Jagdish Raghunathji Lahoti Vs ACIT (ITAT Mumbai)
Time-Barred Notice Dooms Reassessment: ITAT Mumbai Quashes 148 Action- Third-Party Search Can’t Trigger 147: Tribunal Deletes Additions of ₹13 Cr
ITAT Mumbai quashed reassessment notices issued u/s 148, holding them to be time barred in the light of the decision of the Hon’ble Supreme Court in UOI v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC).
The case arose from information unearthed during a search in the premises of Shree Renuka Mata Multi State Urban Co-operative Credit Society Ltd., which revealed substantial cash deposits in the name of Assessee. For AY 2014-15 AO alleged unexplained deposits of Rs. 2.33 crore & for AY 2016-17 deposits of Rs. 10.94 crore were added as unexplained u/s 69/69A. AO proceeded ex parte as there was no response to notices, & CIT(A)/NFAC sustained the additions.
Before the Tribunal, it was argued that information derived from a third-party search could only be assessed u/s 153C & not u/s 147, that the notices issued u/s 148 were beyond limitation prescribed in law, & that the jurisdictional AO issued the notice instead of the faceless AO, rendering the proceedings invalid.
Tribunal, after examining the dates & applying the ratio of Rajeev Bansal (SC), categorically held that the notices issued u/s 148 were time barred & liable to be quashed. Consequently, the reassessment proceedings collapsed in toto & the additions of Rs. 2.33 crore for AY 2014-15 & Rs. 10.94 crore for AY 2016-17 stood deleted. Since the very basis of reassessment was invalid, other grounds raised by the Assessee became academic in nature & were not adjudicated.
The ruling reinforces the settled principle that reassessment proceedings initiated beyond statutory timelines cannot be sustained, irrespective of the nature of incriminating information. It also highlights that where cash deposits are traced through a third-party search, the correct recourse is through proceedings u/s 153C & not by invoking s.147. The appeals of the Assessee were accordingly allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These appeals are filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)”] dated 24.01.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2014-15 & 2016-17.
2. The assessee has raised the following grounds of appeal:
ITA No. 1998/Mum/2025 AY 2014-15
“1. The Ld. CIT(A)-NFAC erred in confirming the income assessed by the Ld. Assessing Officer at Rs.2,36,89,979/- without adjudicating all the grounds and basically based on information derived in the course of search at the place of third party can be assessed only u/s 153C of the Act.
2. The Ld. CIT(A)-NFAC erred in not adjudicating the validity of notice issued u/s 148 r.w.s. 149. The notice issued u/s 148, for A.Y. 2014-15 is invalid and liable to be squashed in light of the decisions of
a) The Hon’ble Supreme Court in the case of UOI Vs. Rajeev Bansal [2024] 167 com70 (SC) and
b) The Hon’ble Bombay High Court in the case of Godrej Industries Vs. ACIT [2024] 160 com13 (Bombay) and
c) The Hon’ble ITAT Mumbai ‘C’ Bench in the case of ITO 10(3)(1), Mumbai Vs. Pushpak Realities Pvt. Ltd. (ITA No. 4812, 4814, 4816/MUM/2024).
3. The notice u/s 148 by the Jurisdictional Assessing Officer, instead of Faceless Assessing Officer is invalid and illegal, liable to be quashed in the light of the decision of Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. Vs. ACIT, Circle 15(1)(2), [2024] 162 taxmann.com225 (Bombay).
4. The action of the Ld. Assessing Officer to issue Notice u/s 148 and completing the assessment u/s 147 is bad in law as the alleged cash deposit is noticed in the search at the place of third party and cannot be assessed u/s 147 instead of section 153C of the Act.
The Assessee requests to add, delete, alter or amend any of the grounds of appeal.”
ITA No. 1999/Mum/2025 AY 2016-17
“1. The Ld. CIT(A)-NFAC erred in confirming the income assessed by the Ld. Assessing Officer at Rs. 10,99,11,581/- without adjudicating all the grounds and basically based on information derived in the course of search at the place of third party can be assessed only u/s 153C of the Act.
2. The notice u/s 148 by the Jurisdictional Assessing Officer, instead of Faceless Assessing Officer is invalid and illegal, liable to be quashed in the light of the decision of Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd. Vs. ACIT, Circle 15(1)(2), [2024] 162 com225 (Bombay).
3. The Ld. AO erred on obtaining approval from inappropriate authority i.e. of Pr.CIT-19, Mumbai, instead Pr. CCIT/CCIT/Pr. DGIT/DGIT as prescribed u/s 151 of the Act, as period of three years lapsed from the end of Assessment Year. The issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of Siemens Financial Services (P.) Ltd. Vs DCIT [2023] 184 com159 (Bombay) and held by Hon’ble Apex Court in the case of UOI Vs Rajeev Bhansal [2021] 167 taxmann.com 70 (SC).
4. The Hon’ble CIT(A) – NFAC failed to note that the learned AO erred in making an addition on account of cash deposit of Rs. 10,94,97,411/-in the bank account with Renuka Mata Multi State urban Co-operative Credit Society Ltd. on the ground that the assessee has failed to prove the sources of the said cash deposited in the bank account and accordingly, addition was warranted u/s 69A of the Act.
5. The action of the Ld. Assessing Officer to issue Notice u/s 148 and completing the assessment u/s 147 is bad in law as the alleged cash deposit is noticed in the search at the place of third party and cannot be assessed u/s 147 instead of section 153C of the Act.
6. Without prejudice to the above grounds the assessee submits that there are cash deposits and withdrawals in the said bank account and accordingly, only the peak credit of the cash deposits should have been as an income of the assessee.
The Assessee requests to add, delete, alter or amend any of the grounds of appeal.”
3. Since similar issues are involved in both the appeals, these are being disposed of by a common order.
ITA No. 1998/MUM/2025 AY 2014-15
4. Brief facts of the case are that the assessee filed return declaring income of Rs. 3,22,350/- on 30.03.2015 for AY 2014-15. The return was processed u/s. 143(1) of the Act. Subsequently, during a search and seizure action u/s. 132 carried out in the case of M/s. Shree Renuka Mata Multi State Urban Cooperative credit society Limited, it was found that the assessee had made a cash deposit of Rs. 2,33,67,629/-. Accordingly, a notice u/s. 148A(b) was issued on 25.05.2022 to the assessee with respect to unexplained and unverified cash deposit of Rs. 2,33,67,629/- with the cooperative society. Since the assessee did not submit any reply to the notice, an order u/s. 148A(d) was passed on 23.07.2022 and notice u/s. 148 was also issued on the same date. Since no compliance to any of the notices was made by the assessee during the course of reassessment proceedings, Ld. AO finalised the assessment ex-parte u/s. 147 r.w.s 144 r.w.s 144B vide order dated 15.05.2023, after making an addition of Rs. 2,33,67,629/- u/s. 69 of the Act. Aggrieved with the order of Ld. AO the assessee preferred an appeal before the Ld. CIT(A), who has set aside the order of Ld. AO for making a fresh assessment after considering the assesse’s submissions.
4.1. Aggrieved with the order of Ld. CIT(A), the assessee has filed an appeal before the Tribunal on the ground that Ld. CIT(A) did not adjudicate the validity of the notice issued u/s. 148 of the Act.
5. At the outset, Ld. AR submitted that apart from the other legal issues, the notice u/s. 148 itself is time barred in view of the decision of the Hon’ble Supreme Court in the case of UOI vs. Rajeev Bansal [2024] 167 taxmann.com70(SC). In this regard the following chart has been submitted by the assessee.
6. Ld. DR, on the other hand, submitted that the matter may be remanded back to either the Assessing Officer or Ld. CIT(A) for adjudication of the issues raised by the assessee.
7. We have heard the rival submissions and perused the material on record. From the details submitted by the Ld. AR, it is clear that the notice u/s. 148 has been issued beyond time and is, therefore, time barred as per the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra). Ld. DR has not controverted the factual details regarding issue of notice submitted by the assessee. In view of these facts, we hold that the notice u/s. 148 was issued beyond time and is, therefore, liable to be quashed. This ground is allowed in favour of the assessee.
7.1. The assessee has also raised certain other legal grounds relating to the issue of notice by Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO) as well as regarding the applicability of section 153C in this case due to the fact that impugned information was discovered during the course of search at the place of a third party and hence the same could be assessed only u/s. 153C of the Act.
7.2. Since we have already quashed the notice u/s. 148, the other legal contentions raised by the assessee have become academic and, therefore, are not been adjudicated upon.
8. In the result, the appeal of the assessee is allowed.
ITA No. 1999/MUM/2025 AY 2016-17
9. The facts and circumstances for AY 2016-17 are identical to AY 2014-15 and the relevant dates relating to the issue of notice u/s. 148 are as under:
10. Since the facts of this year are similar to AY 2014-15, the notice u/s. 148 for AY 2016-17 is also hereby quashed in view the decision of Hon’ble Supreme Court in the case of Rajeev Bansal (supra).
11. Accordingly, the other legal issues raised in this year including, incorrect sanction by the PCIT instead of PCCIT/CCIT as prescribed u/s. 151, are rendered academic and hence are not being adjudicated upon.
12. In this result, both appeals of the assessee are allowed.
Order is pronounced in the open court on 18.09.2025
