When incriminating material pertaining to a third party is seized during a search, the special procedure under Section 153C of the Income Tax Act must be followed; proceedings initiated under the general reassessment provision of Section 148 in such circumstances are legally unsustainable.

O R D E R

Per Ratnesh Nandan Sahay, Accountant Member:

Both the present appeals have been preferred by revenue against the order of Ld. Commissioner of Income Tax Appeal (hereinafter referred to as “Ld. CIT(A)”) dated 08.09.2025 u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “Act”).

2. The revenue has taken the following grounds of appeal:-

i)Whether the Learned CIT(A) erred in quashing the assessment proceedings based solely on the High Court judgment in DBCWP 18363/2019, without considering the unique facts and circumstances of the present case.

(ii) Whether on the facts and circumstances of the case and in law, the Hon. CIT (A) is justified in holding that notice u/s 148 is not sustainable legally relying upon the order of Hon'ble Rajasthan High Court's order dated 19.03.2024 in D.B. Civil Writ Petition No. 18363/2019 and several other linked petitions wherein wrongly held that once there is incriminating material seized or requisitioned belonging or relatable to the person other than on whom search was conducted, Section 153C is to be resorted to without giving any finding that issuance of notice under section 148 was incorrect. Thus, the CIT (A) is not justified in quashing notice issued u/s 148 of the Act.

(iii) Whether the Learned CIT(A) erred in overturning the issuance of a notice under Section 148 of the Income Tax Act, 1961, despite the precedent set by the Hon. Supreme Court of India in Deputy Commissioner of Income Tax (Central) Circle 1(2) V/s. M/s. M.R. Shah Logistics Private Limited (2022) 14 SCC 101. In light of the Supreme Court's ruling in the aforementioned case, the Learned CIT (A) should have upheld the issuance of the notice under Section 148, unless there were compelling reasons to deviate from the established legal precedent.

(iv) The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appellate proceeding

3. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed of by this common order.

4. Facts of the case in brief are that the information was received from the DDIT (Inv.)-II, Jaipur who had carried out substantial inquiries during the course of search proceedings and post search proceedings, in the case of Shri Ramesh Maihar Group, conducted at various premises. During the proceedings, certain incriminating documents (Pen drives) found and seized from the premises were examined during post search proceedings. It was further gathered that the key persons of Ramesh Manihar Group, being Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla were engaged as finance brokers for arranging cash loans between various borrowers and lenders, which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transactions was also not offered for taxation by the group. The assessee has advanced unaccounted loan through the Ramesh Manihar Group and also earned unaccounted interest thereon, which is required to be brought to tax.

5. The Assessing Officer (AO) after having recorded reasons in detail, finally, initiated reopening proceedings u/s 147 of the Act on the ground as under:-

“Thus, Shri Gopal Prasad Gupta, mentioned in the above mentioned table as in the column FROM has provided advances of Rs.3,80,00,000/- in cash during FY 2015-16 relevant to AY 2016-17 through the Ramesh Manihar Group. The said person has also earned unaccounted interest on the advanced cash loan of Rs.3,80,00,000/- given to various persons/concerns. The same is also unrecorded. Hence, it is a fit case for initiation of assessment proceedings for escapement of income.”

6. The AO, thereafter, mentioned that on the basis