The Bombay High Court has held that the reassessment cannot be invoked on the basis of search action.
The bench of Justice G. S. Kulkarni and Justice Advait M. Sethna has observed that in the event of incriminating material is found during the search, the department 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 Income Tax Act stands saved, failing which, the department would be left without remedy.
The bench relied on the decision of the Supreme Court in the case of Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell Pvt. Ltd. in which it was held that once the foundation of the impugned notice itself was based on a search action and the alleged material, then necessarily, the only option available to the respondents was to take recourse to the provisions of Section 153A of the Income Tax Act, which provides for assessment in case of a search or requisition, and not to take recourse to the provisions of Sections 147 and 148 of the Income Tax Act.
The issue raised was whether the department was correct in law in issuing a notice to the petitioner under Section 148 of the Income-tax Act, 1961 on the basis of a search action under section 132 of the Income Tax Act, which is relevant to the entire group of these petitioners. The assessment years in question in all these cases are A.Y. 2012-13.
The Petitioner/assessee is a partnership firm engaged in the business of manufacturing and trading in gold and diamond jewellery. The petitioner filed its return of income on 28 September, 2012 declaring a total income of Rs.25,52,692/-. After about six years,a search action was taken against the petitioner under Section 132 of the Income Tax Act at the premises of the petitioner. The case of the petitioner is that no incriminating material was found in relation to any bogus loan/accommodation entry in such search. However, for the department, it was otherwise.
Consequent to the search action, department has issued the notice to the petitioner dated 29 March, 2019 under section 148 of the Income Tax Act stating that there are reasons to believe, that income chargeable to tax for the assessment year 2012-13 had escaped assessment, within the meaning of Section 147 of the Income Tax Act.
Hence, it was proposed to assess/reassess the income of the petitioner for the assessment year. The petitioner was called upon to file a return in the prescribed form within 30 days.
The Assessing Officer passed an order disposing of the objections to reopen the proceedings, as per the requirement of the provisions of Section 147 of the Income Tax Act. The Assessing Officer observed that in the petitioner’s case, search & seizure action was held on 4 October, 2018 which was relevant to the Financial year 2018-19 (AY 2019-20), hence applicable only for AY 2019-20 and not for any previous year.
The court held 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.
The court quashed the notice under Section 147 of the Income Tax Act and all actions consequent thereto are required to be held to be without jurisdiction and bad in law.
Case Details
Case Title: Sejal Jewellary & Anr v/s Union of India & Ors.
Case No.: Writ Petition No. 3057 Of 2019
Date: 18 FEBRUARY 2025
Counsel For Petitioner: Naresh Jain, Aarti Debnath, Mahaveer Jain, Neha Anchlia, Shobhit Mishra
Counsel For Respondent: Suresh Kumar
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