Sanjay Karnani, Director of the company, failed to identify the 19 companies from whom the assessee stated to have obtained the loan of Rs. 9.21 crore? 2. Ground (ii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) is justified in deleting the addition of Rs. 9,21,07,800/-made on account of unexplained cash credit u/s 68 of the Act by not considering the statement of Sanjay Karnani recorded u/s 132(4) of the Act and disregarding the fact that most of the companies were non-existent? Ground (iii) The appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2.1 On the other hand, assessee has filed the cross objection after the appeal preferred by the revenue thereby challenging the finding of the ld. CIT(A) on the following grounds; “1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in giving directions to AO to implement judgment of Hon’ble Supreme Court in the case of Abhisar Buildwell 2023 149 taxmann.com and the CBDT Instruction Printed from counselvise.com 3 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. No. 1 of 2023 dated 23.8.2023 on the subject Implementation of the judgment of the Hon’ble Supreme Court in the case of Abhisar Buildwell (Supra). The action of the ld. CIT(A) is illegal, unjustified, arbitrary, and against the facts of the case. 3. Before us both the parties supported the finding recorded in the order of the lower authority as favorable to them. First we take up the appeal of the revenue. 4. Succinctly, the fact as culled out from the records is that in this case, original return of income was e-filed on 29.11.2014 for the A.Y 2014-15 declaring income of Rs. 2,32,88,920/-. A search was conducted on 01.10.2018 in the case of Karnani Group, Jaipur to which the assessee belongs. In that action various assets/books of account and documents were found and seized as per annexure prepared during the course of search. Thereafter, jurisdiction over the case was assigned to Central Circle-3, Jaipur in the case of the assessee as per the order passed u/s 127 of the Act by the Pr. CIT-I, Jaipur on 01.03.2019. Accordingly, notice u/s 153A of the Act for the year under consideration was issued on 18.09.2020 and duly served upon the assessee. In compliance to the notice u/s 153A of the IT Act, 1961, return of income was e-filed on 03.10.2020 for the A.Y. 2014-15 declaring income of Rs.2,32,88,920/-. Printed from counselvise.com 4 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Thereafter statutory notices as required under the law were issued from time to time along with questionnaire & Annexure requiring details / information, which was duly served upon the assessee. In that assessment proceeding ld. AO noted that the assessee has taken unsecured loan from various persons. As per enquiry made on the persons who have given unsecured loan to the assessee-company, it was noticed that the 19 entries for an unsecured loan were found suspicious. The list of parties was part of the order for serial no. 1 to 19 for an amount of Rs. 9,21,07,800/- at page 2 and 3 of the assessment order. Accordingly vide letter dated 30.03.2021 assessee was asked to prove the identity, creditworthiness and genuineness of those loans. In response to that the assessee filed reply submitting the details of these unsecured loans and also objected to the fact that in the proceeding u/s. 153A of the Act addition can be made qua incriminating material and thereby the addition so proposed cannot be made based on the decision of the Hon’ble Rajasthan High Court in the cae of Jai Steel Vs. ACIT 36 taxmann.com 523(Raj). Ld. AO noted the reply filed by the assessee was considered but the same was not acceptable because during the search the statement of Shri Sanjay Karni, Director of the assessee company wherein he failed to furnish the identity, creditworthiness and genuineness of the parties against Printed from counselvise.com 5 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. whom the huge unsecured loans reflects in the balance sheet of the assessee company. Based on that statement of the Director of the company the ld. AO did not considered the evidence placed on record as the inquiries at the given address, it was noticed that none of the company(s) mentioned was found existed on the given address, as reported by the ITO/inspectors who have been deputed to verify the identity, creditworthiness of the investors. Further, as regards to the contention of the assessee that no incriminating material had been found in relation to the unsecured loan was not accepted because the director made the statements during the search and the post search proceedings constitute incriminating material for the purpose of making an assessment u/s 153A of the Act. In support of such contention ld. AO relied upon the case of Commissioner of Income-tax, Thichur Vs. ST. Francis Clay Décor Tiles (2016) 70 taxmann.com 234(Kerala), B. Kishore Kumar Vs CIT, 234 Taxman 771(SC) the Hon'ble Supreme Court has dismissed the SLP against High Court's order, wherein it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income tax was to be levied on basis of admission without scrutinizing documents. The ld. AO also noted that the statement made by the assessee is binding in nature and the same has not been retracted by Printed from counselvise.com 6 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. him and thereby he relied upon the case law of (i) Pullangode Rubber Produce Co. Ltd. V. State of Kerala [1973] 91 ITR 18 (SC), (ii) Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi Al 1960 SC 100, (iii) Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (SC) and (iv) Avadh Kishore Das v. Ram Gopal AIR 1979 SC 861 and thereby he concluded that unsecured loan shown to have been received by the assessee is actually an accommodation entry and thereby he considered a sum of Rs. 9,21,07,800/- as unexplained cash credits from undisclosed sources and added back to the income of the assessee u/s. 68 of the Act. 5. Aggrieved by the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: 4.5 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the order, the report and the rejoinder submitted by the appellant. The contentions/submissions of the appellant are being discussed and decided as under:- The brief facts of the case as per assessment order are that a search was conducted on 01.10.2018 in the case of Karnani Group, Jaipur to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search. [A]. Issue whether the incriminating material was unearthed during the course of search and seizure action of the appellant on the issue on which the addition has been made in the assessment order:- Printed from counselvise.com 7 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. As noted by the Id. AO, during the course of search proceedings, it is noticed that the assessee has taken unsecured loan from various persons. As noted by the Id. AO in para 5.2 of the assessment order, during the course of search proceedings, statement of Shri Sanjay Karnani, Director of Karnani group of companies was recorded u/s 132(4) of the IT Act at the residence as well as the business premises. At the residential premises, in answer to question no. 33, Shri Sanjay Karmani could not identify the persons from whom such huge unsecured loans have obtained. He has also failed to furnish identity and present whereabout of such persons. Ld. AO has also noted that Shri Sanjay Karmani failed to furnish the identity, creditworthiness and genuineness of party(s) against whom huge unsecured loan reflects in the balance sheet of their companies. Ld. AO has relied upon question numbers 12. 33 and 34 in this regard. As per the assessment order, the appellant had raised the issue during the assessment proceedings that no incriminating material was found on the issue from the search action on the appellant. In this regard the Id. AO in para 5.3 has noted that the contention of the assessee that no incriminating material had been found in relation to the unsecured loan is not acceptable as it is to be noted that the adverse material collected in the form of confessional statements including such material collected during the search and the post search proceedings constitute incriminating material for the purpose of making an assessment u/s 153A of the Act. Appellant's submissions in brief on the issue of incriminating material- The appellant has stated in the appeal that during the search proceedings, it was noticed that the assessee had taken unsecured loans from various entities as listed in the AO's order. The assessee was required to prove the identity, creditworthiness, and genuineness of these unsecured loans. In response, the assessee submitted documents on 19.03.2021, including copies of Income Tax Returns (ITRs), audited financial statements, and bank statements of the lender companies. The assessee contended that it had discharged the primary onus under Section 68, thus no addition should be made. However, the AO disregarded the submissions and alleged that the unsecured loans were mere accommodation entries, adding Rs. 9,21,07,800/- as unexplained cash credits u/s 68. Printed from counselvise.com 8 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. In the appeal, the appellant has contended that in the present case, assessment had already been completed pursuant to S.143(3) (PB 49-52) and was no longer pending at the time of the search. There would be no abatement of proceedings if routine assessment processes have been completed and are not pending. The AO forfeits its authority to examine the finished evaluation. As a result, the scope of the assessment according to section 153A would be limited to incriminating evidence discovered during the course of the search. As a result, even in the instant case, there is no question of abatement and assessment for the subjected assessment year can be made solely on the basis of incriminating material discovered during the course of the search, and nothing else. The appellant has also contended that the case was selected for scrutiny pursuant to S.143(3) and was concluded by order dated 05/12/2016 (PB 49-52), without any additions on account of these loans. During the course of original scrutiny, all facts were confirmed (PB 54), and the loans that are being contested in the current assessment procedures were determined to be authentic. This assessment was comprehensive, involving scrutiny of various aspects of the taxpayer's financial records, including unsecured loans and related expenditures (PB-54, 59-60, 61-64) During this process, the AO raised specific queries, which were thoroughly addressed by the assessee with appropriate documentation and explanations. During the original assessment u/s 143(3), the AO conducted a thorough examination of the unsecured loans, including their sources, the legitimacy of the lenders, and the nature of the transactions involved. The assessee provided detailed responses, including confirmations from lenders, financial statements, and other relevant documentation to substantiate the genuineness of the transactions (PB-54, 59-60, 61-64). The appellant has also contended that in Answer to Q. No. 33 Shri Sanjay Karnani categorically stated that (PB 46), The genuineness of these transactions is beyond any doubt. The amount has been received through banking channels. The identity of these lenders is well established as we have been purchasing and selling the goods from /to Kolkata therefore we have a large number of contacts there and it was easier for us to arrange loans there from. Therefore, in the Answer to Q.No. 33 of statements of Shri Sanjay Karnani, there is no such fact as observed by the Ld. AO In response to subsequent Questions also, Shri Sanjay Karnani has stated that the confirmations of these loans will be filed, loan are genuine and has been duly repaid and he will also facilitate the physical verification of these lenders (PB 47). As regards to the present status of these lenders he merely stated that as loans Printed from counselvise.com 9 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. have been repaid long back. In answer to Q.No.35 of statements recorded on 02.10.2018 it is evidently clear that Shri Sanjay Karnani has provided name of broker as we address (PB 48). No adverse inference may kindly be drawn on the basis of statements of Shri Sanja Karnani wherein complete details of unsecured loans were elaborated by Shri Sanja Karnani to the satisfaction of search team. Not only did the Director not concede the loans being fictitious, no incriminating documentary evidence has be discovered during the course of the search. Remand report on the issue of incriminating material:- A letter with the submissions of the appellant on the issue was issued to the Id. and in the remand report the Id. AO has inter-alia stated as under:- \"During the course of search proceedings at the office premises of Mi's Kamani Solvex Pvt. Lit statements of its director Shri Sanjay Karmani was recorded uls 132(4) of the Act on 01.10.2018 and 02.10.2018 and questions related to huge unsecured loans taken from certain Kolkata based companies were asked Shri Sanjay Kamani failed to prove the Kentity, creditworthiness and genuineness of the lenders. Notably, in response to Question No. 12 of statement recorded on 02.10.2018, Shri Sanjay Kamani stated that he is unable to prove identity, creditworthiness and genuineness of the loans by stating as follows: 4. From the above statement of Sanjay Kamani it is quite clear that he failed to prove the identity, creditworthiness of lenders and genuineness of unsecured loans transactions during the course of search, which makes the statements incriminating in nature. Since, the Director of the assessee company Sh. Sanjay Kamani failed to identify the 19 companies from whom the assessee stated to have obtained the loan of Rs. 9.21 crore, the AO made addition of Rs. 9.21 crore u/s 68 of the Act on account of unexplained cash credit Printed from counselvise.com 10 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 5 …………..Apart from this, the director of the assessee company Sh. Sanjay Kamani was confronted over this issue during search proceedings vide question no. 12 of the statement dated 01.10.2018 recorded u/s 132(4) of the Act which has evidentiary value itself. …………………… Rejoinder comments of the appellant in brief on the issue of incriminating material:- In the remand report the appellant has contended that Ld. AO is not in possession of any other material except the alleged confessional statement. A perusal of contents of the remand report dated 05.12.2024 clearly shows that during the course of search no incriminating documents were found to initiate the proceedings u/s 153A and purely on the basis of statements recorded during the course of search, entire action of assessment u/s 153A has been taken. The statement recorded during the course of search are not confessional at all, rather Shri Sanjay Karnani clearly stated that these are actual transaction, he was unable to provide the other details at that point of time which were duly supplied during the course of assessment, as actual assessment of income was to be made at the time of assessment proceedings only. With respect to reply in question no. 12, the appellant has submitted that it was stated by Shri Sanjay Karnani that all the unsecured loan transactions were conducted exclusively through banking channels and were actual, genuine transactions. He stated that he would later provide documentary evidence to establish the identity, creditworthiness, and genuinerness of the transactions. As there were a total of 23 lenders involved, Shri Sanjay Karnani needed to coordinate with the staff and accountant to compile all the necessary details, which would require some time. Due to passage of a significant time and more importantly loans being already repaid, Shri Sanjay Karnani merely stated that complete details will be submitted later because during the course of search entire records of the company were scattered and assistance of accountant/staff was needed to compile all the details. Appellant has also referred to notice u/s 142(1) dated 19.08.2016 (PBP 53-54) issued during original scrutiny proceedings and has contended that specific queries were raised on the issue of unsecured loan during the original assessment proceedings and detailed submission was made and no addition was made on the issue. Printed from counselvise.com 11 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Decision on the issue of incriminating material and connected issues:- The issue at hand pertains to the legal issue that in case of unabated or completed assessments years, the addition in the assessment under section 153A of the Act, can be made only on the basis of incriminating material unearthed during the course of search and seizure action on the appellant. In the assessment order and in the remand report the learned AO has treated the statement of Shri Sanjay Karnani the director of the company as incriminating material unearthed during the course of search and seizure action on the appellant. In the factual matrix of the case, in this regard, firstly, it is to be seen whether any material which was not on the file of the learned AO was unearthed during the course of search and seizure action of the appellant. In the factual matrix of the case, in this regard, secondly, it is to be seen whether such unearthed material is incriminating or not. From the perusal of the replies of the director of the company in his statement during the course of search and seizure action it is noted that during the search statement queries were raised to the director on the issue of unsecured loan, which are the subject matter of the addition in the assessment order, however the director of the company stated that the loans were genuine. Ld. AO has referred to question and reply no. 12 in his remand report. The question 12 and reply are as under:- Printed from counselvise.com 12 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Printed from counselvise.com 13 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. There is no admission of bogus unsecured loan' or 'accommodation entry etc. in the statement. There is no incriminating finding or admission in the statement of the director pertaining to the issue of addition in the assessment order under appeal. In reply to Question No. 33 Sh. Sanjay Jain also stated that most of the loans have been repaid and he stated to submit the confirmations. No one can be expected to remember and retrieve all accounting details of a selected old transaction off-hand and extempore. Appellant asked for time to furnish the details for the same, in the background of statements given that the transactions are genuine. In the assessment order, the Id. AO has also referred to question nos. 33 and 34 and replies thereto even though these are not relied upon or claimed as incriminating in the remand report. These questions and replies are as under:- …………………. Question No. 33:- Printed from counselvise.com 14 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Printed from counselvise.com 15 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Printed from counselvise.com 16 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Printed from counselvise.com 17 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Printed from counselvise.com 18 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Printed from counselvise.com 19 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. In reply to question no. 33, Sh Sanjay Karnani has stated that the transactions were through banking channel and genuineness of the loans is beyond doubt. He has also stated that he was providing account statements of these loans and that most of the loans were taken in FY 2013-14 and repaid in subsequent year and that he will furnish the confirmation of these companies. In reply to question no. 34, which was on the issue that the specified companies were non-existent on their given addresses and that why it should not be treated as undisclosed income, Sh Sanjay Karnani has stated that they were in contact with these companies 4-5 years back and loans stand repaid 3-4 years back and that it was not possible to comment on the present position. He also stated that verification of the presently outstanding loans and companies will be get done by him. When looked into totality, the statement of the director of the company does not show confession on the issue and at the same time shows denial and rather during the search statement the director of the company stated that these loans were actual loans and were repaid in subsequent years. The conclusion to be arrived at is that during the course of search action carried out in case of appellant, no incriminating material was unearthed during the course of search and seizure action which could form the basis of the or in support of the addition in assessment that the concerned unsecured loans were bogus or were accommodation entry transaction representing the undisclosed income of appellant. In this case from the perusal of the assessment order u/s 143(3) of the Act, the original income tax return was filed by the appellant on the date of 29.11.2014 and the assessment u/s 143(3) of the Act was completed on the date of 05.12.2016 The search action took place on 01.10.2018. Further neither in the assessment order u/s 153A nor in the material placed on record by the appellant and by the Id. AO, there is reference to any pending assessment proceedings as on date of search action. Thus the present year is unabated/completed category year. In the judgement in the case of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023], the Hon'ble Supreme Court in para 14 has held as under:- Printed from counselvise.com 20 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. \"14. In view of the above and for the reasons stated above, it is concluded as under: 0 (ii).... (ii) 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.\" (emphasis supplied) On the issue there is similar judgement of Hon'ble Supreme Court in the case of Deputy Commissioner of Income-tax v. U. K. Paints (Overseas) Ltd. [2023] 150 taxmann.com 108 (SC)/[2023] 454 ITR 441 (SC)[25-04-2023]. The judgement has been carefully considered. In para 1 and 3 the Hon'ble Supreme Court has held as under:- 1. In this batch of appeals, the assessments in case of each assessee were under section 153-C of the Income-tax Act, 1961 (for short, the Act'). As found by the High Court in none of the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of the matter, as such, the assessments under section 153-C of the Act are rightly set aside by the High Court However, Shri N Venkataraman, learned ASG appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd [2023] 149 taxmann.com 399 (SC), more particularly, paragraphs 11 and 13, has prayed to observe that the Revenue may be permitted to initiate re-assessment proceedings under section 147/148 of the Act as in the aforesaid decision, the powers of the re-assessment of the Revenue even in case of the block assessment under section 153-A of the Act have been saved. Printed from counselvise.com 21 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. ................ 3. However, so far as the prayer made on behalf of the Revenue to permit them to initiate the reassessment proceedings is concerned, it is observed that it will be open for the Revenue to initiate the re-assessment proceedings in accordance with law and if it is permissible under the law. (emphasis supplied) In para 11 of the order in case of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. (Supra), the Hon'ble Supreme Court inter-alia has held as under.- \"11 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 147/48 of the Act, subject to fulfilment 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.\" The assessment order and submissions of the appellant in the appeal and the remand report on the issue and the rejoinder reply of the appellant on the remand report, all have been duly and carefully considered. Neither in the assessment order nor in the remand report there is any reference to incriminating material unearthed during the course of search and seizure action in the case of the assesse appellant for the year under appeal w.r.t. the addition made in the assessment order. The status of assessments before issuance of notice u/s 153A has been discussed in pre-paragraphs. There was no pending/abated assessment on the date search and seizure action took place and the time to issue notice u/s 143(2) of the Act had expired already. Accordingly, the judgement of Hon'ble Supreme Court in the case of Abhisar Buildwell (supra) and U. K. Paints (supra) are squarely applicable to the facts of the case. Accordingly, following the judgment of honorable Supreme Court it is held that the Id. AO rightly issued notices u/s 153A of the Act and at the same time the impugned addition made in assessment order u/s 153A cannot be sustained and is hereby deleted as the same is without basis of incriminating material unearthed during the search action on the appellant and impugned addition could have been done by the learned assessing officer in re-assessment Printed from counselvise.com 22 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. proceedings by issuance of notice under section 147/148. The Id. AO is directed to take necessary action in this regard for issuance of notice u/s 148 of the Act. Further CBDT (ITJ Section) has issued Instruction No. 1 of 2023 dated 23-08- 2023 vide F.No. 279/Misc./M-54/2023-ITJ on the subject \"Implementation of the judgment of the Hon'ble Supreme Court in the case of Pr.CIT (Central-3) v/s Abhisar Buildwell Pvt. Ltd. (Civil Appeal No. 6580 of 2021)-Instruction regarding\". The learned assessing officer is directed to implement the law and ratio of the judgement of Abhisar Buildwell (supra) and the said Instruction No. 1 of 2023 dated 23-08-2023 and section 150 of the Act, in the case of the appellant appropriately as per the facts of the case and as per above findings. This issue is adjudicated an above terms. For statistical purposes this issue is treated as allowed. [B]. Issue of Typographical errors / system errors in reproduction of the statement of the director of the company in the assessment order and regarding the reproduction of the inspector report in the assessment order- The appellant has contended that as it is apparent on the face of it, from the assessment order that the so-called statements of the Director of the company which were recorded during the course of the search, appear as nothing more than a jumble of letters thrown together in a haphazard manner which cannot, in any way. be construed as or rearranged to make any sense at all. The lackadaisical approach of the Ld. AO in passing this assessment order is starkly visible in this ludicrous rendition of the recorded statements. It seems that the Ld. AO also has little to no idea as to what the Director of the appellant company, Shri Sanjay Karnani had to say during the course of the statements recorded during the search, because no prudent person can decipher what has been reproduced of those statements, in this assessment order. Similarly, at Page-21 of assessment order, reference to an inspector report has been made along with reproduction of the same but actually not reproducing anything. The appellant has argued that the appellant is being expected to defend himself by being served with an illegible document that is teeming with fallacies, and the proceedings amounted to nullity for want of jurisdiction. The assessment order serves as the foundation or pillar for all actions brought under the Income Tax Act and is a vital document, and if any part of it is illegible then it would acutely prejudice the appellant, as it is a settled principle of law that no man shall be condemned unheard and for the proceedings to be just and equitable, the Printed from counselvise.com 23 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. accused must have a clear roadmap as to exactly what it is that he is being condemned for. From the perusal of the facts of the case on the issue it is seen that the objection and the contention raised by the appellant is not fatal to the issue as the appellant is in possession of the material which has been relied upon by the learned AO and which is not illegible in the assessment order. Even though the content of the evidence is not illegible in the assessment order, however the reference to the evidence is clear. For example with respect to the statement recorded during the search action which is referred in the assessment order, the learned AO has clearly mentioned the person whose statement has been referred and also even referred the question number of the statement. These statements are already with the appellant. Thus there is no violation of the principle of natural justice. Accordingly this contention of the appellant on this issue are hereby dismissed. [C]. Issue of challenge to the validity of the proceedings and assumption of jurisdiction on the ground that notice u/s 142(1) of the Act was issued before notice u/s 143(2) of the Act- The appellant has also contended that firstly the notice u/s 142(1) of the Act was issued by the Id. AO and lateron the notice pursuant to S.143(2) assuming statutory authority was issued on 25.01.2021, i.e. following the notice pursuant to S.142(1). This prima facie invalidates the notice issued according to S.142(1), therefore nullifying the whole assessment action, as the same is unconstitutional and bad in law. The authority to issue an assessment order is presumed only upon service of such legal and adequate notice. If a correct and legal notice is not served, the AO cannot be deemed to have taken authority to make an order of assessment, and hence any reassessment order issued would be null and void in the legal sense, In the instant case, the notice asking for information has been issued by the Ld. AO without first assuming jurisdiction to issue such a notice. From the perusal of the facts of the case on the issue, the limited contention of the appellant is that the query notice under section 142(1) of the Act was issued before the scrutiny notice was issued by the learned AO. Without going into the exact facts of the issue, and even purely going by law, this does not invalidate the entire assessment proceedings and at the maximum in such a situation the query notice under section 142(1) of the Act can be treated as invalid. However in the present case even such query notice is valid. This is due to the fact that in case of assessment under section 153A of the Act it is not necessary to issue the notice Printed from counselvise.com 24 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. under section 143(2) of the Act and thus if the notice under section 142(1) of the Act was issued before the issuance of notice under section 143(2) of the Act that does not invalidate the query notice under section 142(1) of the Act. Regarding the legal position that notice under section 143(2) is not required to be issued in case of assessments under section 153A of the Act, the reference is made to the ratio of the following judgement- Judgement of Hon'ble Madras High Court in the case of B. Kubendran v. Deputy Commissioner of Income Tax, Central Circle 2(1), Chennai [2021] 126 taxmann.com 107 (Madras):- \"12. Revenue argues that the language of Section 158BC is different from that of Section 158C and where the former specifically refers to a notice under section 143(2), the latter merely states that a notice may be issued to the assessee and that the provisions of this Act shall, so far as may be, apply accordingly, as if such return were a return required to be furnished under section 139. Thus, in the absence of specific reference to Section 143(2), the only stipulation being that the assessment be completed in line with the provisions of the Act, it would suffice that the assessment be completed in accordance with law and the principles of natural justice. This is, he says, the view that has been taken by the High Courts in the decisions relied upon by the revenue …………….. 14. The provisions of section 153A(1)(a) deal with assessment in cases of search or requisition and are extracted below: Assessment in case of search or requisition. 153A [(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 section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years [and or the relevant assessment year or years) referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139, (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous years in which such search is conducted or requisition is made [and for the relevant assessment year or years): Printed from counselvise.com 25 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 15. In the case of Rangroopchand Chordia, a Division Bench of this Court dealt with a statutory appeal filed by the revenue under section 260A of the Act. The appeal had been admitted on two substantial questions relating to whether an addition of undisclosed income may be made on the basis of loose sheets found in the search, particularly when the assessee therein had accepted, in his sworn statement, that the information contained in the sheets reflected his undisclosed income. In that case the assessee had not filed a return within the time stipulated in the notice issued under section 158BC. The return had been filed one year and seven months after the date of the notice and there was only three days left for the department to complete the assessment. 16. The Bench thus stated that a notice under section 143(2) could not be issued, since the issuance of such notice contemplated adherence to the principles of natural justice. Since the assessee had created a situation to his advantage by defaulting on the requirement to comply with the notice under section 158BC, he should not be permitted to take advantage of such default. It was in that context that the Bench held that the decision in the case of Blue Moon should be seen to come to the aid of a person, who had filed his return within the time stipulated in the statutory notice, and not one who had defaulted. 17. Both decisions, that of the Supreme Court in Blue Moon as well as this Court in RangroopchandChordia, are in the context of erstwhile Chapter-XIV B and neither decision comes to the aid of the petitioner in this case, since it would not answer the argument in relation to whether the issuance of notice under section 143(2) was mandatory in the context of an assessment under Section 153A/C as well. 18. The Delhi High Court in Ashok Chaddha (supra) had framed a substantial question specifically on whether the issue of a notice under section 143(2) was mandatory for finalisation of assessment under section 153A. This case is thus on point as far as the present writ petition is concerned. The assessee therein relied on a slew of decisions of the Supreme Court and various High Courts for the proposition that notice under section 143(2) was mandatory. However, the Bench, after an elaborate discussion negates the plea of the assessee, concluding that the issuance of notice was not mandatory in the case of an assessment under section 153A. 19. The discussion, running between paragraphs 7 and 13 are extracted below: Printed from counselvise.com 26 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 7. On the other hand, learned counsel for the Revenue argues that the assessment being under s. 153A, there is no requirement of issue of notice under's, 143(2) of the Act. He submits that in any case, there is no prescribed proforma for issuing the notice. The notice is usually issued in the proforma marked as \"ITNS-33\". It is a communication by the AO to the assessee giving him the opportunity as required under s. 143(2). Therefore, once the assessee has been put to notice and given opportunity to attend the office, the requirement of s. 143(2) is complete whether notice is issued in proforma \"ITNS-33\" or in any other format. In the present case, the AO had communicated his. intention to scrutinize the return by way of two letters and afforded opportunity to the assessee to produce necessary accounts, documents or evidence. Therefore, the requirement, if any, of s. 143(2) has been satisfied. 8. Admittedly, the assessee was issued a notice under s. 153A of the Act, in response to which he had filed a return of income. Thereafter, two detailed questionnaires were issued to the assessee before the completion of assessment s. 153A of the Act provides procedure for assessment in case where a search is initiated or documents are requisitioned. The relevant portion of s. 153A is reproduced here under: \"Sec. 153A- Assessment in case of search or requisition [1] Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, in the case of a person where a search is initiated under s. 132 or books of account, other documents or any assets are requisitioned under s. 132A after the 31st day of May, 2003, the AO shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in cl. (b), in the prescribed 3 form and verified in the prescribed manner and setting forth such other particulars as may be prescribed 3 and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under s. 139;\" 9. There is no specific provision in the Act requiring the assessment made under s. 153A to be after issue of notice under s. 143(2) of the Act. Learned counsel for the assessee places heavy reliance on the judgment of the Hon'ble Supreme Court in Hotel Blue Moon (supra) wherein it was held that the where an assessment has to be completed under s. 143(3) r/w s. 158BC, notice under s. 143(2) must be issued and omission to do so cannot be a procedural irregularity and the same is not curable. It is to be noted that the above said judgment was in the context of s. 158BC. Clause (b) of s. 158BC expressly provides that \"the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply. This is not the position under s. 153A. The law laid down in Hotel Blue Moon, is thus not applicable to the facts of the present case. 10. The decision of Lunar Diamond Ltd. (supra), Vardhman Estates (supra) and BhanTestiles (supra) relied upon by learned counsel for the assessee related to the requirement of service of notice upon the assessee within a prescribed time and thus not Printed from counselvise.com 27 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. applicable to the present case. The case of Pawan Gupta (supra) related to mandatory issue of notice under s. 143(2) of the Act in the case of regular assessment as also on block assessment. This being not a case of assessment based on search under s. 153(A), the same is not applicable to the present case. In the case of Raj Kumar Chawla (supra) relied upon by learned counsel for the assessee was that of the Tribunal, wherein, a view was taken that if a return filed under s. 148 of the Act is sought to be scrutinized, the compliance of provision contained in proviso under s. 143(2) of the Act is mandatory. The issue of requirement of notice under s. 143(2) for an assessment under s. 147 came up for consideration before this Court recently in CIT v. Madhya Bharat Energy Corpn. IT Appeal No. 950 of 2008 decided on 11th July, 2011. In that case also, this Court has held that in the absence of any specific provision under s. 147 of the Act, the issuance of notice under s. 143(2) cannot be held to be a mandatory requirement. 11. It is also to be noted that s. 153A provides for the procedure for assessment in case of search or requisition. Sub-s. (1) starts with non-obstante clause stating that it was \"notwithstanding\" anything contained in ss. 147, 148 and 149, etc. Clause(a) thereof provides for issuance of notice to the person searched under s. 132 or where documents etc are requisitioned under s. 132(A), to furnish a return of income. This clause nowhere prescribes for issuance of notice under s. 143(2). Learned counsel for the assessee/appellant sought to contend that the words, \"so far as may be applicable\" made it mandatory for issuance of notice under s. 143(2) since the return filed in response to notice under s. 153A was to be treated as one under s. 139. Learned counsel relies upon R.Dalmia v. CIT (supra) wherein the question of issue of notice under s. 143(2) was examined with reference to s. 148 by the Supreme Court in the context of s. 147. The Apex Court held as under (page 488): \"As to the argument based upon ss. 144A, 246 and 263, we do not doubt that assessments under s. 143 and assessments and reassessments under s. 147 are different, but in making assessment and re-assessments under s. 147 the procedure laid down in sections subsequent to s. 139, including that laid down by s. 144B, has to be followed.\" 12. The case of R. Dalmia v CIT (supra) primarily was with regard to applicability of s. 144B and s. 153 (since omitted w.e.f. 1st April, 1989) to the assessment made under ss. 147 and 148 and thus cannot be said to be the decision laying down the law regarding arding mandatory issue of notice under s. 143(2). 13. The words 'so far as not be interpreted that the issue of notice under s. 143(2) was mandatory in case of assessment under s. 153A. The use of the words, 'so far as may be cannot be stretched to the extent of mandatory issue of notice under s. 143(2). As is noted, a specific notice was required to be issued under cl. (a) of sub-s. (1) of s. 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under s. 143(2) could be contemplated for assessment under s. 153A. Printed from counselvise.com 28 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 20. The Punjab & Haryana High Court applies the same ratio in an identical challenge before it in the case of TarsemSingla (supra). 21. The Kerala High Court in PromyKuriakose (supra) was also dealing with a statutory appeal wherein one of the substantial questions related specifically to the issue of whether a notice under section 143(2) was mandatory and has to be issued in line with the procedure stipulated under section 139 of the Act. The Bench relied on the decision of the Delhi High Court in Ashok Chaddha's case and the Punjab & Haryana High Court in TarsemSingla (supra), reiterating their conclusion that there was no requirement for a notice to be issued under Section 143(2) for completion of an assessment under section 153C and thus the question of adhering to the time limit prescribed under the proviso to Section 143(2) did not arise. 22. The difference in the language of section 158 BC and Section 153A must be attributed sufficient weightage. While there is specific reference to the provisions of section 143(2) in Section 158 BC, such reference is conspicuous by its absence in Section 153A. Section 153A only states that an assessment in terms thereof shall be completed in terms of the provisions of the Income-tax Act, 1961 as if such retum were a return required to be furnished under section 139. 23. It would thus suffice that in framing an assessment under section 153A, due regard must be given to the principles of natural justice, which requirement will stand satisfied either by issuance of notice under section 143(2) or a questionnaire under section 142(1). In this case, a questionnaire has been issued. 24. I am, thus in agreement with the ratio of the decisions cited above and answer this legal issue in favour of the revenue.\" In view of the above discussion this issue raised by the appellant is hereby dismissed. 5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In the earlier part of this order it has already been held that the additions done by the learned assessing officer in the assessment order is not sustainable on the Printed from counselvise.com 29 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. technical ground that the addition is not based on any incriminating material unearthed during the search and seizure action on the appellant. Since the additions do not survive on technical ground, the other grounds of appeal on the merits of such addition are rendered only academic and do not warrant detailed adjudication. In view of this discussion, the subject grounds of appeal raised by the appellant are treated as disposed off. 6. Ground of Appeal No. 4 is as under: Ground No. 4: Under the facts and circumstances, Ld.AO has erred by initiating the penalty U/s 271(1)(c), the penalty. The action is unjustified. illegal or excessive and deserves to be deleted in full. 6.1 The ground is general in nature. The grounds are pre-matture as these are against mere initiation of penalty proceedings. Penalty proceedings are independent proceedings and the appellant is required to make his submissions before the appropriate authority during the penalty proceedings. Accordingly, the ground of appeal raised by the appellant on this issue is treated as disposed off. 7. Ground of Appeal No. 5 is as under: Ground No. 5: That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. 7.1 The appellant has not added or altered any of the above mentioned grounds of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off. 8. In the result, the appeal of the appellant is partly allowed. 6. Feeling dissatisfied with the finding so recorded in the order of the ld. CIT(A), revenue preferred the present appeal on the grounds as reiterated herein above. Apropos to the grounds so raised ld. DR submitted that the ld. CIT(A) has not appreciated the detailed finding of the ld. AO that the statement of the director of the company itself was considered as Printed from counselvise.com 30 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. incriminating material based on the various decisions as cited by the ld. AO in his order and thereby the ld. CIT(A) was not justified in directing the ld. AO to delete the addition of Rs. 9,21,07,800/-. Ld. DR also submitted that the law does not define the incriminating material. As regards the merits of the issue ld. AO has also made the filed enquiry and after that he holds that the unsecured loans is nothing but the unexplained credit of the assessee and thereby he rightly made the addition u/s. 68 of the Act. 7. Per contra, ld. AR of the assessee supported the order of the ld. CIT(A) so far as the finding given in his favour. In support of the finding so record and to contest the cross objection the ld. AR of the assessee filed a detailed written submission which reads as under : 1. A search operation was conducted on 01.10.2018 concerning the Karnani Group, Jaipur, to which the assessee belongs. Various assets, books of account, and documents were found and seized as per the annexure prepared during the search. Subsequently, a notice u/s 153A for the A.Y. 2014-15 was issued on 18.09.2020. In compliance with this notice, the assessee filed an e-return on 03.10.2020 for the A.Y. 2014-15, declaring an income of ₹2,32,88,920/-. 2. During the search proceedings, it was noticed that the assessee had taken unsecured loans from various entities as listed in the AO`s order. The assessee was required to prove the identity, creditworthiness, and genuineness of these unsecured loans. In response, the assessee submitted documents on 19.03.2021, including copies of Income Tax Returns (ITRs), audited financial statements, and bank statements of the lender companies. The assessee contended that it had discharged the primary onus under Section 68, thus no addition should be made. However, the AO disregarded the submissions and Printed from counselvise.com 31 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. alleged that the unsecured loans were mere accommodation entries, adding ₹9,21,07,800/- as unexplained cash credits u/s 68. 3. In the present case, assessment had already been completed pursuant to S.143(3) (CIT(A) PBP 49-52) and was no longer pending at the time of the search. There would be no abatement of proceedings if routine assessment processes have been completed and are not pending. The AO forfeits its authority to examine the finished evaluation. As a result, the scope of the assessment according to section 153A would be limited to incriminating evidence discovered during the course of the search. As a result, even in the instant case, there is no question of abatement and assessment for the subjected assessment year can be made solely on the basis of incriminating material discovered during the course of the search, and nothing else. 4. Being severely aggrieved by the assessment so made, assessee approached Ld.CIT(A) through an appeal. Ld.CIT(A) vide its order dated 08.01.2025, quashed the assessment order so passed u/s 153A dated 04.08.2021. Against which revenue has preferred the appeal before Hon’ble ITAT. 5. While quashing the assessment order, Ld.CIT(A) has given a direction at Page- 60 as under: “The ld. AO is directed to take necessary action in this regard for issuance of notice u/s 148 of the Act. Further CBDT (ITJ Section) has issued Instruction No. 1 of 2023 dated 23-08-2023 vide F.No. 279/Misc./M-54/2023 ITJ on the subject “Implementation of the judgment of the Hon’ble Supreme Court in the case of Pr.CIT (Central-3) v/s Abhisar Buildwell Pvt. Ltd. (Civil Appeal No. 6580 of 2021)-Instruction regarding”. The learned assessing officer is directed to implement the law and ratio of the judgement of Abhisar Buildwell (supra) and the said Instruction No. 1 of 2023 dated 23-08-2023 and section 150 of the Act, in the case of the appellant appropriately as per the facts of the case and as per above findings” Against the said direction of CIT(A), assessee has preferred a Cross Objection to appeal filed by revenue taking the following ground: In the facts and circumstances of the case and in law, ld. CIT(A) has erred in giving directions to AO to implement judgment of Honorable Supreme Court in the case of Abhisar Buildwell 2023 149 taxmann.com and the CBDT Instruction No. 1 of 2023 dated 23.8.2023 on the subject Implementation of the judgment of the Honorable Supreme Court in the case of Abhisar Buildwell (Supra). The Printed from counselvise.com 32 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. action of the ld. CIT(A) is illegal, unjustified, arbitrary, and against the facts of the case. Written Submissions on Revenue’s Appeal 1. In the instant case, entire issue revolves around the fact whether any incriminating material was unearthed during the course of search and seizure action of the appellant on the issue on which the addition has been made in the assessment order. 2. AO’s View: 2.1 During the course of search proceedings, it was observed that the assessee had obtained unsecured loans from various persons. As recorded by the Ld. AO in para 5.2 of the assessment order, the statement of Shri Sanjay Karnani, Director of Karnani Group of Companies, was recorded under section 132(4) of the Income-tax Act, 1961, both at his residence and business premises. 2.2 In response to Question No. 33 at the residential premises, Shri Sanjay Karnani was unable to identify the persons from whom such substantial unsecured loans had allegedly been obtained. He also failed to provide details regarding their identity and present whereabouts. The Ld. AO has further noted that Shri Sanjay Karnani did not establish the identity, creditworthiness, and genuineness of the parties in respect of the large unsecured loans reflected in the balance sheets of the group companies. For this purpose, reliance was placed on his answers to Question Nos. 12, 33, and 34. 2.3 The assessee, during the assessment proceedings, had contended that no incriminating material was found during the course of search in relation to the unsecured loans. However, in para 5.3 of the assessment order, the Ld. AO rejected this contention, holding that the adverse material in the form of confessional statements, including those recorded during and subsequent to the search, constituted incriminating material within the meaning of section 153A of the Act, sufficient for the purpose of making the impugned addition. 3. Submissions: 3.1 Nature of Statement On a bare perusal of the statement recorded, particularly the replies to Question Nos. 33 and 34, it emerges that there is no admission of bogus unsecured loans or accommodation entries. Rather, the director has consistently maintained that the loans were genuine, duly routed through banking channels, and in fact most of them stood repaid in subsequent years. He further assured to furnish confirmations and bank statements in support of such genuineness. Printed from counselvise.com 33 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. It is pertinent that in response to Question No. 33, the director specifically stated that the loans were genuine, routed through bank, and repayment had already taken place. Similarly, in reply to Question No. 34, he explained that although some companies may no longer be traceable at their given addresses at present, the transactions were genuine at the relevant point of time and had since been squared off. (ii) No Confessional or Incriminating Statement It is respectfully submitted that no portion of the statement can be read as a confession or admission that the unsecured loans were sham or accommodation entries. On the contrary, the tenor of the replies indicates a denial of any such allegation and an assertion of genuineness. At best, the director sought reasonable time to furnish documentary evidence, which is normal in the backdrop that one cannot be expected to recall or retrieve all accounting details of past transactions extempore during the course of search. (iii) No Incriminating Material Unearthed Importantly, no independent incriminating document, paper, diary, ledger, or evidence was found during the course of search in support of the allegation of bogus loans. The entire case of the Ld. AO rests on the statement alone. It is a settled law that statement simpliciter without corroborating material does not constitute incriminating material within the meaning of section 153A. In the Notice u/s 142(1), with respect to statements of Shri Sanjay Karnani recorded u/s 132(4), the Ld. AO has made certain observations on the basis of which it has been concluded that the appellant has failed to prove all the three conditions laid down in S.68 of the Act. The observations made by the Ld. AO on the basis of statements of Shri Sanjay Karnani vis a vis our reply thereon is as under: (i) the Ld. AO has observed that in Answer to Q.No.33 of statement recorded u/s 132(4) of Shri Sanjay Karnani on 02.10.2018, he could not identify the persons from whom such loans were taken. (ii) It has been further observed that Shri Sanjay Karnani failed to furnish identity and present whereabouts of such lenders. In this regards it is submitted that in Answer to Q. No. 33 Shri Sanjay Karnani categorically stated that: (CIT(A) PBP 46) • The genuineness of these transactions is beyond any doubt. • The amount has been received through banking channels. • The identity of these lenders is well established as we have been purchasing and selling the goods from /to Kolkata therefore we have a large number of contacts there and it was easier for us to arrange loans there from. Therefore, in the Answer to Q.No. 33 of Printed from counselvise.com 34 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. statements of Shri Sanjay Karnani, there is no such fact as observed by the Ld. AO. (b) In response to subsequent Questions also, Shri Sanjay Karnani has stated that the confirmations of these loans will be filed, loan are genuine and has been duly repaid and he will also facilitate the physical verification of these lenders (CIT(A) PBP 47). As regards to the present status of these lenders he merely stated that as loans have been repaid long back therefore it is not possible to talk about present status but he assured the search team that physical verification of these can be done and he will facilitate the same. (iii) In notice u/s 142(1), the Ld. AO has further observed that Shri Sanjay Karnani has also failed to furnish the contact number and address of the agent, who have provided the secured loans. It is being bring into kind attention of the Ld. AO that in answer to Q.No.35 of statements recorded on 02.10.2018, it is evidently clear that Shri Sanjay Karnani has provided name of broker as well address (CIT(A) PBP 48). As regards to contact number of the broker he merely stated that he used to talk to him at the time when loans were taken but now his mobile number has been showing not exit. Therefore, there is not even a single word in the manner as mentioned by the Ld. AO in the Notice u/s 142(1). - Under these facts and circumstance, no adverse inference may kindly be drawn on the basis of statements of Shri Sanjay Karnani wherein complete details of unsecured loans were elaborated by Shri Sanjay Karnani to the satisfaction of search team. - It is being further submitted that not only did the Director not concede to the loans being fictitious, no incriminating documentary evidence has been discovered during the course of the search. The impugned addition of Rs.9,21,07,800/- by rendering genuine loans as unexplained has been imposed solely on the basis of absence and not the presence of any incriminating material. 3.2 It is further submitted that the validity of proceedings u/s 153A hinges critically on the presence of incriminating evidence obtained during a search. In the present case, it is essential to highlight that no such incriminating documents or materials related to the assessment years in question were found during the search conducted by the authorities. This absence of incriminating evidence Printed from counselvise.com 35 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. fundamentally undermines the jurisdictional basis for proceeding under Section 153A. 3.3 S.153A provides for the assessment or reassessment of income for the specified assessment years in cases where a search has been conducted. However, this provision is predicated on the discovery of incriminating evidence that directly supports the inference of undisclosed income or non-compliance with tax obligations. Without such evidence, the proceedings lack a valid foundation, as the primary intent of Section 153A is to address scenarios where the tax authorities uncover information that warrants further investigation. 3.4 A perusal of the statement recorded (copy of these statements enclosed with the remand report of AO) shows that no incriminating documentation involving these loans were discovered over the course of the search. This contention along with the detailed written submissions on each question of statement recorded were filed before the CIT(A). The said written submissions were forwarded to the AO to get the information as to what was the incriminating material found during the course of search. In response to this, Ld.AO submitted its remand report dated 06.12.2024, wherein it was categorically stated that Ld. AO is not in possession of any other material except the alleged confessional statement. Ld.CIT(A) has given a detailed finding in this regard at Page-48 of the order, reproduced hereunder: “ In the remand report the appellant has contended that Ld. AO is not in possession of any other material except the alleged confessional statement. A perusal of contents of the remand report dated 05.12.2024 clearly shows that during the course of search no incriminating documents were found to initiate the proceedings u/s 153A and purely on the basis of statements recorded during the course of search, entire action of assessment u/s 153A has been taken.” 3.5 Whether the statements were confessional in nature: As submitted above and confirmed by CIT(A), except the alleged confessional statement, Ld.AO was not in possession of any other incrimination material to assume the jurisdiction u/s 153A of the Act. As far as the issue whether the statements were confessional in nature is concerned, Ld.CIT(A) after going through the statement recorded in Printed from counselvise.com 36 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. detail, has given its finding at Page-48 of the order, clearly stating that the statements of Shri Sanjay Karnani cannot be considered confessional in nature. The relevant finding of CIT(A) on which reliance is being placed is reproduced hereunder: “The statement recorded during the course of search are not confessional at all, rather Shri Sanjay Karnani clearly stated that these are actual transaction, he was unable to provide the other details at that point of time which were duly supplied during the course of assessment, as actual assessment of income was to be made at the time of assessment proceedings only. With respect to reply in question no. 12, the appellant has submitted that it was stated by Shri Sanjay Karnani that all the unsecured loan transactions were conducted exclusively through banking channels and were actual, genuine transactions. He stated that he would later provide documentary evidence to establish the identity, creditworthiness, and genuineness of the transactions. As there were a total of 23 lenders involved, Shri Sanjay Karnani needed to coordinate with the staff and accountant to compile all the necessary details, which would require some time. Due to passage of a significant time and more importantly loans being already repaid, Shri Sanjay Karnani merely stated that complete details will be submitted later because during the course of search entire records of the company were scattered and assistance of accountant/staff was needed to compile all the details Appellant has also referred to notice u/s 142(1) dated 19.08.2016 (PBP 53-54) issued during original scrutiny proceedings and has contended that specific queries were raised on the issue of unsecured loan during the original assessment proceedings and detailed submission was made and no addition was made on the issue.”. 3.6 In the subsequent paras, Ld.CIT(A) has analyzed in detail whether any of the answer in the statement recorded during the course of search constitute incriminating in nature. (Kindly refer Page-49 to 57) 3.7 In view of the above, it is evident that during the course of search no incrimination documents were found. Since the year under consideration falls within the category of unabated/completed assessments. The return of income was originally filed on 29.11.2014 and assessment under section 143(3) of the Act was duly completed on 05.12.2016. The search and seizure action under Printed from counselvise.com 37 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. section 132 of the Act took place much later, i.e., on 01.10.2018. At the time of search, there were no pending proceedings for the relevant year. Thus, by settled position of law, any addition under section 153A of the Act for such unabated year can only be made on the basis of incriminating material unearthed during the course of search and seizure action on the appellant and in absence of any incriminating material, the assessment so made by Ld.AO has been rightly quashed by Ld.CIT(A) by holding as under: The issue at hand pertains to the legal issue that in case of unabated or completed assessments years, the addition in the assessment under section 153A of the Act, can be made only on the basis of incriminating material unearthed during the course of search and seizure action on the appellant. In the assessment order and in the remand report the learned AO has treated the statement of Shri Sanjay Karnani the director of the company as incriminating material unearthed during the course of search and seizure action on the appellant. In the factual matrix of the case, in this regard, firstly, it is to be seen whether any material which was not on the file of the learned AO was unearthed during the course of search and seizure action of the appellant. In the factual matrix of the case, in this regard, secondly, it is to be seen whether such unearthed material is incriminating or not. From the perusal of the replies of the director of the company in his statement during the course of search and seizure action it is noted that during the search statement queries were raised to the director on the issue of unsecured loan, which are the subject matter of the addition in the assessment order, however the director of the company stated that the loans were genuine Ld. AO has referred to question and reply no. 12 in his remand report. The question 12 and reply are as under: There is no admission of ‘bogus unsecured loan’ or ‘accommodation entry’ etc. in the statement. There is no incriminating finding or admission in the statement of the director pertaining to the issue of addition in the assessment order under appeal. In reply to Question No. 33 Sh. Sanjay Jain also stated that most of the loans have been repaid and he stated to submit the confirmations. No one can be expected to remember and retrieve all accounting details of a selected old transaction off-hand and extempore. Appellant asked Printed from counselvise.com 38 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. for time to furnish the details for the same, in the background of statements given that the transactions are genuine. In the assessment order, the ld. AO has also referred to question nos. 33 and 34 and replies thereto even though these are not relied upon or claimed as incriminating in the remand report. These questions and replies are as under: In reply to question no. 33, Sh Sanjay Karnani has stated that the transactions were through banking channel and genuineness of the loans is beyond doubt. He has also stated that he was providing account statements of these loans and that most of the loans were taken in FY 2013-14 and repaid in subsequent year and that he will furnish the confirmation of these companies. In reply to question no. 34, which was on the issue that the specified companies were non- existent on their given addresses and that why it should not be treated as undisclosed income, Sh Sanjay Karnani has stated that they were in contact with these companies 4-5 years back and loans stand repaid 3-4 years back and that it was not possible to comment on the present position. He also stated that verification of the presently outstanding loans and companies will be get done by him. When looked into totality, the statement of the director of the company does not show confession on the issue and at the same time shows denial and rather during the search statement the director of the company stated that these loans were actual loans and were repaid in subsequent years. The conclusion to be arrived at is that during the course of search action carried out in case of appellant, no incriminating material was unearthed during the course of search and seizure action which could form the basis of the or in support of the addition in assessment that the concerned unsecured loans were bogus or were accommodation entry transaction representing the undisclosed income of appellant In this case from the perusal of the assessment order u/s 143(3) of the Act, the original income tax return was filed by the appellant on the date of 29.11.2014 and the assessment u/s 143(3) of the Act was completed on the date of 05.12.2016 The search action took place on 01.10.2018. Further neither in the assessment order u/s 153A nor in the material placed on record by the appellant and by the ld. AO, there is reference to any pending assessment proceedings as on date of search action. Thus the present year is unabated/completed category year. In the judgement in the case of Printed from counselvise.com 39 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023], the Hon’ble Supreme Court in para 14 has held as under: “14. In view of the above and for the reasons stated above, it is concluded as under: (i) ….. (ii) …. (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.” (emphasis supplied) On the issue there is similar judgement of Hon’ble Supreme Court in the case of Deputy Commissioner of Income-tax v. U. K. Paints (Overseas) Ltd. [2023] 150 Page 58 of 85 AADCK2977N- KARNANI SOLVEX PRIVATE LIMITED A.Y. 2014-15 ITBA/APL/S/250/2024- 25/1072002081(1) taxmann.com 108 (SC)/[2023] 454 ITR 441 (SC)[25-04-2023]. The judgement has been carefully considered. In para 1 and 3 the Hon’ble Supreme Court has held as under 1. In this batch of appeals, the assessments in case of each assessee were under section 153-C of the Income-tax Act, 1961 (for short, `the Act'). As found by the High Court in none of the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of the matter, as such, the assessments under section 153-C of the Act are rightly set aside by the High Court. However, Shri N Venkataraman, learned ASG Printed from counselvise.com 40 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd.[2023] 149 taxmann.com 399 (SC), more particularly, paragraphs 11 and 13, has prayed to observe that the Revenue may be permitted to initiate re-assessment proceedings under section 147/148 of the Act as in the aforesaid decision, the powers of the re-assessment of the Revenue even in case of the block assessment under section 153-A of the Act have been saved. …………… 3. However, so far as the prayer made on behalf of the Revenue to permit them to initiate the reassessment proceedings is concerned, it is observed that it will be open for the Revenue to initiate the re assessment proceedings in accordance with law and if it is permissible under the law. In para 11 of the order in case of Principal Commissioner of Income- tax, Central-3 v. Abhisar Buildwell (P.) Ltd. (Supra), the Hon’ble Supreme Court inter-alia has held as under: “ “11. ……………………….. 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 147/48 of the Act, subject to fulfilment 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.” The assessment order and submissions of the appellant in the appeal and the remand report on the issue and the rejoinder reply of the appellant on the remand report, all have been duly and carefully considered. Neither in the assessment order nor in the remand report there is any reference to incriminating material unearthed during the course of search and seizure action in the case of the assesse appellant for the year under appeal w.r.t. the addition made in the assessment order. The status of assessments before issuance of notice u/s 153A has been discussed in pre paragraphs. There was no pending/abated assessment on the date Printed from counselvise.com 41 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. search and seizure action took place and the time to issue notice u/s 143(2) of the Act had expired already. Accordingly, the judgement of Hon’ble Supreme Court in the case of Abhisar Buildwell (supra) and U. K. Paints (supra) are squarely applicable to the facts of the case. Accordingly, following the judgment of honorable Supreme Court it is held that the ld. AO rightly issued notices u/s 153A of the Act and at the same time the impugned addition made in assessment order u/s 153A cannot be sustained and is hereby deleted as the same is without basis of incriminating material unearthed during the search action on the appellant and impugned addition could have been done by the learned assessing officer in re-assessment proceedings by issuance of notice under section 147/148. The ld. AO is directed to take necessary action in this regard for issuance of notice u/s 148 of the Act. Further CBDT (ITJ Section) has issued Instruction No. 1 of 2023 dated 23-08- 2023 vide F.No. 279/Misc./M-54/2023 ITJ on the subject “Implementation of the judgment of the Hon’ble Supreme Court in the case of Pr.CIT (Central-3) v/s Abhisar Buildwell Pvt. Ltd. (Civil Appeal No. 6580 of 2021)- Instruction regarding”. The learned assessing officer is directed to implement the law and ratio of the judgement of Abhisar Buildwell (supra) and the said Instruction No. 1 of 2023 dated 23-08-2023 and section 150 of the Act, in the case of the appellant appropriately as per the facts of the case and as per above findings. This issue is adjudicated an above terms. For statistical purposes this issue is treated as allowed 3.8 In our situation, rightly stated by CIT(A), the search did not yield any documents or information that could be construed as incriminating. The authorities conducted a thorough examination of relevant records, but the findings did not support any allegations of undisclosed income or tax evasion pertaining to the assessment years in question. As a result, there exists no factual basis to proceed with assessments u/s 153A and accordingly the assessment order passed u/s 153A has been rightly quashed by CIT(A). 4 Prior Assessment Completed u/s 143(3): 4.1 In the current context, it is crucial to establish that the assessment for the assessment year 2014-15 was previously concluded u/s 143(3). This assessment was comprehensive, involving scrutiny of various aspects of Printed from counselvise.com 42 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. the taxpayer’s financial records, including unsecured loans and related expenditures (CIT(A) PBP-54, 59-60, 61-64). During this process, the AO raised specific queries, which were thoroughly addressed by the assessee with appropriate documentation and explanations. 4.2 The completion of an assessment u/s 143(3) signifies that the income and deductions claimed by the taxpayer have been examined and accepted by the tax authorities at that time. Once this assessment is finalized, it creates a presumption of correctness and finality regarding the matters addressed during that assessment, barring any new evidence or material that would warrant reopening the assessment. 4.3 The principles governing reassessment are well-established in tax jurisprudence, particularly as articulated in CIT v. Shree Ram Dhanraj Sarda, (2017) 394 ITR 1 (Rajasthan). The Rajasthan High Court underscored that once an assessment has been completed, it should not be subjected to further scrutiny u/s 153A unless there is newly discovered incriminating evidence that justifies such a review. This ruling affirms the necessity of having fresh evidence to initiate reassessment proceedings, thereby preventing the reopening of settled matters without substantive grounds. 4.4 During the original assessment u/s 143(3), the AO conducted a thorough examination of the unsecured loans, including their sources, the legitimacy of the lenders, and the nature of the transactions involved. The assessee provided detailed responses, including confirmations from lenders, financial statements, and other relevant documentation to substantiate the genuineness of the transactions (CIT(A) PBP-54, 59-60, 61-64). The fact that these queries were explicitly raised and addressed demonstrates that the assessment was not only comprehensive but also involved active engagement between the AO and the assessee. 4.5 In the absence of any new incriminating evidence arising from subsequent investigations or searches, the AO’s attempt to reassess the income for the same assessment year lacks justification. The taxpayer has already undergone a detailed scrutiny process, and the issues surrounding the unsecured loans have been satisfactorily resolved during the prior assessment. Consequently, there exists no legal basis for the AO to revisit these matters u/s 148 or S.153A. Printed from counselvise.com 43 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 4.6 Given the prior assessment u/s 143(3) and the absence of newly discovered incriminating material, it is evident that the proceedings initiated u/s 153A are not justified. The legal precedent established in Shree Ram Dhanraj Sarda firmly supports the position that prior assessments should not be reopened without the emergence of new evidence. Thus, the reassessment is unwarranted, and we respectfully urge that the proceedings be deemed invalid and concluded in favor of the taxpayer. In this regards we place our reliance on the decision of Apex Court in the case of PCIT, Central-3 Vs Abhishar Buildwell P Ltd in Civil Appeal No.6580 of 2021 vide order dated 24.04.2023 holding as under (CIT(A) PBP-445-503): “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. ” 5 When nothing incriminating regarding the loan transactions has been revealed, relying only on the appellant's statements cannot be used to justify an addition, as the Ld. AO did in the instant case. The Ld. AO has put an undue weight on a slew of court rulings establishing the evidentiary value of statements made during search procedures. While this may be true, it is acknowledged that statements have evidential value only if they are accompanied by documented proof. All of the examples cited by the Ld. AO include sworn declarations and admissions. The Ld. AO has again erred by referring to all judicial pronouncements when no such testimony was elicited from the Director during the search proceedings in the instant case. The Director has continuously maintained in all of his statements that all loans obtained were bona fide and genuine, and he has verified the creditworthiness and authenticity of his creditors by providing their PAN numbers, residences, and contact numbers. Without some type of incriminating evidence or documentation to support them, statements do Printed from counselvise.com 44 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. not constitute substantial evidence. It is a well-established legal concept that assertions made in a vacuum are useless, and that absence of presence cannot serve as a basis for commencing legal action. Thus, The Ld. AO’s reliance on judicial pronouncements is clearly misplaced as the facts of the cases relied upon by the Ld. AO are materially different from the instant case. In the case laws cited by the Ld. AO, the statements recorded during the course of search proceedings were corroborated by incriminating material found during the course of search whereas in the instant case, there is not even an iota of incriminating material nor any confessional statement which can be used as the bedrock to incriminate the appellant. 6 In view of the facts and circumstances mentioned above, the appellant respectfully urges that Your Honour takes note of the following facts: i. The assessment pertains to the financial year 2013-14 that is applicable to the assessment year 2014-15, for which assessment has already been completed u/s 143(3). ii. There was no incriminating material found during the search as evident from the remand report of AO warranted by Ld.CIT(A) in the appeal proceedings. iii. There is no such confessional statement as alleged by Ld.AO. The said fact has been categorically established by Ld.CIT(A) by analyzing the statements recorded in detail. 7 With these uncontested facts and established principles of law in mind, it is abundantly evident that an abated assessment cannot be reopened u/S.153A if no incriminating material for the relevant assessment year is found during the course of search, thus order passed u/s 153A is erroneous, bad in law and needs to be quashed. 8 The following judicial pronouncements elucidate this principle: i. The Hon’ble High court of Delhi in the case of PCIT Vs Bhadani Financiers Pvt. Ltd. (Delhi High Court) [ITA 81/2020] on 09/09/2021 held that “Completed assessments could be interfered with by 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 Printed from counselvise.com 45 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. in the course of search which were not produced or not already disclosed or made known in the course of original assessment. No addition could be made under Section 153A as the cases of respondents were of non-abated assessments. Held: Revenue contended that ITAT had erred in confirming the orders of CIT (Appeal) and directing AO to delete the additions made under Section 68 on account of unexplained credits and under Section 69C on account of unexplained expenses. Revenue further contended that incriminating documents or materials had been found during the course of the searches and consequently by virtue of Section 153A, AO had to assess the total income of six years under Section 153A. Since the assessments were not completed under Section 143(3), consequently, prior to the date of search i.e. 18th June, 2013, the assessment of the respondents had not attained finality and ITAT had erred in restricting the applicability of the section u/s 153A in respect of completed assessment, only to undisclosed income and assets detected during search u/s 132. It was held that in the case of CIT vs Kabul Chawla, (2016) 380 ITR 573, the Court held that the completed assessments could be interfered with by 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. Since assessment of the respondents had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search. Consequently, no addition could be made under Section 153A as the cases of respondents were of non-abated assessments.” ii. The Hon’ble Supreme Court Of India in the case of Principal Commissioner of Income-tax v. Gaurav Arora [2021] 133 taxmann.com 293 (SC) on 17.09.2021 held that “Notice issued in SLP against order of High Court holding that completed assessments can be interfered with by Assessing Officer while making assessment under section 153A only on basis of some incriminating material unearthed during course of search which was not produced or not already disclosed or made known in course of original assessment and since there was no incriminating material or facts/circumstances justifying additions made under section 2(22)(e), Tribunal was justified Printed from counselvise.com 46 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. in deleting addition. After hearing counsel for the parties and considering the grounds urged in support of the Revenue's appeal, this Court is of the opinion that there is no infirmity with the decision of the ITAT. In Kabul Chawla (supra), the Court had clearly indicated that the AO cannot arbitrarily complete the block assessment under section 153A without any relevance or nexus with the seized material. The Court also held that an assessment in such circumstances has to be made under the provision only on the basis of seized material. Furthermore, it was held that in the absence of any incriminating material, the completed assessment can be reiterated and abetted assessment or re-assessment can be made. In the present case, the Revenue does not urge that it discovered any new material justifying the addition under section 2(22)(e). Rather, there was no material to connect the additions made under that head. Clearly, there was no incriminating material or facts and circumstances justifying the addition of Rs.17,19,14,701/- .” iii. The Hon’ble Delhi High Court in the case of Pr. CIT Vs Meeta Gutgutia Prop. Ferns ‘N’ Petals [2017] 395 ITR 526 (Del) : 152 DTR 153 (Del) held “that it is only if during the course of search under section 132, incriminating material justifying the reopening of the assessments for six previous years is found that the invocation of section 153A qua each of the assessment years would be justified. If no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under sections 153A / 153C. It was also held in this case that section 153A is titled “Assessment in the case of search or requisition”. It is connected to section 132, which deals with “search and seizure”. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to reopen at least six years of preceding assessment year of search. It is not to be exercised lightly. It is only if during the course of search under section 132, incriminating material justifying the reopening of the assessments for six previous years is found that the invocation of section 153A qua each of the assessment year would be justified. If no incriminating material was found during the course of search in respect of an issue, then no additions in respect of such an issue can be made to the total income in the assessment under sections 153A and 153C of the Act.” Printed from counselvise.com 47 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. iv. The Hon’ble Delhi High Court in the case of PCIT (Central) vs Agson Global Pvt Ltd “dismissed a bunch of appeals against deletion of addition u/s 68 towards Share capital/ share premium, bogus purchases and deposit in bank account vide judgment delivered on 19.01.2022. It has held that where the ITAT decided the matter based on appreciation of evidences placed on record and the order of ITAT not being challenged on ground of perversity, no substantial question of law arises. It also held that the investigation wing directed the A O to frame the assessment in a manner that would protect the revenue’s interest. The A O performs a quasi-judicial function while framing an assessment. The revenue cannot dictate the manner, in which, the AO frames the assessment order. The Tribunal records a finding of fact that “no unaccounted income of the assessee” had been introduced in its books of accounts in the form of share capital. Based on this, the Tribunal concluded that there was “no confession” made by Mr Arpesh Garg that unaccounted income had been introduced by the assessee in the form of share capital. Therefore, according to the Tribunal, the statement made under Section 132(4) of the Act did not constitute incriminating material. the Tribunal concluded that the assessee had been able to prove the identity of the investors, their creditworthiness and genuineness, which are the ingredients of Section 68 of the Act. The relevant observations made in paragraph 86 by the Tribunal read as follows : 86. Considering the facts of the case in the light of material on record in voluminous paper books and confirmations of the parties and the summary of transfer of funds reproduced above, it is clear that assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of Section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. We may also note that during the course of hearing of these appeals, A.O. was present in the Court, but, did not make any adverse comment upon the documentary evidences filed in the paper book filed by the assessee. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the Printed from counselvise.com 48 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. transaction between the Investor Companies and the assessee company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties. Considering the totality of the facts and circumstances of the case and material on record, we are of the view that assessee has been able to prove that it has received genuine amounts which is routed through various companies. Therefore, there was no justification to make any addition under section 68 of the I.T. Act. The moot point which the Tribunal, thus, dealt with, as noted by us hereinabove, was- that as long as there was no material on record which established that unaccounted money (i.e., income generated which was not recorded in the books of accounts) had been funnelled in the form of investment by way of share capital/share premium, it could not be made the basis for making addition under Section 68 of the Act.” 9 As far as merits of the case are concerned, it is important to note that extensive details with respect to each borrower were submitted before ld.AO as well as Ld.CIT(A), which were examined in detail by Ld.CIT(A), however since the issue was already answered in favour of assessee on legal ground, therefore, no detailed adjudication was given, however, it is important to note that the facts of the case along with findings of Ld.AO and details submitted in respect of each borrower were checked in detail. Below details were submitted before CIT(A) in respect of borrowing so made to prove identity, creditworthiness and genuineness: (Copy of Paper Book filed before CIT(A) is also filed before the Hon’ble Bench) S.No. Particular Page Nos 1. Copy of reply filed before AO dated 05.04.2021 1-14 2. Copy of reply filed before AO dated 04.03.2021 15-41 3. Copy of statement of Shri Sanjay Karnani 42-48 4. Copy of assessment made u/s 143(3) vide order dated 05-12-2016 49-52 5. Copy of Notice u/s 142(1) dated 19.08.2016 53-54 6. Copy of replies filed in the proceeding u/s 143(3) 55-67 7. Copy of ITR of MNP Metaliks P Ltd for AY 2014-15 to 2020-21 68-74 8. Copy of Director Report and Auditors report of MNP Metaliks P Ltd along with Financial Statements 75-90 9. Copy of leger account of assessee in the books of 91-92 Printed from counselvise.com 49 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. MNP Metaliks P Ltd 10. Copy of Bank Statements of MNP Metaliks P Ltd 93-97 11. Copy of certificate/confirmation issued by MNP Metaliks P Ltd 98-98 12. Copy of rent receipt of Matrix Distributor P Ltd 99-100 13. Copy of electricity bill of Matrix Distributor P Ltd 101- 102 14. Copy of Director Report and Auditors report of Matrix Distributor P Ltd along with Financial Statements 103- 119 15. Copy of ITR of Matrix Distributor P Ltd 120- 120 16 Copy of bank statement of Matrix Distributor P Ltd 121- 121 17. Copy of Director Report and Auditors report of Pawan Shiv Construction P Ltd along with Financial Statements 122- 135 18 Copy of bank statement of Pawan Shiv Construction P Ltd 124- 125 19. Copy of ITR of Pawan Shiv Construction P Ltd 136- 136 20. Copy of ITR of Sankat Haran Sales P Ltd 137- 137 21. Copy of ITR of Prem Kunj Commontrade P Ltd 138- 138 22. Copy of ITR of Prem Kunj Commosales P Ltd 139- 139 23. Copy of assessment order u/s 143(3) of Sankat Haran Sales P Ltd for AY 2014-15 dated 26.07.2016 140- 145 24. Copy of assessment order u/s 143(3) of Prem Kunj Commosales P Ltd for AY 2014-15 dated 07.12.2016 146- 152 25. Copy of assessment order u/s 143(3) of Panchkoti Wholeseller P Ltd for AY 2014-15 dated 13.12.2016 153- 159 26. Copy of assessment order u/s 143(3) of Night Bird Barter P Ltd for AY 2014-15 dated 21.11.2016 160- 165 27. Copy of certificate/confirmation given by Sankatharan Sales P Ltd 166- 166 28. Copy of certificate/confirmation given by Prem Kunj Commosales P Ltd 167- 167 29. Copy of certificate/confirmation given by Panchkoti Wholeseller P Ltd 168- 168 30. Copy of certificate/confirmation given by Night Bird Barter P Ltd 169- 170 Printed from counselvise.com 50 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 31. Copy of ITR of Night Bird Barter P Ltd for AY 2014-15 171- 171 32 Copy of ITR of Panchkoti Wholeseller P Ltd for AY 2014-15 172- 172 33. Copy of Director Report and Auditors report of Panchkoti Wholeseller P Ltd along with Financial Statements 173- 183 34. Copy of Director Report and Auditors report of Prem Kunj Commosales P Ltd along with Financial Statements 184- 195 35. Copy of Director Report and Auditors report of Prem Kunj Commotrade P Ltd along with Financial Statements 196- 207 36. Copy of Director Report and Auditors report of Sankatharan Sales P Ltd along with Financial Statements 208- 219 37. Copy of Bank Statement of Night Bird Barter P Ltd 220- 221 38. Copy of Bank Statement of Panchkoti Wholeseller P Ltd 222- 223 39. Copy of Bank Statement of Sankatharan Sales P Ltd 224- 224 40. Copy of Bank Statement of Prem Kunj Commosales P Ltd 225- 225 41. Copy of Bank Statement of Prem Kunj Commotrade P Ltd 226- 226 42. Copy of assessment order u/s 143(3) of Mahamani Plaza P Ltd for AY 2014-15 dated 13.12.2016 227- 231 43. Copy of ITR along with computation of proprietor of SD International for AY 2014-15 232- 235 44. Copy of ITR of Koel Tradecom for AY 2014-15 236- 236 45. Copy of ITR of Mahamani Plaza P Ltd for AY 2014-15 237- 237 46. Copy of Director Report and Auditors report of Koel Tradecom along with Financial Statements 238- 252 47. Copy of Director Report and Auditors report of Mahamani Plaza P Ltd along with Financial Statements 253- 264 48. Copy of Bank Statement of Mahamani Plaza P Ltd 265- 266 49. Copy of Bank Statement of Koel Tradecom P Ltd 267- 267 50. Copy of Affidavit given by Proprietor of SD International along with Financial Statements 268- 271 51. Copy of assessment order u/s 143(3) of Angita 272- Printed from counselvise.com 51 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Tower P Ltd for AY 2014-15 dated 26.12.2016 276 52. Copy of assessment order u/s 143(3) of Vidya Laxmi Fabrics P Ltd for AY 2014-15 dated 12.05.2016 277- 281 53. Copy of assessment order u/s 143(3) of Subhrashi Enclave P Ltd for AY 2014-15 dated 19.08.2016 282- 286 54. Copy of assessment order u/s 143(3) of Starwise Computers P Ltd for AY 2017-18 dated 23.08.2019 287- 293 55. Copy of assessment order u/s 143(3) of Linkview Tradelink P Ltd for AY 2014-15 dated 18.08.2016 294- 298 56. Copy of assessment order u/s 143(3) of Yashodev Commotrade P Ltd for AY 2014-15 dated 28.12.2016 299- 304 57. Copy of assessment order u/s 143(3) of Sushil Securities P Ltd for AY 2006-07 dated 22.08.2008 305- 305 58. Copy of certificate/confirmation given by Subhrashi Enclave P Ltd 306- 306 59. Copy of certificate/confirmation given by Starwise Computers P Ltd 307- 308 60. Copy of certificate/confirmation given by linkview tradelink P Ltd 309- 310 61. Copy of affidavit given by director of Yashodev Commotrade P Ltd 311- 312 62. Copy of affidavit given by director of Sushil Securities P Ltd 313- 315 63. Copy of ITR of Angita Plaza P Ltd for AY 2014-15 316- 316 64. Copy of ITR of Vidya Laxmi Fabrics for AY 2014- 15 317- 317 65. Copy of ITR of Subhrashi Enclave P Ltd for AY 2014-15 318- 318 66. Copy of ITR of Starwise Computer P Ltd for AY 2014-15 319- 319 67. Copy of ITR of Linkview Tradelink P Ltd for AY 2014-15 320- 320 68. Copy of ITR of Satrangi Vinimay P Ltd for AY 2014-15 321- 321 69. Copy of order u/s 143(1) of Sushil Securities P Ltd for AY 2018-19 dated 11.04.2019 322- 334 70. Copy of Director Report and Auditors report of Angita Plaza P Ltd along with Financial Statements 335- 346 71. Copy of Director Report and Auditors report of Vidya Laxmi Fabrics P Ltd along with Financial Statements 347- 358 Printed from counselvise.com 52 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 10. Initial Onus Discharged: At the outset, it is submitted that S.68 mandates that if any sum is credited in the books of an assessee, and the explanation regarding its nature and source is either not provided or deemed unsatisfactory by the AO, then such sum may be treated as income of the assessee for that previous year. In this case, the assessee has provided comprehensive documentation, including PAN details, ITRs, audited financial statements, and confirmations from lenders. All documents included the complete addresses and PAN numbers of the lenders. Furthermore, all lenders confirmed the balances reported in the assessee’s accounts. The assessee also demonstrated 72. Copy of Director Report and Auditors report of Sushil Securities P Ltd along with Financial Statements 359- 373 73. Copy of Director Report and Auditors report of Subhrashi Enclave P Ltd along with Financial Statements 374- 385 74. Copy of Director Report and Auditors report of Starwise Computer P Ltd along with Financial Statements 386- 398 75. Copy of Director Report and Auditors report of Linkview Trade Link P Ltd along with Financial Statements 399- 410 76. Copy of Director Report and Auditors report of Yashodev Commotrade P Ltd along with Financial Statements 411- 421 77. Copy of Director Report and Auditors report of Satrangi Vinimay P Ltd along with Financial Statements 422- 430 78. Copy of Bank Statement of Angita Plaza P Ltd 431- 431 79. Copy of Bank Statement of Vidya Laxmi Fabrics P Ltd 432- 434 80. Copy of Bank Statement of Subhrashi Enclave P Ltd 435- 436 81. Copy of Bank Statement of Starwise Computers P Ltd 437- 439 82. Copy of Bank Statement of Link view tradelink P Ltd 440- 440 83. Copy of Bank Statement of Satrangi Vinimay P Ltd 441- 441 84. Copy of assessment order u/s 143(3) of Satrangi Vinimay P Ltd for AY 2013-14 dated 14.10.2015 442- 444 85. Copy of order of Hon’ble Supreme Court in the case of M/s Abhishar Buildwell dated 24.04.2023 445- 503 Printed from counselvise.com 53 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. repayment of the loans during the assessment year and in subsequent years. Hence, the evidence presented clearly satisfies the requirements of S.68. Establishing Key Elements: Identity Established: 10.1 During the year under consideration, the identity of the lenders has been clearly established through comprehensive documentation such as Confirmations, ITRs, PAN, Audited Financial Statement including specific details such as amounts, cheque numbers, dates, and PAN numbers. 10.2 Each lender has provided a formal confirmation letter detailing the loan provided, on official letterhead, reinforce the legitimacy of the transactions and demonstrate the lenders' acknowledgment of the loans extended. Moreover, the ITRs of the lenders for the relevant assessment years have been submitted, showcasing their financial standing and tax compliance. These returns include complete details such as Name, Addresses and Income Details. There apart, The PAN details of the lenders have been provided, allowing for further verification through the Income Tax Department's records. The PAN serves as a unique identifier for each lender, linking them to their financial activities and tax obligations. 10.3 The AO was able to verify the ITRs of the lenders through the Income Tax Portal, which offers a comprehensive database of taxpayer information, including complete names, addresses, and other pertinent details. This access to official records allows for a thorough corroboration of the lenders' identities with credible sources, reinforcing the assertion of their existence. However, the AO failed to discharge the onus that lay upon him to substantiate any doubts regarding the authenticity of these lenders. Rather than providing evidence to dispute their legitimacy, the AO's conclusions were based on incomplete inquiries, which does not meet the required standard of proof. 10.4 This comprehensive establishment of lender identities is underscored by the ruling of the Rajasthan High Court in Ramesh Chandra Daga v. State of Rajasthan, (2002) 246 ITR 370. In this landmark decision, the court emphasized the critical nature of establishing the identity of creditors to fulfill the requirements stipulated u/s 68. The court ruled that without concrete evidence to establish the identities of the creditors, any addition to the income of the assessee based on unexplained cash credits is Printed from counselvise.com 54 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. unwarranted. 10.5 Moreover, in the Supreme Court decision of CIT v. Lovely Exports (P) Ltd., (2008) 216 CTR (SC) 195, the court clarified that once the identities of creditors are established and the loans are received through banking channels, the onus shifts to the revenue to disprove the authenticity of the transactions. The court held that it is not sufficient for the AO to merely question the legitimacy of the lenders without providing evidence to substantiate such claims. Genuineness of Transactions: 10.6 The transactions in question were characterized by clear, traceable flows of funds received and repaid exclusively through recognized banking channels. All relevant amounts were documented as having been transferred via cheques or bank transfers, ensuring a transparent audit trail. Importantly, there were no outstanding balances associated with these transactions at any point, indicating that loans were duly repaid in subsequent years. This factor is pivotal in establishing the genuineness of the transactions, as it reflects a legitimate business practice rather than an attempt to camouflage undisclosed income. 10.7 The importance of conducting transactions through banking channels is underscored by the Supreme Court in the landmark case CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC). In this ruling, the Court affirmed that transactions that are executed through formal banking channels can be regarded as genuine, provided that there is a clear record of such transactions. The judgment elucidates that the mere existence of a transaction in the books of accounts, supported by bank statements, is sufficient to establish its legitimacy. 10.8 Moreover, the AO's conclusion to disregard these banking transactions does not align with the established judicial precedent. The AO has not provided any contrary evidence or reasonable grounds to question the integrity of these transactions. In fact, the absence of outstanding balances coupled with the documentary evidence of repayments strengthens the position that these transactions were executed in good faith. 10.9 Furthermore, all relevant documentation, including confirmations, audited financials and bank statements, have been submitted for review. These Printed from counselvise.com 55 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. documents substantiate that the transactions were not only genuine but also conducted in accordance with regulatory norms. Capacity Proved: 10.10 The lenders, being regular taxpayers, demonstrate the capacity to extend loans to the assessee has been thoroughly demonstrated through a comprehensive review of their financial standing and taxpayer status. Each lender in this case is a regular taxpayer, actively filing ITRs and complying with all applicable tax obligations. This status not only affirms their legitimacy as lenders but also indicates their financial capability to provide the funds in question. 10.11 Crucially, the funds were transferred from the lenders' respective bank accounts, which is a significant factor in establishing their capacity to lend. The documentation submitted includes detailed bank statements for all lenders, reflecting substantial balances and transactional history prior to the loans being issued. These bank statements have been included in the paper book, providing concrete evidence of the lenders' ability to generate and manage sufficient funds for lending purposes. 10.12 The Income Tax Appellate Tribunal (ITAT) in Gopal Krishan v. ACIT, ITA No. 892/JP/2019, underscores this principle by affirming that when the source of funds can be traced back to the bank accounts of the lenders, the onus of proving their capacity to lend is sufficiently met. In this case, the Tribunal recognized that the mere existence of funds in the bank accounts, along with the lenders' status as taxpayers, is adequate to establish their capacity to provide loans. 10.13 In addition to the bank statements, the assessee also provided Audited Financial Statements, Confirmations etc. Given this substantial body of evidence, it is clear that the lenders possess both the identity and financial capacity to extend the loans to the assessee. The AO's assertion of the lenders' incapacity is unsubstantiated and does not align with the presented documentation. Therefore, the addition u/s 68, based on a presumed lack of capacity, is unwarranted and should be dismissed. 11. Lender-wise Submissions: It is further submitted that the AO alleged that the assesse failed to prove all the three limbs of S.68 satisfactorily i.e. identity, genuineness and credit worthiness. Therefore, the said transactions are bogus and are unexplained income under the provisions of S.68. However, the allegation made by the AO is contrary to the facts available on record in as much as the assessee explained each and every point raised by the AO, providing detailed explanations and supporting documentation. The same are as under: Printed from counselvise.com 56 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. MNP Metalikes Pvt Ltd: (CIT(A) PBP 68, 75, 91, 93, 98) (a) In respect of this lender, it has been alleged that an inquiry was conducted on 01.10.2018 and on said basis it has been alleged that physical verification of this lenders could not be made therefore the entity is not in existence. (b) A perusal of Inspector Report dated 01.10.2018 makes it clear that Ld. Inspector could not found the place because the place of address is very busy and congested market area, buildings of addresses was a two storey buildings therefore in absence of Floor Number or Room Number he could not reach to the place, as address communicated to him was mere 113A, Manohar Das Katra, Kolkata, without being any reference of Room No. or Floor No. Hence, inspector did not say that entity is not is existence he has merely shown his inability to reach to the place due to incomplete address communicated to him. (c) Here it is pertinent to note that at the time of search itself the PAN details of these lenders was communicated to search party as evident from Q.No.33 of statements of Shri Sanjay Karnani recorded on 02.10.2018 u/s 132(4) of the Act, wherein name of each lender company has been written with their respective PAN Number. (d) Now kind attention of your goodself is invited to ITRs of lender company for AY 2014-15 to 2020-21 filed before the date of search, wherein complete address of the lender company is mentioned along with Room No., Floor Number etc. (CIT(A) PBP-68-74). (e) Copy of ITR of AY 2014-15 to AY 2020-21 (CIT(A) PBP-68-74) is enclosed wherein the lender company has shown total income of Rs.55,53,130/-, 60,54,290/-, 58,99,140/-, 51,40,380/-, 43,80,260/-, 38,66,010/- and 46,44,500/- respectively. The huge profits shown by the lender proves its credit worthiness beyond any doubt. (f) The copy of Audited Financial Statements of lender company along with Directors Report for FY 2013-14 (CIT(A) PBP-75-90) is enclosed to further strengthen the identity, creditworthiness and genuineness. (g) Copy of ledger account of assessee in the books of M/s MNP Metaliks P Ltd is enclosed. (CIT(A) PBP-91-92) Printed from counselvise.com 57 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. (h) Bank statement of Lender Company is enclosed. A perusal of the above reveals that in the bank there was continuous business transactions as well as sufficient available balance to affect this transaction. (CIT(A) PBP-93-97) (i) Furthermore, certificate issued by M/s MNP Metaliks Private Limited on its official letter head mentioning the details of transactions viz. details of loans given to assessee company, amount and date thereof, mode of payment, immediate source of loan given and date of repayment made by assessee company is enclosed (CIT(A) PBP-98-98). (j) In view of these facts and circumstances, the identity, and creditworthiness of the lender company and genuineness of transaction is well established and resultantly no addition for the same is warranted. Matrix Distributors Pvt Ltd. (CIT(A) PBP 99,101,103,120,121,) (i) In respect of this lender, it has been alleged that an inquiry was conducted on 01.10.2018 and on said basis it has been alleged that physical verification of these lenders could not be made therefore the entities are not in existence. (ii) A perusal of Inspector Report dated 01.10.2018 makes it clear that Ld. Inspector could not found the place because the place of address was a three-storey building, therefore in absence of Floor Number or Room Number he could not reach to the place Hence, inspector did not say that entity is not is existence he has merely shown his inability to reach to the place due to incomplete address communicated to him. (iii) In this regard, it is submitted that operations of M/s Matrix Distributors Private Limited were carried on from a rented premise situated at 2, Madhab Kisto Sett Lane, Kolkata, 700007. In this regard certificate issued by land lord Shri Santosh Kumar Soni (CIT(A) PBP-101-102) and bill of Rent (CIT(A) PBP-99-100) issued to lender company by land lord is enclosed. (iv) The existence of said place is further evident from copy of bill issued for electricity at said premises (CIT(A) PBP-101-102). Thus, it is evidently clear that the place 2, Madhab Kisto Sett Lane, Kolkata is in existence and due to the fact that said premises was taken on rent by M/s Matrix Distributors P Ltd, the existence of lender gets proved. (v) The copy of Audited Financial Statements of lender company along with Directors Report for FY 2013-14 (CIT(A) PBP-103-119) and Copy of ITR for Printed from counselvise.com 58 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. AY 2014-15 (CIT(A) PBP-120-120) are enclosed to further strengthen the identity, creditworthiness and genuineness. (vi) Bank statement of Lender Company duly reflecting the loan transaction along with source thereof is enclosed. (CIT(A) PBP-121-121) (vii) Copy of assessment order passed u/s 143(3) for AY 2011-12 dated 05.11.2018 is enclosed. (CIT(A) PBP 3-9) If any further detail/explanation was required, the direct enquiry from the said lender could have also been made by the ld.AO by adopting the appropriate measures. (viii) In view of these facts and circumstances, the identity, and creditworthiness of the lender company and genuineness of transaction is well established and resultantly no addition for the same is warranted. Pawan Shiv Construction Pvt Ltd: (CIT(A) PBP 122, 124, 136) (i) In respect of this lender, it has been alleged that an inquiry was conducted on 01.10.2018 and on said basis it has been that that physical verification of these lenders could not be made therefore the entities are not in existence. (ii) A perusal of Inspector Report dated 01.10.2018 makes it clear that Ld. Inspector could not found the place because the place of address was an 8- storey building therefore in absence of Floor Number or Room Number he could not reach to the place Hence, inspector did not say that entity is not is existence he has merely shown his inability to reach to the place. (iii) In this regards it is submitted that the company is in existence on the address 2, Lal Bazar Street, Kolkata. The company has been operating a bank account with a nationalized bank and the customer address mentioned in the bank statement is also same (CIT(A) PBP 124-125). Therefore, the existence of company on the address cannot be doubted merely because inquiring authority could not reach to the place due to the reasons of building being 8-storey. (iv) The copy of Audited Financial Statements of lender company along with Directors Report for FY 2013-14 (CIT(A) PBP 122-135) and Copy of ITR for AY 2014-15 (CIT(A) PBP 136) are enclosed to further strengthen the identity, creditworthiness and genuineness. (v) Bank statement of Lender Company duly reflecting the loan transaction along with source thereof is enclosed. (CIT(A) PBP 124-125) Printed from counselvise.com 59 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. (vi) In view of these facts and circumstances, the identity, and creditworthiness of the lender company and geniuneness of transaction is well established and resultantly no addition for the same is warranted. Sankatharan Sales P Ltd (CIT(A) PBP 137, 140, 166, 208, 224), Premkunj Commotrade P Ltd (CIT(A) PBP 138, 196, 226), Premkunj Commonsales Private Limited (CIT(A) PBP 139, 146, 167, 184, 225) , Panchkoti Wholeseller P Ltd, (CIT(A) PBP 153, 168, 172, 173, 222 ) Nightbrid Barter P Ltd (CIT(A) PBP 160, 169, 171, 220, ): (i) In respect of M/s Shankatharan Sales P Ltd, M/s Premkunj Commotrade P Ltd, M/s Premkunj Commosales P Ltd, Panchkoti Wholeseller P Ltd and M/s Nightbird Barter P Ltd an undated inquiry report of ITO Ward-2 Alwar has been provided. (ii) In respect of the aforesaid lenders, it has been alleged that an inquiry was conducted on 01.10.2018 and on said basis it has been observed that physical verification of these lenders could not be made therefore the entities are not in existence. (iii) A perusal of the inspector report reveals that he visited the address mentioned on the website/s of the companies, however what address is mentioned therein is not mentioned in said report. However, from statement of Shri Nirajan Todi recorded u/s 131 of the Act, on 01.10.2018 it reveals that the address 2, Lal Bazaar Street, Kolkata was visited to carry out physical verification of aforesaid companies. (iv) At the outset, it is submitted that in respect of M/s Sankat Haran Sales, Premkunj Commotrade, Premkunj Commosales, the address at which physical verification was made and the address as per ITR of these concerns differs significantly. Admittedly, during the course of search Shri Sanjay Karnani submitted the PAN details of all these concerns, therefore the present address of these concerns was very well in the knowledge of department. (v) During the course of inquiry, statements of Shri Nirajan Prasad Todi, caretaker of commercial complex situated at 2, Lal Bazar Street, Kolkata were recorded u/s 131 of the Act. In the said statements in answer to Q.No. 6, he stated that office situated at Room No. 107C were sold by them to Smt. Champa Banka in the year 18.11.1988. In answer to Q.No.7, he further stated that in the said office Smt. Banka and her staff used to sit. He merely shown his inability to tell about Printed from counselvise.com 60 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. what work is carried on from said office which is natural as how a caretaker would know as to what work is being carried from offices of a large commercial complex which is of 5 storeys and each floor is having more than 60-70 offices. (vi) It is further important to note that M/s Sankatharan Sales Private Limited, Premkuj Commosales P Ltd, Panchkoti Wholeseller P Ltd and M/s Nighbird Barter P Ltd were subject to assessment proceedings u/s143(3) for AY 2014- 15 and assessments have been completed u/s143(3) vide order dated 26.07.2016 (CIT(A) PBP 140-145), 07.12.2016 (CIT(A) PBP 146-152), 13.12.2016 (CIT(A) PBP 153-159) and 21.11.2016 (CIT(A) PBP 160-165) respectively at their address as mentioned in ITRs. A perusal of the assessment orders will reveal that during the course of assessment proceedings Notice u/s 143(2) as well as notice u/s 142(1) were issued and served, thus the physical identity and physical existence of these companies at the given address is evident. A perusal of the assessment order will reveal several vital facts which are as follows: - During the course of assessment of M/s Sankatharan Sales P Ltd., details with respect to loans and advances were asked duly submitted. (Kindly refer Page-1, Para-1 of assessment order). (CIT(A) PBP 140) - In the assessment order itself, the nature of business carried out by these companies has been elaborated which is investment and given loans and advances. This fact strengthens the genuineness of transaction. - In the case of Sankatharan Sales P Ltd, the directors of the company as well as several other parties were summoned u/s 131 of the Act (CIT(A) PBP 140). Those parties appeared before the Authorities. - A perusal of the certificate given by these lenders would reveal that the amount of loan has been given out of share application money received and the event of receipt of share application money has been subject to details scrutiny and verification during the course of assessment proceedings u/s 143(3), therefore, the source of source has also been found to be genuine. (CIT(A) PBP 166-170) (vii) The facts and circumstances make it evidently clear that the companies were in existence and their business and affairs have been scrutinized by the income tax department. Thus, there remains no doubt about their identity and genuineness. (viii) As regards to their creditworthiness, it is submitted that activities and business of lenders have been discussed in the assessment orders. Moreover, certificate issued by M/s Sankatharan Sales P Ltd (CIT(A) PBP 166), Premkunj Commonsales Private Limited (CIT(A) PBP 167), Panchkoti Printed from counselvise.com 61 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Wholeseller P Ltd (CIT(A) PBP 168), Nightbrid Barter P Ltd (CIT(A) PBP 169- 170) on their official letter head mentioning the details of transactions viz. details of loans given to assessee company, amount and date thereof, mode of payment, immediate source of loan given and date of repayment made by assessee company is enclosed. (ix) Furthermore, copy of ITR of AY 2014-15 is enclosed. (CIT(A) PBP-137 for Sankatharan Sales, CIT(A) PBP-138 for Premkunj Commotrade, CIT(A) PBP- 139 for Premkunj Commosales, CIT(A) PBP-172 for Panchkoti Wholeseller, CIT(A) PBP-171 for Nightbird) (x) The copy of Audited Financial Statements of lender company along with Directors Report for FY 2013-14 are enclosed to further strengthen the identity, creditworthiness and genuineness. (CIT(A) PBP-173-183 for Panchkoti Wholeseller, CIT(A) PBP-184-195 for Premkunj Commosales, CIT(A) PBP 196-207 for Premkunj Commotrade, CIT(A) PBP-208-219 for Sankatharan Sales) (xi) Bank statement of Lender Company is enclosed. A perusal of the above reveals that in the bank there was continuous business transactions as well as sufficient available balance to affect these transactions. It is further important to note that all these concerns are having bank accounts in nationalized banks therefore, existence also get strengthen. (CIT(A) PBP- 220-221 for Nightbird, CIT(A) PBP-222-223 for Panchkoti Wholeseller, CIT(A) PBP 224 for Sankatharan sales, CIT(A) PBP-225 Premkunj Commosales, CIT(A) PBP-226 Premkunj Commotrade) (xii) In view of these facts and circumstances, the identity, and creditworthiness of the lender company and genuineness of transaction is well established and resultantly no addition for the same is warranted. 8.5 Koel Tradecom P Ltd, (CIT(A) PBP 236, 238, 267) M/s SD International (CIT(A) PBP 232, 268) and Mahamani Plaza P Ltd (CIT(A) PBP 227, 237, 253, 265): (i) In respect of the aforesaid lenders, it has been alleged that an inquiry was conducted on 01.10.2018 and 02.10.2018 and on said basis it has been alleged that physical verification of these lenders could not be made therefore the entities are not in existence. (ii) A perusal of Inspector Report dated 01.10.2018 makes it clear that Ld. Inspector could not found the place of M/s Koel Tradecom P Ltd and M/s SD International because full address was not communicated to him. Hence, inspector did not say that entity is not is existence he has merely shown his Printed from counselvise.com 62 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. inability to reach to the place due to incomplete address communicated to him. (iii) A perusal of Report dated 02.10.2018 in respect of Mahamani Plaza P Ltd makes it clear that inspector has clearly shown his inability to reach to the place as there was more than 5000 Offices and without pointing out the address in pin pointed manner, it cannot be reached. (iv) It is further important to note that, in addition to communicating the incomplete address, incorrect address was also communicated for inquiry in respect of M/s Koel Tradecom P Ltd and M/s SD International. The address at which physical verification was made and the address as per ITR (Copy enclosed) of these concerns differs significantly as SD International is a Jaipur based concerns whereas inquiry for the same has been made in Kolkata. Admittedly, during the course of search Shri Sanjay Karnani submitted the PAN details of all these concerns, therefore the present address of these concerns was very well in the knowledge of department. (v) M/s Koel Tradecom exists at the very same location as mentioned in its ITR and your good self may make direct inquiry from the said concern, as deem appropriate. (CIT(A) PBP-236) (vi) It is further important to note that M/s Mahamani Plaza P Ltd was subject to assessment proceedings u/s 143(3) for AY 2014-15 and assessments have been completed u/s 143(3) vide order dated 13.12.2016 (CIT(A) PBP-227- 231) at its address as mentioned in ITRs. A perusal of the assessment orders will reveal that during the course of assessment proceedings Notice u/s 143(2) dated 28.08.2015 as well as Notice u/s 142(1) dated 04.07.2016 were issued and served, thus the physical identity and physical existence of these companies at the given address is evident. A perusal of the assessment order will reveal several vital facts which are as follows: - During the course of assessment of lender, complete balance sheet has been subject to verification, thus certainly loans and advances appearing therein and source thereof has also been scrutinized. - In the assessment order itself, the nature of business carried out by these companies has been mention. This fact strengthens the genuineness of transaction. (vii) The facts and circumstances make it evidently clear that the companies were in existence and their business and affairs have been scrutinized by the income tax department. Thus, there remains no doubt about their identity and genuineness. (viii) To further substantiate the identity, creditworthiness and genuineness of the lender companies, copy of ITRs for AY 2014-15 (CIT(A) PBP-232-235 for Printed from counselvise.com 63 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. SD International, CIT(A) PBP-236 for Koel Tradecom, CIT(A) PBP-237 for Mahamani Plaza), Audited Financial Statements (CIT(A) PBP-232-235 for SD International, CIT(A) PBP-238-252 for Koel Tradecom, CIT(A) PBP-253-264 for Mahamani Plaza) and Bank Statement clearly revealing the loan transaction and source thereof is enclosed (CIT(A) PBP-267 for Koel Tradecom, CIT(A) PBP-265-266 for Mahamani Plaza). (ix) In respect of loan taken from M/s SD International, duly notarized affidavit of Smt. Suraj Devi Agarwal (Prop. Of SD International) containing details of loan transactions and source thereof is enclosed along with copy of her ITR and Financial Statements (CIT(A) PBP 268-271). A perusal of ITR and computation thereof reveals that assessee is having significant interest income. (x) The identity, genuineness and creditworthiness of Koel Trade Com is further evident from the assessment order passed u/s 143(3) vide order dated 09.09.2014 for AY 2012-13. (CIT(A) PBP-10-14) A perusal of assessment order will reveal that during the course of assessment various details viz. books of accounts, bank details, and various other details were submitted. (xi) It is further important to note that during the course of assessment, source of fund i.e. share capital received by M/s Koel Tradecom P Ltd, out which loan was scrutinized in detail viz the parties from whom share capital was received were examined by issuance of notice u/s 133(6). (xii) In view of these facts and circumstances, the identity, and creditworthiness of the lender company/person and genuineness of transaction is well established and resultantly no addition for the same is warranted. Angita Plaza Private Limited (CIT(A) PBP 272, 316, 335, 431), Vidya Laxmi Fabrics P Ltd (CIT(A) PBP 277, 317, 347, 432) , Sushil Securities P Ltd (CIT(A) PBP 305, 313, 322, 359) , Subhrashi Enclave P Ltd (CIT(A) PBP 282, 306, 318, 374, 435), Starwise Computers P Ltd (CIT(A) PBP 287, 307, 319, 386, 437), Linkview Tradelink P Ltd (CIT(A) PBP 294, 309, 320, 399, 440), Yashodev Commotrade P Ltd (CIT(A) PBP 299, 311, 411, ), Satrangi Vinimay P Ltd (CIT(A) PBP 321, 422, 441, 442): (i) A common inquiry report dated 01.10.2018 has been filed in respect of Angita Plaza Private Limited, Vidyalaxmi Fabrics P Ltd, Sushil Securities P Ltd, Subhrashi Enclave P Ltd, Starwise Computers P Ltd, Linkview Tradelink P Ltd, Yashodev Commotrade P Ltd and Satrangi Vinimay P Ltd. Printed from counselvise.com 64 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. (ii) At the outset, it is submitted that the address at which physical verification was made and the address as per ITR of these concerns differs significantly. Admittedly, during the course of search Shri Sanjay Karnani submitted the PAN details of all these concerns, therefore the present address of these concerns was very well in the knowledge of department. (iii) In respect of Satrangi Vinimay P Ltd, physical verification could be made as a major burning incidence took place in the said complex, therefore it was not possible to visit the place. (iv) M/s Yadhodev Commotrade P Ltd was assessed at AT Road, Dibrugarh, Assam whereas physical inquiry was conducted at Kolkata. (vi) It is further important to note that M/s Angitia Tower P Ltd Private Limited, Vidyalaxmi Fabrics P Ltd, Subhrashi Enclave P Ltd, M/s Starwise Computers P Ltd, Linkview Tradelink P Ltd Yashodev Commotrade, Sushil Securities and Satrangi Vinimay were subject to assessment proceedings u/s 143(3) and assessments have been completed u/s 143(3) vide order dated 26.12.2016 (CIT(A) PBP-272-276), 12.05.2016 (CIT(A) PBP-277-281), 19.08.2016 (CIT(A) PBP-282-286), 23.08.2019 (AY 2017-18) (CIT(A) PBP-287-293), 18.08.2016 (CIT(A) PBP-294-298), 28.12.2016 (CIT(A) PBP-299-304), 22.08.2008 (AY 2006-07) (CIT(A) PBP-305-305), 14.10.2015 (AY 2013-14) (CIT(A) PBP-442-444) respectively at their addresses. A perusal of the assessment orders will reveal that during the course of assessment proceedings Notice u/s 143(2) as well as Notice u/s 142(1) were issued and served, thus the physical identity and physical existence of these companies at the given address is evident. A perusal of the assessment order will reveal several vital facts which are as follows: - In the assessment order itself the nature of business carried out by these companies has been elaborated which is investment and given loans and advances. This fact strengthens the genuineness of transaction. - A perusal of the certificate given by these Subhrashi Enclave P Ltd (CIT(A) PBP-306-306), Starwise Computers P Ltd (CIT(A) PBP-307-308), Linkview Tradelink P Ltd (CIT(A) PBP-309-310), Yashodev Commotrade P Ltd (CIT(A) PBP-311-312) would reveal that the amount of loan has been given out of share application money received or sale of shareholding or from repayment of loans received and the event of receipt of share application money or sale of sale of shareholding or operating in the business of giving Printed from counselvise.com 65 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. and taking of loans have been subject to detailed scrutiny and verification during the course of assessment proceedings u/s 143(3), therefore, the source of source has also been found to be genuine. - A duly notarized affidavit of M/s Sushil Securities P Ltd (CIT(A) PBP-313- 315) is enclosed wherein complete details of transaction along with source thereof has been elaborated. (vii) The facts and circumstances make it evidently clear that the companies were in existence and their business and affairs have been scrutinized by the income tax department. Thus, there remains no doubt about their identity and genuineness. (viii) To further substantiate the identity, creditworthiness and genuineness of the lender companies, copy of ITRs for AY 2014-15 (CIT(A) PBP-316 for Angita Plaza, CIT(A) PBP-317 for Vidya Laxmi, CIT(A) PBP-318 for Subhrashi Encalve, CIT(A) PBP-319 for Starwise, CIT(A) PBP-320 for Linkview, CIT(A) PBP-321 for Satrangi Vinimay), Audited Financial Statements (CIT(A) PBP-335-346 for Angita Plaza, CIT(A) PBP-347-358 for Vidya Laxmi, CIT(A) PBP-359-373 for Sushil Securities, CIT(A) PBP-374-385 for Subhrashi Encalve, CIT(A) PBP-386-398 for Starwise, CIT(A) PBP-399- 410 for Linkview, CIT(A) PBP-422-430 for Satrangi Vinimay, CIT(A) PBP-411- 421 for Yashodev Commotrade) and Bank Statement clearly revealing the loan transaction and source thereof is enclosed (CIT(A) PBP-431 for Angita Plaza, CIT(A) PBP-432-434 for Vidya Laxmi, CIT(A) PBP-435-436 for Subhrashi Encalve, CIT(A) PBP-437-439 for Starwise, CIT(A) PBP-440-440 for Linkview, CIT(A) PBP-441-441 for Satrangi Vinimay. (ix) In view of these facts and circumstances, the identity, and creditworthiness of the lender company/person and genuineness of transaction is well established and resultantly no addition for the same is warranted. 12. The aforementioned information clearly sums up as to how all the 3 elements of a transaction i.e identity of the creditors, genuineness of the transaction and the credit-worthiness of said creditors have been sufficiently fulfilled by the appellant by providing all the requisite information and documents, and it is enough to establish that all of the transactions are bona fide and no addition can be made on account of classifying them as bogus loans in the absence of any evidence to call them so. If the AO had any doubt or suspicion regarding the lenders ,he could have enquired from the banks as to how the money travelled to the appellant company's account, and any other information she believed was necessary in order to verify the veracity of the transactions. Nothing has been brought on record by the Ld. AO to dispute the loan transactions of the appellant and yet, a huge addition has been made in a routine and mechanical manner. Printed from counselvise.com 66 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 13. We wish to further emphasise that no cash or other incriminating evidence was uncovered during the search operations. Ld.AO has observed that it was assessee’s undisclosed income, which was brought in the garb of these loans, however, no such evidence was brought on record to show that assessee was having cash to this extent and at the time of repayment in subsequent years, assessee received the cash back. If the loans obtained by the appellant are believed to be fraudulent, there should have been proof of the appellant's corresponding undisclosed income that he attempted to route via this channels. 14. In keeping with the aforementioned grounds of submission, it is apparent beyond any reasonable doubt that the impugned addition of Rs.9,21,07,800/- u/S.68 and the order passed u/S.153A after making said addition and assessing the total income at Rs.11,53,96,270/- as against the returned income of Rs.2,32,88,920/- is bad in law, unjustified and is liable to be deleted, and the assessment order is liable to be quashed. Written Submissions with regard to CO 27/JPR/2025 1. The appeal of the assessee was allowed by Ld.CIT(A) on technical ground but while allowing the appeal, he has directed the ld. AO to implement judgment of Hon’ble Supreme Court in the case of Abhisar Buildwell 2023 149 taxmann.com and the CBDT Instruction No. 1 of 2023 dated 23.8.2023. The said direction is challenged by way of this cross objection. 2. Direction given beyond jurisdiction: 2.1 The provisions concerning the jurisdiction and power of Ld.CIT(A)/JCIT(A) are contained in section 250 and 251 which reads as follows: 150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was Printed from counselvise.com 67 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. made by reason of any other provision limiting the time within which any action for assessment, reassessment or re computation may be taken. 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;] (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (1A) In disposing of an appeal, the Joint Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit.] (2) The Joint Commissioner (Appeals) or the] Commissioner (Appeals), as the case may be,] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals), may consider and decide any matter arising out of Printed from counselvise.com 68 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals) 72[, as the case may be,] by the appellant 2.2 A perusal of the above clearly shows that the power vested with Ld. CIT(A) are limited wherein he may confirm, reduce, enhance or annual the assessment, thus he has no power to issue directions to initiate a new assessment or reassessment for a different year or under a different provision. 2.3 The appellate jurisdiction is circumscribed by the assessment year under appeal and the issues arising out of the impugned assessment order. By issuing a direction to the Ld. AO to initiate reassessment proceedings—whether for the very same year under an altogether different provision or for some other assessment year—the CIT(A) has travelled far beyond the scope of the appeal and has acted in excess of the powers expressly vested in him under Section 251 of the Act. 2.4 It is trite law that the jurisdiction and powers of the CIT(A) are creatures of the statute and strictly controlled by Section 251. Prior to the amendment of 2001, the CIT(A) was statutorily empowered to set aside assessments and remit matters back to the Assessing Officer in specified circumstances. However, with effect from 01.06.2001, the legislature, in its wisdom, consciously withdrew the “set-aside” powers, compelling the appellate authority to adjudicate appeals conclusively without remand. While a narrow and partial restoration of this power was made vide Finance Act (No.2) of 2024, effective 01.10.2024, it was confined exclusively to cases of best judgment assessments under Section 144. This careful legislative design leaves no manner of doubt that except in such limited cases, the CIT(A) cannot remand or direct reassessment. 2.5 Any direction beyond these statutory boundaries—particularly a mandate to initiate proceedings under Sections 147/148—is wholly without authority of law. The appellate authority is bound to operate within the confines of Section 251, and any attempt to traverse beyond those limits renders the action ultra vires, void, and legally unsustainable. 2.6 In the present case, the conduct of the Ld. CIT(A) betrays an impermissible attempt to do indirectly what he is precluded from doing directly. Having himself deleted the addition made in the Section 153A proceedings, the CIT(A) has Printed from counselvise.com 69 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. sought to substitute a fresh route of taxation by way of Section 147—a course of action that is entirely outside his jurisdiction under Sections 250/251. 2.7 Further, the present case of assessee squarely falls within the ratio of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (CLC 111-128) wherein Hon’ble Supreme Court underscored that the appellate provisions (Section 33(4) of the 1922 Act, analogous to Section 250/254 of the 1961 Act) do not confer on the appellate authority a power to make any direction on matters not arising in the appeal, especially as the Act provides separate mechanisms (like Section 34 of 1922 Act, now Section 147) to deal with escaped income. Accordingly, the Apex Court held that: “It was not contended, nor was it possible to contend, that by reason of the reference to the said provisions the powers and jurisdiction conferred on the respective authorities, tribunals or courts referred to therein were enlarged or modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions.” 2.8 In other words, a CIT(A) cannot broaden the scope of the appeal decision to “advise” or “compel” the AO to take actions in a different proceeding. Thus, applying these principles in the present case, the ld. CIT(A) was tasked with deciding whether the addition under Section 153A was sustainable given the specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue. By proceeding to direct the AO to consider re-opening under Section 147, the ld. CIT(A) acted ultra vires. This extraneous direction was not part of adjudicating the appeal but an attempt to influence future proceedings, which is beyond the scope of Section 250. 2.9 The power to issue directions in the manner exercised by the ld. CIT(A) in the present case is clearly unwarranted and impermissible under the scheme of Act. If such power to issue binding directions for reassessment proceedings under Sections 147/148 read with Section 150 were to be vested in the hands of the CIT(A), it would lead to a situation where, irrespective of statutory time limits Printed from counselvise.com 70 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. prescribed under Section 149, the ld. AO could indefinitely reopen completed assessments. 2.10 In other words, any jurisdictional error committed by an AO in issuing a notice under a wrong section or due to incorrect invocation of powers could not be subsequently rectified through a direction from the ld. CIT(A) at any future point in time—without any statutory limitation whatsoever. 2.6.xii. To illustrate the grave implications, consider a hypothetical scenario where an appeal remains undecided before the CIT(A) for an extended period, say until the year 2030, as Section 250 of the Act does not prescribe a mandatory time limit for disposal of appeals. If the power claimed by the CIT(A) in the present case were valid, he could pass directions in the year 2030 instructing the AO to initiate reassessment proceedings for the present assessment year. Such a direction would enable the AO to reopen assessments long after statutory limitation periods had elapsed, effectively rendering statutory limits meaningless. This scenario clearly cannot represent the legislative intent behind the provisions governing appellate proceedings. In essence, the ld. CIT(A), through the impugned direction, has improperly attempted to confer upon the AO an indefinite and unlimited jurisdiction to reopen completed assessments. The ld. CIT(A), acting in appellate jurisdiction under Section 251, cannot revive or rectify jurisdictional mistakes made by the AO through such directions. 2.11 Therefore, the impugned direction not only exceeds statutory authority but also fundamentally undermines the core principles of certainty, finality, and predictability that form the bedrock of the taxation framework. Such construction is impermissible and must be struck down by the Hon’ble Tribunal. 2.12 In light of the detailed legal submissions hereinabove, it is most respectfully submitted that the direction issued by the ld. CIT(A) to initiate reassessment proceedings under Section 147/148 of the Act—by invoking Section 150 and relying on CBDT Instruction No. 1/2023— is ex-facie without jurisdiction, contrary to binding judicial precedent, and violative of the appellate framework under Sections 250/251 of the Act. 4. It is therefore humbly prayed that this Hon’ble Tribunal, in exercise of its plenary powers under Section 254, be pleased to expunge/quash the said direction from the appellate order, and thereby uphold the relief granted to the assessee without permitting any overreach or illegal consequence to flow from an otherwise just appellate decision. 2.13 It is of utmost importance to underscore that the observations of the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra) and DCIT v. U.K. Printed from counselvise.com 71 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Paints (Overseas) Ltd. (supra)—wherein the possibility of resorting to reassessment under Sections 147/148 (in cases where additions under Sections 153A/153C failed on account of absence of incriminating material) were expressly circumscribed by the Hon’ble Court itself. The Apex Court categorically emphasised that such reassessment proceedings can only be undertaken subject to the rigorous fulfilment of the jurisdictional conditions and statutory safeguards prescribed under Sections 147 and 148 of the Act. This explicit caveat is not ornamental but a substantive rider, intended to ensure that the Assessing Officer independently applies his mind and scrupulously complies with all statutory preconditions before invoking reassessment. 2.14 Accordingly, the ratio of Abhisar Buildwell (supra) and U.K. Paints (supra) cannot be stretched to confer an unbridled or blanket authority to the Revenue for reopening assessments, much less to empower appellate authorities like the Ld. CIT(A) to direct or compel the initiation of reassessment proceedings. 2.14 Against the judgment dated 24.04.2023 in Abhisar Buildwell Pvt. Ltd. (supra), the Revenue filed a Miscellaneous Application before the Hon’ble Supreme Court on 26.04.2023. Vide order dated 12.05.2023, the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. [2023] 294 Taxman 70 (SC) dismissed the said application, holding as under: “2. Having gone through the averments made in the application and the prayers, we are of the opinion that the prayers sought can be said to be in the form of review which requires detail consideration at length looking into the importance of the matter. Therefore, the present application in the form of clarification is not entertained and we relegate the Revenue to file an appropriate review application for the relief sought in the present application and as and when such review application is filed the same can be heard in the open court. 3. In view of the above and without further entering into the merits of the application and/or expressing anything on merits on the prayers sought in the present application, the present application is not entertained and we relegate the Revenue to file an appropriate review application seeking the reliefs which are sought in the present application and as and when such review application is filed the same be heard and decided and disposed of in the open court. At the cost of repetition, we observe that as we have not entered into the merits of the present application and we relegate the Revenue to file an appropriate review application, the review application be decided and disposed of in accordance with law and on its own merits.” Printed from counselvise.com 72 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 2.15 Following the dismissal of the Revenue’s Miscellaneous Application in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra), wherein the Hon’ble Supreme Court expressly relegated the Department to file a formal review petition—no such review was pursued. Instead, the CBDT issued Instruction No. 1/2023 dated 23.08.2023, which provided internal guidance to Assessing Officers regarding the course of action in cases where assessments under Section 153A/153C have failed due to lack of incriminating material. CBDT Instruction No. 1/2023 – Administrative and Non-Binding: 2.16 It is respectfully submitted that Instruction No. 1/2023 is purely administrative in nature, intended for internal guidance of Assessing Officers. The Hon’ble Supreme Court in UCO Bank v. CIT [(1999) 237 ITR 889 (SC)] has laid down in clear terms that CBDT circulars or instructions cannot override or expand the scope of statutory provisions. In the instant case, the Ld. CIT(A) has manifestly misapplied Instruction No. 1/2023 by construing it as a source of power to direct reassessment. This is legally untenable. The Instruction neither authorises nor empowers appellate authorities to issue directions for reassessment. More importantly, the Instruction cannot displace the statutory scheme of Sections 147–151, which governs reopening and prescribes specific timelines under Section 149. These provisions must be independently satisfied by the Assessing Officer before assuming jurisdiction to reopen. 2.13 Covered issue: The issue of assessee is squarely covered by the decision of Hon’ble Bench in the case of DCIT Vs Vaibhav Banka in ITA No.310/JP/2025 vide order dated 08.07.2025 holding as under: “We also take note of the facts that CBDT’s instructions is an internal administrative directive intended solely for operational guidance of Assessing Officers. It attempts to clarify the post-Abhisar Buildwell (supra) reassessment landscape, specifically in situations where additions under Section 153A/153C were struck down due to absence of incriminating material. This administrative instructions are not binding on quasi-judicial authorities like the CIT(A). It is a settled principle of law, as held by the Hon’ble Supreme Court in UCO Bank v. CIT [(1999) 237 ITR 889 (SC)] (CLC 41-49), that CBDT circulars or instructions cannot override, supplement, or expand the scope of statutory provisions. Thus, taking shelter of Instruction No. 1/2023 as enabling or empowering appellate authorities to direct initiation of reassessment proceedings is a fundamental misapplication of the Instruction, which neither authorizes appellate intervention Printed from counselvise.com 73 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. in reassessment matters nor vests any such power in the ld. CIT(A). Even other wise the Instruction cannot substitute the independent statutory preconditions under Sections 147/148 read with Section 149, which provides the timelines for issuance of notice of reopening. Provision of such section must be satisfied by the ld. AO at any given point of time, when the jurisdiction is assumed for reopening a particular assessment year. Even the power vested with ld. CIT(A) are limited wherein he may i.) confirm, or ii.) reduce, or iii.) enhance, or iv.) annul the assessment; Thus, he has no power to give any direction that what is prescribed in law. The issue related to the power of the commissioner of income has already been dealt with in a decision in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (CLC 111-128) wherein Hon’ble Supreme Court underscored that the appellate provisions (Section 33(4) of the 1922 Act, analogous to Section 250/254 of the 1961 Act) do not confer on the appellate authority a power to make any direction on matters not arising in the appeal, especially as the Act provides separate mechanisms (like Section 34 of 1922 Act, now Section 147) to deal with escaped income. Accordingly, the Apex Court held that; “It was not contended, nor was it possible to contend, that by reason of the reference to the said provisions the powers and jurisdiction conferred on the respective authorities, tribunals or courts referred to therein were enlarged or modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions.” We also take note that the apex court has dealt with the provision of section 150 i.e. Provision for cases where assessment is in pursuance of an order on appeal and section 149 i.e. Time limit for notices under section148 of the Act. While dealing with that provision the apex court in the case of K. M. Sharma Vs. Income Tax Officer [122 Taxmann 426 (SC) ] while dealing with the judgment of the land revenue case and thereby the reopening of the case has in detailed analysis the provision for cases where assessment is in pursuance of an order of an appeal and time limit. The relevant finding is reproduced in full because this will clarify the issue on hand with that of the case decided by apex court; Printed from counselvise.com 74 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. In this appeal, which is filed after obtaining special leave, the order dated 24-5 1996 of the Delhi High Court has been assailed. The main question involved is on the application and interpretation of the provisions of section 150 of the Income-tax Act, 1961 ('the Act'). The relevant facts necessary for deciding the legal question raised are as under : 1. The appellant's lands were acquired under section 6 of the Land Acquisition Act, 1894, and an award was passed on 2-12- 1967 by the Chief Commissioner of Delhi granting compensation in favour of the appellant. The Additional District Judge by the judgment dated 20-5-1980 held the appellant entitled to 1/32 share of the compensation awarded under various awards and the appellant was granted total compensation in the sum of Rs. 1,18,810 approximately in the year 1981. 2. On a reference under section 18 of the Land Acquisition Act, the learned Additional District Judge, Delhi vide his judgment dated 31-7-1991 awarded a sum of Rs. 1,10,20,624. The amount was paid to the appellant between 15-10-1992 and 26-5-1993. The amounts paid represented principal sum of compensation of Rs. 41,96,496 and interest in the sum of Rs. 76,84,829 up to 18-5-1992. Before making the above payments, tax was deducted at source amounting to Rs. 8,60,701. 3. Since the lands acquired were agricultural lands and were acquired prior to 1-4 1970, capital gains tax was not leviable but tax was leviable on interest earned on the amount awarded on year to year basis. 4. The appellant through counsel sent a letter dated 17-9- 1993 informing the ITO that he had received interest amount of Rs. 76,84,829 and interest accrued from year to year was assessable in each year. Year-wise break up of the interest was also given in the letter. According to the appellant, no tax was leviable on interest accruing up to 31-3-1982 as assessment for it had become barred by time. The appellant, therefore, requested that necessary action be taken under section 147 of the Act to enable the appellant as assessee to file his income-tax return and pay tax accordingly. 5. On 31-3-1994, the appellant was served with impugned notices under section 148 of the Act for 16 assessment years, i.e., 1968-69 to 1971-72 and the assessment years 1981-82 to 1992-93. 6. The appellant, in the High Court, assailed the notices issued under section 148 for reassessment for the assessment years 1968-69 to 1971-72 and for the year 1982-83 on the ground that the proposed reassessment for those assessment years had already become barred by time under section 149 of the Act, for which in the relevant periods maximum period of four years or seven years limitation was prescribed depending upon the quantum of liability towards tax. 7. The High Court by the impugned judgment accepted the contention of the department that the provisions of section 150(1) of the Act, as amended with effect from 1-4-1989, could be resorted to for reassessment to levy tax on the increased amount of interest earned by the appellant in the relevant assessment years. It was held that bar of limitation prescribed under section 149 of the Act Printed from counselvise.com 75 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. was not attracted by virtue of the provisions of section 150(1) because notices for such reassessments are based on the awards passed in the land acquisition proceedings by the Court of the Additional District Judge on a reference under section 18 of the Land Acquisition Act. Upholding the validity of the assessment proceedings initiated by the department under section 148, the High Court rejected the contention of the assessee that sub-section (2) of section 150 is an Explanation to sub-section (1) and proceedings for reassessment, which had already become barred by time under section 149 before 1-4-1989, could not have been commenced on the amended provisions of sub-section (1) of section 150. 8. To appreciate the contentions advanced by the learned counsels for the parties and the decision of the High Court, it is necessary to reproduce for critical examination the provisions of section 150(1) and (2). The provisions read as under : \"Provision for cases where assessment is in pursuance of an order on appeal, etc.—(1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law]. [The portion bracketed and italicised above is inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989]. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.\" 9. Section 149 prescribes maximum period of four or seven years depending upon the quantum of tax as mentioned in the said section for initiating reassessment proceedings. Section 150(1) states that the period of limitation prescribed in section 149 is not applicable, if the reassessment is proposed on the basis of any order passed by any 'authority in any proceedings under the Act by way of appeal, reference or revision' or 'by Court in proceedings under any other law'. Sub-section (2) of section 150, however, makes it clear that reassessment permissible under sub- section (1) of section 150 would not be available to the department where the period of limitation for such assessment or reassessment has expired at the time it is proposed to be reopened. In sub-section (1) of section 150, by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989, the words 'or by a Court Printed from counselvise.com 76 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. in any proceeding under any other law' were inserted which are shown in bracket with underline in the section reproduced above. 10. The main question that has been raised on behalf of the learned counsels appearing for the parties is whether the provisions of sub-section (1) of section 150 as amended can be availed for reopening assessments, which have attained finality and could not be reopened due to bar of limitation, that was attracted at the relevant time to the proposed reassessment proceedings under the provisions of section 149. 11. The submission made on behalf of the appellant is that neither the provisions of sub-section (1) nor sub-section (2) can be read as giving more than intended operation to the said provision. The provisions, it is argued, do not permit the authorities to reopen assessments, which have become final and reassessment of which had become barred by time before 1-4-1989 when section 150(1) was amended. Reliance is placed on the decision of this Court in S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 . 12. The learned counsel appearing on behalf of the department has made an effort to persuade this Court to accept his construction of the provisions of section 150(1) and (2). It is argued that it is for the specific purpose of assessing income, which might accrue on the basis of any decision of any Court in any proceeding in any other law, that the provision has been amended to lift bar of limitation for reassessment. 13. Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to sub-section (1) of section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub-section (1) of section 150 which intends to lift embargo of period of limitation under section 149 to enable authorities to reopen assessments not only on the basis of orders passed in proceedings under the Act but also on order of a Court in any proceedings under any law, has to be applied prospectively on or after 1-4-1989 when the said amendment was introduced to sub-section (1). The provision in sub-section (1), therefore, can have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under section 149. 14. To hold that the amendment to sub-section (1) would enable the authorities to reopen assessments, which had already attained finality due to bar of limitation prescribed under section 149 as applicable prior to 1-4- 1989, would amount to give sub-section (1) a retrospective operation which is Printed from counselvise.com 77 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. neither expressly nor impliedly intended by the amended sub-section. 15. On behalf of the assessee before the High Court and in this Court reliance has been placed on the provisions contained in sub-section (2) of section 150. It is submitted that the provision contained in sub-section (2) of section 150 is in the nature of clarification or Explanation to sub-section (1). Sub-section (2) makes it clear that the embargo of period of limitation lifted under sub-section (1) for proposed reassessments based on order in proceedings under appeal, reference or revision, as the case may be, would not apply to assessments which have attained finality due to bar of limitation applicable at the relevant time. 16. The High Court rejected the above contention of the assessee on the ground that on the amendment introduced with effect from 1-4-1989 in sub-section (1), which enables reopening of assessment based on any order of 'Court in any proceedings in any law', there is no corresponding amendment made in sub section (2) of section 150 to bar reassessment based on order of court passed in any proceedings in any law in cases where prescribed period of limitation for reassessment had already expired. 17. We do not find that the above reasoning of the High Court is sound. The plain language of sub-section (2) of section 150 clearly restricts application of sub section (1) to enable the authority to reopen assessments which have not already become final on the expiry of prescribed period of limitation under section 149. As is sought to be done by the High Court, sub-section (2) of section 150 cannot be held applicable only to reassessments based on orders 'in proceedings under the Act' and not to orders of Court 'in proceedings under any other law'. Such an interpretation would make the whole provision under section 150 discriminatory in its application to assessments sought to be reopened on the basis of orders under the Act and other assessments proposed to be reopened on the basis of orders under any other law. Interpretation, which creates such unjust and discriminatory situation, has to be avoided. We do not find that sub-section (2) of section 150 has that result. Sub-section (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to sub-section (1), as is the reasoning adopted by the High Court. 18. Sub-section (2) aims at putting embargo on reopening assessments, which have attained finality on expiry of prescribed period of limitation. Sub-section (2) in putting such embargo refers to whole of sub-section (1) meaning thereby to insulate all assessments, which have become final and may have been found liable to reassessments or recomputation either on the basis of orders in proceedings under the Act or orders of courts passed under any other law. The High Court, therefore, was in error in not reading whole of amended sub-section (1) into sub-section (2) and coming to the conclusion that reassessment Printed from counselvise.com 78 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. proposed on the basis of order of the court in proceedings under the Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on expiry of period of limitation under section 149. On a combined reading of sub-section (1) as amended with effect from 1-4-1989 and sub-section (2) of section 150 as it stands, in our view, a fair and just interpretation would be that the authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section 149. 19. This Court took similar view in the case of S.S. Gadgil (supra) in somewhat comparable situation arising from the retrospective operation given to section 34(1) of the Indian Income-tax Act, 1922 as amended with retrospective effect from 1-4-1956 by the Finance Act, 1956. In the case of S.S. Gadgil ( supra) admittedly under clause (iii) of the proviso to section 34(I), as it then stood, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident under section 43, after the expiry of one year from the end of the year of assessment. The section was amended by section 18 of the Finance Act, 1956, extending this period of limitation to two years from the end of the assessment year. The amendment was given retrospective effect from 1-4-1956. On 12-3-1957, the ITO issued a notice calling upon the assessee to show cause as to why, in respect of the assessment year 1954-55, the assessee should not be treated as an agent under section 43 in respect of certain non-residents. The case of the assessee, inter alia, was that the proposed action was barred by limitation as right to commence proceedings of assessment against the assessee as an agent of non-resident for the assessment year 1954-55 ended on 31-3-1956, under the Act before it was amended in 1956. This Court in the case of S.S. Gadgil (supra) accepted the contention of the assessee and held as under : \". . . The Legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., up to April 1, 1956 only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred.\" (p. 240) 20. On a proper construction of the provisions of section 150(1) and the effect of its operation from 1-4-1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1-4-1989 for assessments which have already become final due to bar of limitation prior to 1-4-1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless Printed from counselvise.com 79 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub- section (1) of section 150, as amended with effect from 1-4 1989, does not enable the authorities to reopen assessments, which have become final due to bar of limitation prior to 1-4-1989 and this position is applicable equally to reassessments proposed on the basis of orders passed under the Act or under any other law. 21. As a result of the discussion aforesaid, the appeal is allowed. The judgment of the Delhi High Court dated 24-5-1996 is hereby set aside. As prayed in the petition, the impugned notices issued by the respondent of the Income-tax Department under sections 148 and 142 against the appellant for the assessment years 1968-69 to 1971-72 and 1981-82 are hereby quashed. The appeal stands allowed with costs. The above view is also get support by a decision of Nagpur Bench of this ITAT in the case of M B Traders Vs. ACIT [ 132 TTJ 490 ] wherein the co ordinate bench held that ; 9. After an in-depth study of the entire case record, on a patient hearing of both the sides and after reading the case law cited at length, our observations and findings on the matter are as follows. Before giving our observation and finding, it has been deemed proper to quote ss. 150 and 151 as it is, as under : \"150. (1) Notwithstanding anything contained in s. 149 the notice under s. 148 may be issued at any time of the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the lime the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 151. (1) In a case where an assessment under sub-s. (3) of s. 143 or s. 147 has been made for relevant assessment year, no notice shall be issued under s. 148 by an AO, who is below the rank of Asstt. CIT or Dy. CIT unless the Jt. CIT is satisfied Printed from counselvise.com 80 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. on the reasons recorded by such AO that it is a fit case for the issue of such notice. Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice. Explanation : For the removal of doubts, it is hereby declared that the Jt. CIT, the CIT or the Chief CIT, as the case may be, being satisfied on the reasons recorded by the AO about fitness of a case for the issue of notice under s. 148, need not issue such notice himself.\" Sec. 149 deals as quoted above with regard to time-limit for notice. Sec. 150 deals with regard to provision for cases where assessment is in pursuance of an order on appeal. In our considered view there is no bar for issuing notice under s. 148 by the AO on the direction of the first appellate authority. At the same time, reassessment proceeding must be based on the belief of the AO and not of the CIT or appellate authority or that of the Tribunal as had been meant and interpreted from a perusal of s. 147 of the IT Act. The direction of higher authority should not be interpreted as a blanket direction by the AO. But that should be accompanied by the direct satisfaction of the AO with regard to the escapement of income. The appellate authorities or higher authorities cannot interfere on this power of the AO. It means the direction of the higher authorities and that of the appellate authorities must be acted upon by the AO with utter satisfaction. Taking initiation of reassessment proceeding without satisfaction of the AO, simply on the basis of the blanket direction, will not justify the action of initiation of reopening proceeding. In this particular case as has been rightly pointed out by the learned Authorised Representative from p. 13 of the paper book filed, the AO has simply acted upon, i.e., initiated reopening proceeding on the basis of the direction of the CIT(A) and has totally ignored his part of the job i.e., his satisfaction, as is evident from p. 13 of the paper book filed by the learned counsel which is quoted below for better appraisal of facts : \"Assessee filed the return of income of Rs. 39,720 on 25th Jan., 1993. Assessment under s. 143(3) was completed on a total income of Rs. 15,55,579 on 29th March, 1996 making addition of Rs. 15,15,859. The order under s. 143(3) was contested before CIT(A) who cancelled the order of the AO and directed as under : 'It is held that assessment proceedings are bad in law and hence cancelled. The AO should take remedial action under s. 147 or any other provisions of the Act to tax the income escaping assessment.' Accordingly notice under s. 148 of the IT Act, 1961 was issued and sent by RPAD on 27th March, 1998, but assessee denied about the receipt of Printed from counselvise.com 81 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. notice vide his letter dt. 12th Jan., 1999. Considering the legal aspect at the initial stage and considering the large amount of income to be taxed, an approval under s. 147 may kindly be granted. Sd/- Asstt. CIT, Circle-1(3), Nagpur.\" 10. Direction of the higher authority including that of the CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. With this considered view, on a total in-depth study of the case laws and considering the rival submissions, we allow the assessee's appeal and cancel the order of the CIT(A). Before parting with the order it is to be pointed out that the notice issued under s. 143(2) was also barred by time in this case and since the root of the matter had been dealt at length as above, we did not feel it proper to again deal with ground No. 5 in detail. Howsoever it is treated to have been considered and decided in favour of the assessee. 11. In the result, the assessee's appeal is allowed. Even the co-ordinate bench of Kolkata vide dealing with the appeal of the revenue in the case of ITO Vs. Sri Biswajit Chatterjee ITA no. 565/Kol/2023 has also held that “ CIT(A) has not power under the provision of law for giving any direction to AO for re-opening of assessment”. Respectfully following the finding as discussed herein above we are of the considered view that ld. CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. Even otherwise the apex court has also while dealing with the provision of section 147/148 of the Act in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1 held that; “According to section 148 of the Act of 1961, before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section. The Income-tax Officer has also, before issuing such notice, to record his reasons for doing so. Section 149 prescribes the time limit for the notice. The time limit in a case not falling under clause (ii) of sub-section (1) of section 149, with which we are not concerned, shall be eight years from the end of the relevant assessment year. Incases falling under clause (b) of section 147, however, the time limit for the notice is four years from the end of the relevant assessment year. Clause (a) of section 147 of the Act of 1961 corresponds to clause (a) of sub-section (1) of section 34 of the Act of 1922. The language of clause (a) of section 147 read with sections 148 and 149 of the Act of 1961 as also the corresponding provisions of the Act of Printed from counselvise.com 82 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 1922 makes it plain that two conditions have to be satisfied before the Income- tax Officer acquires jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments: See Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The words \"omission or failure to disclose fully and truly all material facts necessary for his assessment for that year\" postulate a duty on the assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a Printed from counselvise.com 83 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR 191 , 201 (SC). As further observed in that case: \"Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative, Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else—far less the assessee—to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences—whether of facts or law—he would draw from the primary facts.\" Keeping in view the principles enunciated above, we may deal with the contention advanced on behalf of the appellant that the present is not a case in which action could be taken under section 147(a) of the Act of 1961. This contention has been controverted by the learned counsel for the respondent who has canvassed for the correctness of the view taken by the High Court in the judgment under appeal. It would appear from what has been discussed above that one of the essential requisites for proceeding under clause (a) of section 147 of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee appellant the particulars given were not correct. Form C under rule 19 of the Indian Income-tax Rules, 1922, at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled in by the assessee. It has not been suggested that any of the information furnished or any of the particulars given in those columns by the appellant-company were factually incorrect. Nor is it the case of the revenue that the appellant failed to furnish the particulars required to be inserted in those columns. Indeed, the copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us. Part V of the form no doubt requires the assessee to state the written down value in column No. (2). Such written down value had to be specified without taking into account the initial depreciation because such depreciation in terms of clause (vi) of Printed from counselvise.com 84 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. section 10(2) of the Act of 1922 could not be deducted in determining the written down value for the purpose of that clause. The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March, 1945, and before the 1st day of April, 1956, is normally claimed and allowed. It seems that the Income-tax Officer in working the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As observed by Shah J. in Commissioner of Income-tax v. Bhanji Lavji [1971] 79 ITR 582 (SC), section 34(1)(a) of the Act of 1922 (corresponding to section 147(a) of the Act of 1961) does not cast a duty upon the assessee to instruct the Income- tax Officer on questions of law. It may also be mentioned that so far as the assessment for the assessment year 1957-58 is concerned, the assessment order was once rectified and at another time revised. Despite such rectification and revision, the above mistake in the calculation of the depreciation remained undetected. It was only in October, 1965, that the Income-tax Officer realised that higher amount of depreciation had been allowed to the appellant than was actually due. A letter to that effect was consequently sent to the assessee on October 5, 1965. It was, however, nowhere mentioned in that letter that the higher amount of depreciation had been allowed and the income as such had escaped assessment because of the omission or failure on the part of the assessee to disclose truly and fully all material facts. Reference to such omission or failure came only in a subsequent communication. The submission made on behalf of the appellant is not without force that reference was made to the assessee's omission or failure to disclose truly and fully all material facts because it was realised that after the expiry of four years from the end of the relevant assessment year, no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of the omission or failure of Printed from counselvise.com 85 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. the appellant to disclose fully and truly material facts. Looking to all the facts, we are of the opinion that it cannot be said that the excess depreciation was allowed to the appellant-company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts. It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well- versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed, the judgment of the High Court is set aside and the impugned notices are quashed.” Thus, what is not permitted directly cannot be permitted indirectly and therefore, the ld. CIT(A) cannot broaden the scope of the appeal decision to “advise” or “compel” another round of litigation again and again and as held by the apex court that we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage. Thus, looking to the provision of the law, decided case and facts of the present case we are of the considered view that ld. CIT(A) was tasked with deciding whether the addition under Section 153A was sustainable given the specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue. By proceeding to direct the AO to consider re-opening under Section 147, the ld. CIT(A) acted ultra vires and thereby we allow the cross objection of the assessee. In the result, the appeals of the revenue in ITA No. 301/JP/2025 stands dismissed and the cross objection in CO No. 02/JP/2025 of the assessee is allowed.” Prayer: Printed from counselvise.com 86 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. In light of the detailed legal submissions hereinabove, it is most respectfully submitted that: (i) Appeal of revenue, challenging the order of CIT(A) dated 08.01.2025 on the issue of deletion of addition u/s 68 may kindly be dismissed and findings of Ld.CIT(A) in this regards may kindly be upheld. (ii) The direction issued by the ld. CIT(A) to initiate reassessment proceedings under Section 147/148 of the Act—by invoking Section 150 and relying on CBDT Instruction No. 1/2023— is ex-facie without jurisdiction, contrary to binding judicial precedent, and violative of the appellate framework under Sections 250/251 of the Act. It is therefore humbly prayed that this Hon’ble Tribunal, in exercise of its plenary powers under Section 254, be pleased to expunge/quash the said direction from the appellate order dated 08.01.2025, and thereby uphold the relief granted to the assessee without permitting any overreach or illegal consequence to flow from an otherwise just appellate decision. 8. To support the contention so raised in the written submission reliance was placed on the following decisions so far as to the cross objections filed by the assessee : S. No. Particular Page Nos 1 ITAT Jaipur in DCIT, Central Circle-01, Jaipur vs. Sh. Vaibhav Banka in ITA No. 301/JP/2025 vide order dated 08.07.2025 1-68 2 Hon’ble Rajasthan High Court in Shyam Sunder Khandelwal vs. ACIT, Central Circle-02, Jaipur in DB Civil Writ Petition No. 18363/2019 vide order dated 19.03.2024 69-118 3 Hon’ble Rajasthan High Court in Tirupati Construction Company vs. ITO Ward-01, Chittorgarh in DB Civil Writ Petition No. 17523/2022 vide order dated 21.03.2024 119-128 9. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee merely statement without any corroborative material cannot be considered as incriminating material and thereby stand by the finding recorded in the order of the ld. Printed from counselvise.com 87 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. CIT(A). So far as to the ground for cross objections filed by the assessee, he submitted that the ld. CIT(A) cannot give direction. He submitted that the statement cannot be considered as incriminating. As regards the contention on the unsecured loan of the parties he relied upon remand report of the ld. AO as discussed in the order of the ld. CIT(A). 10. We have heard the rival contentions and perused the material placed on record. Though there are two grounds of appeal raised by the revenue in this appeal, both the grounds deal with the direction of the ld. CIT(A) in deleting the addition of Rs. 9,21,07,800/-made on account of unexplained cash credit u/s 68 of the Act without appreciating the fact that Shri Sanjay Karnani, Director of the company, failed to identify the 19 parties from whom the assessee stated to have obtained the loan of Rs. 9.21 crore. The ld. CIT(A) failed to consider the fact that the addition was made on account of unexplained cash credit u/s 68 of the Act which is based on the statement of Shri Sanjay Karnani recorded u/s 132(4) of the Act. The facts relating to this dispute are that in this case the assessee filed the original return of income on 29.11.2014 for the A.Y 2014-15 declaring income of Rs. 2,32,88,920/-. A search was conducted on 01.10.2018 in the case of Karnani Group, Jaipur to which the assessee Printed from counselvise.com 88 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. belongs. Because of that action the jurisdiction over the case was assigned to ACIT Central Circle-3, Jaipur in the case of the assessee as per the order passed u/s 127 of the Act by the Pr. CIT-I, Jaipur on 01.03.2019. Thereafter, the assessee was served with the notice u/s 153A of the Act for the year under consideration on 18.09.2020. In response return of income was e-filed on 03.10.2020 declaring income of Rs.2,32,88,920/-. Statutory notices as required under the law were issued from time to time along with questionnaire & Annexure requiring details / information, which was duly served upon the assessee. While assessment proceeding ld. AO noted that the assessee has taken unsecured loan from various parties. As per enquiry made on the parties who have given unsecured loan to the assessee company, it was noticed that for 19 parties from whom loans were found suspicious. Accordingly vide letter dated 30.03.2021 assessee was asked to prove the identity, creditworthiness and genuineness of those loans. In response to that the assessee filed reply submitting the details of these unsecured loans and also objected to the fact that in the proceeding u/s. 153A of the Act no addition cannot be made without any incriminating material and thereby the addition so proposed was opposed based on the decision of our Hon’ble Rajasthan High Court in the case of Jai Steel Vs. ACIT 36 taxmann.com 523(Raj). Printed from counselvise.com 89 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Ld. AO noted the reply filed by the assessee was considered but the same was not acceptable because during the search the statement of Shri Sanjay Karni, Director of the assessee company, was recorded. Ld. AO noted that while recording that statement, Shri Sanjay Karni submitted that he could not furnish the identity, creditworthiness and genuineness of the parties against whom the huge unsecured loans reflect in the balance sheet of the assessee company. Based on that statement of the Director of the company the ld. AO did not considered the evidence placed on record as the inquiries at the given address, it was noticed that none of the company(s) mentioned was found existed on the given address, as reported by the ITO/inspectors who have been deputed to verify the identity, creditworthiness of the investors. Further, as regards to the contention of the assessee that no incriminating material had been found in relation to the unsecured loan was not accepted because the director made statements during the search and the post search proceedings constitute incriminating material for the purpose of making an assessment u/s 153A of the Act. In support of such contention ld. AO relied upon the case of Commissioner of Income-tax, Thichur Vs. ST. Francis Clay Décor Tiles (2016) 70 taxmann.com 234(Kerala), B. Kishore Kumar Vs CIT, 234 Taxman 771(SC) the Hon'ble Supreme Court has dismissed the SLP Printed from counselvise.com 90 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. against High Court's order, wherein it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income tax was to be levied on basis of admission without scrutinizing documents. The ld. AO also noted that the statement made by the assessee is binding in nature and the same has not been retracted by him and thereby he relied upon the case law of (i) Pullangode Rubber Produce Co. Ltd. V. State of Kerala [1973] 91 ITR 18 (SC), (ii) Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi Al 1960 SC 100, (iii) Satinder Kumar (HUF) v. CIT [1977] 106 ITR 64 (SC) and (iv) Avadh Kishore Das v. Ram Gopal AIR 1979 SC 861 and thereby he concluded that unsecured loan shown to have been received by the assessee is actually an accommodation entry and thereby he considered a sum of Rs. 9,21,07,800/- as unexplained cash credits from undisclosed sources and added back to the income of the assessee u/s. 68 of the Act. When the matter challenged before the ld. CIT(A) who considered the submissions and contentions raised before him and thereby directed to delete that addition. Revenue challenged that finding of the ld. CIT(A) before this tribunal on this aspect of the material having considered the rival submission and material placed on record the bench noted during the course of search Printed from counselvise.com 91 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. proceedings, it is noticed that the assessee has taken unsecured loan from various persons. As noted by the Id. AO in para 5.2 of the assessment order, while search proceedings, statement of Shri Sanjay Karnani, Director of Karnani group of companies was recorded u/s 132(4) of the IT Act at the residence as well as the business premises. When the statement recorded at residence he has vide answer to question no. 33, stated that he could not identify the parties from whom such huge unsecured loans have obtained. He has also failed to furnish identity and present whereabout of such parties. Ld. AO has also noted that Shri Sanjay Karmani failed to furnish the identity, creditworthiness and genuineness of party(s) against whom huge unsecured loan reflects in the balance sheet of their companies. Ld. AO has relied upon question numbers 12, 33 and 34 in this regard. As per the assessment order, the assessee raised the issue during the assessment proceedings that no incriminating material was found on the issue from the search action at the premises covered. In this regard the Id. AO in para 5.3 noted that the contention of the assessee that no incriminating material had been found in relation to the unsecured loan was not considered as acceptable as it was noted that the adverse material collected in the form of confessional statements including such material collected during the search and the post search proceedings constitute Printed from counselvise.com 92 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. incriminating material for the purpose of making an assessment u/s 153A of the Act. On this issue the assessee submitted that during the search proceedings, it was noticed that the assessee had taken unsecured loans from various entities as listed in the AO's order. The assessee was required to prove the identity, creditworthiness, and genuineness of these unsecured loans. In response, the assessee submitted documents on 19.03.2021, including copies of Income Tax Returns (ITRs), audited financial statements, and bank statements of the lender companies. The assessee contended that it had discharged the primary onus casted under them as per provision of section 68 of the Act. Revenue having in possession of the all the information has not acted upon and has not brought on record any adverse material and merely relied upon the statement given. The ld. AR of the assessee submitted that the assessment had already been completed pursuant to S.143(3) and was no longer pending at the time of the search. There would be no abatement of proceedings if routine assessment processes were completed and are not pending. Not only that as stated that the case was selected for scrutiny pursuant to S.143(3) and was concluded by order dated 05/12/2016, without any additions on account of these loans. While original scrutiny, all facts were confirmed, and the loans that are being contested in the current Printed from counselvise.com 93 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. assessment procedures were determined to be authentic. This assessment was comprehensive, involving scrutiny of various aspects of the taxpayer's financial records, including unsecured loans and related expenditures. During this process, the AO raised specific queries, which were thoroughly addressed by the assessee with appropriate documentation and explanations. During the original assessment u/s 143(3), the AO conducted a thorough examination of the unsecured loans, including their sources, the legitimacy of the lenders, and the nature of the transactions involved. The assessee provided detailed responses, including confirmations from lenders, financial statements, and other relevant documentation to substantiate the genuineness of the transactions. The assessee also contended in Answer to Q. No. 33 that the genuineness of these transactions was beyond any doubt. The assessee also contended that these loans have already been repaid and therefore, now issuing doubt on their genuiness is beyond doubt. The Gujarat High Court in the case of Rohini Builders 256 ITR 306 held that \"The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques.\" As a result, the scope of the Printed from counselvise.com 94 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. assessment proceeding pursuant to the provision of section 153A would be limited to incriminating evidence discovered while the search. As a result, even in the instant case, merely based on the statement without any incriminating material no addition can be made. The question as to whether the statement recorded while search can be considered as incriminating material without any supporting incriminating in nature can be considered as incriminating in nature or not. The ld. CIT(A) has sought the remand report from the AO and has discussed at length as to the contention made in the statement is considered to have any incriminating in nature and there is no contrary material placed on record as to what has been stated in the remand report and therefore, it was clear that except the statement there were no adverse material placed on record. As is evident from the following judgment that statement recorded u/s 132 of the Act does not constitute incriminating material in the absence of any other corroborative evidence as held in following judicial pronouncements: A. “PCIT vs. Best Infrastructure Pvt. Ltd., 397 ITR 82 (Delhi) affirmed by the Hon'ble Supreme Court in the case of Pr. Commissioner of Income Tax 2 Delhi Versus M/S Best Infrastructure (India) Pvt. Ltd. 2018 (6) TMI 971 - SC ORDER, Dated: 14-5-2018 B. CIT vs. Harjeev Aggarwal, 2016 (3) TMI 329 - DELHI HIGH COURT, Dated: - 10-3-2016 • PCIT (Central) - 3 Versus Anand Kumar Jain (HUF), SatishDev Jain, Sajan Kumar Jain, 2021 (3) TMI 8 – DELHIHIGH COURT, Dated: 12-2- 2021 Printed from counselvise.com 95 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. C. Principal Commissioner of Income Tax (Central) -3 Versus Pavitra Realcon Pvt. Ltd. Design Infracon Pvt. Ltd., And Delicate Realtors Pvt. Ltd., 2024 (5) TMI 1408 - DELHI HIGH COURT, Dated: - 29-5-2024 D. Principal Commissioner of Income Tax, Delhi-20 Versus Ms. Suman Agarwal, 2023 (2) TMI 1116 - DELHI HIGH COURT, Dated: - 28-7-2022. Thus, looking to the discussion made herein above and looking to the statement recorded at the time of search in a holistic manner the statement of the director of the company does not show confession on the issue and at the same time shows denial and rather during the search statement the director of the company stated that these loans were actual loans and were repaid in subsequent years. As rightly observed by the ld. CIT(A) that the assessment order u/s 143(3) of the Act, the original income tax return was filed by the appellant on the date of 29.11.2014 and the assessment u/s 143(3) of the Act was completed on the date of 05.12.2016 The search action took place on 01.10.2018. Further neither in the assessment order u/s 153A nor in the material placed on record by both the parties that the assessment was pending as on date of search action. Thus the present year is unabated/completed category year and therefore, as decided in the following the judgement in the case of Principal Commissioner of Income- tax, Central-3 v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 Printed from counselvise.com 96 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC)[24-04-2023], wherein the Hon'ble Supreme Court decided this issue as under:- 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: \"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 section 132 or books of account, other documents or any assets are requisitioned under section 132-A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132-A, as the case may be, shall abate. (2) 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: Provided that such revival shall cease to have effect, if such order of annulment is set aside Printed from counselvise.com 97 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Explanation.—For the removal of doubts, it is hereby declared that,— (i) save as otherwise provided in this section, section 153-B and section 153-C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.\" 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, 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. 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 147/48 of the Act, subject to fulfilment 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. Printed from counselvise.com 98 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 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 rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 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 Printed from counselvise.com 99 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 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. In view of the above and for the reasons stated above we see no infirmity in the finding so recorded by the ld. CIT(A) in holding that when 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 as held by decision of the Apex Court as referred herein above we see no merits in the grounds of appeal raised by the revenue and thereby the same are dismissed. Printed from counselvise.com 100 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 11. Now we take up the cross objection filed by the assessee wherein the assessee has taken following ground against the appeal so filed by the revenue; In the facts and circumstances of the case and in law, ld. CIT(A) has erred in giving directions to AO to implement judgment of Hon’ble Supreme Court in the case of Abhisar Buildwell 2023 149 taxmann.com and the CBDT Instruction No. 1 of 2023 dated 23.8.2023 on the subject Implementation of the judgment of the Hon’ble Supreme Court in the case of Abhisar Buildwell (Supra). The action of the ld. CIT(A) is illegal, unjustified, arbitrary, and against the facts of the case. 12. The above ground being legal in nature the ld. AR of the assessee in support of the above ground of objection cited upon the following judicial precedent ; S. No. Particular Page Nos 1 ITAT Jaipur in DCIT, Central Circle-01, Jaipur vs. Sh. Vaibhav Banka in ITA No. 301/JP/2025 vide order dated 08.07.2025 1-68 2 Hon’ble Rajasthan High Court in Shyam Sunder Khandelwal vs. ACIT, Central Circle-02, Jaipur in DB Civil Writ Petition No. 18363/2019 vide order dated 19.03.2024 69-118 3 Hon’ble Rajasthan High Court in Tirupati Construction Company vs. ITO Ward-01, Chittorgarh in DB Civil Writ Petition No. 17523/2022 vide order dated 21.03.2024 119-128 13. This ground being legal ld. DR relied upon the decision of the ld. CIT(A) and that of the instruction issued by the board while implementing the decision of the Apex Court as referred in the order of the ld. CIT(A). Printed from counselvise.com 101 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 14. The issue raised by the assessee has already been decided by the co-ordinate bench of Jaipur while dealing with the bunch of appeal DCIT Vs. Shri Vaibhav Banka in ITA no. 301/JP/2025 and Co/02/JP/2025 wherein the co-ordinate bench has decided the above issue by holding that; 13. Now coming to the cross objection filed by the assessee against the appeal filed by the revenue. As the appeal of the assessee was allowed by the ld. CIT(A) on technical ground but while allowing that appeal of the assessee on technical ground he directed the ld. AO to implement judgment of Hon’ble Supreme Court in the case of Abhisar Buildwell 2023 149 taxmann.com and the CBDT Instruction No. 1 of 2023 dated 23.8.2023. This direction is challenged by the assessee in cross objection filed stating that the action of the ld. CIT(A) is illegal, unjustified, arbitrary, and against the facts of the case. As is evident from the order of the ld. CIT(A) that after granting relief on technical ground ld. CIT(A) further directed the ld. AO to initiate appropriate proceedings under Section 147/148 of the Act, relying on the same judgment of Abhisar Buildwell (supra), CBDT Instruction No. 1/2023 (CLC 35-40), and the provisions of Section 150 of the Act. The assessee, while supporting the ultimate relief granted, is aggrieved by the directions given by the ld. CIT(A) in his order suggesting the AO initiate proceedings under Section 147/148 of the Act. The assessee therefore before us by preferring the present Cross-Objection to challenge the directions and to raise other legal and factual grounds in support of the deletion of the addition. Record reveals that ld. CIT(A) vide page 36 while dealing with the appeal of the assessee has issued direction to the ld. AO which reads as under : “Accordingly, the judgement of Hon’ble Supreme Court in the case of Abhisar Buildwell (supra) and U. K. Paints (supra) are squarely applicable to the facts of the case. Accordingly, following the judgment of honorable Supreme Court it is held that the ld. AO rightly issued notices u/s 153A of the Act and at the same time the impugned addition made in assessment order u/s 153A cannot be sustained and is hereby deleted as the same is without basis of incriminating material unearthed during the search action on the appellant and impugned addition could have been done by the learned assessing officer in re-assessment proceedings by issuance of notice under section 147/148. The ld. AO is directed to take necessary action in this regard. Further, the CBDT (ITJ Section) has issued Instruction No. 1 of 2023 dated 23-08- 2023 vide F.No. 279/Misc./M-54/2023-ITJ Printed from counselvise.com 102 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. on the subject “Implementation of the judgment of the Hon’ble Supreme Court in the case of Pr.CIT (Central-3) v/s AbhisarBuildwell Pvt. Ltd. (Civil Appeal No. 6580 of 2021)- Instruction regarding”. The learned assessing officer is directed to implement the law and ratio of the judgement of AbhisarBuildwell (supra) and the said Instruction No. 1 of 2023 dated 23-08-2023 and section 150 of the Act, in the case of the appellant appropriately as per the facts of the case and as per above findings. Accordingly this ground of appeal is adjudicated in above terms. For statistical purposes this ground is hereby treated as allowed” [Emphasis Supplied] Before us the ld. AR of the assessee submitted that the appeal of the assessee has decided considering the two landmark judgment of apex court in the case of Abhishar Buildwell and U. K. Paints. Thus, the issue before us is to be decided considering the following records placed on record: 1. Decision of the apex court in the case of Abhisar Buildwell & U. K. Paints. 2. Miscellaneous Application filed by Revenue before the apex court 3. CBDT’s Instruction No. 1 of 2023 dated 23-08-2023 As is evident the cross objection of the assessee hinges on the provision of section 150, 251, Miscellaneous application filed by the revenue before the apex court and CBDT’s instructions. The provision of section 150 deals as under : Provision for cases where assessment is in pursuance of an order on appeal, etc. 150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject- matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. Section 251 reads as follows : Powers of the70[Joint Commissioner (Appeals) or the] Commissioner (Appeals). Printed from counselvise.com 103 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment: 71[Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;] (aa) in an appeal against the order of assessment in respect of which the proceeding before the Settlement Commission abates under section 245HA, he may, after taking into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. 70[(1A) In disposing of an appeal, the Joint Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit.] (2) The 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals) 72[, as the case may be,] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Printed from counselvise.com 104 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Explanation.—In disposing of an appeal, the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals), may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 72[Joint Commissioner (Appeals) or the] Commissioner (Appeals) 72[, as the case may be,] by the appellant. The law is settled by the decision of the apex court in the case of Abhishar Buildwell and U. K. Paints and the revenue’s Miscellaneous application was disposed off by observing as under 4.1.i Against the judgment dated 24.04.2023 passed by the Hon’ble Supreme Court in Abhisar Buildwell Pvt. Ltd. (supra) the revenue filed Misc. Application before the Hon’ble Supreme Court on 26.04.2023 seeking following reliefs: “(a) This Hon’ble Court may clarify that the waiver of limitation as stipulated in section 150(2) is to be read in respect of the date of issue of notice for reassessment under section 148 (i.e.) if as on the date the assessment under section 153A or section 153C was passed, a notice under section 148 could have been issued as per the law then in force, then fresh proceedings for reassessment of such income not arising from the incriminating material found in searchcan now be initiated pursuant to the findings of this Hon’ble Court in the present appeals/application and may further clarify as follows: (i) That the findings in para 11 and 14 would apply to all the proceedings pending in all the forums including before this Hon’ble Court. (ii) That even though the appeals of the Revenue are dismissed in respect of assessments passed under 153A and 153C, in the absence of incriminating material found during the search, in respect of such income which was found to have escaped assessment other than through incriminating material, the assessing officers would be entitled to reassess such income in terms of Section 147/148 read with section 150. (iii) That the Assessing Officer, may if found necessary initiate fresh proceedings within 60 days from date of disposal of this application following the procedure stipulated in section 147-151 of the Act as is in force now.” 4.1.iii. The Hon’ble Supreme Court vide its order dated 12.05.2023 titled as PCIT v. Abhisar Buildwell Pvt. Ltd. [2023] 294 Taxman 70 (SC) (CLC 32-34) dismissed the Revenue’s Misc. Application by observing as under: “2. Having gone through the averments made in the application and the prayers, we are of the opinion that the prayers sought can be said to be in the form of review which requires detail consideration at length looking into the importance of the matter. Therefore, the present application in the form of clarification is not entertained and we relegate the Revenue to file an appropriate review application for the relief sought in the present application and as and when such review application is filed the same can be heard in the open court. Printed from counselvise.com 105 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 3. In view of the above and without further entering into the merits of the application and/or expressing anything on merits on the prayers sought in the present application, the present application is not entertained and we relegate the Revenue to file an appropriate review application seeking the reliefs which are sought in the present application and as and when such review application is filed the same be heard and decided and disposed of in the open court. At the cost of repetition, we observe that as we have not entered into the merits of the present application and we relegate the Revenue to file an appropriate review application, the review application be decided and disposed of in accordance with law and on its own merits.” 4.1.iii Following the dismissal of the Revenue’s Miscellaneous Application in PCIT v. Abhisar Buildwell Pvt. Ltd. (supra), wherein the Hon’ble Supreme Court expressly relegated the Department to file a formal review petition—no such review was pursued. Instead, the CBDT issued Instruction No. 1/2023 dated 23.08.2023, which provided internal guidance to Assessing Officers regarding the course of action in cases where assessments under Section 153A/153C have failed due to lack of incriminating material. 4.1.iv The instruction outlines procedural steps for invoking reassessment under Sections 147/148 read with Section 150. However, the nature, scope, and legal force of this instruction remain subject to statutory limitations and judicial precedent, as discussed below. We also take note of the facts that CBDT’s instructions is an internal administrative directive intended solely for operational guidance of Assessing Officers. It attempts to clarify the post-Abhisar Buildwell (supra) reassessment landscape, specifically in situations where additions under Section 153A/153C were struck down due to absence of incriminating material. This administrative instructions are not binding on quasi-judicial authorities like the CIT(A). It is a settled principle of law, as held by the Hon’ble Supreme Court in UCO Bank v. CIT [(1999) 237 ITR 889 (SC)] (CLC 41-49), that CBDT circulars or instructions cannot override, supplement, or expand the scope of statutory provisions. Thus, taking shelter of Instruction No. 1/2023 as enabling or empowering appellate authorities to direct initiation of reassessment proceedings is a fundamental misapplication of the Instruction, which neither authorizes appellate intervention in reassessment matters nor vests any such power in the ld. CIT(A). Even other wise the Instruction cannot substitute the independent statutory preconditions under Sections 147/148 read with Section 149, which provides the timelines for issuance of notice of reopening. Provision of such section must be satisfied by the ld. AO at any given point of time, when the jurisdiction is assumed for Printed from counselvise.com 106 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. reopening a particular assessment year. Even the power vested with ld. CIT(A) are limited wherein he may i.) confirm, or ii.) reduce, or iii.) enhance, or iv.) annul the assessment; Thus, he has no power to give any direction that what is prescribed in law. The issue related to the power of the commissioner of income has already been dealt with in a decision in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (CLC 111-128) wherein Hon’ble Supreme Court underscored that the appellate provisions (Section 33(4) of the 1922 Act, analogous to Section 250/254 of the 1961 Act) do not confer on the appellate authority a power to make any direction on matters not arising in the appeal, especially as the Act provides separate mechanisms (like Section 34 of 1922 Act, now Section 147) to deal with escaped income. Accordingly, the Apex Court held that; “It was not contended, nor was it possible to contend, that by reason of the reference to the said provisions the powers and jurisdiction conferred on the respective authorities, tribunals or courts referred to therein were enlarged or modified by a reference in the proviso or that the proviso could be read or construed as amending those sections conferring on those bodies wider or different powers or jurisdiction. Learned counsel for the department expressly disclaimed any such submission. Therefore, the scope of the proviso cannot ordinarily exceed the scope of the jurisdiction conferred on an authority under the said provisions.” We also take note that the apex court has dealt with the provision of section 150 i.e. Provision for cases where assessment is in pursuance of an order on appeal and section 149 i.e. Time limit for notices undersection 148 of the Act. While dealing with that provision the apex court in the case of K. M. Sharma Vs. Income Tax Officer [122 Taxmann 426 (SC) ] while dealing with the judgment of the land revenue case and thereby the reopening of the case has in detailed analysis the provision for cases where assessment is in pursuance of an order of an appeal and time limit. The relevant finding is reproduced in full because this will clarify the issue on hand with that of the case decided by apex court; In this appeal, which is filed after obtaining special leave, the order dated 24-5-1996 of the Delhi High Court has been assailed. The main question involved is on the application and interpretation of the provisions of section 150 of the Income-tax Act, 1961 ('the Act'). The relevant facts necessary for deciding the legal question raised are as under : Printed from counselvise.com 107 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 1. The appellant's lands were acquired under section 6 of the Land Acquisition Act, 1894, and an award was passed on 2-12-1967 by the Chief Commissioner of Delhi granting compensation in favour of the appellant. The Additional District Judge by the judgment dated 20-5-1980 held the appellant entitled to 1/32 share of the compensation awarded under various awards and the appellant was granted total compensation in the sum of Rs. 1,18,810 approximately in the year 1981. 2. On a reference under section 18 of the Land Acquisition Act, the learned Additional District Judge, Delhi vide his judgment dated 31-7-1991 awarded a sum of Rs. 1,10,20,624. The amount was paid to the appellant between 15-10-1992 and 26-5-1993. The amounts paid represented principal sum of compensation of Rs. 41,96,496 and interest in the sum of Rs. 76,84,829 up to 18-5-1992. Before making the above payments, tax was deducted at source amounting to Rs. 8,60,701. 3. Since the lands acquired were agricultural lands and were acquired prior to 1-4-1970, capital gains tax was not leviable but tax was leviable on interest earned on the amount awarded on year to year basis. 4. The appellant through counsel sent a letter dated 17-9-1993 informing the ITO that he had received interest amount of Rs. 76,84,829 and interest accrued from year to year was assessable in each year. Year-wise break up of the interest was also given in the letter. According to the appellant, no tax was leviable on interest accruing up to 31-3- 1982 as assessment for it had become barred by time. The appellant, therefore, requested that necessary action be taken under section 147 of the Act to enable the appellant as assessee to file his income-tax return and pay tax accordingly. 5. On 31-3-1994, the appellant was served with impugned notices under section 148 of the Act for 16 assessment years, i.e., 1968-69 to 1971-72 and the assessment years 1981-82 to 1992-93. 6. The appellant, in the High Court, assailed the notices issued under section 148 for reassessment for the assessment years 1968-69 to 1971-72 and for the year 1982-83 on the ground that the proposed reassessment for those assessment years had already become barred by time under section 149 of the Act, for which in the relevant periods maximum period of four years or seven years limitation was prescribed depending upon the quantum of liability towards tax. 7. The High Court by the impugned judgment accepted the contention of the department that the provisions of section 150(1) of the Act, as amended with effect from 1-4-1989, could be resorted to for reassessment to levy tax on the increased amount of interest earned by the appellant in the relevant assessment years. It was held that bar of limitation prescribed under section 149 of the Act was not attracted by virtue of the provisions of section 150(1) because notices for such reassessments are based on the awards passed in the land acquisition proceedings by the Court of the Additional District Judge on a reference under section 18 of the Land Acquisition Act. Upholding the validity of the assessment proceedings initiated by the department under section 148, the High Printed from counselvise.com 108 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. Court rejected the contention of the assessee that sub-section (2) of section 150 is an Explanation to sub-section (1) and proceedings for reassessment, which had already become barred by time under section 149 before 1-4-1989, could not have been commenced on the amended provisions of sub-section (1) of section 150. 8. To appreciate the contentions advanced by the learned counsels for the parties and the decision of the High Court, it is necessary to reproduce for critical examination the provisions of section 150(1) and (2). The provisions read as under : \"Provision for cases where assessment is in pursuance of an order on appeal, etc.—(1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision [or by a Court in any proceeding under any other law]. [The portion bracketed and italicised above is inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989]. (2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject- matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken.\" 9. Section 149 prescribes maximum period of four or seven years depending upon the quantum of tax as mentioned in the said section for initiating reassessment proceedings. Section 150(1) states that the period of limitation prescribed in section 149 is not applicable, if the reassessment is proposed on the basis of any order passed by any 'authority in any proceedings under the Act by way of appeal, reference or revision' or 'by Court in proceedings under any other law'. Sub-section (2) of section 150, however, makes it clear that reassessment permissible under sub-section (1) of section 150 would not be available to the department where the period of limitation for such assessment or reassessment has expired at the time it is proposed to be reopened. In sub-section (1) of section 150, by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1-4-1989, the words 'or by a Court in any proceeding under any other law' were inserted which are shown in bracket with underline in the section reproduced above. 10. The main question that has been raised on behalf of the learned counsels appearing for the parties is whether the provisions of sub-section (1) of section 150 as amended can be availed for reopening assessments, which have attained finality and could not be reopened due to bar of limitation, that was attracted at the relevant time to the proposed reassessment proceedings under the provisions of section 149. Printed from counselvise.com 109 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 11. The submission made on behalf of the appellant is that neither the provisions of sub- section (1) nor sub-section (2) can be read as giving more than intended operation to the said provision. The provisions, it is argued, do not permit the authorities to reopen assessments, which have become final and reassessment of which had become barred by time before 1-4-1989 when section 150(1) was amended. Reliance is placed on the decision of this Court in S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 . 12. The learned counsel appearing on behalf of the department has made an effort to persuade this Court to accept his construction of the provisions of section 150(1) and (2). It is argued that it is for the specific purpose of assessing income, which might accrue on the basis of any decision of any Court in any proceeding in any other law, that the provision has been amended to lift bar of limitation for reassessment. 13. Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to sub-section (1) of section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub-section (1) of section 150 which intends to lift embargo of period of limitation under section 149 to enable authorities to reopen assessments not only on the basis of orders passed in proceedings under the Act but also on order of a Court in any proceedings under any law, has to be applied prospectively on or after 1-4-1989 when the said amendment was introduced to sub-section (1). The provision in sub-section (1), therefore, can have only prospective operation to assessments, which have not become final due to expiry of period of limitation prescribed for assessment under section 149. 14. To hold that the amendment to sub-section (1) would enable the authorities to reopen assessments, which had already attained finality due to bar of limitation prescribed under section 149 as applicable prior to 1-4-1989, would amount to give sub- section (1) a retrospective operation which is neither expressly nor impliedly intended by the amended sub-section. 15. On behalf of the assessee before the High Court and in this Court reliance has been placed on the provisions contained in sub-section (2) of section 150. It is submitted that the provision contained in sub-section (2) of section 150 is in the nature of clarification or Explanation to sub-section (1). Sub-section (2) makes it clear that the embargo of period of limitation lifted under sub-section (1) for proposed reassessments based on order in proceedings under appeal, reference or revision, as the case may be, would not apply to assessments which have attained finality due to bar of limitation applicable at the relevant time. Printed from counselvise.com 110 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 16. The High Court rejected the above contention of the assessee on the ground that on the amendment introduced with effect from 1-4-1989 in sub-section (1), which enables reopening of assessment based on any order of 'Court in any proceedings in any law', there is no corresponding amendment made in sub-section (2) of section 150 to bar reassessment based on order of court passed in any proceedings in any law in cases where prescribed period of limitation for reassessment had already expired. 17. We do not find that the above reasoning of the High Court is sound. The plain language of sub-section (2) of section 150 clearly restricts application of sub-section (1) to enable the authority to reopen assessments which have not already become final on the expiry of prescribed period of limitation under section 149. As is sought to be done by the High Court, sub-section (2) of section 150 cannot be held applicable only to reassessments based on orders 'in proceedings under the Act' and not to orders of Court 'in proceedings under any other law'. Such an interpretation would make the whole provision under section 150 discriminatory in its application to assessments sought to be reopened on the basis of orders under the Act and other assessments proposed to be reopened on the basis of orders under any other law. Interpretation, which creates such unjust and discriminatory situation, has to be avoided. We do not find that sub-section (2) of section 150 has that result. Sub-section (2) intends to insulate all proceedings of assessments, which have attained finality due to the then existing bar of limitation. To achieve the desired result it was not necessary to make any amendment in sub-section (2) corresponding to sub-section (1), as is the reasoning adopted by the High Court. 18. Sub-section (2) aims at putting embargo on reopening assessments, which have attained finality on expiry of prescribed period of limitation. Sub-section (2) in putting such embargo refers to whole of sub-section (1) meaning thereby to insulate all assessments, which have become final and may have been found liable to reassessments or recomputation either on the basis of orders in proceedings under the Act or orders of courts passed under any other law. The High Court, therefore, was in error in not reading whole of amended sub-section (1) into sub-section (2) and coming to the conclusion that reassessment proposed on the basis of order of the court in proceedings under the Land Acquisition Act could be commenced even though the original assessments for the relevant years in question have attained finality on expiry of period of limitation under section 149. On a combined reading of sub-section (1) as amended with effect from 1-4-1989 and sub-section (2) of section 150 as it stands, in our view, a fair and just interpretation would be that the authority under the Act has been empowered only to reopen assessments, which have not already been closed and attained finality due to the operation of the bar of limitation under section 149. 19. This Court took similar view in the case of S.S. Gadgil (supra) in somewhat comparable situation arising from the retrospective operation given to section 34(1) of the Indian Income-tax Act, 1922 as amended with retrospective effect from 1-4-1956 by the Finance Act, 1956. In the case of S.S. Gadgil ( supra) admittedly under clause (iii) of the proviso to section 34(I), as it then stood, a notice of assessment or reassessment could not be issued against a person deemed to be an agent of a non-resident under Printed from counselvise.com 111 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. section 43, after the expiry of one year from the end of the year of assessment. The section was amended by section 18 of the Finance Act, 1956, extending this period of limitation to two years from the end of the assessment year. The amendment was given retrospective effect from 1-4-1956. On 12-3-1957, the ITO issued a notice calling upon the assessee to show cause as to why, in respect of the assessment year 1954-55, the assessee should not be treated as an agent under section 43 in respect of certain non- residents. The case of the assessee, inter alia, was that the proposed action was barred by limitation as right to commence proceedings of assessment against the assessee as an agent of non-resident for the assessment year 1954-55 ended on 31-3-1956, under the Act before it was amended in 1956. This Court in the case of S.S. Gadgil (supra) accepted the contention of the assessee and held as under : \". . . The Legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e., up to April 1, 1956 only. That provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorise the Income-tax Officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred.\" (p. 240) 20. On a proper construction of the provisions of section 150(1) and the effect of its operation from 1-4-1989, we are clearly of the opinion that the provisions cannot be given retrospective effect prior to 1-4-1989 for assessments which have already become final due to bar of limitation prior to 1-4-1989. Taxing provision imposing a liability is governed by normal presumption that it is not retrospective and settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot in the absence of clear contrary intendment expressed therein be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to open up liabilities, which have become barred by lapse of time. Our conclusion, therefore, is that sub-section (1) of section 150, as amended with effect from 1-4-1989, does not enable the authorities to reopen assessments, which have become final due to bar of limitation prior to 1-4-1989 and this position is applicable equally to reassessments proposed on the basis of orders passed under the Act or under any other law. 21. As a result of the discussion aforesaid, the appeal is allowed. The judgment of the Delhi High Court dated 24-5-1996 is hereby set aside. As prayed in the petition, the impugned notices issued by the respondent of the Income-tax Department under sections 148 and 142 against the appellant for the assessment years 1968-69 to 1971- 72 and 1981-82 are hereby quashed. The appeal stands allowed with costs. Printed from counselvise.com 112 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. The above view is also get support by a decision of Nagpur Bench of this ITAT in the case of M B Traders Vs. ACIT [ 132 TTJ 490 ] wherein the co-ordinate bench held that ; 9. After an in-depth study of the entire case record, on a patient hearing of both the sides and after reading the case law cited at length, our observations and findings on the matter are as follows. Before giving our observation and finding, it has been deemed proper to quote ss. 150 and 151 as it is, as under : \"150. (1) Notwithstanding anything contained in s. 149 the notice under s. 148 may be issued at any time of the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law. (2) The provisions of sub-s. (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the lime the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken. 151. (1) In a case where an assessment under sub-s. (3) of s. 143 or s. 147 has been made for relevant assessment year, no notice shall be issued under s. 148 by an AO, who is below the rank of Asstt. CIT or Dy. CIT unless the Jt. CIT is satisfied on the reasons recorded by such AO that it is a fit case for the issue of such notice. Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief CIT or CIT is satisfied, on the reasons recorded by the AO aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-s. (1), no notice shall be issued under s. 148 by an AO, who is below the rank of Jt. CIT, after the expiry of four years from the end of the relevant assessment year, unless the Jt. CIT is satisfied, on the reasons recorded by such AO, that it is a fit case for the issue of such notice. Explanation : For the removal of doubts, it is hereby declared that the Jt. CIT, the CIT or the Chief CIT, as the case may be, being satisfied on the reasons recorded by the AO about fitness of a case for the issue of notice under s. 148, need not issue such notice himself.\" Sec. 149 deals as quoted above with regard to time-limit for notice. Sec. 150 deals with regard to provision for cases where assessment is in pursuance of an order on appeal. Printed from counselvise.com 113 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. In our considered view there is no bar for issuing notice under s. 148 by the AO on the direction of the first appellate authority. At the same time, reassessment proceeding must be based on the belief of the AO and not of the CIT or appellate authority or that of the Tribunal as had been meant and interpreted from a perusal of s. 147 of the IT Act. The direction of higher authority should not be interpreted as a blanket direction by the AO. But that should be accompanied by the direct satisfaction of the AO with regard to the escapement of income. The appellate authorities or higher authorities cannot interfere on this power of the AO. It means the direction of the higher authorities and that of the appellate authorities must be acted upon by the AO with utter satisfaction. Taking initiation of reassessment proceeding without satisfaction of the AO, simply on the basis of the blanket direction, will not justify the action of initiation of reopening proceeding. In this particular case as has been rightly pointed out by the learned Authorised Representative from p. 13 of the paper book filed, the AO has simply acted upon, i.e., initiated reopening proceeding on the basis of the direction of the CIT(A) and has totally ignored his part of the job i.e., his satisfaction, as is evident from p. 13 of the paper book filed by the learned counsel which is quoted below for better appraisal of facts : \"Assessee filed the return of income of Rs. 39,720 on 25th Jan., 1993. Assessment under s. 143(3) was completed on a total income of Rs. 15,55,579 on 29th March, 1996 making addition of Rs. 15,15,859. The order under s. 143(3) was contested before CIT(A) who cancelled the order of the AO and directed as under : 'It is held that assessment proceedings are bad in law and hence cancelled. The AO should take remedial action under s. 147 or any other provisions of the Act to tax the income escaping assessment.' Accordingly notice under s. 148 of the IT Act, 1961 was issued and sent by RPAD on 27th March, 1998, but assessee denied about the receipt of notice vide his letter dt. 12th Jan., 1999. Considering the legal aspect at the initial stage and considering the large amount of income to be taxed, an approval under s. 147 may kindly be granted. Sd/- Asstt. CIT, Circle-1(3), Nagpur.\" 10. Direction of the higher authority including that of the CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. With this considered view, on a total in-depth study of the case laws and considering the rival submissions, we allow the assessee's appeal and cancel the order of the CIT(A). Before parting with the order it is to be pointed out that the notice issued under s. 143(2) was also barred by time in this case and since the root of the matter had been dealt at length as above, we Printed from counselvise.com 114 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. did not feel it proper to again deal with ground No. 5 in detail. Howsoever it is treated to have been considered and decided in favour of the assessee. 11. In the result, the assessee's appeal is allowed. Even the co-ordinate bench of Kolkata vide dealing with the appeal of the revenue in the case of ITO Vs. Sri Biswajit Chatterjee ITA no. 565/Kol/2023 has also held that “ CIT(A) has not power under the provision of law for giving any direction to AO for re-opening of assessment”. Respectfully following the finding as discussed herein above we are of the considered view that ld. CIT(A) will not confer power to assume jurisdiction to the AO to initiate reassessment proceeding. Even otherwise the apex court has also while dealing with the provision of section 147/148 of the Act in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1 held that; “According to section 148 of the Act of 1961, before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub- section. The Income-tax Officer has also, before issuing such notice, to record his reasons for doing so. Section 149 prescribes the time limit for the notice. The time limit in a case not falling under clause (ii) of sub-section (1) of section 149, with which we are not concerned, shall be eight years from the end of the relevant assessment year. Incases falling under clause (b) of section 147, however, the time limit for the notice is four years from the end of the relevant assessment year. Clause (a) of section 147 of the Act of 1961 corresponds to clause (a) of sub-section (1) of section 34 of the Act of 1922. The language of clause (a) of section 147 read with sections 148 and 149 of the Act of 1961 as also the corresponding provisions of the Act of 1922 makes it plain that two conditions have to be satisfied before the Income-tax Officer acquires jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., (i) the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (ii) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer Printed from counselvise.com 115 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessments: See Income-tax Officer v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The words \"omission or failure to disclose fully and truly all material facts necessary for his assessment for that year\" postulate a duty on the assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise, the assessing authority has to draw inference as regards certain other facts; and ultimately from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable: See Calcutta Discount Co. v. Income-tax Officer [1961] 41 ITR 191 , 201 (SC). As further observed in that case: \"Does the duty, however, extend beyond the full and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative, Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else—far less the assessee—to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences—whether of facts or law—he would draw from the primary facts.\" Keeping in view the principles enunciated above, we may deal with the contention advanced on behalf of the appellant that the present is not a case in which action could be taken under section 147(a) of the Act of 1961. This contention has been controverted by the learned counsel for the respondent who has canvassed for the correctness of the view taken by the High Court in the judgment under appeal. Printed from counselvise.com 116 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. It would appear from what has been discussed above that one of the essential requisites for proceeding under clause (a) of section 147 of the Act of 1961 is that the income chargeable to tax should escape assessment because of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee-appellant the particulars given were not correct. Form C under rule 19 of the Indian Income-tax Rules, 1922, at the relevant time gives the form of return which had to be filed by the companies. Part V of that form deals with depreciation. The said part requires a number of columns to be filled in by the assessee. It has not been suggested that any of the information furnished or any of the particulars given in those columns by the appellant-company were factually incorrect. Nor is it the case of the revenue that the appellant failed to furnish the particulars required to be inserted in those columns. Indeed, the copy of the return has not been filed and consequently no argument on that score could be or has been addressed before us. Part V of the form no doubt requires the assessee to state the written down value in column No. (2). Such written down value had to be specified without taking into account the initial depreciation because such depreciation in terms of clause (vi) of section 10(2) of the Act of 1922 could not be deducted in determining the written down value for the purpose of that clause. The case of the appellant is that in determining the amount of depreciation at the time of the original assessment for the two assessment years in question, the Income-tax Officer relied upon the written down value of the various capital assets as obtaining in the records of the department. This stand has not been controverted. When an Income-tax Officer relies upon his own records for determining the amount of depreciation and makes a mistake in doing so, we fail to understand as to how responsibility for that mistake can be ascribed to an omission or failure on the part of the assessee. It also cannot be disputed that initial depreciation in respect of items of capital assets in the shape of new machinery, plant and building installed or erected after the 31st day of March, 1945, and before the 1st day of April, 1956, is normally claimed and allowed. It seems that the Income-tax Officer in working the figures of depreciation for certain items of capital assets lost sight of the fact that the aggregate of the depreciation, including the initial depreciation, allowed under different heads could not exceed the original cost to the assessee of those items of capital assets. The appellant cannot be held liable because of this remissness on the part of the Income-tax Officer in not applying the law contained in clause (c) of the proviso to section 10(2)(vi) of the Act of 1922. As observed by Shah J. in Commissioner of Income-tax v. Bhanji Lavji [1971] 79 ITR 582 (SC), section 34(1)(a) of the Act of 1922 (corresponding to section 147(a) of the Act of 1961) does not cast a duty upon the assessee to instruct the Income-tax Officer on questions of law. It may also be mentioned that so far as the assessment for the assessment year 1957- 58 is concerned, the assessment order was once rectified and at another time revised. Despite such rectification and revision, the above mistake in the calculation of the Printed from counselvise.com 117 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. depreciation remained undetected. It was only in October, 1965, that the Income-tax Officer realised that higher amount of depreciation had been allowed to the appellant than was actually due. A letter to that effect was consequently sent to the assessee on October 5, 1965. It was, however, nowhere mentioned in that letter that the higher amount of depreciation had been allowed and the income as such had escaped assessment because of the omission or failure on the part of the assessee to disclose truly and fully all material facts. Reference to such omission or failure came only in a subsequent communication. The submission made on behalf of the appellant is not without force that reference was made to the assessee's omission or failure to disclose truly and fully all material facts because it was realised that after the expiry of four years from the end of the relevant assessment year, no action for reopening of assessment could be taken on the basis of detection of mistake alone unless there was also an allegation that the income had escaped assessment because of the omission or failure of the appellant to disclose fully and truly material facts. Looking to all the facts, we are of the opinion that it cannot be said that the excess depreciation was allowed to the appellant-company and its income as such escaped assessment because of its omission or failure to disclose fully and truly all material facts. It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as the income-tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed, the judgment of the High Court is set aside and the impugned notices are quashed.” Thus, what is not permitted directly cannot be permitted indirectly and therefore, the ld. CIT(A) cannot broaden the scope of the appeal decision to “advise” or “compel” another round of litigation again and again and as held by the apex court that we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage. Thus, looking to the provision of the law, decided case and facts of the present case we are of the considered view that ld. CIT(A) was tasked with deciding whether the addition under Section 153A was Printed from counselvise.com 118 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. sustainable given the specific facts and circumstance of the case. Ld. CIT(A) rightfully found it was not (for want of incriminating material) and deleted it. At that point, ld. CIT(A)’s authority ended. Ld. CIT(A) should have simply allowed the appeal on that issue. By proceeding to direct the AO to consider re-opening under Section 147, the ld. CIT(A) acted ultra vires and thereby we allow the cross objection of the assessee. In the result, the appeals of the revenue in ITA No. 301/JP/2025 stands dismissed and the cross objection in CO No. 02/JP/2025 of the assessee is allowed. On being consistent to the finding so already recorded we consider the ground raised by the assessee and thereby the cross objection filed by the assessee is allowed. In the result, the appeal of the revenue in ITA No. 480/JP/2025 stands dismissed and the cross objection No. 27/JP/2025 of the assessee is allowed. Order pronounced in the open court on 13/10/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 13/10/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- DCIT, Central Circle-03, Jaipur 2. izR;FkhZ@ The Respondent- Karnani Solvex Private Limited, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur Printed from counselvise.com 119 ITA Nos. 480/JP/2025 DCIT vs. Karnani Solvex Private Ltd. 6. xkMZ QkbZy@ Guard File (ITA No. 480/JP/2025 & CO No. 27/JP/2025) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar Printed from counselvise.com "
Other Referred Cases
Abhisar Buildwell vs. PCIT, U.K. Paints (Overseas) Ltd. vs. DCIT, Kabul Chawla vs. CIT, Gaurav Arora vs. PCIT, Meeta Gutgutia vs. PCIT, Shyam Sunder Khandelwal vs. ACIT, M B Traders vs. ACIT, S S Gadgil vs. Lal & Co., Parashuram Pottery Works Co. Ltd vs. ITO
Laws Referred To
Income Tax Act, 1961
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