Anil Dalmia Vs DCIT (ITAT Jaipur)
Pen Drives Could Not Turn Back the Clock: ₹1.63 Crore Reassessment Quashed
Limitation Defeats the Reassessment
The Jaipur Tribunal quashed a reassessment involving aggregate additions of approximately ₹1.63 crore, holding that the notice issued under section 148 was barred by the first proviso to section 149(1).
The reassessment arose from electronic records seized during a search on another group. The Tribunal examined whether the relevant assessment year could have been reopened under the earlier search-assessment regime. Finding that AY 2012-13 fell outside the permissible period, it declared the consequential assessment void ab initio.
The CIT(A)’s direction to conduct a fresh assessment consequently became infructuous.
Search Reveals Alleged Cash Transactions
A search under section 132 was conducted on the Nirmal Kumar Bardiya Group on 23 November 2021. The search also covered finance broker Radha Mohan Maheshwari, popularly known as Radha Mohan Totla, and his associate Arun Snehi.
Seven pen drives containing Excel sheets were seized from Snehi’s residence. Maheshwari admitted ownership of the pen drives and their contents in statements recorded during and after the search.
The electronic records allegedly contained details of cash loans, business transactions, interest and commission involving several persons over more than ten years. The Investigation Wing communicated information suggesting that the assessee had entered into unaccounted cash transactions with Maheshwari.
Based on this information, the Assessing Officer issued a section 148 notice on 28 March 2023, after obtaining approval from the specified authority.
Additions Based on Peak Transactions and Interest
The Assessing Officer completed the assessment under section 144, treating it as an ex parte assessment.
Applying the peak theory to the seized material, he determined an alleged unaccounted peak of ₹1,18,06,687 and added it under section 69A. The assessment treated this amount as cash paid by the assessee to Maheshwari.
The Excel sheets also reflected alleged interest expenditure of ₹52,29,667 and interest income of ₹7,40,800. The Assessing Officer added the difference of ₹44,88,867 as unexplained interest expenditure.
Although the order’s introductory paragraph describes this second addition as interest or commission earned, its detailed discussion identifies it as net unexplained interest expenditure.
The CIT(A), noting that the assessment was a best judgment assessment, exercised powers under section 251(1)(a) and remitted the matter to the Assessing Officer for a fresh assessment after providing a hearing.
Assessee Challenges the Reopening Itself
Before the Tribunal, the assessee argued that the CIT(A) should have decided the jurisdictional objection concerning limitation, rather than merely ordering another assessment.
Since the search occurred after 1 April 2021, the assessee submitted that the new reassessment provisions applied. However, their application remained subject to the first proviso to section 149(1), which preserved the limitation restrictions of the earlier regime for the years covered by that proviso.
The assessee also raised an alternative contention that adjustment for the preceding year’s peak investment would reduce the relevant addition below ₹50 lakh. The Tribunal’s decision ultimately rested on the first-proviso limitation objection, rather than this alternative computation.
Earlier Section 153C Time Limit Remains Relevant
The Tribunal held that the limitation enquiry required examining whether a notice could have been issued under the applicable earlier reassessment or search-assessment provisions.
Because the information came from a search on another person, it considered section 153C relevant to that enquiry.
Relying on CIT v. Jasjit Singh (2025) 476 ITR 157, the Tribunal stated that, for a person other than the searched person, the relevant date was the date on which the jurisdictional Assessing Officer received the seized books, documents or assets.
Since the section 148 notice was issued on 28 March 2023, the Tribunal presumed that the material had been received during FY 2022-23. It treated AY 2023-24 as the relevant reference year and held that the six preceding assessment years extended back only to AY 2017-18.
Consequently, AY 2012-13 was outside that period.
Revenue’s Report Does Not Answer the Objection
The Revenue submitted an Assessing Officer’s report asserting that a section 153C notice could have been issued as on 1 April 2021. It also referred to approval for reopening and an earlier order disposing of the assessee’s objections.
The Tribunal found that the report did not explain how AY 2012-13 remained open under section 153C or address the assessee’s legal and factual contentions.
It therefore quashed the reassessment and allowed the appeal.
Author’s Comments
The decision highlights the need to examine limitation before debating the seized evidence or computing peak additions. Even substantial alleged escapement and approval from the competent authority did not overcome the limitation defect identified here.
The Tribunal applied the earlier section 153C framework as a limitation safeguard under the first proviso to section 149, while examining a notice issued under the new reassessment regime.
Its conclusion also relied on a presumed year of receipt of the seized material. Practitioners should therefore verify the actual receipt or handover records when applying this reasoning to another case.
The relief was jurisdictional: the Tribunal did not decide whether the alleged cash transactions or interest expenditure were factually established.
Cases Discussed
- CIT Vs Jasjit Singh (Supreme Court), (2025) 476 ITR 157 — relied upon for the principle that, in the case of a person other than the searched person, the date of receipt/handing over of seized books, documents or assets to the jurisdictional Assessing Officer is the relevant date for purposes of Section 153C.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been filed by the assessee against the order passed by the Office of the Commissioner of Income Tax, Appeal CIT(Appeals), Jaipur 05 (hereinafter referred to as “Ld. CIT(A)”), dated 24.09.2025 under Section 250of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The grounds raised by the assessee read as under:-
1. That the Id. CIT (A) erred in law in sending the case back to Id. AO for framing a fresh assessment by observing that the Id. AO had passed the order u/s 144 whereas the Id. AO had framed the assessment after considering complete replies of the assessee.
2. Without prejudice to ground no. 1, the CIT (A) erred in not deciding the issue that the proceedings u/s 148 of the Income Tax Act, 1961 in the instant case were barred by limitation and the reassessment proceedings as well as the assessment order passed are liable to be quashed in toto. The same being legal issue may kindly be decided by the Honorable Bench even without there being any decision of the Id. CIT (Α).
3. Without prejudice to ground no. 1, the CIT (A) erred in not deciding the issue that the addition in this case has been made without allowing credit for peak investment in immediately preceding year which would have resulted into the reduction in quantum of proposed addition less than Rs. 50.00 Lacs making the instant proceedings asun sustainable u/s 149 being beyond three years from end of the relevant assessment year. The total additions in assessment are based on summary of transactions of code ‘PAPER’ with Radha Mohan Maheshwari attached with AO notice u/s 142(1) dated 08.08.2023. The same being legal issue may kindly be decided by the Honorable Bench even without there being any decision of the Id. CIT (A).
4. That the appellant craves leave to add, arnend, alter, withdraw any of the ground of appeal before or during hearing of the appeal by Hon’ble Bench.
3. Briefly stated, in the facts of the present case assessment was framed ex parte u/s 144 of the Act making addition on account of alleged unaccounted cash transaction entered into by the assessee amounting to Rs.1,18,06,687/- and alleged interest/commission earned by the assessee (net) amounting to Rs.44,88,867/-. The Ld. CIT(A) noting that, it was best judgment assessment ,exercised his power u/s 251(1)(a) of the Act and set aside the assessment, remitting the matter back to the file of the AO for making fresh assessment after providing an opportunity to the assessee of being heard.
4. The contention of the ld. Counsel for the assessee before us was that the assessment framed in the present case was barred by limitation in view of the provisions of Section 149 of the Act read with the proviso thereto.
5. The facts of the case are that the case of the assessee was reopened on the basis of information obtained during search and seizure action u/s 132 of the Act carried out in the case of Nirmal Kumar Bardiya Group on 23.11.2021. Information was received from the DDIT Investigation 02 Jaipur that the assessee had made cash transactions with Sh. Radha Mohan Maheshwari (also known as Radha Mohan Totla referred hereinafter as RMT”) a finance broker, who was also covered in the search action conducted on 23.11.2021), and who was found to have been indulging in activities of financebroker , giving and taking cash loans, undertaking cash transactions on a large scale. During the course of search electronic data comprising of excel sheets contained in seven pen-drives was seized from the residence of Shri Arun Snehi also covered in the search action conducted on 23.11.2021 as a part of Nirmal Kumar Bardiya group. Sh. Arun Snehi was found to be a close associate and confidant of Shri Radha Mohan Maheshwari, residing at House no. 8, Jai Kishan Colony, Near Mahesh Colony, Tonk Phatak, Jaipur. Subsequently during the course of proceedings under Income tax Act, 1961, Sh. Radha Mohan Maheshwari admitted the ownership of the pen drives and the data contained therein, in his statements recorded under oath during the search and also in his post search statements. The excel sheets from the pen drive data were analysed and it was prime facie noted that these excel sheets had details comprising of unaccounted transactions between Sh. Radha Mohan Maheshwari and others. These transactions were spread over a time frame of more than 10 years.
6. During the search proceedings, Sh. Arun Snehi stated in his statements recorded on oath w/s 132(4) stated that the pendrives belonged to Sh. Radha Mohan Maheshwari aka ‘Totla’. On being confronted with the same, Sh. Radha Mohan Maheshwari also admitted that the seized pendrives and contents thereof belonged to him and the same were found and seized from the residence of Sh. Arun Snchi. On being asked about the nature of transactions recorded in these files present in these pen drives, Sh. Radha Mohan Maheshwari stated that these transactions pertain to business transactions, interestand commission transactions with various parties. Basis the aforestated the transactions recorded in the various ledgers/excel sheets found and seized in the pendrives of RMT were concluded to relate to unaccounted cash transactions.
Noting that the information revealed the assessee also to have entered into cash transactions with the said party, the case of the assessee was reopened by issuing notice u/s 148 of the Act after obtaining necessary approval of the Specified Authority in law.
7. During the course of assessment proceedings, the assessee remained unrepresented and the AO accordingly worked out the unaccounted income of the assessee on the basis of material before him applying the peak theory and arrived at an incriminate peak for the year amounting to Rs.1,18,06,687/-. The aforesaid amount was added to the income of the assessee u/s 69A of the Act, noting that the impugned amount had been paid in cash by the assessee to Sh. Radha Mohan Totla (RMT).
8. Furtherthe excel sheets maintained by RMT were noted to contain entries of interest/commission taken and given by Sh. Radha Mohan Totla in the case of the assessee. The following interest commission component was noted in the excel sheets:-
Interest expenditure of assessee (TAKEN column):Rs. 52,29,667/-
Interest income of assessee (GIVEN column):Rs. 7,40,800/-
Net amount = Rs. 44,88,867/-
9. The AOaccordingly, held that the assessee had incurred unexplained interest expenditure of Rs.44,88,867/- and added the same alsoto the income of the assessee.
10. Having narrated the facts as above, the contention of the ld. Counsel for the assessee was that the search in the present case was undertaken after 01.04.2021. That therefore, the provisions of Section 147 r.w.s 148 of the Act were applicable on account of the sunset clause in the earlier regime of framing search assessment in terms of the provisions of Section 153A/153C of the Act. That the timeline for issuing notice u/s 147 of the Act was provided by Section 149 of the Act and as per the first proviso to Section 149, the notice issued u/s 148 of the Act in the present case was barred by limitation. Our attention was drawn to provisions of Section 149(1) of the Act and the first proviso thereto is under:-
…….
2[Time limit for notice.
149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause(b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1stday of April, 2021,if [a notice under section 148 or section 153A or section 153C could not havebeen issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section153A or section 153C, as the case may bee), as they stood immediately before the commencement of the Finance Act, 2021:
11. A perusal of the above would reveal that as per Section 149(1) of the Act, the limitation for issuing notice u/s 148 of the Act as prescribed under Sub-Section (1) is three years in all cases and beyond three years upto 10 years only in those cases where the income chargeable to tax escaping assessment is likely to amount to Rs.50 lacs or more for the said year. The first proviso thereto provides that no notice u/s 148 of the Act shall be issued for the assessment years beginning or before 1st of April, 2021 if as per the earlier regime applicable u/s 153A, 153C or 148 of the Act, no notice on the said date could have been issued to the assessee. The proviso prohibits issuance of notice u/s 148 of the Act of the new regime , if such notices have become time barred under section 149 of the old regime or having become time barred as per section 153A or 153C of the Act.
12. Therefore, what is to be seen is whether on the date of issuance of notice u/s 148 of the Act in the present case, the limitation provided for issuing notice under the earlier regime of reassessment or search assessment had elapsed or not. In the facts of the present case, the impugned assessment year before us is AY 2012-13, the re-assessment has been resorted to on the basis of information/ documents in the possession of the AO regarding unaccounted income of the assessee revealed during search action carried on Nirmal Kumar Bardiya Group. As per the earlier regime, the provisions of Section 153C would have been applicable and as per the provisions of Section 153C of the Act,the assessment for six years prior to the year in which the initiation of search action took place could be reopened. Relevant provision is reproduced hereunder:
……
Assessment of income of any other person.
153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,
a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A :
………
13. As per the proviso to Section 153C, the reference to the date of initiation of search was to be construed as reference to the date of receiving the books of account or documents or assets seized are requisitioned by the Assessing Officer having jurisdiction over such other person. The provisions of Section 153C are as under:-
………
Assessment of income of any other person.
153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to,
a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A :
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :
……….
14. The Hon’ble apex court in the case of CIT vs Jasjit Singh (2025) 476 ITR 157 interpreted the said provision holding that in the case of a person other than the searched person, the date of receipt /handing over of the seized books , documents or assets by the AO of the searched person to the AO having jurisdiction over the other person is to be treated as the relevant date of search for purposes of section 153C of the Act.
15. In the facts of the present case, the notice u/s 148 of the Act was issued by the AO on 28.03.2023. Therefore, it can be safely presumed that books of accounts and documents were received by the AO of the assessee in the previous year 2022-23. Therefore, the year in which the search action is to be treated as initiated in the case of the assessee is AY 2023-24 and as per the provisions of Section 153C of the Act six years prior to the search year can be assessed, which goes to upto AY 2017-18. The reopening of the case for AY 2012-13 accordingly, is found to be barred by limitation as per the proviso to Section 149 of the Act.
16. Ld. DR when confronted with the above sought some time to file report of the AO on the same which was submitted on and the contents of which are as under:-
Kindly refer to the subject mentioned above and your office letter No. 150 dated 01.07.2026 on the above-mentioned subject.
In this regard, it is submitted that vide above referred letter, it has been directed to this office to justify the reopening of the case u/s 148 in view of the contention raised by the AR of the Assessee.
A search & Seizure action was carried out in the case of Shri Radha Mohan Totla (Maheshwari) on 23.11.2021. During the search proceedings, incriminating details related to the assessée were found from the material seized in the case of Shri Radha Mohan Maheshwari. On the basis of material on record, it was found that there are certain transactions carried out by the assessee with Shri Radha Mohan Totla (Maheshwari) which remain unaccounted on the part of the assessee. Thereafter, the assessee was issued Notice u/s 148 of the Income Tax Act, 1961 on 28.03.2023 in accordance with the provisions of the Income Tax Act, 1961.
The proviso to Section 149(1) which reads as under:
Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021,if [a notice under section 148 or section 153A or section 153C could not havebeen issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section153A or section 153C, as the case may bee), as they stood immediately before the commencement of the Finance Act, 2021:
It is pertinent to mention here that notice u/s 153C could have been rightly issued as on 01.04.2021, therefore, Notice u/s 148 issued to the assessee is not time barred and was issued well within the time limit as governed by the Income Tax Act, 1961.
Also, the Notice u/s 148 of the Act was issued in the case after obtaining prior approval of the competent authority who had accorded sanction after due application of mind and after considering the facts of the case and submissions made by the assessee.
3. It is also pertinent to mention here that during the course of assessment proceedings also, the assessee has raised objection to reopening of assessment u/s 148 for the AY 2012-13. The then Assessing Officer vide letter dated 31.10.2023 has disposed off the objections raised by the assessee in a detailed speaking order on the above issue. A copy of the letter / order dated 31.10.2023 is attached herewith for your kind perusal.
4. Considering the above facts and circumstances of the case, the Hon’ble ITAT may be prayed to decide the case on merits.
17. A perusal of the above reveals that there is no mention in the same of as to how the notice u/s 153C of the Act could be issued for the impugned assessment year AY 2012-13 as on 01.04.2021.Non of the legal and factual contentions of the assessee have been dealt with in the report .
18. We have examined the contentions of the Ld. Counsel for the assessee and find merit in the same. We concur with the contention of the ld. Counsel for the assessee that the issue in the present case u/s 148 of the Act was barred by limitation prescribed u/s 149 of the Act first proviso. The order passed as a consequence is held to be void ab initio and is quashed. The order of the Ld. CIT(A) , setting aside the case to the file of the AO for reconsideration, is accordingly set aside as infructuous.
19. In effect, appeal of the assessee is accordingly allowed in above terms.
Order pronounced in the Open Court on 06.10.2026
