Bipinbhai Maganbhai Virani Vs ITO (ITAT Ahmedabad)
Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal considered appeals filed by the assessee against separate orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Years 2013-14 to 2017-18. The appeals were delayed by periods ranging from 25 days to 390 days. Although the reasons stated in the applications for condonation were considered somewhat general and vague, the Tribunal, considering the peculiar facts and circumstances and in the interests of justice, condoned the delays.
The principal issue was whether the Assessing Officer was justified in reopening the assessments under Sections 147 and 148 of the Income Tax Act, 1961. The reopening was based on documents seized during a search under Section 132 in the case of Shri Vipul Jasoliya on 06.01.2017. The seized material was forwarded by the Assessing Officer of the searched person to the Assessing Officer of the assessee, who noticed transactions allegedly involving substantial amounts that were not reflected in the assessee’s returned income.
The assessee submitted that Sections 153A to 153C constituted a separate search assessment code having an overriding effect over the general reassessment provisions. It was argued that, since the material had been seized from another person and allegedly pertained to the assessee, the proper course was to proceed under Section 153C rather than Section 147. The assessee also contended that there was no allegation that the seized documents were incriminating or had a bearing on the assessee’s income.
The Assessing Officer’s report maintained that Section 153C could be invoked only after the prescribed jurisdictional requirements were satisfied. The Tribunal, however, noted that the searched person’s Assessing Officer had forwarded the seized material because it either belonged to or pertained to the assessee. The reasons recorded by the assessee’s Assessing Officer also referred to transactions in the seized material allegedly undertaken by the assessee with Shri Vipul Jasoliya.
The Tribunal further observed that the non-obstante clauses in Sections 153A and 153C give those provisions an overriding effect over provisions including Sections 147 and 148. It referred to Paras Chandreshbhai Koticha vs. ITO, Tirupati Construction vs. ITO and Shyam Sunder Khandelwal vs. ACIT. It held that the assessments made under Section 147 were without jurisdiction and therefore quashed them. Since the assessments were quashed on the legal ground, the Tribunal did not adjudicate the factual issues, which it considered academic at that stage. All the assessee’s appeals were allowed.
Background of the Appeals
The captioned appeals were filed by the assessee against separate orders passed by the Ld. CIT(A), NFAC, Delhi under Section 250 of the Income Tax Act, 1961 for Assessment Years 2013-14 to 2017-18.
The appeals were filed with delays ranging from 25 days to 390 days. The assessee filed separate applications seeking condonation of delay and attributed the delay to negligence on the part of the consultant. The Tribunal observed that the reasons were somewhat general and vague but, considering the peculiar facts and circumstances and in the interests of justice, condoned the delays.
Reopening of Assessments Under Sections 147 and 148
The sole issue in the appeals concerned the validity of reopening the assessments under Section 147 read with Section 148 of the Act.
The assessment orders had been reopened after the Assessing Officer received information and seized documents from the Assessing Officer of a searched person. The search under Section 132 had been conducted in the case of Shri Vipul Jasoliya at Surat on 06.01.2017.
During the search, documents were found showing transactions allegedly carried out by the assessee with Shri Vipul Jasoliya. The seized documents were forwarded to the Assessing Officer of the assessee. The Assessing Officer noted that the seized material recorded transactions involving substantial amounts, while the returns filed by the assessee for the relevant assessment years did not disclose income corresponding to those transactions.
On this basis, notices under Section 148 were issued and the assessments were reopened under Section 147.
Assessee’s Submissions on Section 153C
The Ld. AR submitted that the search and seizure assessment provisions contained in Sections 153A to 153C constitute a separate code and override the general provisions of the Act, including Section 147.
It was submitted that there was no allegation that the documents seized from the searched person were incriminating or had any bearing on the assessee’s income. The assessee further submitted that, even if the seized documents were considered to have a bearing on its income, the appropriate statutory route was Section 153C and not Section 147.
Accordingly, the assessee contended that the assessment orders passed under Section 147 were not sustainable.
Assessing Officer’s Report
A report was called from the Assessing Officer in relation to the assessee’s submissions. The report stated that the search had not been conducted in the case of the assessee and therefore, according to the Assessing Officer, the proceedings did not fall under Section 153A.
Regarding Section 153C, the Assessing Officer reported that it could be invoked when the Assessing Officer of the searched person recorded the requisite satisfaction that the books of account, documents or assets seized or requisitioned belonged to or pertained to another person and that the material had a bearing on determination of the total income of that other person.
The Assessing Officer stated that, unless those jurisdictional requirements were satisfied, Section 153C would not apply.
Tribunal’s Findings on Section 153C
The Tribunal noted that the Assessing Officer did not dispute that the reassessment under Section 147 was based on material received from the Assessing Officer of the searched person. The material had been seized during the search conducted in the case of Shri Vipul Jasoliya.
The Tribunal observed that the searched person’s Assessing Officer had forwarded the material through a letter dated 26.11.2018. According to the Tribunal, the material was forwarded to the assessee’s Assessing Officer because it either belonged to or pertained to the assessee.
The Tribunal further noted that the reasons recorded by the assessee’s Assessing Officer referred to transactions in the seized material allegedly undertaken by the assessee with Shri Vipul Jasoliya.
Satisfaction Regarding Bearing on Income
The Tribunal stated that, under Section 153C, the searched person’s Assessing Officer was required to forward the seized material where it was considered to belong to or pertain to another person. The Tribunal observed that there was no requirement for the searched person’s Assessing Officer to record satisfaction that the seized material had a bearing on the income of the other person.
According to the Tribunal, such satisfaction was required to be recorded by the Assessing Officer of the other person after considering the material received from the Assessing Officer of the searched person.
The Tribunal noted that the assessee’s Assessing Officer had recorded in the reasons that the transactions in the seized material would have a bearing on determination of the assessee’s income. At the same time, the Tribunal expressed serious doubts about the correctness of that observation because the reasons did not identify the transactions as unaccounted transactions.
The Tribunal observed that mere recovery of a document containing certain transactions would not, by itself, give the Assessing Officer reason to believe that the transactions were unaccounted or that the related income had escaped assessment.
Overriding Effect of Sections 153A and 153C
The Tribunal observed that Section 153A begins with a non-obstante clause referring to Sections 139, 147, 148, 149, 151 and 153. It noted that Section 153C contains a similarly worded non-obstante clause.
On that basis, the Tribunal held that Sections 153A and 153C have an overriding effect over the general provisions, including Sections 147 and 148.
The Tribunal referred to the decision of the Gujarat High Court in Paras Chandreshbhai Koticha vs. ITO, reported as (2026) 182 taxmann.com 204 (Gujarat). It also referred to the Rajasthan High Court decisions in Tirupati Construction vs. ITO, reported as (2024) 165 taxmann.com 176 (Rajasthan), and Shyam Sunder Khandelwal vs. ACIT, reported as 161 taxmann.com 255 (Rajasthan).
Assessment Orders Quashed
In view of its findings, the Tribunal held that the proper course for the Assessing Officer was to proceed under Section 153C of the Act. It concluded that the assessments passed under Section 147 in all the appeals were without jurisdiction and were therefore not sustainable.
The Tribunal accordingly quashed the assessment orders on the legal ground.
Factual Issues Not Adjudicated
Since the assessment orders had been quashed on the legal ground, the Tribunal did not adjudicate the factual matrix. It observed that the factual issues had become academic in nature at that stage.
Final Decision
The Tribunal allowed all the appeals filed by the assessee. The assessment orders passed under Section 147 of the Income Tax Act, 1961 were quashed on the ground that, in the circumstances considered by the Tribunal, the appropriate course was to proceed under Section 153C.
The order was pronounced in the Open Court on 05/08/2026.
Cases Discussed
- Paras Chandreshbhai Koticha vs. ITO — (2026) 182 taxmann.com 204 (Gujarat).
- Tirupati Construction vs. ITO — (2024) 165 taxmann.com 176 (Rajasthan).
- Shyam Sunder Khandelwal vs. ACIT — 161 taxmann.com 255 (Rajasthan).
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeals have been preferred by the assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals), [hereinafter referred to as ‘Ld. CIT(A)’] National Faceless Appeal Centre (in short “NFAC”), Delhi passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Years (AYs) 2013-14 to 2017-18 respectively.
2. There is a delay in filing the present appeals ranging from 25 days to 390 days. Separate applications for condonation of delay have been filed, wherein, negligence on the part of the consultant of the assessee has been alleged. Though, the reasons cited in the said applications are somewhat, general and vague, however, considering the peculiar facts and circumstances of the case, and in the interests of justice, the delay in filing the appeal is hereby condoned.
3. The sole issue involved in all the appeals is as to whether the Assessing Officer (hereinafter referred to as “the AO”) was justified in reopening the assessment for all the captioned assessment years u/s 147 r.w.s. 148 of the Income Tax Act and consequently, the assessee has challenged the validity of the assessment order passed u/s 147 of the Act.
4. A perusal of the opening para of the assessment order would reveal that the AO has mentioned that a search and seizure action u/s 132 of the Act was carried out in the case of one Shri Vipul Jasoliya on 06.01.2017 who is based at Surat. During the course of search action, certain documents were found showing that the assessee had carried certain transactions in the assessment year under consideration with the said Shri Vipul Jasoliya. The AO of the searched person i.e. ACIT, Central Circle-2, Surat passed on the said information alongwith seized documents to the AO of the assessee. The AO of the assessee observed that there were transactions involving hefty amount, recorded in the seized documents, whereas, the Return of Income filed by the assessee for the assessment years under consideration did not show the income matching with the said transactions. He, therefore, reopened the assessment for all the assessment years u/s 147 of the Act by serving notice u/s 148 of the Act.
4.1 The legal issue raised by the Ld. AR of the assessee is that the provisions of sections relating to search and seizure action, as envisaged in Section 153A to 153C of the Act, are, in itself, a separate code and that the same have an overriding effect on the other general provisions of the Act including the provisions of Section 147 of the Act. He in this respect has submitted that firstly, there is no allegation that the documents seized from the searched person were incriminating, having any bearing on the income of the assessee; secondly, even, if it is assumed that the said documents, in view of the AO of the assessee had any bearing on the income of the assessee for the assessment years under consideration, even then the proper course of the AO was to proceeded u/s 153C of the Act and not u/s 147 of the Act. He, therefore, has pleaded that the impugned assessment orders passed u/s 147 of the Income Tax Act were not sustainable.
4.2 At this stage, it is pointed out here, that in respect of the above submissions of the Ld. AR, a report was called from the AO, a copy of which has been tendered on record today by the Ld. DR. A perusal of the said report furnished by the AO would show that the AO has conveniently ignored the aforesaid plea raised by the Ld. AR and has simply written that in this case, search was not conducted in the case of the assessee and therefore, it was not a case where the AO should have proceeded u/s 153A of the Act. He, therefore, has justified the action of the AO in proceeding u/s 147 of the Act. So far as the query that how was the AO justified in proceeding u/s 147 of the Act instead of u/s 153C of the Act, the AO has reported in his report that Section 153C can be invoked only when the AO of the searched person records the requisite satisfaction that the books of account, documents, or assets seized or requisition belong to or pertain to another person and such material has a bearing on determination of the total income of such other person. He has further reported that unless these jurisdiction requirements are satisfied, Section 153C has not applicable.
4.3 We note that the AO in this case has not disputed that the assessment in this case of the assessee u/s 147 of the Act was reopened on the basis of the material received by the AO of the assessee from the AO of the searched person, which was seized during the course of search action in the case of one Shri Vipul Jasoliya. The AO of the searched person had forwarded the said material alongwith his letter dated 26.11.2018 and it is obvious that the said material was forwarded to the AO of the assessee only because the said material either belonged to or pertained to the assessee. This fact is further verified from the reasons recorded by the AO of the assessee, wherein, he has noted that in the seized material, there were certain transactions recorded, which were allegedly done by the assessee with Shri Vipul Jasoliya. Therefore, so far as the requirement on the part of the AO of the searched person was concerned, that had been duly complied with by the AO of the searched person. A perusal of the provision of Section 13C of the Act would reveal that the only requirement on the part of the AO of the searched person is that if, he is of the view, that the material seized during the search action, belong to or pertain to another person, such material has to be forwarded to the AO of the such other person. There is no requirement under law that the AO of the searched person will record a satisfaction that the said seized material has a bearing on the income of such other person. Such a satisfaction is required to be recorded by the AO of such other person, after duly considering the material received from the AO of the searched person. Admittedly, in the reasons recorded, the AO of the assessee has also given an observation that the transactions recorded in the seized material will have a bearing on the determination of the income of the assessee. Though, we have serious doubts about the correctness of such an observation made by the AO of the assessee, as he has not pointed out in the reasons recorded that the said transactions recorded in the seized documents were in the shape of any unaccounted transactions. Merely, recovery of the document, wherein, certain transactions have been noted, would not if so facto give reasons to believe to the AO that the said transactions are unaccounted transaction or that the income relating to such transactions has escaped assessment. However, at this stage it is to be noted that under the circumstances, the proper course for the AO of the assessee, was to proceed u/s 153C of the Act. It is to be noted here that the provisions of Section 153A of the Act open with a non-obstante clause “notwithstanding anything contained in Section 139, Section 147, Section 148, Section 149, Section 151 and Section 153….”. There is similarly worded non-obstante clause in the opening lines of the Section 153C of the Act. Therefore, the provisions of Section 153A/153C of the Act have an overriding effect over the other general provisions including that of Section 147 of the Act. The issue has been settled by the decisions of various Hon’ble High Courts including the decision of the Hon’ble Gujarat High Court in the case of “Paras Chandreshbhai Koticha vs. ITO” (2026) 182 taxmann.com 204 (Gujarat). Similar view has been taken by one Rajasthan High Court in the case of “Tirupati Construction vs. ITO” (2024) 165 taxmann.com 176 (Rajasthan) and in the case of “Shyam Sunder Khandelwal vs. ACIT” 161 taxmann.com 255 (Rajasthan). In view of this, the assessment order passed u/s 147 of the Act in all these appeals being without jurisdiction, are not sustainable in the eyes of law. Therefore, the same are hereby quashed. All the appeals of the assessee are allowed on this legal ground.
5. Since we have quashed the assessment orders in view of our adjudication given on legal grounds, therefore, no adjudication is given on the factual matrix as the same is rendered academic in the nature at this stage.
6. With the above observation, all the appeals of the assessee are allowed.
Order pronounced in the Open Court on 05/08/2026.
