IMPORTANT POINT
The provisions of Section 153C do not override Section 147 unless the jurisdictional conditions for Section 153C are satisfied; reassessment can proceed under Section 147 based on other information.

JUDGMENT :

VIBHU BAKHRU, J

INTRODUCTION

1. The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 [hereafter the Act] impugning an order dated 09.12.2021 [hereafter the impugned order] passed by the Income Tax Appellate Tribunal [hereafter the ITAT] in ITA No.592/DEL/2020 captioned Shri Naveen Kumar Gupta v. The I.T.O.

2. The learned ITAT had allowed the appeal preferred by the respondent [hereafter the Assessee] against an order dated 26.11.2019 passed by the Commissioner of Income Tax (Appeals) [hereafter CIT(A)], whereby the Assessee’s appeal against the assessment order dated 26.12.2018 passed under Section 147 read with Section 143(3) of the Act in respect of assessment year [AY] 2011-12 was dismissed.

3. The assessment of the Assessee’s income chargeable to tax for the previous year relevant to the AY 2011-12 was reopened by issuance of a notice under Section 148 of the Act on the basis of information and evidence unearthed during the course of the search conducted on Shri Anand Kumar Jain and Shri Naresh Kumar Jain group on 17.12.2015. And, the Assessee’s income was reassessed under Section 147 of the Act.

4. The learned ITAT held that the Assessing Officer [hereafter AO] was required to frame the assessment/reassessment under Section 153C of the Act and was precluded from proceeding under Section 147 of the Act. Accordingly, the learned ITAT set aside the assessment order for the aforesaid singular reason.

QUESTION OF LAW

5. This Court by an order dated 20.03.2024 admitted the present appeal in respect of the following question of law:

“Whether in the facts and circumstances of the case, the ITAT was correct in holding that provisions of section 153C have overriding effect on the provisions of section 147 of the Income Tax Act, 1961?”

FACTUAL CONTEXT

6. Before proceeding further, it would be necessary to briefly summarize the relevant facts for addressing the question of law as framed.

7. At the material time – that is, the period relevant to AY 2011-12 – the Assessee, was engaged in the business of trading of shares, securities, commodities, Future and Options (F&O), foreign exchange, etc.

8. The Assessee filed his return of income for the AY 2011-12 on 30.09.2011 declaring a loss of Rs.2,50,39,010/-.

9. On 17.12.2015, a search was conducted under Section 132 of the Act in respect of Anand Kumar Jain and Naresh Kumar Jain [hereafter Jain Brothers] and a large volume of documents were seized. According to the Revenue, upon examination of the seized documents and other documents obtained thereafter, including the bank statements of certain companies, alleged to be the shell companies, it was revealed that the Assessee was the major beneficiary of accommodation entry operations carried on by Jain Brothers.

10. The Assessee had allegedly made a statement before the ACIT, Central Circle-26, New Delhi to the effect that he had received the entries of Rs.11,39,99,000/-. In addition, the AO had also received information from the investigation wing [DDIT (Inv.), Unit-2(2), Mumbai] that the Assessee had purchased 1994 units of a penny scrip named SVC Resources Ltd., during the financial year 2010-11.

11. The AO, based on the information and material available, issued a notice dated 28.03.2018 under Section 148 of the Act, for reassessment of income for the AY 2011-12 after prior approval from the competent authority. Thereafter, notices under Section 143(2) and under Section 142(1) of the Act were also issued to the Assessee for reassessing the income for the AY 2011-12.

12. The reassessment proceedings culminated in the assessment order dated 26.12.2018, whereby the AO determined the Assessee’s total income at Rs.11,93,64,350/-. The AO added an amount of Rs.11,30,00,000/- on the basis of a ledger submitted by the Assessee indicating receipt of entries from shell companies operated by Jain Brothers; an amount of Rs.66,33,250/-, which was disclosed to be the commission paid for the alleged entries; and, an amoun