The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the reassessment under Section 148 based on incriminating materials, directing that the reassessment should have been carried out under Section 153C of Income Tax Act,1961 instead.
Sheel Trading Company,appellant-assessee,was involved in a search under Section 132 of the Act on M/s. Dhanuka Group, Neemuch, on 13.02.2019. During the search, it was found that the assessee had made purchases from bogus entities.
The Assessing Officer ( AO ) issued a notice under Section 148 on 30.03.2021, leading to re-assessment and an addition of Rs. 9,75,301/-, which was upheld by the First Appellate Authority. The assessee then filed the appeal before the tribunal.
The assessee’s counsel argued that the reassessment was wrongly initiated under Section 148 based on the search of M/s. Dhanuka Group, Neemuch, on 13.02.2019. The counsel claimed it should have been done under Section 153C instead. The argument was supported by judgments from the cases of ITO vs. Arun Kumar Kapoor (2011), M/s. ASG Developers Pvt. Ltd. (ITA No. 2185/Del/2024), Shyam Sunder Khandelwar vs. ACIT (2024), and Pr.CIT vs. Abhisar Buildwell (2023).
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Section 153C of the Act allows re-assessment of a taxpayer’s income if documents or materials related to them are found during a search on another person’s premises. The assessing officer can initiate the re-assessment based on these materials within six years from the end of the assessment year. This section applies specifically when the seized documents belong to someone other than the person whose premises were searched.
A single member bench comprising Madhumita Roy (Judicial Member) agreed with the assessee counsel’s submission that the reopening under Section 148 was based on materials found during the search of M/s. Dhanuka Group on 13.03.2019. It stated that the re-opening should have been done under Section 153C instead. The judgments cited by the assessee counsel were also considered, and since the reopening under Section 148 was found to be incorrect, it was quashed.
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In short, the appeal filed by the assessee was allowed for statistical purposes.
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