Nanne Gulzar & Company Vs ACIT (ITAT Mumbai)
Search-Based Addition Cannot Be Made Through Reassessment; ITAT Quashes Entire Assessment
In a significant ruling, the Mumbai ITAT held that where the very foundation of an addition is material unearthed during a search, the Assessing Officer cannot bypass the special provisions of section 153C and proceed under sections 147/148. The Tribunal quashed the reassessment proceedings against the assessee, observing that the additions were entirely based on search material, statements recorded during search, and information gathered from the search conducted in the Allana Group.
The Tribunal noted that the assessee’s partner, whose statement formed the basis of the addition, was himself assessed under the search assessment provisions, and the assessment orders of the partner and the firm were virtually identical. Since the Revenue relied on the same seized material and statements in both cases, the assessee, being an “other person”, ought to have been proceeded against under section 153C and not through reassessment proceedings under sections 147/148.
Relying heavily on the Bombay High Court decision in Sejal Jewellery, as well as other judicial precedents, the Tribunal held that sections 153A and 153C override sections 147 and 148 through a non-obstante clause. Once incriminating material belonging to or relating to another person is found during search, the Assessing Officer is mandatorily required to invoke section 153C. Any attempt to assess such income through reassessment provisions amounts to bypassing the statutory scheme and renders the proceedings without jurisdiction.
Accordingly, the Tribunal held that the notice issued under section 148 and all consequential proceedings were void ab initio, quashed the assessments for both assessment years, and allowed the assessee’s appeals without examining the additions on merits.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The instant appeals emanating from the appellate order dated 13.10.2025 are preferred by the assessee against the orders passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 30.12.2019 for the Assessment Year [A.Y.] 2017-18 and 2018-19. Since the grounds are identical in both the years, barring figurative differences and the issues involved are also similar and were also adjudicated by the ld.CIT(A) vide orders of even date, the appellate orders are decided vide a composite order for the sake of convenience and brevity. We take up the appeal for AY 2017-18 as Lead Case. The decision rendered would apply mutatis mutandis to appeal for AY 2018-19.
