SHRI AMIT MANGILAL JAIN,MUMBAI V. ACIT, - 33(1), MUMBAI

ITA 3332/MUM/2019

AI Insights

The case involves Shri Amit Mangilal Jain, who appealed against the reassessment orders for the Assessment Years 2009-10 and 2010-11. The reassessment was initiated under section 147 of the Income-tax Act, 1961, based on information from the Investigation Wing and a statement from Shri Akshay Doshi, following a search operation on the Bhoomi Group. The Tribunal considered whether the reassessment should have been conducted under section 153C, which deals with cases where materials seized during a search pertain to a person other than the one searched. The Tribunal found that the conditions for invoking section 153C were met, and thus, the reassessment under section 147 was not legally valid.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713063 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2010-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KRISHN KEDIA
• Assessee Lawyers: NARESH JAIN; MAHAVEER JAIN; ARS
• Keywords: Set aside; Reassessment proceedings; Depreciation; Income from undisclosed sources; Document seized; Documents seized; Search and seizure; Accommodation entries; Block assessment; Reason to believe
• Section: 147; 148; 143(3); 132; 153A; 131; 133A

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.3331/MUM/2019 (A.Y. 2009-10) ITA No.3332/MUM/2019 (A.Y. 2010-11) Shri Amit Mangilal Jain, 2nd Floor, Arkade House, Atmaram Sawant Marg, Kandivali East, Mumbai- 400101, Maharashtra v/s. बनाम Assistant Commissioner of Income Tax– 33(1), 103, Earnest House, 1st Floor, Nariman Point, Mumbai - 400021, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AABPJ0925G Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Naresh Jain & Shri Mahaveer Jain, ARs Respondent by : Shri Ram Krishn Kedia, (Sr. DR) Date of Hearing 13.06.2025 Date of Pronouncement 28.07.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals have been filed by the assessee against the orders of even date as passed by the Learned Commissioner of Income- tax (Appeals)-45 [hereinafter referred to as “CIT(A)”] pertaining to the assessment orders passed u/s. 143(3) r.w.s.147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”]for the Assessment Years [A.Y.] 2009-10 and 2010-11.Since the issues in these two appeals are common and identical, hence they were clubbed and heard together and consolidated Printed from counselvise.com P a g e | 2 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain order is being passed. For the sake of convenience, we shall take up ITA No. 3331/Mum/2019 for the A.Y 2009-10 as a ‘Lead case’. 2. The grounds of both the appeals are as under:- 1. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in confirming the action of the Ld AO of re-opening the assessment by issuing notice u/s. 147 which was merely based on information received from Investigation Wing and statement recorded of Shri Akshay Doshi u/s. 131. Confirming the initiation of reassessment proceedings, in absence of any failure on the part of appellant to disclose material facts necessary for assessment, is bad in law and consequently the reassessment order needs to be quashed. 2. Without prejudice to the above and without admitting, on the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the reopening proceedings inspite of the fact that the objections against reopening of the assessment raised by the appellant were not rejected by the Ld. AO in a meaningful manner. The Ld. CIT(A) ought to have quashed the reassessment proceedings and consequential assessment order. 3. It may be stated here that these appeals are part of second round of litigation. In the course of hearing before us, the assessee has raised following additional ground of appeal: Additional ground of appeal “That Ld. AO erred in facts & in law, in issuing reopening notice u/s 147 of the Act without appreciating the fact that in the case of search & seizure of third party, AO is duty bound to initiate proceedings u/s 153C in case of person relating to whom some material is found. Thus, action of Ld. AO in initiating the proceedings u/s 148 is null & void and deserves to be set aside.” 3.1 In this regard, it is submitted that hon’ble ITAT vide order dated 10.08.2022 during first round of appeal, has admitted the Printed from counselvise.com P a g e | 3 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain additional ground, and the relevant portion of the order is herein reproduced below: “1.2 At the time of hearing, the Ld. AR has raised the additional grounds of appeal as under: 1. That the CIT(A) erred in facts and in law, in issuing reopening notice u/s 147 of the Act without appreciating the fact that in the case of search and seizure of third party, AO is duly bound to initiate proceedings u/s 153C in case of person relating to whom some material is found. Thus, action of the Ld. AO in initiating the proceedings u/s 148 instead of Sec. 153C is Null & void and deserves to be set aside. 1.3. The Ld. DR has no serious objections for admission of additional ground of appeal filed by the assessee. Accordingly, we admit the additional ground of appeal and heard.” 3.2 It is further stated that in spite of citing judgements of various coordinate benches and hon'ble Madras High Court in case of Karti P. Chidambaram 2021 (7) TMI 393, hon’ble Tribunal dismissed the additional ground of appeal in the first round of appeal without considering the judgements cited. Thereafter, Miscellaneous Application (MA 57 & 58/MUM/2023) was filed on the ground of non-consideration of the judgement of Coordinate Benches which leads to mistake apparent from record. The hon'ble ITAT dismissed the MA vide order dated 31.08.2023 by stating that satisfaction note has not been recorded in this case. Thereafter, the assessee preferred Writ Petition before hon'ble Bombay High Court against the MA order. As per the hon'ble court the matter was remanded to the tribunal to rehear to MA No. 57 & Printed from counselvise.com P a g e | 4 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain 58/Mum/2023.The original appellate orders dated 10.08.2022 were also quashed and set aside. 3.3 Subsequently, as per direction of hon'ble High Court order, the ITAT has restored the appeal. The additional ground raised by the assessee was already admitted by the ITAT. Since the additional ground raised goes to the root of the matter, being jurisdictional ground, it is to be admitted following the judgement of Hon'ble Supreme Court in the case of NTPC Ltd. 229 ITR 383 (SC). 4. On due consideration of the above facts and also the previous order of the tribunal(supra) and also the fact that the additional ground is legal in nature which goes into the very root of the assessment proceedings, it is admitted by us for further adjudication. Moreover, the additional grounds raised challenges the legality of the reassessment proceedings and the consequent assessment order, the same is being taken up for adjudication in the paras to follow. 5. The assessee is an individual and is also a member in the AOP called Arkade Bhoomi Developers and Arkade Bhoomi Enterprise. A search action was conducted on M/s Ekta and Bhoomi Group on 05.10.2015 wherein one ledger account from the searched records was found bearing the name ‘Bridgeland Hamau’ Account. The AO taking Printed from counselvise.com P a g e | 5 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain cognizance of the certain entries therein reopened the assessment u/s 147 of the Act. The ld.AR has submitted that on the same document and same data found during the course of search, proceeding u/s 153C was initiated against the above mentioned AOP Arkade Bhoomi Enterprise and Arkade Bhoomi Developers. The AO of the searched party Ekta Bhoomi is also the A.O. of the above mentioned AOPs ie. they were the same viz. DCIT- CC-6(2).Assessments of above mentioned AOPs were completed u/s 153C of the Act wherein the AO of the AOPs has considered the receipts involved in present case for both the assessment years as receipts of AOPs out of sale of residential flats and shops in their real estate project. As per page no. 2 and 3 of the AOP order showing the receipts involved in present case have been considered as receipts of AOP. The order of Arcade Bhoomi Enterprise along with office note has been enclosed and relevant portion of office note is reproduced herein below for ready reference: “On perusal of seized papers which is decoded, it is evident that following cash transactions are noted – 1) Shri Amit Jain AY 2006-07Rs. 75,00,000/- AΥ 2007-08 Rs. 2,15,00,000/- 2) Arkade Bhoomi Developers – AY 2008-09Rs 1,05,00,000/- AY 2009-10Rs. 3,40,00,000/- 3) Arkade Bhoomi Enterprises- Printed from counselvise.com P a g e | 6 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain AY 2009-10Rs. 3,40,00,000/- AY 2010-11Rs. 2,00,00,000/- AY 2011-12Rs. 50,00,000/- Entries of cash sale of Arkade Bhoomi Enterprises amounting to Rs. 3.40 Cr for A Y 2009-10 is noted in the seized papers, But, since the intimation was received in December, 2016, that assessment could not be reopened. For AY 2010-11, the noting shows receipt of Rs. 2,00,00,000/- as unaccounted sales. This receipt being 50% share of Shri Akshay Dashi & Shri Ajay Mehta of Bhoomi Group the total unaccounted sales comes to Rs. 4,00,00,000/- In the return filed response to notice u/s 153C for AY 2010-11, the assessee has shown unaccounted sales Rs 4,00,00,000/-. The project situated at Kandivli(East) being eligible for deduction u/s 801B(10), additional income offered is claimed as deduction u/s 801B(10) of the Act. Following the decision of Bombay High Court in the cate of CIT vs. Sheth Developers P Ltd (2012) 254 CTR (Bom) 127, the claim of deduction u/s 80 1B(10) of the Act is allowed to the assessee.” 5.1 The satisfaction note prepared on the same document is reproduced in Pg no.12, para 3.8, of A.O.s order of A.Y. 2009-10 and para 5.7 at page 15 of CIT(A)’s order. Thus, it is contented that the ld.A.O. for the searched party and both the AOPs being the same, who had first hand information over the material was the appropriate officer as per section 153C and thus, it was concluded by him after recording his satisfaction that the said receipts were sale proceeds by the AOP. Thereafter, the AO of AOP issued notice u/s 153C and completed assessment after being satisfied that such receipts pertained to AOP. It is stated that even as per section 153C, DCIT-CC,6(2) was the appropriate officer to determine the issue as to whom the seized records belonged. Printed from counselvise.com P a g e | 7 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain 5.2 It is further contented that the same information was utilised by the ld.A.O. of the assessee to reopen assessee's case. It is emphasised that not only the information but also the document which was found in the search viz. the ledger account named “Bridgeland Hamau” was relied upon by the A.O. in assessing the income u/s. 147 of the Act. The search document viz, the ledger has not only been reproduced but also has been the basis of addition in the ld.A.O.’s order on page-4 of the A.O.'s order which clearly shows that the re-opening was based on the material gathered in the search itself. 5.3 Based on above facts, it is argued that the assessment based on material seized during the course of search of third party should be u/s. 153C of the Act and not u/s. 147 of the Act. In the present case, the search was conducted on M/s. Ekta Bhoomi Group on 05.10.2015, and the seized documents and ledgers are alleged to relate to the assessee. Therefore, any reassessment based on such documents must be made only under section 153C and not u/s 147. Therefore, the invocation of section 147 in this context is not legally valid. 5.4 The ld.AR has strongly relied upon the latest decision of hon'ble Bombay High Court in the case of Sejal Jewellery 2025(2) TMI 870-Bombay wherein it held that the use of the non-obstante clause contained in the provisions u/s. 153C of the Act makes it clear Printed from counselvise.com P a g e | 8 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain that the legislative intent was for AO to proceed only under section 153C upon receipt of material seized or requisitioned. Hon'ble High Court relied on the judgement of Rajasthan High Court in the case of Shyam Sunder Khandelwal 2024 (4) TMI 196- Rajasthan High Court and concurred with the view taken by it. Further, hon’ble High Court has also relied on judgement of hon’ble Karnataka High Court in case of Sri Dinakara Suvarna us DCIT (2022) 143 taxmann.com 362 (Karnataka). 5.5 The ld.AR has been fair enough to draw our attention to a contrary judgement by hon’ble Delhi High Court on the same issue in the case of Naveen Kumar Gupta 2024 (11) TMI 1071- Delhi High Court in which it did not concur with the view taken by Rajasthan High Court in the case of Shyam Sunder Khandelwal (Supra). Further, hon'ble Delhi High Court has also expressed disagreement with the view taken by hon'ble Karnataka High Court in case of VSL Mining 2024(9) TMI 1383- Karnataka High Court. 5.6 It is submitted that decision of the jurisdictional High Court is binding on revenue authorities under its jurisdiction. Moreover, there being two contrary views of courts, as held by hon’ble Apex Court in CIT vs Vegetable Products Ltd(1973), one which is favourable to the assessee will prevail. Printed from counselvise.com P a g e | 9 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain 5.7 The ld.CIT-DR has relied upon the assessment order claiming that there is no infirmity in the action of the AO in taking action u/s 148 of the Act since no satisfaction was recorded at any stage by any of the authorities concerned in terms of section 153 C of the Act. Therefore, the only recourse available to the AO was section 147 of the Act. 6. We have duly considered all the relevant facts of the case, perused the records and have also gone through the relevant provisions of the Act as also the citations relied upon by the ld.AR. The brief facts of the case are that the assessee is an individual and proprietor of Arcade Creations engaged in the business of real estate. Original assessment was completed in AY 2009-10 on total income of Rs 32,05,523/- which was later reopened u/s 148 of the Act based on the information of the Investigation wing on the basis of search operation in the case of Bhoomi Group and its director, Sri Akshay Doshi. A ledger containing digital data found during search revealed that the assessee had made capital contribution of Rs 6.80 cr and Rs 2.50 cr. in FY 2008-09 and 2009-10 respectively in connection with certain project in which he was one of the partners. The amounts were treated as unexplained income of the assessee. The ld.CIT(A) directed the AO to delete the addition. The ITAT restored the issue of unaccounted income to the ld.CIT(A) for fresh adjudication. Printed from counselvise.com P a g e | 10 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain 6.1 We find that in the additional ground the assessee has basically contented that the proceedings u/s 147/148 of the Act are liable to be treated void as on facts of the case, provisions of section 153C of the Act were applicable which the AO failed to initiate. It is emphasized that the assessee’s case is intrinsically linked to a search and seizure operation in Bhoomi group and the information received emanated from search proceedings. At the outset it would be relevant to go through the information shared by the Investigation wing which are stated to be the basis of reassessment proceedings reproduced below: 3.1. Gist of information received from the investigation Wing on 22.03.2016 is as follows: i. \"Search was carried out in the case of Bhoomi Group and Shri Akshay Doshi, Director of the Bhoomi Group has admitted that the digital data found during the course of search represents the cash transactions executed and the same have not been recorded in regular books of accounts. ii. A ledger containing data namely Bridgeland (Humau) has been found during the course of search proceedings and Shri Akshay J Doshi has submitted that these transactions have been executed to acquire land in Kandivali for the purpose of TDR generation and Shri Amit M. Jain, being one of the partner in the project has made capital contribution in the cash as follows: TOTAL The amount so invested in cash as capital contribution is undisclosed income of F.Y. Amt. (Rs.) 2008-2009 6,80,00,000/ 2009-2010 2,50,00,000/ Total 9,30,00,000/-. The amount so invested in cash as capital contribution undisclosed income of Shri Amit M. Jain. On the basis of the information passed, reasons have been recorded and once all the approvals were in place, notice U/'s 148 has been issued on 28.03.2016, thereby reopening the assessment. This notice U/s 148 was duly served on the assessee on 29.03.2016. The reason recorded being as under: \"As a result of Search and Survey action conducted by the Investigation Wing, Mumbai, information has been received from DDIT(Inv.) Unit 3(4), Mumbai that Shri Amit Mangilal Jain in the capacity of partner has introduced capital in cash amounting to Rs. 6,80,00,000/-. This capital introduction in cash is nothing but money generated out of undisclosed income of Shri Amit Mangilal Jain. As such, it is also failure on the part of the assessee to make full and true disclosure of these material facts in the relevant assessment year, as far as the above issue is concerned. Therefore, I have a reason to believe that the income of Rs. 6,80,00,000/- has escaped assessment within the meaning of Section 147 of the Income Tax Act.\" Printed from counselvise.com P a g e | 11 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain The A.O. has received the details and information, were the search and survey action was carried at M/s Ekata & Bhoomi Group on 05.10.2015, and during the course of search action incriminating data of M/s Bhoomi group has been found relating to cash transactions executed by the Bhoomi Group with different parties and was in digital form. The data relating to cash transactions is maintained in journal and posted later in ledger and the transactions are not part of regular books of accounts. The revenue has recorded statement of M/s Bhoomi Group Director Mr. Akshy Doshi in post search statement u/s 131 of the Act dated 28.12.2015 and the modus operandi of cash transactions recorded. The A.O on verification of ledger account, find the capital contribution by Shri Amit Jain in the F.Y 2008-09 of Rs. 6.8 crores , F.Y 2009-10 of Rs. 2 Crores, F.Y 2010-11 of Rs. 50 lakhs total aggregating to Rs. 9.30 crores. The disputed issue in this year being A.Y 2009-10, where there is a capital contribution of Rs.6.8 crores. The A.O has referred to the ledger account received from the DDIT (Inv) Mumbai at Para 3.2.4 on the cash transactions between 19-12-2005 to 26-11-2010. The revenue to confirm the transactions conducted survey on the assessee on 23.09.2016 and the relevant questions/answers in the course of survey u/s 133A of the Act were refereed in the assessment order. 6.2 For ready reference we quote section 153C as under:- \" 153C. [Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person][and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A] : [Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to [sub- section (1) of] section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :] [Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A] except in cases where any assessment or reassessment has abated.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which Printed from counselvise.com P a g e | 12 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year-- (a) no return of income has been furnished by such other person and no notice under sub- section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.\" 6.3 This section begins with non-obstante clause and therefore, has an overriding effect on sections 147 and 148 of the Act. As per the scheme and object of section 153C r.w.s 153A, the AO has no discretion or choice to invoke the provisions of section 147/148 instead of section 153C r.w.s. 153A of the Act. Once the case of reassessment is made out by the AO which falls in the preview of specific provisions of section 153C of the Act, the AO cannot resort to invoke the provisions of section 147/148 of the Act to assess or reassess income of the assessee. The action of the AO to initiate the proceedings under section 147/148 of the Act vitiates the entire reassessment proceedings and the assessment order. Once, the AO is satisfied that the documents seized belong to the persons other than the searched person, the AO shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to Printed from counselvise.com P a g e | 13 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be assessed or reassessed. 6.4 In view of the above recorded reasons, it is undisputed fact that the reassessment proceedings initiated u/s 147 of the Act are directly linked to incriminating materials shared by the Wing. The ld.AR has pointed out that in such circumstances, the AO ought to have taken recourse to section 153C of the Act. Therefore, subsequent assessment made u/s 147/143(3) is without assuming correct jurisdiction is void and illegal. Exactly identical issue has been adjudicated by hon’ble Bombay High Court in the case of Sejal Jewellary And Anr vs Union Of India And 3 Ors on 18 February, 2025 IN WP3057_2019.DOCwherein the hon’ble Court has duly examined the provisions of section 147 and 153A/153C of the Act in a search and seizure related case. Relevant portions of the order is reproduced as below: “16. On a plain reading of Section 153A, it is clear that it begins with a ' non- obstante' clause, when it provides that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 but on or before 31 March, 2021, the Assessing Officer shall have jurisdiction to issue notice to such person to furnish the return of income as specified in the notice or assess or reassess the total income as provided by the provision. Section 153C also begins with a non-obstante clause, when it provides that notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153, to provide that, in a situation which may fall under Section 153C insofar as assessment of income of any other person is concerned, the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of other persons in accordance with the provisions of Section 153A, if he is satisfied that the books of account or document or assets seized or requisitioned have a bearing on the determination of the total income of such person for a period as specified in the said provision and after compliance of other provisions as mandated. On the other hand, Section Printed from counselvise.com P a g e | 14 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain 147 provides for \"Income escaping assessment\", can be invoked when any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year. In such situation, the Assessing Officer may subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year and for which a prior notice under Section 148 would be required to be issued. Section 147 does not contemplate an eventuality which Section 153A or Section 153C contemplates, the basis of which is inter alia a search action under Section 132 being resorted as noted hereinabove. Thus, both these provisions are quite compartmentalized although the deeming effect of both the provisions, may be the same. However, the situations in which such provisions operate are required to be invoked are completely different. This is clear from the bare reading of the provisions, hence would not warrant any elaborate discussion. 17. The purport and effect of these provisions had fell for consideration of the Supreme Court in Abhisar Buildwell P. Ltd. (supra), wherein the scope of assessment under Section 153A of the I.T. Act was considered. In this case, the Revenue's contention was to the effect that the Assessing Officer was competent to consider all the materials which were available on record, including the materials found during search so as to make an assessment of the total income. Some of the High Courts had accepted such propositions. However, the assessee had contended that there were also decisions of the High Courts to the effect that if assessment proceedings were not pending on the date of initiation of the search, the Assessing Officer needs to consider only the incriminating material found during the search, and was precluded from considering any other material derived from any other source. It is in such context, the Supreme Court considering the purport of the provisions of Section 153A of the I.T. Act, vis a vis its applicability qua the provisions of Section 147, and the applicability of Section 132, 132A and notably the decision of the Delhi High Court in Commissioner of Income Tax, Central-III vs. Kabul Chawla6 inter alia held that the provisions of Section 153A(1) need to be mandatorily resorted once a search takes place. The Supreme Court held as under: \"7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under Summary of the legal position 38. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs \"in which both the disclosed and the undisclosed income would be brought to tax\". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment \"can be arbitrary or made without any relevance or nexus with the seized material. Printed from counselvise.com P a g e | 15 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain Obviously an assessment has to be made under this Section only on the basis of seized material.\" v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be (2015) 61 taxmann.com 412 (Delhi) made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.\" 18. The Supreme Court held that it was in complete agreement with the view taken by the Delhi High Court in Kabul Chawla (supra) and of the Gujarat High Court in Principal Commissioner of Income Tax-4 vs. Saumya Construction7 taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 19. Insofar as the present proceedings are concerned, the following observations made by the Supreme Court in the context of Section 147 and 148 of the I.T. Act need to be noted: \"11. As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re- assessment, if any, (2016) 387 ITR 529 (Guj.) relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. 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 Printed from counselvise.com P a g e | 16 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain under Sections 147/148 of the Act, subject to fulfillment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under Sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub- section (2) of Section 153A would be redundant and/or re- writing the said provisions, which is not permissible under the law.\" 20. It is thus clear that in the event any incriminating material is found during the search, the Revenue necessarily would be required to take recourse to the provisions of Section 153A and in the event no incriminating material found during the search, then the power of the Revenue to have the reassessment under Sections 147/148 of the I.T. Act stands saved, failing which, the Revenue would be left without remedy. It is on such observations the conclusions as rendered by the Supreme Court and which are relevant to the case in hand, are required to be noted, which reads thus: \"14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved. Printed from counselvise.com P a g e | 17 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.\" 21. The Rajasthan High Court in Shyam Sunder Khandelwal s/o. Late Damodar Lal Khandelwal vs. Assistant Commissioner of Income Tax, Central Circle-2, Jaipur8 (supra) also had taken a similar view when the issue which had arisen before the Court was in regard to the notice issued under Section 148 of the I. T. Act, the basis of issuance of such notice was the material seized during search. The contention of the assessee was to the effect that in the said circumstances, the proceedings ought to have been initiated under Section 153C of the I.T. Act. The Division Bench referring to the decision of Supreme Court in Abhisar Buildwell P. Ltd. (supra) as also the decision of Karnataka High Court in Sri Dinakara Suvarna (supra) allowed the petitions observing that the department had not set up a case, that for initiating proceedings under Civil Writ Petition No. 18363/2019 dated 19.03.2024 , it had material other than the material seized during the search of a related party. The relevant observations of the Division Bench are required to be noted, which reads thus: \"23. The reasons supplied in case in hand for initiation of proceedings under Section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group. 24. In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the assessee for filing of income tax return for the relevant preceding years. The AO assumes jurisdiction to assess/reassess 'total income' by passing separate order for each assessment. 25. In cases of the person other than on whom search was conducted but material belonging or relating such person was seized or requisition, the AO has to proceed under Section 153C. The two pre-requisites are that the AO dealing with the assessee on whom search was conducted or requisition made, being satisfied that seized material belongs or relates to other assessee shall hand over it to AO having jurisdiction of such assessee. Thereafter, the satisfaction of AO receiving the seized material that the material handed over has a bearing for determination of total income of such other person for the relevant preceding years. On fulfillment of twin conditions the AO shall proceed in accordance with the provisions of Section 153A. 26. Special procedure is prescribed under Section 153A to 153D for assessment in cases of search and requisition. There cannot be a quibble with the proposition that the special provision shall prevail over the general provision. To say it differently the provisions of Section 153A to 153D have prevalence over the regular provisions for assessment or reassessment under Section 143 & 147/148. 27. Section 153A and 153C starts with non- obstante clause. The procedure for assessment/reassessment in Section 153A, 153C in cases of search or requisition has an overriding effect to the regular provisions for assessment or reassessment under Sections 139, 147, 148, 149, 151 & 153. 28. The language of explanation 2 to new Section 148 is akin to Section 153A and Section 153C. Corollary being that after seizing of operational period of Section 153A to 153D, the Printed from counselvise.com P a g e | 18 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain cases being dealt thereunder were circumscribed in the scope of newly substituted Section 148.\" We are in complete agreement with the view taken by the Division Bench of Rajasthan High Court in the aforesaid decision. 22. Applying the principles of law as discussed hereinabove, we are of the clear opinion that the foundation of the present case was certainly a search action which was undertaken by the Revenue against one Shilpi Jewellers Pvt. Ltd. and in such search and seizure action, materials were seized and such materials were further explored and enquired. Such enquiry revealed significant information in regard to M/s. Green Valley Gems Pvt. Ltd., which according to the Revenue had provided accommodation entries to the petitioner, in which it was also revealed that Green Valley Gems Pvt. Ltd. was a shell company. We do not find that the record would indicate something which is not on the basis of such new materials gathered under the search and seizure action under Section 132. If this be the case, then certainly the provisions of Section 153C read with Section 153A would be applicable, as held by the Supreme Court in Abhisar Buildwell P. Ltd. (supra) when the Court interpreted the effect and purport of Section 153C and 153A, as also held by the Rajasthan High Court in Shyam Sunder Khandelwal (supra). 23. Insofar as Mr. Suresh Kumar's contention supporting the proceedings under Section 147 and 148 of I.T. Act are concerned, for the aforesaid reasons, such contention would in fact go contrary to the intention of the legislature as depicted by the provisions of Section 153A and 153C of the I.T. Act. There would not be any difficulty in accepting the proposition as canvassed by Mr. Suresh Kumar, referring to the decision of the Supreme Court in Phool Chand Bajrang Lal (supra), however, the facts in the present case are distinct. There cannot be any doubt on the position in law when the Revenue intends to proceed purely on materials relevant for an action under Section 148 read with Section 147. We have already observed that the provisions of Sections 147, 148 vis-a-vis Section 153A and Section 153 are quite compartmentalized. To avoid any overlapping of these provisions, the legislature in its wisdom has thought it appropriate to provide for an independent effect, to be given under Section 153A read with Section 153C by incorporating the \" non-obstante\" clause, in these provisions, which carves out an exception to any normal/regular action being resorted under Section 147. 24. In this view of the matter, we are of the clear opinion that the impugned notice under Section 147 of the I.T. Act and all actions consequent thereto are required to be held to be without jurisdiction and bad in law. The petition is accordingly allowed in terms of prayer clauses (a) and (b).” 7. We find that the ratio decidendi of the above decision squarely applies to the facts of the case under consideration before us.On perusal of the above provisions, it is clear that the provisions of section 153C of the Act were applicable, which supersede the applicability of provisions of section 147 and 148 of the Act. As we have already noted hereinabove Printed from counselvise.com P a g e | 19 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain that relevant documents were seized during the search under s. 132 of the Act, in our view only the provision in which any assessment could be made against the assessee in the Act was section 153C r/w s. 153A of the Act. Hence, notice issued under s. 148 of the Act and proceedings under s. 147 of the Act by the AO are illegal and void ab initio. In the instant case, the procedure laid down under section 153C has not been followed by the AO and, therefore, assessment has become invalid. The AO initiated action u/s 147 incorrectly as the on the facts and the circumstances of the case in the presence of incriminating materials found in search action u/s 132 of the Act ,only recourse available with him was section 153C of the Act. 7.1 It is worthwhile to mention here that the coordinate Bench of Mumbai ITAT in certain recent decisions have taken similar view in the light of the judgement in the case of Sejal Jewls(supra) i.e.Parshwa Investment ,Mumbai in ITA No.1429/Mum/2025 dated 30 June, 2025 and Ghanshaym R. Shah in ITA No.4707/Mum/2024 dated 21.4.2025,the later decision inter alia holding that, “the legal issue is agitated before us whether the initiation of reassessment proceedings under Section 147 of the Act, is not legally sustainable in the present case. The foundation of the reopening rests entirely on documents seized during the search and seizure operation conducted on a third party, namely the xxxxxxxxxx. As per the express scheme of the Act, where documents seized in a search pertain to or belong to a person other than the Printed from counselvise.com P a g e | 20 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain searched party, the appropriate and mandatory course of action is to proceed under Section 153C and not under Section 147…………….. However, if the pre-conditions of Section 153C were not met, the invocation of Section 147 based solely on the same documents amounts to circumvention of the statutory safeguards embedded in Section 153C. Allowing such a course of action would render Section 153C otiose, defeating the purpose of the special procedure laid down by the legislature.” 7.2 Respectfully following the jurisdictional High Court decision in the case of Sejal Jewellary and coordinate bench decisions(supra) we hold that the impugned notice under section 147 of the Act and all actions consequent thereto are held to be without jurisdiction and bad in law and therefore quashed allowing the additional ground of appeal. 8. Since the additional ground of appeal has already been allowed, rest of the grounds of appeal have become academic and do not need adjudication but are nevertheless kept open. ITA No.332/Mum/2019 9. Since facts of the case are identical in the appeal for AY 2010- 10, our decision rendered in para 7.2 above applies mutatis mutandis, allowing the appeal of the assessee. 10. In the result, both the above appeals are allowed. Order pronounced in the open court on 28.07.2025. Sd/- Sd/- Printed from counselvise.com P a g e | 21 ITA No. 3331, 3332/Mum/2019 A.Y. 2009-10, 2010-11 Shri Amit Mangilal Jain SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 28.07.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "