Reassessment under Section 147/148 is invalid when incriminating materials are found in a third party's premises; the correct procedure is under Section 153C.

ORDER

PER: PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER

1. Both these appeals preferred by the assessee emanate from the separate orders of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] both dated 24/03/2023 for the Assessment Year (AY) 2016-17 and 2018-19 respectively as per the grounds of appeal on record. Facts and circumstances of both these appeals are common. Grounds of appeal raised by the assessee in both these appeals are identical, therefore, with the consent of parties, both these appeals were clubbed and heard together and are being decided by this common order.

2. In these appeals, the assessee has preferred both the grounds on merit as well as legal ground. One of the legal ground that has been assailed in these appeals are that a search had taken place in a third party premises and certain incriminating materials were found there which pertains to the assessee which formed the basis for reason to believe for the Assessing Officer that income has escaped assessment and therefore starting proceedings under Section 147/148 of the Act. It is the contention of learned Authorised Representative (ld. AR) of the assessee that a search had taken place in a third party premises and therein certain incriminating documents pertaining to the assessee were found, in such scenario, the assessment order should have been passed under Section 153C of the Act and not under Section 147/148 of the Act. The ld. AR of the assessee further submitted that if this ground is answered in favour of assessee, all other grounds becomes academic in nature.

3. The ld. A.R of the assessee referred to paper book page No. 9 wherein the reasons recorded for issuance of notice under Section 148 of the Act has been provided and therein it is clear that search and seizure operation were carried out in the premises of one Shri Rohit Sharma on 16/11/2017 and whereas the assessee i.e. Luxmi Hard Coke Manufacturing Company, no search action had taken place in the premises of assessee. It is only during the search operation in the premises of Rohit Sharma that incriminating materials were found pertaining to the assessee.

4. In the similar facts and circumstances, the Hon’ble High Court of Rajasthan Jodhpur Bench in D.B. Civil Writ Petition No. 17651/2022 connected with D.B. Civil Writ Petition No. 17523/2022 dated 21/03/2024 observed and held as folows:

"14. In view of above, it is clear that the entire basis for reopening the assessment is nothing but the material and information collected during search conducted in the premises of another assessee. Collection of details relating to search would not mean collection of new incriminating material and information, independent of the incriminatingmaterialandinformationcollectedduringsearchproceedings.

15. Learned counsel for the petitioner is correct in submitting that in fact, search was carried out in the year 2016 and the respondents had the authority to reopen the assessmentbyinvokingthepowersunderSection153CoftheActof 1961anddraw reassessmentproceedingsunderSection153AoftheActof1961.Thatwasnotdone withintheperiodoflimitationprescribedunderSection153BoftheActof1961.The respondent-authority was fully aware of the fact that proceedings under Section 153CoftheActof1961wouldbebarredbylimitation,therefore,recoursewastaken totheprovisionscontainedinSection148andSection148AoftheActof1961which hasnoapplicationinthepresentcases."

Similarly in another decision of Hon’ble High Court of Rajasthan in the case of Shyam Sunder Khandelwal Vs ACIT (2024) 161 taxmann.com 255 (Raj) which has been observed and held as follows:

"In cases of the person other than on whom search was conducted but material belonging or relatingsuch