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Reassessment u/s 147 held invalid when based on search material from third party – Proceedings ought to be u/s 153C

Case Law Details

TaxGuru Citation
2025 taxguru.in 9142
Case Name
Abharan Jewellers Vs ACIT (Karnataka High Court)
Date of Judgement/Order
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Abharan Jewellers Vs ACIT (Karnataka High Court)

Abharan Jewellers, a partnership firm, challenged the reassessment proceedings initiated u/s 147 r.w.s 148 for A.Y. 2013-14. AO had issued notice dated 01-08-2016 u/s 148 & completed assessment u/s 143(3) r.w.s 147 on 29-12-2017, raising demand & initiating penalty. Assessee contended that the reopening was entirely founded on material seized during a search on a third party, & therefore, the only proper course available to the Revenue was to invoke the special procedure prescribed u/s 153C & not the general provision of s.147.

Assessee relied upon the coordinate Bench decision in W.P. No. 8577/2018 dated 29-10-2024 (same group case), while the Department did not dispute that the issue stood covered by that ruling.

Justice Nagaprasanna noted that the coordinate Bench had already examined identical facts & held that when the Revenue seeks to reopen an assessment based solely on documents or evidence seized during search on another person, the proceedings must be under s.153C, since s.153A & 153C-both beginning with non-obstante clauses overriding ss.139, 147, 148, 149 & 151-constitute a special code for search-based assessments.

The Court endorsed the principle laid down in Dinakara Suvarna v. DCIT (ITA 16/2015) & the Rajasthan HC ruling in Shyam Sundar Khandelwal v. ACIT [2024] 161 Taxmann.com 255 (Raj.), that when incriminating material is seized from another person’s premises, the AO must follow s.153C procedure & cannot resort to s.147, as the latter stands overridden by the special provisions.

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Author Info

CA Vijayakumar Shetty
Qualification: CA in Practice
Company: Shetty & Co, Chartered Accountants, Mangalore
Location: Mangalore, Karnataka
Articles Published: 6,879

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