Devendra Anubhai Shah Vs ACIT (Gujarat High Court)
Summary: The Gujarat High Court allowed the taxpayer’s petition challenging a notice dated 14 March 2022 under section 148A(b), an order dated 7 April 2022 under section 148A(d), and the consequential notice under section 148 for AY 2018-19. The proceedings arose from a search under section 132 conducted on 11 April 2017 at the residential premises of the petitioner and his brother. A steel cupboard containing approximately 39 kilograms of silver bars, coins and block was placed under a prohibitory order. The petitioner stated that 15 kilograms belonged to his wife and had been disclosed in wealth tax returns; the judgment records that he could not explain the source and offered a demand draft of ₹10,22,000. His return for AY 2018-19 declared total income of ₹1,92,72,870 and was not selected for scrutiny.
The petitioner argued that, since the search preceded 1 April 2021, the Revenue could proceed only under sections 153A/153C, rather than issue a notice under section 148. The Revenue alleged escapement of income of ₹22,50,675 on account of unexplained cash and jewellery. It also submitted that an inquiry under section 148A(a) was not mandatory and that the Assessing Officer had considered the taxpayer’s response before passing the impugned order.
Referring to section 149 and the undisputed search date, the Court held that, in the facts of this case, notices could have been issued under sections 153A/153C, and the impugned proceedings under sections 148A and 148 were without jurisdiction. It followed Paras Chandreshbhai Koticha Vs ITO, which distinguished reassessment based on incriminating search material from reassessment based on material obtained from independent sources. The reproduced precedent requires the prescribed satisfaction for proceedings concerning another person under section 153C and holds that the special search assessment route cannot be replaced by sections 147/148 on the same search material. It preserves the Revenue’s ability to invoke sections 147/148, subject to their conditions, on material collected from other independent sources.
The Court accordingly quashed the notice dated 14 March 2022, the order dated 7 April 2022 and the consequential notice of the same date. Rule was made absolute, with no order as to costs.
Cases Discussed
- Paras Chandreshbhai Koticha Vs Income Tax Officer, Ward-1(2)(2) (Gujarat High Court); Special Civil Application No. 17933 of 2018 and allied matters; 07/01/2026; 2026 taxguru.in 522 — Followed on the requirement to use the applicable special search assessment provisions for incriminating search material, the recording of satisfaction under section 153C, and the distinction between search material and material obtained from independent sources.
FULL TEXT OF THE JUDGMENT OF GUJARAT HIGH COURT
1. Heard Mr.B.S. Soparkar, learned advocate appearing for the petitioner and Mr.Aaditya D. Bhatt, learned senior standing counsel appearing for the respondent.
2. By way of present petition, the petitioner herein has challenged the notice dated 14.03.2022 issued by the respondent under section 148A(b) of the Income Tax Act, 1961 (for short ‘the Act’) for the Assessment Year (for short ‘A.Y.’) 2018-19. The petitioner also challenges the order dated 07.04.2022 passed by the respondent under section 148A(d) of the Act as well as the notice dated 07.04.2022 issued under section 148 of the Act.
3. Briefly stated, a search under section 132 of the Act was conducted on 11.04.2017 at 42, Jain Society, Ellisbridge, Ahmedabad, which is the residential premises of the petitioner as well as his brother – Dinesh Anubhai Shah. A warrant under section 132 of the Act was also issued for locker of Dena Bank belonging to the petitioner. During the search at the residence premise of the petitioner, a prohibitory order under section 132(3) of the Act was placed on a steel cupboard, which is in a room adjoining the kitchen located on the ground floor. The said steel cupboard contained silver bars, coins and block weighing around 39 kgs in total.
3.1 A statement of the petitioner was recorded under section 132(4) of the Act wherein, he has stated that the search premised was his residence. Subsequently, the prohibitory order was revoked on 05.06.2017 and the statement of the petitioner was again recorded wherein, the petitioner was asked to explain the source for the purchase of such silver. The petitioner stated that 15kgs out of 39 kgs belonged to his wife and wealth tax returns were filed accordingly. The petitioner could not explain the source and offered demand draft of Rs.10,22,000/-. The prohibitory order was revoked then.
3.2 The petitioner herein filed the return of income for the A.Y. 2018-19 offering the total income at Rs.1,92,72,870/-. The return of income was not selected for scrutiny. The impugned show cause notice under section 148A(b) of the Act came to be issued by the respondent on 14.03.2022. The petitioner filed detailed reply to the said notice on 17.03.2022 by raising objections. The respondent disposed of the objections filed by the petitioner vide impugned order dated 07.04.2022 passed under section 148A(d) of the Act. The aforesaid has given rise to the filing of the present petition.
4. Mr.B.S. Soparkar, learned advocate appearing for the petitioner submits that the notice under section 148 of the Act could not have been issued for a search conducted prior to 01.04.2021. The respondents could have issued the notice only under section 153A/153C of the Act. It is submitted that on the aforesaid ground alone, the present petition is required to be allowed. Mr.B.S. Soparkar, learned advocate has placed reliance on the judgment of this Court dated 07.01.2026 in the case of Paras Chandreshbhai Koticha vs. Income Tax Officer Ward -1(2)(2), Special Civil Application No.17933 of 2018 and allied matters. It is submitted that the present petition may be allowed by setting aside the impugned notice and the order.
5. Mr.Aaditya D. Bhatt, learned senior standing counsel appearing for the respondent has relied on the affidavit-in-reply and submitted that there was escapement of income on account of unexplained cash and jewellery amounting to Rs.22,50,675/-. It is further submitted that it is not mandatory to conduct inquiry as provided under section 148A(a) of the Act. In the facts of the present case, the Assessing Officer did not find requirement of conducting inquiry under section 148A(a) of the Act and issued notice under section 148A(b) of the Act dated 14.03.2022 providing an opportunity to the petitioner- assessee of being heard on the issue of income escapement. The petitioner – assessee filed his response on 22.03.2022. It is submitted that considering the submissions made by the petitioner – assessee, the impugned order came to be passed by the respondent, which requires no interference.
6. Having heard the learned advocates appearing for the respective parties and considering the facts of the present case, as referred to herein above, it is apposite to refer to the provision of section 149 of the Act, which existed prior to the amendment of the section vide Finance Act, 2021, which reads thus:
“149. Time limit for notice.- (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-
(i) an asset;
(i) expenditure in respect of a transaction or in relation to an event or occasion;
(iii) an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:
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 Ist day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been 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 section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021:
Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:
6.1 As provided under section 149 of the Act, in the facts of the present case, it is not in dispute that the search was conducted prior to 01.04.2021 i.e. on 11.04.2017. Resultantly, the respondents could have issued notice under section 153A/153C of the Act. The notice issued under section 148A of the Act or 148 of the Act is without jurisdiction, the same could not have been issued on or after 01.04.2021 as in the facts of the present case where the search is conducted prior to 01.04.2021.
7. Further, the case of the present petitioner is squarely covered by the judgment rendered in the case of Paras Chandreshbhai Koticha (Supra), considering the fact that the only option available to the Assessing Officer to assume the jurisdiction on the incriminating material found during the search proceedings under section 132 of the Act is to reopen the assessment under the provision of section 153C of the Act and not under sections 147/148 of the Act on the basis of the incriminating material available to him after recording the satisfaction. It is apposite to reproduce relevant paragraph of the said decision, which reads thus:
“76. We answer the issues by summarizing the observations as under:
1) It is mandatory for the Assessing Officer of a “searched person” (Section 153A of the Act) to record satisfaction on the incriminating material found during the search under Sections 132/132A of the Act and communicate the same to the jurisdictional Assessing Officer of the “other/third person”.
2) In the absence of any satisfaction note recorded by the Assessing Officer of the searched person, the jurisdictional Assessing Officer of the other person cannot assume jurisdiction under Section 153C of the Act solely on the basis of material sent to him by the Assessing Officer of the searched person. In other words, the “other person” cannot be subjected to assessment/ reassessment under Section 153C of the Act on the material received by him sans a satisfaction note; hence, such an approach would be illegal, without jurisdiction, and liable to be quashed.
3) The jurisdictional Assessing Officer of the “other/searched person” (Section 153C) can invoke the provisions of Sections 147/148 of the Act only on the basis of material available to him from other sources, other than the incriminating material sent to him. In case a satisfaction note is recorded on the incriminating material and transmitted to him/her, then the only recourse available to the jurisdictional Assessing Officer is to proceed under Section 153C of the Act and not under Sections 147/148 of the Act.
4) In the case of assessees who are subjected to reassessment under the provisions of Section 153A of the Act, the Assessing Officer cannot switch over or invoke the provisions of Sections 147/148 of the Act on the basis of incriminating material found during the search and seizure conducted under Sections 132 or 132A of the Act. However, the Revenue cannot be restricted, barred, or left remediless from invoking the provisions of Sections 147/148 of the Act, subject to fulfillment of the conditions mentioned therein, and the assessment can be reopened on the basis of material collected post-search from any other independent source.”
8. Considering the facts of the present case and position of law, as referred to herein above, the present writ petition succeeds. The impugned notice dated 14.03.2022 and the impugned order dated 07.04.2022 along with the notice dated 07.04.2022, are hereby quashed and set aside. Rule is made absolute. No order as to costs.
