Reopening of assessment under the Income Tax Act must follow Section 153C if based on incriminating material from a search, not Section 148.

ORDER :

Since the issue involved in these writ petitions is identical, therefore, both the writ petitions are being decided by this common order. However, for convenience, facts mentioned in Writ Petition No. 17651/2022 are being taken into consideration.

2. The Petitioner-assessee is a partnership firm. It filed its return of income for Assessment Year 2016-17 on 14.10.2016 declaring total income of Rs. 12,690/-. The return was processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961'). According to the petitioner, along with income tax return, copies of the audited balance sheet, profit and loss account were also submitted.

3. Respondent No. 1 issued a notice under Section 148 of the Act of 1961 on 31.03.2022 seeking to reopen the assessment. In compliance of the decision of the Hon'ble Supreme Court in the case of Union of India v. Ashish Agarwal, 2022 SCC Online 543 and instruction issued by the Central Board of Direct Taxes on 11.05.2022, notice under Section 148 was followed by notice under Section 148A(b) of the Act of 1961 on 02.06.2022. This notice shared with the petitioner-assessee certain information alleging that income chargeable to tax to the extent of Rs. 20,70,639/- has escaped assessment within the meaning of the provisions of Section 147 of the Act of 1961 for the Assessment Year 2016-17.

4. The petitioner, in response, submitted a reply-cum-objection on 13.06.2022. The respondent-authority, however, was not satisfied with the reply, particularly the objection with regard to maintainability of proceedings drawn under Section 148A of the Act of 1961 and proceeded to pass impugned order on 27.07.2022 under Section 148A(d) of the Act of 1961. Similar order was also passed in the proceedings relating to Assessment Year 2017-18. The aforesaid orders are under challenge in these petitions.

5. Though number of grounds have been urged by the petitioner in these petitions, learned counsel for the petitioner has confined his argument by submitting that since the entire information, which has been made the basis for reopening the assessment, was part of the documents and material collected during search conducted in the premises of another assessee, the legally permissible course of action was to invoke Section 153C of the Act of 1961 and not Section 148 of the Act of 1961. His submission is that the search was conducted long back and prior to 31.03.2021, but proceedings were not initiated within the period of limitation prescribed under Section 153B of the Act of 1961. Therefore, in order to overcome the said statutory bar, it is being wrongly projected as if the present are the cases of reopening of assessment on the basis of information received before and after the search, which is factually incorrect. He would also highlight that if notice under Section 148A(b) of the Act of 1961 and the final order passed under Section 148A(d) of the Act of 1961 is perused, it would be apparently clear that the basis for reopening the assessment is the information collected from the documents which were seized during search conducted in the premises of another assessee. Therefore, invocation of powers under Section 148A of the Act of 1961 is against the provisions of law. Learned counsel would further submit that present cases are covered under Section 153C of the Act of 1961 and assessment ultimately has to be done under Section 153A of the Act of 1961, but bar under Section 153B of the Act of 1961 would be applicable and for that reason, even on the day when the notice under Section 148A(b) of the Act of 1961 was issued, i.e., on 31.03.2021-01.04.2021, assessment under Section 153C read with Section 153A of the Act of 1961 was barred in view of the period of limitation prescribed under Section 153B of the Act of 1961. Therefore, even the proceedings could not be drawn under Section 153C of the Act of 1961.

6. Per contra, learned counsel for the respondents would submit that the enti