DCIT Vs Nawal Kumar Kanodia (ITAT Kolkata)
The Kolkata Bench of the ITAT dismissed the Revenue’s appeal against the CIT(A)’s order annulling a reassessment framed under Sections 147/143(3) of the Income Tax Act, 1961. The assessee had filed the return of income on 30 July 2019 declaring total income of Rs. 67,44,290, which was processed under Section 143(1). A search conducted on the Kasera and Sanwaria Group on 30 November 2018 resulted in seizure of incriminating materials indicating cash transactions between the assessee and the searched group. Based on these materials seized during the third-party search, a notice under Section 148A(b) was issued, followed by an order under Section 148A(d) dated 27 March 2023 and a notice under Section 148 dated 30 March 2023. The AO subsequently completed assessment under Sections 147/143(3) on 29 March 2024, making an addition of Rs. 2.08 crore as unexplained money under Section 69A.
In appellate proceedings, the CIT(A) annulled the assessment on the ground that the reassessment was based on incriminating material found and seized during a search on a third party. The CIT(A) held that the proper course was to initiate proceedings under Section 153C and relied on Sri Dinakara Suvarna v. Dy. CIT [2022] 143 com 362 (Karnataka), where the Revenue’s SLP was dismissed by the Supreme Court vide order reported in 2023 151 taxman.com 489 (SC), Shyam Sunder Khandelwal Vs. ACIT [2024] 161 taxmann.com 255 (Rajasthan), and Sejal Jewellary Vs. UOI [2025] 171 taxman.com 846 (Bombay HC).
The ITAT found that the proceedings under Sections 147/148 were apparently initiated on the basis of incriminating material found and seized during the search on the Kasera and Sanwaria Group. It held that proceedings to assess escaped income should have been initiated under Section 153C, which is the special provision provided under the Act and overrides the other provisions. The Tribunal therefore held that the CIT(A) had rightly annulled the assessment. It further found that the assessee’s case was covered by the decisions discussed by the CIT(A), including Shyam Sunder Khandelwal Vs. ACIT, which, according to the order, was duly approved by the Supreme Court in ACIT Vs. Promod Jain (2025) 163 com 762 (SC). Finding no infirmity in the CIT(A)’s reasoned and speaking order, the ITAT upheld the annulment of the assessment and dismissed the Revenue’s appeal.
