Case Law Details
Kulwant Singh Vs ITO (ITAT Jaipur)
The appeal was filed before the Income Tax Appellate Tribunal (ITAT), Jaipur, challenging the order dated 14.02.2025 passed by the Commissioner of Income Tax (Appeals) under Section 250 of the Income Tax Act, 1961. The assessee contested the validity of reassessment proceedings initiated under Sections 147 and 148, along with additions made and other procedural grounds.
The Assessing Officer (AO) had reopened the assessment based on alleged incriminating material found during a search conducted in the case of a builder. The allegation was that the assessee had paid “on-money” for the purchase of a flat, leading to an addition of ₹6,00,000 as unexplained investment under Section 69B of the Act. This addition was upheld by the CIT(A).
Before the Tribunal, the assessee argued that the reopening of assessment under Section 147 was without jurisdiction. It was contended that where reassessment is based entirely on material found during a search conducted in the case of a third party, the proper legal provision to be invoked is Section 153C and not Section 147.
The Tribunal considered the legal position in light of binding precedents of the jurisdictional Rajasthan High Court. It relied on judicial decisions holding that when the basis of reassessment is incriminating material found during a search on another person, proceedings must be initiated under Section 153C. In such circumstances, reopening under Section 147 is not valid.
Applying this principle, the Tribunal held that the reassessment proceedings initiated under Section 147 were not in accordance with law. Since the entire basis of reopening was material obtained from the search in the case of another person, the AO should have proceeded under Section 153C.
Accordingly, the Tribunal quashed the reopening of the assessment. As a consequence, the additions made, including the addition of ₹6,00,000 as unexplained investment under Section 69B, were also deleted.
Other grounds raised by the assessee, including issues relating to jurisdiction, procedural validity of the assessment order, and levy of interest, were not separately adjudicated in view of the decision to quash the reassessment itself.
The appeal of the assessee was allowed, and the order was pronounced on 08.04.2026 under Rule 34 of the ITAT Rules, 1963.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been preferred by assessee against the order of Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as “Ld. CIT(A)”] dated 14.02.2025u/s 250 of the Income Tax Act, 1961 (in short “Act”).
2. The assessee in this appeal has taken following grounds of appeal:-
“1. The impugned additions and disallowances made in the order u/s 143(3) r.w.s 147 dated 25.11.2019 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted.
2. The ld. AO erred in law as well as on the facts of the case in issuance of the impugned notice u/s 148 of the Act is without jurisdiction, as the proper and legal recourse available to the ld. AO was to invoke the provisions of S. 153C and not S.148 of the Act. The addition so made and confirmed by the CIT(A) being totally contrary to the provisions of law and facts of the case, kindly be deleted in full.
3. Rs 6,00,000/-: The ld. CIT(A) erred in upholding the addition made by the ld. AO by treating Rs. 6,00,000/- as unexplained investment u/s 69B of the Act, in connection with the purchase of a flat. The addition so made and confirmed by the ld. CIT(A) being totally contrary to the provisions of law and the facts of the case, kindly be deleted in full.
4. The impugned assessment order dated 25.11.2019 is a nullity being non-est and must be considered as never passed in as much as no DIN number has been generated as per the prescribed procedure, which is in violation of the binding instructions of CBDT and hence, the impugned assessment order may kindly be held as non-est and may kindly be quashed.
5. The impugned assessment order passed u/s 143(3) r.w.s. 147 dated 25.11.2019 is nullity and being without jurisdiction in as much as the said order has not been signed digitally as per the prescribed procedure, which is in violation of the binding instructions of CBDT and hence, the impugned assessment order may kindly be held as non-est and may kindly be quashed. Hence, the impugned order is completely devoid of jurisdiction not having being signed digitally as statutorily required.
6. The ld. AO erred in law as well as on the facts of the case in charging interest u/s 234A, 234B & 234C of the Act. The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, kindly be deleted in full.
7. The appellant prays your honour to add, amend or alter any of the grounds of the appeal on or before the date of hearing.”
3. The allegation of the AO has been that the assessee had made on-money to the builder for purchase of flat. The aforesaid addition has been made on the basis of certain incriminating material found during the course of search action in the case of builder namely Shri Surendra Pal Sahni.Based on such material, the assessment of the assessee was reopened u/s 147 of the Act. The plea of the assessee before this Tribunal is that as per the lawlaid down by the Hon’ble Jurisdictional Rajasthan High Court in the case of “Tirupati Construction Vs. ITO”(2024) 165 Taxmann.com 176 (Rajasthan),where the entire basis for reopening of the assessment was material and information collected during the search action in case of a searched person, then the course to proceed in case of third party on the basis of such incriminating material is by way of provisions of Section 153C of the Act. The reopening of the assessment under said cases u/s 147 of the Act held to be as not valid. The issue is also covered by the another decision of Hon’ble Jurisdictional Rajasthan High Court in the case of “Shyam Sunder Khandelwal Vs. Asstt. CIT”, 161 Taxmann.com 255. Therefore, the reopening of the assessment in this case is hereby quashed. Consequently, the additions stand deleted.
4. In the result, appeal of the assessee stands allowed.
Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 08.04.2026
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