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2026 Supreme(Online)(ITAT) 13251
INCOME TAX APPELLATE TRIBUNAL (AGRA BENCH)
NEELIMA AGRAWAL ASHOK NAGAR – Appellant
Versus
INCOME TAX OFFICER ASHOK NAGAR ASHOK NAGAR – Respondent
ITA 232/AGR/2026[2018-19]
For persons other than the searched person, reassessment based on incriminating search material must be under Section 153C, not Section 147/148, as the special provision overrides the general.
Headnote:(A) Income-tax Act, 1961 - Sections 147, 148, 148A, 153C, 153A, 144B, 132, 132A - Assessment/Reassessment - (S. 147/148) - Reopening of assessment - (S. 153C) - Assessment of other person in search cases - Validity - Search and seizure operation conducted on a group - Incriminating material pertaining to assessee found - Assessing Officer initiated proceedings under S. 147 of the Act instead of S. 153C - Held, assumption of jurisdiction under S. 147 is flawed - When incriminating material is found during a search, provisions of S. 153C must be followed for a person other than the searched person - Recourse to general provisions of S. 147/148 is impermissible on such search material - Proceedings under S. 147/148 quashed. (Paras 4-5)
(B) The non obstante clause in Sections 153A and 153C overrides the general provisions of Sections 147 and 148 - The intention of the legislature is that assessment or reassessment emanating from incriminating material arising from a search must be undertaken under Section 153A for the searched person and under Section 153C for the other person. (Para 52)
Facts of the case:
The assessee filed her original return for AY 2018-19. A search and seizure operation was conducted on a group (P N Group) on 09.01.2020. During the search, documents relating to the assessee were found, indicating she had sold an immovable property to a concern of the searched group, without offering capital gains in her return. The Assessing Officer initiated proceedings under Section 148A of the Act and issued a notice under Section 148, concluding the reassessment under Section 147 read with Section 144B, making an addition on account of long term capital gains. The assessee challenged the validity of the assumption of jurisdiction under Section 147.
Findings of Court:
The Tribunal held that the correct course of action for the revenue was to proceed under Section 153C of the Act, as the proceedings were initiated pursuant to a search where documents of the assessee were found. Following the decision of the Gujarat High Court in Paras Chandreshbhai Koticha, the Tribunal ruled that the Assessing Officer cannot directly invoke the provisions of Section 147/148 on the incriminating material found during a search. The assumption of jurisdiction under Section 147 was flawed, and the reassessment proceedings were quashed. Other grounds were left open as academic.
Issues: The main issue was the validity of the assumption of jurisdiction under Section 147 of the Act for reassessment, when incriminating material pertaining to the assessee was found during a search of a third party, instead of following the procedure under Section 153C of the Act.
Ratio Decidendi: When incriminating material of a person other than the searched person is found during a search, the special provisions of Section 153C of the Act must be strictly followed. The Assessing Officer cannot bypass the mandatory procedure of recording satisfaction under Section 153C and resort to the general reassessment provisions under Section 147/148 on the same search material. Such an action is without jurisdiction and invalid.
Result: Appeal allowed. Reassessment proceedings quashed.
ORDER
1. The appeal in ITA No. 232/AGR/2026 for AY 2018-19, arises out of the order of the ld National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 09.09.2025 against the order of assessment passed u/s 147 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 06.03.2023 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘ld. AO’).
2. The preliminary issue raised by the assessee is challenging the validity of assumption of jurisdiction u/s. 147 of the Act and consequently framing of reassessment by the ld A.O. u/s. 147 of the Act instead of framing the assessment u/s 153C of the Act.
3. I have heard the rival submissions and perused the materials available on record. The assessee had filed her original return of income for the Assessment Year 2018-19 declaring total income of Rs 6,56,850/- including agricultural income of Rs 1,72,320/-. A search and seizure operation was conducted on P N Group, Guna on 09.01.2020. During the course of search and seizure operations, it was noticed that assessee had sold an immovable property located at Village Takneri, District Ashoknagar, Madhya Pradesh to one of the concerns of PN Group, Guna during the year under consideration for Rs 21,20,000/-. The assessee herein had not offered the capital gains in her return of income. Accordingly, proceedings stood initiated on the assessee u/s. 148A of the Act and notice u/s. 148 of the Act was issued to the assessee. The assessee filed his return on 16.06.2022 declaring total income of Rs. 4,91,697/- plus agricultural income of Rs 1,72,320/-. The reassessment was concluded in the hands of assessee u/s. 147 r.w.s. 144B of the Act on 06.03.2023 after making an addition of Rs. 21,20,000/- on account of long term capital gains on sale of land. This action of the ld A.O. was upheld by the ld CIT(A).
4. At the outset, I find the assessment proceedings on the assessee stood initiated u/s. 147 of the Act pursuant to the search and seizure operation carried out in the hands of PN Group on 09.01.2020, wherein certain documents pertaining/ relating to assessee herein were found. Hence the right course of action available to the revenue would be to proceed on the assessee by initiating proceedings u/s. 153C of the Act. Since the proceedings stood initiated u/s/ 147 of the Act, it was argued by the ld AR that the entire proceedings gets vitiated. In support of this proposition, the ld AR rightly relied on the decision of Hon’ble Gujarat High Court in the case of Paras Chandreshbhai Koticha & Ors Vs. ITO reported in (2026) 1 CTOCTR 47(Guj). The relevant operative portion of the said order is reproduced below:-
“48. The aforesaid decisions of the Supreme Court and the Circular issued by the CBDT have been considered in numerous judgments. Unequivocally, the law mandates the recording of satisfaction by the AO of the ‘searched person’ (under s. 153A of the Act) at the stage of transmission of seized material to the jurisdictional AO of the ‘other person’ before assuming jurisdiction under s. 153C.
49. When incriminating material pertaining to a ‘third/other person’ is found during the course of a search conducted under s. 132/132A of the Act and such material is transmitted to the jurisdictional AO of such ‘other person’, the statute obliges the AO to record satisfaction on such material before proceeding further. The legislative scheme does not carve out any exception permitting the jurisdictional AO of the third person to assume jurisdiction under s. 153C of the Act in the absence of satisfaction recorded by the AO of the searched person in the first place, and, as a necessary corollary, unequivocally not under s. 147/148 of the Act as a second instance on the same material.
50. In other words, the absence of satisfaction recorded by the AO of the searched person does not vest jurisdiction in the AO of the third person to directly invoke the provisions of s. 147/148 of the Act on the
