Rajesh Kumar Jain Vs DCIT (ITAT Mumbai)
Mumbai ITAT Quashes Search-Based Scrutiny Assessment: Notice Under Section 148 Mandatory for Pre-Search Year
In Rajesh Kumar Jain v. DCIT, the Mumbai ITAT held that where a search was conducted after 1 April 2021, the assessment of a year preceding the search year must be undertaken through the reassessment mechanism under sections 147 and 148. Such assessment cannot be initiated merely by selecting the return for compulsory scrutiny and issuing a notice under section 143(2).
The search was conducted on 31 January 2023, whereas the disputed assessment related to AY 2022-23. The Assessing Officer selected the case for compulsory scrutiny based on CBDT guidelines and completed the assessment under section 143(3) without issuing any notice under section 148. Additions were made under section 69A in respect of cash found during the search and notings contained in a loose paper.
The Tribunal observed that the Finance Act, 2021 restricted section 153A to searches initiated up to 31 March 2021 and brought subsequent searches within the redesigned reassessment framework. Under Explanation 2 to section 148, a post-1 April 2021 search constitutes deemed information suggesting escapement of income. Therefore, issuance of notice under section 148 was the jurisdictional gateway for assessing a preceding year.
The Tribunal clarified that:
