Case Law Details
Zubin Paul Driver Vs ACIT (ITAT Mumbai)
Section 147 Assessment Held Invalid Because Seized Third-Party Material Required Proceedings Under Section 153C; Assessment Declared Invalid Because Search Material Triggered Section 153C, Not Section 147
The assessee appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated 09.10.2025 for Assessment Year 2010-11, arising from an assessment made under Section 143(3) read with Section 147 of the Income Tax Act. The appeal challenged the reopening of assessment under Section 147, the validity of framing the assessment under Section 143(3) read with Section 147 instead of Section 153C, and the additions of ₹84,52,000 under Section 69 and ₹8,85,000 as interest income.
The assessee had originally filed a return declaring total income of ₹1,38,65,530, which was processed under Section 143(1). The assessment was subsequently reopened under Section 147 based on information received from the DCIT, Central Circle-6(2), Mumbai following a search conducted in the case of Samira Group. Relying on seized material, including page 42 of Annexure A-1, page 172 of Annexure A-6, and material found at the residence of Smt. Vijaya Iyer, the Assessing Officer concluded that the assessee had advanced cash loans and earned interest thereon. Consequently, additions of ₹84,52,000 and ₹8,85,000 were made. Although the CIT(A) had initially deleted the additions, the Tribunal, in Revenue’s appeal, restored the matter to the CIT(A) for fresh adjudication on merits while dismissing the assessee’s cross-objection relating to reopening. Thereafter, the CIT(A) passed the impugned order confirming the additions.
Before the Tribunal, the assessee contended that the additions were entirely based on seized material found during the search of a third party and, therefore, proceedings ought to have been initiated under Section 153C instead of Section 147. It was argued that this was a jurisdictional issue that could be raised at any stage of the proceedings, even though it had not been raised in the earlier round.
The Revenue argued that the issue of reopening had already been decided by the Tribunal in the earlier proceedings and could not be reopened.
The Tribunal observed that the reasons recorded for reopening specifically referred to information received from the DCIT, Central Circle-6(2), Mumbai and identified the seized material by reference to the relevant annexures and page numbers. It held that the very foundation of the reopening was the seized material found during the search of a third party.
The Tribunal further observed that the question of applicability of Section 153C instead of Section 147 was a jurisdictional issue, which could be raised at any stage of the proceedings. It noted that Section 153C provides a specific mechanism where documents or assets seized during a search belong to or pertain to a person other than the searched person. Referring to the decision of the Bombay High Court in Sejal Jewellery India Ltd. and the coordinate bench decision in Amit Jatia v. DCIT, the Tribunal held that where additions are based on seized material found during a search, recourse to Section 147 is not permissible and proceedings must be initiated under Section 153C.
Since the Assessing Officer himself had relied upon seized material while recording reasons for reopening, the Tribunal held that the case squarely fell within the scope of Section 153C. Accordingly, the assessment framed under Section 143(3) read with Section 147 was held to be invalid and bad in law.
As the assessment itself was declared invalid, the Tribunal held that the additions on merits did not survive for consideration. The grounds relating to the additions were therefore not adjudicated, and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal filed by the assessee is directed against the order dated 09.10.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2010-11, arising out of the assessment order passed under section 143(3) r.w.s 147 of the Income Tax Act, 1961.
2. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the reopening of assessment u/s 147 of the Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the assessment framed u/s 143(3) r.w.s. 147 instead of u/s 153C of the Act.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 84,52,000/- u/s 69.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 8,85,000/- as interest income.
5. The appellant craves leave to add, alter or amend the grounds.
3. Briefly stated, the facts of the case are that the assessee filed return of income declaring total income of Rs. 1,38,65,530/-. The return was processed u/s 143(1) of the Act. Subsequently, the case was reopened u/s 147 on the basis of information received from DCIT, Central Circle-6(2), Mumbai, consequent to search action in the case of Samira Group. The Assessing Officer, relying upon seized material, inter alia, page 42 of Annexure A-1 and page 172 of Annexure A-6 and material found from the residence of Smt. Vijaya Iyer, concluded that the assessee had advanced cash loans and earned interest thereon and completed the assessment u/s 143(3) r.w.s. 147 making additions of Rs. 84,52,000/- and Rs. 8,85,000/-. On appeal Ld CIT(A) deleted the addition . However, on appeal by the Revenue , the Tribunal restored the issues on merit to the file of the Ld.
CIT(A) for fresh adjudication , while dismissing the cross objection of assessee on reopening . Pursuant thereto, the Ld. CIT(A) passed the impugned order confirming the additions.
4. The Ld. Authorised Representative submitted that the additions are entirely based on seized material found during search in the case of a third party and therefore proceedings ought to have been initiated u/s 153C. It was submitted that this being a jurisdictional issue can be raised at any stage of proceedings. It was also submitted that though this specific ground was not taken in the first round, the same is purely legal and goes to the root of the matter and has been raised before Ld CIT(A) in the set aside proceeding .
5. The Ld. Departmental Representative submitted that the issue of reopening has already been adjudicated by the Tribunal in the first round wherein the cross objection of the assessee was dismissed and reopening was upheld. It was further submitted that the assessee cannot now challenge the same.
6. We have heard the rival submissions and perused the material available on record. It is noticed that in the reasons recorded for reopening, the Assessing Officer has clearly stated that information was received from DCIT, Central Circle-6(2), Mumbai along with specific reference to the seized material, including the page numbers of Annexure A-1 and Annexure A-6. Thus, it is evident that the very basis of reopening is the seized material found during the course of search conducted in the case of a third party.
7. It is also an admitted position that the specific issue regarding applicability of section 153C vis-à-vis section 147 was not raised in the earlier round of proceedings. However, in our considered view, the said issue goes to the root of jurisdiction. And it is a settled legal position that a jurisdictional issue can be raised at any stage of proceedings, even if not raised earlier.
8. Section 153C provides a specific mechanism where documents or assets seized during search belong to or pertain to a person other than the searched person. In such circumstances, the assessment has to be framed under section 153C. The Hon’ble jurisdictional High Court in the case of Sejal Jewellery India Ltd. [2025] 171 com 846 (Bom.) has held that where the additions are based on seized material found during search, recourse to section 147 is not permissible and the proceedings must be taken under section 153C. The coordinate bench in the case of Amit Jatia vs DCIT (181 taxmann.com 472) has also taken a similar view.
9. In the present case, since the Assessing Officer himself in the reasons recorded has relied upon the seized material and even referred to specific page numbers of such material received from DCIT, Central Circle-6(2), Mumbai, the case squarely falls within the ambit of section 153C. Therefore, the action of the Assessing Officer in invoking section 147 instead of section 153C is not in accordance with law.
10. The contention of the Ld. DR that reopening has been upheld in the earlier round does not alter the legal position, as the issue now raised pertains to the correct jurisdictional provision applicable to the facts of the case.
11. Respectfully following the ratio laid down by the Hon’ble jurisdictional High Court and the decisions of the coordinate bench, we hold that the assessment framed u/s 143(3) r.w.s. 147 is invalid and bad in law.
12. Accordingly, Ground Nos. (i) and (ii) are allowed.
13. Since the assessment itself is held to be invalid, the additions made on merits do not survive for adjudication. The arguments advanced by both the parties on merits, including the issue of retraction, are therefore rendered academic.
14. Ground Nos. (iii) and (iv) are not adjudicated.
15. Ground No. (v) being general in nature does not require adjudication.
16. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 30/03/2026
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