Case Law Details
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.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal filed by the revenue arises from order dated 12.04.2025 passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals)-Kolkata-27 [hereafter “the Ld. CIT(A)].
2. The issue raised in Ground No. 1 is against the order of Ld.CIT(A) annulling the assessment framed u/s 147/143(3) of the Act dated 29.03.2024 by treating the same as void-ab-initio without properly appreciate that the facts of the case and the legal validity of the reassessment proceedings.
3. The facts in brief are that the assessee filed its return of income on 30.07.2019 declaring total income at Rs. 67,44,290/- which was processed u/s 143(1) of the Act on 22.10.2019. Thereafter, a search was conducted at Kasera and Sanwaria Group on 30.11.2018 and certain incriminating materials were found and seized. The search/ investigation revealed some entries which were found from such seized evidences indicating transactions in cash between the assessee and Kasera and Sanwria Group meaning thereby that these incriminating materials were seized from the search on the third party. Accordingly, notice u/s 148A(b) of the Act was issued and after following the procedure laid down under the Act order u/s 148A(d) of the Act was passed on 27.03.2023. Finally, notice was issued u/s 148 of the Act was issued on 30.03.2023. Thereafter, statutory notices along with questionnaire were issued and served upon the assessee. The assessee also filed full details in compliance. Finally, assessment was framed u/s 147/143(3) on 29.03.2024 making an addition of Rs. 2,08,00,000/- in the hands of the assessee as unexplained money u/s 69A of the Act.
4. In the appellate proceedings, the Ld. CIT(A) annulled assessment framed by the AO on the ground that re-assessment was based upon the incriminating material found and seized during the course of search on Kasera and Sanwaria Group. The Ld. CIT(A) held that since the incriminating material was found during the course of search on 3rd party, therefore, the right course would have been to initiate the proceedings u/s 153C of the Act. The Ld. CIT(A) while passing the order relied on the decision of Sri Dinakara Suvarna v. Dy. CIT [2022] 143 com 362 (Karnataka), where the SLP filed by the revenue in the Apex Court was dismissed vide order in 2023 151 taxman.com 489 (SC), in the case of Shyam Sunder Khandelwal Vs. ACIT reported in [2024] 161 taxmann.com 255 (Rajasthan) and Sejal Jewellary Vs. UOI [2025] 171 taxman.com 846 (Bombay HC).
5. After hearing the rival contention and perusing the material available on record, we find that incriminating material on the basis of which proceeding u/s 147/148 of the Act were initiated apparently on the basis of said incriminating material found and seized during the course of search on Kasera and Sanwaria Group on 30.11.2018. Therefore proceeding have been initiated to assess the escaped income u/s 153C of the Act which is the special provisons provided under the Act as it overrides the other provisions of the Act. Therefore, the Ld. CIT(A) has rightly annulled the assessment framed by the AO. The case of the assessee is squarely covered by the decision as discussed by the Ld. CIT(A) in the appellate order. Beside the case is squarely covered by decision in the case of Shyam Sunder Khandelwal Vs. ACIT (supra) which was duly approved by the Hon’ble Apex Court in the case of ACIT Vs. Promod Jain (2025) 163 com 762 (SC). Thus we do not find any infirmity in the appellate order which a very reasoned and speaking order. We are inclined to uphold the order of CIT(A) and dismissed the appeal of the revenue. The appeal of the revenue is dismissed.
6. In the result, the appeal of the revenue is dismissed.
Order pronounced on 06.03.2026
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