Citation Codes

Equivalent Citations

citation codes

Case Number

ITA 5079/DEL/2019

Disposition

allowed

Attorney(S)

Judges

M. Balaganesh, A.M.
Anubhav Sharma, J.M.

Acts

Section 147/148. 32.
Sections 139, 147, 148, 149, 151 & 153. 28.
provisions of Section 147/148 vis-a-vis Section 153C
Section 143 & 147/148. 27. Section 153A
u/s 250 of the Income Tax Act, 1961 passed by CIT(A)-8 (hereinafter referred as the 'Act')
Section 148. 7 29.
provisions of Section 153A. 26. Special procedure

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Smart Summary

Case Summary: ITA No. 5079/Del/2019 - Shri Karshni Metals Pvt. Ltd. Vs. ITO (A.Y. 2010-11)

Factual and Procedural Background

The assessee (Shri Karshni Metals Pvt. Ltd.) appealed against an order under Section 250 of the Income Tax Act, 1961 passed by the Commissioner of Income Tax (Appeals)-8 dated 08/03/2019, which arose from an assessment framed under Sections 147/143 of the Act by the Income Tax Officer, Ward 23(3), New Delhi, for the assessment year 2010-11.

The Assessing Officer had made an addition of Rs. 1,00,00,000 under Section 68 on account of receipt of share application money and an addition of Rs. 2,00,000 as commission @2% on that amount, treating those amounts as unexplained investment. The assessment action followed a search conducted on the Surendra Kumar Jain Group and was based on material found during that search (reasons recorded are part of the Paper Book).

On appeal, the assessee challenged the jurisdiction exercised under Section 147/148, arguing that where incriminating material found during a search belongs to a person other than the person searched, assessments should be proceeded with under Section 153C (and then Section 153A procedure), not under Section 148/147. The matter was heard by the Income Tax Appellate Tribunal (Delhi Bench 'B') on 14/08/2024 and the order was pronounced on 27/08/2024.

Legal Issues Presented

Whether the Assessing Officer erred in proceeding under Section 147/148 of the Income Tax Act when the incriminating material seized during a search related to persons other than the person searched, thereby requiring assessment proceedings under Section 153C (and the special procedure under Sections 153A–153D).
Whether the additions made under Section 68 (share application money of Rs. 1,00,00,000) and the commission of Rs. 2,00,000 (2%) were sustainable when the jurisdictional and procedural provisions applicable to search/requisition cases (Sections 153A–153D and Section 153C) were not followed.

Arguments of the Parties

Appellant's Arguments

The Assessing Officer illegally exercised jurisdiction under Section 147/148 instead of invoking Section 153C where the incriminating material found during the search belonged to persons other than the person in whose case the search was conducted.
The presence of the non-obstante clause in Section 153A (and related Sections 153B–153D) and the special procedures for search assessments mean that where seized material relates to a third party, assessment must proceed under Section 153C (with the consequential Section 153A procedure), not under Section 148/147.
The appellant relied on multiple precedents (including a decision of this Bench in M/s Mah Impex Pvt. Ltd. v. ITO) to support the proposition that the AO should have proceeded under the special provisions applicable to search/requisition cases rather than under Section 148/147.

Respondent's (Department) Arguments

The Departmental Representative (DR) relied on the decision Saloni Kumar Prakash v. ITO (Madras High Court, 2023) and argued that the Assessing Officer was justified in completing the assessment under Section 147 of the Act on the basis of information found during the search.
The DR thus contended that initiating proceedings under Section 148/147 was permissible in the circumstances and supported the additions made by the AO and confirmed by the CIT(A).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Warm Forgings P. Ltd. v. DCIT, Circle 27(1), New Delhi (ITAT Delhi, April 3, 2024)	The opinion lists this decision relied upon by the assessee; the specific principle cited in the present text is not separately described.	The decision is cited by the assessee among authorities to support the position that Section 153C applies where seized material relates to a third party.
M/s Mah Impex Pvt. Ltd. v. ITO, Ward-16(1), ITA No. 279/Del/2019 (Order dated 31/10/2023) (This Bench)	The Bench's earlier findings concerning assessment procedure following a search of the Surendra Kumar Jain Group were relied upon; the specific legal principle as applied here relates to the proper procedure (interplay of Sections 148/147 and Sections 153A–153C) in search cases.	The present Bench held that the findings in Mah Impex "squarely apply" to the assessee's case and treated those findings as supporting allowance of the additional ground and the appeal.
Sri Dinakara Suvarna (Prop. Balaji Constructions) v. DCIT Central Circle, Mangalore (Karnataka High Court, July 8, 2022)	Cited by parties (petitioner relied upon it); the specific paragraph quoted in the opinion indicates concern about non-application of mind where Section 153C proceedings were not initiated.	The decision was considered by the Tribunal in the overall survey of authorities; the text reproduces a paragraph from that decision and treats it as part of the body of authorities addressing application of Section 153C.
Deputy Commissioner of Income Tax v. Sri Dinakara Suvarna (Supreme Court order dated March 27, 2023)	Listed among authorities; the opinion states it was one of the judicial pronouncements considered by the Rajasthan High Court in Nishit Gupta.	The Tribunal notes that higher courts' pronouncements (including this one) were part of the judicial history considered by the Rajasthan High Court which the Tribunal relied upon in its reasoning.
M/s Aditi Constructions v. DCIT Central Circle-1 (Bombay High Court, May 4, 2023)	Quoted in the opinion for the proposition that specific provisions of Section 153C would prevail over general provisions like Section 147 in the case of search affecting a third party.	The Tribunal reproduced the Bombay High Court paragraph and treated it as supportive authority for the view that Section 153C prevails in search-of-third-party scenarios.
Karti P. Chidambaram v. Principal Director of Income Tax (Investigation), Chennai (Madras High Court, July 5, 2021)	Cited in the list of authorities relied upon by parties; the present text does not state the particular rule drawn from this decision.	Listed among precedents considered; no distinct Court application beyond listing is specified in the opinion.
M/s Ravi Nirman Nigam Ltd. v. DCIT-Circle-13 (ITAT Mumbai, April 27, 2022)	Listed in the opinion; the specific principle cited for in the present text is not detailed.	Included in the array of tribunal/court decisions that were placed before the Court; the opinion does not state a targeted application beyond consideration.
ACIT Circle-45 (1) New Delhi v. M/s K.S. Chawla & Sons [HUF] (ITAT Delhi, May 18, 2021)	Listed among tribunal decisions cited; the specific rule cited is not described in the present opinion.	Listed as part of precedential material relied on by the parties or considered by the courts; the Tribunal does not summarise a discrete holding from it in this text.
Income-tax Officer v. Arun Kumar Kapoor (ITAT Amritsar, June 21, 2011)	Listed among cited decisions; no specific principle extracted in the present text.	Included in the list of authorities; no separate application or reliance is described in the opinion.
Shri Sanjay Singhal (HUF) v. DCIT Central Circle-1 Chandigarh (ITAT Chandigarh, June 19, 2020)	Listed among tribunal decisions cited; the opinion does not state what specific principle was taken from it.	Mentioned among precedents considered; no specific application by the Tribunal is described beyond listing.
Shri Adarsh Agrawal v. The Income Tax Officer, Ward-61(1), New Delhi (ITAT Delhi, January 14, 2020)	Listed among tribunal decisions; the present text does not indicate the exact principle cited.	Included among authorities; the Tribunal does not elaborate targeted application in the opinion.
Sambhavnath Infrabuild and Farms Pvt. Ltd. (Successor to Lodha Construction Pvt. Ltd.) v. Asst. CIT Central Circle-7 (ITAT Mumbai, January 6, 2022)	Listed among tribunal decisions cited; the text does not extract a specific rule from it for present purposes.	Listed in the opinions' catalogue of authorities; no distinct application beyond listing is recorded.
Saloni Kumar Prakash v. ITO (Madras High Court, 2023 - 153 Taxman.com 432)	The Department relied on this decision to argue that issuance of notice under Section 148 is not precluded even when search material is involved; the Madras High Court held Section 153C does not preclude issuance of notice under Section 148 (as noted in the opinion).	The Tribunal recorded that the Department relied on this decision, yet the Tribunal (via the Rajasthan High Court discussion and the present analysis) considered this decision of no help to the Department's contention in the facts before the Tribunal.
Nishit Gupta (son of Shri Ramesh Gupta) v. ACIT (Rajasthan High Court, DB, Order dated 19/03/2024) (DB Civil Writ Petition No. 18363/2019)	The Rajasthan High Court considered the applicability of Section 153C and Section 148 where seized material during search or requisition related to persons other than the person searched, and held that where the twin pre-requisites for Section 153C are satisfied the AO must proceed under Section 153A/153C (special procedure) rather than Section 148.	The Tribunal relied on and quoted at length from the Rajasthan High Court's reasoning; it treated that decision as persuasive and consistent with its conclusion that Section 153C must be resorted to when seized material relates to a third party, thereby supporting quashing of Section 148 action in such cases.
Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd. [(2023) 454 ITR 212 (SC)] (Supreme Court)	The Supreme Court decision was considered in the judicial history; the Rajasthan High Court and the Tribunal noted that Abhisar Buildwell clarified that in the absence of incriminating material seized during search the department may proceed under Section 148 based on material from other sources.	The Tribunal (via the Rajasthan High Court analysis) treated the Supreme Court decision as not supporting the Department's contention that Section 148 should be used where incriminating material seized during search relates to a third party; the Supreme Court's holding was acknowledged as limited to cases without incriminating seized material.
M/s M.R. Shah Logistics Pvt. Ltd. (supra)	Mentioned in the Rajasthan High Court discussion; the opinion records that this decision did not address the specific interplay between Sections 147/148 and Section 153C for third-party seized material.	The Rajasthan High Court (quoted in the Tribunal's reasoning) said reliance on this decision was of no avail because the specific issue was not before the Supreme Court in that case.
Vijay Kumar Mehta (single bench decision)	Referenced by the Rajasthan High Court in its survey of authorities; the opinion notes that the Single Bench held that if the Department chose not to proceed under Section 153C, no right was created for quashing a notice under Section 148 — but the Single Judge did not have benefit of Abhisar Buildwell decision.	The Tribunal recorded the Rajasthan High Court's assessment of this authority and treated it in light of later authorities; no separate application beyond that recording is made by the Tribunal.

Court's Reasoning and Analysis

The Tribunal considered the parties' submissions and an extensive body of case law addressing the interplay between the special search/requisition provisions (Sections 153A–153D, particularly Section 153C) and the general reassessment provisions (Sections 147/148). The Tribunal relied substantially on the reasoning in the Rajasthan High Court's decision in Nishit Gupta (DB, 19/03/2024), which the opinion quotes and summarises at length.

Key steps of the Tribunal's reasoning (as recorded in the opinion):

The Tribunal accepted the proposition, derived from Nishit Gupta, that Sections 153A–153D prescribe a special procedure for assessments where searches or requisitions occur and that the special provisions are intended to prevail over general provisions (such as Sections 139, 147, 148) because they contain a non-obstante clause and a distinct procedural scheme.
The Tribunal set out the "twin pre-requisites" for invoking Section 153C cited in the Rajasthan decision: (a) the AO of the person searched must be satisfied that seized material belongs to or relates to another person and must hand over that material to the AO having jurisdiction over that other person; and (b) the AO receiving the material must be satisfied that the material has a bearing on the determination of that other person's total income for the relevant years. Only on fulfillment of these conditions does Section 153C/153A procedure become applicable.
The Tribunal (via the Rajasthan High Court reasoning) emphasised that once the twin conditions for Section 153C are satisfied, the AO must proceed under the special scheme (Sections 153A/153C), issue notices for returns for relevant years and assess or reassess the "total income" (which includes returned income, unearthing from search, and information from other sources), rather than proceeding under Section 148/147.
The Tribunal noted that the Supreme Court decision in Abhisar Buildwell clarified that Section 148 remains available where no incriminating material is seized during search — i.e., Abhisar Buildwell does not support using Section 148 where incriminating material seized during search belongs to a third party and the Section 153C conditions are met.
The Tribunal found that certain decisions relied upon by the Department (for example, Saloni Kumar Prakash) were not persuasive in the factual context before the Tribunal; the Rajasthan High Court had considered Saloni and concluded it was of no help to the Department's position in that context.
Applying the above legal principles and precedents (in particular the findings of this Bench in M/s Mah Impex Pvt. Ltd. and the reasoning in Nishit Gupta), the Tribunal concluded that the Assessing Officer had erred in proceeding under Section 148/147 when the correct procedure required resort to Section 153C (and the special procedure under Section 153A) upon satisfaction of the relevant conditions.

Holding and Implications

The Additional Ground raised by the assessee is allowed and the appeal is allowed.

Direct consequences (as recorded in the opinion):

The Tribunal allowed the Additional Ground (which challenged the jurisdictional exercise under Section 147/148 in circumstances where Section 153C should have applied) and consequently allowed the assessee's appeal against the CIT(A) order dated 08/03/2019 that had confirmed additions made by the AO.
The Tribunal expressly treated the findings of this Bench in M/s Mah Impex Pvt. Ltd. (which involved a search of the Surendra Kumar Jain Group) as squarely applicable to the assessee's case and relied on the reasoning in the Rajasthan High Court decision (Nishit Gupta) and related authorities in reaching its result.

The opinion does not state in explicit express detail any broader new precedent being laid down by this order; rather, the Tribunal applied existing Bench and High Court reasoning to the factual matrix before it and reached the result of allowing the appeal. (The Rajasthan High Court reasoning quoted in the opinion specifically stated that notices issued under Section 148 and impugned orders were quashed in its context; the Tribunal applied analogous reasoning here and allowed the appeal.)

Disposition: Appeal allowed. Order pronounced on 27 August 2024.

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Shri Karshni Metals Pvt Ltd, New Delhi v. ITO WARD - 23(3), New Delhi

1 ITA No. 5079/Del/2019 Shri Karshni Metals Pvt. Ltd. Vs. ITO

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH: 'B' NEW DELHI

BEFORE SH. M. BALAGANESH, ACCOUNTANT MEMBER

AND

SHRI ANUBHAV SHARMA, JUDICIAL MEMBER

I.T.A. No. 5079/DEL/2019 (A.Y 2010-11)

Shri Karshni Metals Pvt. Ltd. Gali No. 1, Shiv Vihar, Shahbad Dairy, New Delhi PAN No. AANCS6341N (APPELLANT)	Vs.	Income Tax officer Ward-23(3) New Delhi (RESPONDENT)
Assessee by :	S h. Ved Jain, Adv and Ms. Supriya Mehta, CA
Department by:	Sh. Shyam Manohar Singh, SR. D R
Date of Hearing	14.08.2024
Date of Pronounc ement	27.08.2024

ORDER

PER ANUBHAV SHARMA, JM

The assessee has come in Appeal against the order u/s 250 of the Income Tax Act, 1961 passed by CIT(A)-8 (hereinafter referred as the 'Act') dated 08/03/2019 arising out of assessment order u/s 147/143 of the Act made by the ITO, Ward 23(3), New Delhi

(hereinafter referred as the 'Assessing Officer' or in short 'A.O') for the Assessment Year 2010-11.

2. On hearing both the sides, it comes up that the Ld. CIT(A) has confirmed the addition of Rs. 1,00,00,000/-, made by the Assessing Officer u/s 68 of the Act on account of receipt of share application money and an addition of Rs. 2,00,000/- on account of commission @2% on Rs. 1,00,00,000/-, treating the same as unexplained investment. The background to this addition was that a search was conducted on the Surendra Kumar Jain Group and as is evident from copy of reasons recorded made available at Page No. 21-38 of the Paper Book, an assessment in the present case was framed u/s 147 of the Act in the case of the assessee on the basis of material found during the course of search of the Surendra Kumar Jain Group.

3. The Ld. Counsel appearing for the assessee, at the outset has raised the issue of illegal exercise of jurisdiction u/s 147 of the Act instead of Section153C of the Act.

4. In this context, we find that the Additional Ground No. 11 has been raised as follows:-

"11. On the facts and circumstances of the case, the AO as well as the Id. CIT(A) has erred both on facts and in law in ignoring the settled position of law that if any material found during the course of search, belongs to a person other than the person in whose case search was conducted, then assessment of such person shall be computed u/s 153C of the Act & not u/s 148 of the Act."

5. The Ld. Counsel has submitted that due to non-obstante clause in Section 153A coupled that the principle of abatement the mechanism contained in the provisions of search assessments, the assessment can be concluded in case of incriminating material relied u/s 153C only. The Ld. Counsel has relied following Judgments:-

"WARM FORGINGS P. LTD. VERSUS DCIT CIRCLE 27 (1), NEW DELHI., 2024 (4) TMI 259 - ITAT DELHI, Dated.- April 3, 2024. M/S. MAH IMPEX PRIVATE LTD. VERSUS ITO, WARD-16 (1), DELHI, 2024 (1) TMI 411 - ITAT DELHI, Dated.- October 31, 2023.

SRI DINAKARA SUVARNA PROP. BALAJI CONSTRUCTIONS

SHESHAPPA COMPOUND VERSUS DEPUTY COMMISSIONER OF

INCOME TAX CENTRAL CIRCLE MANGALORE, 2022 (7) TMI 800- KARNATAKA HIGH COURT, Dated.- July 8, 2022.

DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE

VERSUS SRI DINAKARA SUVARNA, 2023 (6) TMI 1175-SC ORDER, Dated.- March 27, 2023.

M/S. ADITI CONSTRUCTIONS VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 (3) MUMBAI ASST.

COMMISSIONER OF INCOME TAX 24 (1), MUMBAI, UNION OF

INDIA, 2023 (5) TMI 281-BOMBAY HIGH COURT, Dated.- May 4,

2023.

KARTI P. CHIDAMBARAM VERSUS THE PRINCIPAL DIRECTOR OF

INCOME TAX (INVESTIGATION) INCOME TAX INVESTIGATION WING

BUILDING, THE DEPUTY DIRECTOR OF INCOME TAX,

(INVESTIGATION) UNIT 3 (2), CHENNAI, THE DEPUTY

COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, 2 (1),

CHENNAI, 2021 (7) TMI 393-MADRAS HIGH COURT, Dated.- July 5,

2021.

M/S RAVI NIRMAN NIGAM LIMITED VERSUS DCIT-CIRCLE-13 (3)

(1) MUMBAI, 2022 (6) TMI 256-ITAT MUMBAI, Dated.- April 27,

2022.

ACIT CIRCLE-45 (1) NEW DELHI. VERSUS M/S. K.S. CHAWLA & SONS [HUF] AND (VICE- VERSA), 2021 (5) TMI 586-ITAT DELHI, Dated.- May 18, 2021.

INCOME-TAX OFFICER VERSUS ARUN KUMAR KAPOOR, 2012 (6) TMI 403-ITAT AMRITSAR, Dated.- June 21, 2011.

SHRI SANJAY SINGHAL (HUF) VERSUS THE DCIT CENTRAL

CIRCLE-1 CHANDIGARH, 2020 (9) TMI 338-ITAT CHANDIGARH, Dated.- June 19, 2020.

SHRI ADARSH AGRAWAL VERSUS THE INCOME TAX OFFICER,

WARD-61 (1), NEW DELHI, 2020 (1) TMI 620-ITAT DELHI, Dated.- January 14, 2020

SAMBHAVNATH INFRABUILD AND FARMS PVT. LTD.,

(SUCCESSOR TO LODHA CONSTRUCTION PVT. LTD., } VERSUS ASST. CIT- CENTRAL CIRCLE - 7 (3), MUMBAI, 2022 (1) TMI 735 - ITAT MUMBAI. Dated.- January 6, 2022.

6. The Ld. Counsel specifically relied the Judgment of this Bench itself in the case of M/s Mah Impex Pvt. Ltd Vs. ITO, Ward-16(1)

in ITA No. 279/Del/2019 order dated 31/10/2023 to contend that assessment should have been completed u/s 147.

7. On the contrary, the Ld. Departmental Representative has relied the Judgment in the case of Saloni Kumar Prakash Vs. ITO the Hon'ble Madras High Court reported in 2023-153 Taxman.com 432 Madras, and contended the AO was justified to complete the assessment u/s 147 of the Act, considering the information found during search.

8. We have given a thoughtful consideration to the matter and are of considered view that the Judgment which the Ld. Departmental Representative has relied of Hon'ble Madras High Court has been considered by Hon'ble Rajasthan High Court in the case of Nishit Gupta son of Shri Ramesh Gupta Vs. ACIT order dated 19/03/2024 in DB Civil Writ Petition No. 18363/2019 and other connected matters. Hon'ble Rajasthan High Court has considered the issue involved in the bunch of writ petitions about the applicability of Section 153C and Section 148 of the Act in the case of seizure of material in search or requisition of

books/documents relating to Assessee other than on whom the search was conducted or requisition made and after taking into consideration the history of special provisions in search cases and various judicial pronouncements including the Hon'ble Supreme Court Judgment in the case of Principal Commissioner of Income Tax, Central-3 Vs. Abhisar Buildwell P. Ltd. reported in [(2023)454 ITR 212 (SC)] has held as follows:-

"CONCLUSION:-

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 cases being dealt there under were circumscribed in the scope of newly substituted Section 148.

29. The Department has not set up a case that for initiating proceedings under Section 148 it had material other than the material seized during the search of Manihar Group. The contention was that though the material with regard to unaccounted loan advanced by the petitioner was received, the earning of interest on unaccounted loan was derivation of the AO from the material received. The submission is that the derived conclusion cannot be acted upon under Section 153C. The submission lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing 'total income' in case of incriminating material found during search or requisition.

30. The argument that by enactment of Section 153A to 153D has not eclipsed Section 148 does not enhance the case of respondent to initiate the proceedings under Section 148. On fulfillment of two conditions for invoking Section 153C the proceeding in accordance with Section 153A are to be initiated. The operating field of and Section 153A to 153D and Section 148 are different. Applicability of Section 153C in cases where the seized material related to or belonged to person other than on whom search is conducted or requisition made does not render Section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition.

31. The other aspect of the matter is that under Section 153A and 153C, 'the total income' is to be assessed. The total income includes returned income (if any), undisclosed income unearthed during the search or requisitioning and information possessed from the other sources. For Illustration:- An assessee had returned income of

Rs.100, undisclosed income of Rs.200 is unearthed during search and there is information from annual information statement of non- disclosure of income of Rs.150/-. The AO under Section 153A and 153C shall pass order dealing with income of

Rs.100+Rs.200+Rs.150, the total income being Rs.450/-. In cases where there is no unearthing of undisclosed income of Rs.200/-, the department can resort to proceeding under Section 147/148.

32. The argument that Section 153C can be invoked in case there is incriminating material for all the relevant preceding years and otherwise Section 148 is to be resorted to, is misplaced. On satisfaction of the twin condition for proceedings under Section 153C, the AO has to proceed in accordance with Section 153A. Notice is to be issued for filing of the returns for relevant preceding years and thereupon proceed to assessee or reassessee the 'total income'. It is not [2024:RJ-JP:14106-DB] (48 of 50) [CW- 18363/2019] obligatory on the AO to make assessment for all the years, the earlier orders passed may be accepted. But once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to.

33. Before concluding, it would be fair to deal with the case law cited by both the parties.

34. Reliance of respondents on decision of M/s. M.R. Shah Logistics Pvt. Limited (supra) is of no avail. The issue of interplay of provisions of Section 147/148 vis-a-vis Section 153C in the case of seized material relating or belonging to the person other than on whom the search was conducted or requisition made was not the issue before the Supreme Court.

35. The Supreme Court in the case of Abhisar Buildwell P. Ltd. (supra) while dealing with the provisions of Section 153A held that in case of absence of incriminating material seized during the search, the department is not remediless for reassessing the unabated assessment on the basis of material received from the other sources and can proceed under section 148. The decision does not support the contentions raised that Section 148 is rendered redundant if Section 153C is to be resorted to in the facts of the present case.

36. The Single Bench of this Court in the case of Vijay Kumar Mehta (supra) held that if the Department has chosen not to proceed under Section 153C, no right is created to the petitioner for getting the notice under Section 148 quashed. Moreover, learned Single Judge was not having the benefit of the decision of the Supreme Court in the case of Abhisar Buildwell P. Ltd. (supra). The appeal against the order was dismissed having rendered infructuous in view of the subsequent developments that the assessment order was passed.

37. The decision of the Madras High Court in the case of Saloni Prakash Kumar (supra) is of no help to the respondents. The High Court held that Section 153C does not preclude issuance of notice under Section 148. The field of applicability of two sections was not the issue before the Court.

38. The petitioner relied upon the decision of the Karnataka High Court in the case of Sri Dinakara Suvarna (supra). It would be relevant to quote Para-10:-

"10. Admittedly no proceedings were initiated under Section 153C of the Act. Thus, there is patent non-application of mind. It is relevant to note that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. It was argued on behalf of the Revenue that Shri. Ashok Kumar Chowta had offered tax on lump- sum income."

39. Further reliance was placed upon the decision of the Bombay High Court in the case of M/s. Aditi Constructions (supra). The para-9 is quoted:-

"9. We find that the jurisdictional conditions for invoking section 147 - 148 are not satisfied as there is no failure to disclose material facts fully and truly. It is not in dispute that by the letter dated 11th September 2015 (Exhibit H) the Petitioner have submitted all the particulars along with supporting documents to the Respondent No.1. Hence the reasons to believe and a presumption based on the statement of Shri Bhanwarlal Jain (a third party) in the course of a search, that the loans of the entities were bogus or accommodation entries was clearly dispelled. Moreover, the specific provisions of S. 153C would prevail over the general provisions of section 147 in the case of search on 3rd party."

40. In view of above discussion the notices issued under Section 148 and the impugned orders are quashed."

9. Thus, the findings of this Bench in the case of M/s Mah Impex Pvt. Ltd Vs. ITO (supra) which also involved the case of search conducted in Surendra Kumar Jain Group squarely applies to the case of the assessee before us.

10. As a consequence, the Additional Ground as raised stands allowed and the Appeal of the assessee is allowed. Order pronounced in the open court on 27^thAUGUST, 2024. Sd/- Sd/-

( M. BALAGANESH ) (ANUBHAV SHARMA)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 27/08/2024

R.N, Sr. PS*

Copy forwarded to :

1. Appellant

2. Respondent

3. CIT

4. CIT (Appeals)

5. DR: ITAT

ASSISTANT REGISTRAR

ITAT NEW DELHI

Shri Karshni Metals Pvt Ltd, New Delhi v. ITO WARD - 23(3), New Delhi

Case Summary: ITA No. 5079/Del/2019 - Shri Karshni Metals Pvt. Ltd. Vs. ITO (A.Y. 2010-11)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's (Department) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Shri Karshni Metals Pvt Ltd, New Delhi v. ITO WARD - 23(3), New Delhi

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