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Judgment
PER SUDHIR KUMAR, JM:
These appeals filed by two different Assessees namely, Monika Garg and Shashi Garg which are directed against the separate orders both dated 26.12.2025 of the Ld. Commissioner of Income Tax (Appeals-3), Gurugram (in short “the Ld. CIT(A)) relevant to assessment years 2015-16 & 2013-14. Since the issues involved in both these appeals are identical and similar, hence, the appeals were heard together and disposed of by this common order for the sake of convenience, by dealing with the facts related to assessment year 2015-16.
The assessee has argued only the common legal ground nos. 2 & 3 in both the appeals, which read as under:-
1.On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the order of the AO despite the fact that reopening the assessment of the Income Tax Act, 1961 and consequent reassessment order under section 147/143(3) without complying with the statutory conditions and the procedure prescribed under the law are bad and liable to be quashed.
2.On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the order of the AO despite the fact that notice issued under section 148 of the Act and consequent reassessment order under section 147/143(3) are illegal, without jurisdiction, invalid and liable to be quashed.
The brief facts of the case are that assessee filed her return of income declaring an income of Rs. 13,63,113/- after claiming deduction of Rs. 153910/-under Chapter VI of the Income Tax Act, on 1.2.2016 pertaining to the assessment year 2015-16. The income declared consists of salary income of Rs. 2,90,400/- from Antrsikh Automotive, Rental income Rs. 4,72,462/-, business income declared u/s. 44AD rs. 3,78,000/-, interest on loan Rs. 1,80,000/- and interest on saving bank Rs. 3910/-. Search operations under the provisions of Income Tax Act were carried out on 6.6.2016 on SRS Group, Faridabad and during the course of post search investigation proceeding, it was gathered that assessee purchased plot / land measuring 2 kanal 19 marla (1800 sq. yards) for total consideration of Rs. 25,20,000/- (including stamp duty of Rs. 120000/-) from Shri Girraj Singh. The assessee was asked to explain the source of investment made in this property. In response, assessee vide her reply dated 7.8.2018 submitted that payment of Rs. 13.50 lacs was made by Smt. Monika Garg from her saving bank account and payment of Rs. 120000/- was made in cash for stamp duty. The balance amount has been paid by Smt. Shashi Garg. The assessee also submitted copy of bank account statement to substantiate her claim. On perusal of bank account statement of Smt. Monika Garg and Smt. Shashi Garg, AO noted that bank account of Monika Garg is credited by transfer of fund from Lalit Garg HUF, Mohan Garg HUF, M/s Jitendra Enterprises and bank account and Dharam Chand Garg and sons HUF. However, assessee could not explain nature of transaction and also failed to explain genuineness and creditworthiness of persons /HUF/concern from where fund were received. Moreover, assessee also failed to explain source of cash expenditure of Rs. 1.20 lacs towards stamp duty payment. On being satisfied, notice under section 148 was issued to the assessee on 19.12.2018 after obtaining prior approval from Addl. CIT, Range-1, Faridabad. In compliance thereof assessee furnished her return of income on 16.1.2019 pertaining to the assessment year 2015-16 declaring an income of Rs. 12,09,200/- as originally declared in the return of income as mentioned above. Notice under section 143(2) and 142(1) were issued from time to time and compiled by the AR of the assessee. Later, on case was received on transfer to the undersigned vide order u/s. 120 of the Act, passed by the Pr. CIT, Faridabad dated 31.10.2019. Notices were issued and compliance was made from the assessee’s side. On the basis of material available and information as per ITR, at the outset, it would be necessary to mention here that assessee was house wife and not doing any regular business during the year. Assessee taken the entry of salary by paying cash in lieu of cheque received. Similarly, no business of any nature is being conducted by the assessee. The assessee has stated in her reply that immovable property measuring 2 k 19 marla at Nangla Gujran purchased jointly with Mrs. Shashi Garg and she has contributed Rs. 13,50,000/-. Source of investment of Rs. 9,50,000/- and Rs. 1,80,000/- and Rs. 5,80,000/- loan taken from Jitendera Enterprises, Mohan Garg HUF and Lalit Garg HUF respectively. The return of income of Mohan Garg and Sons placed on record and income of Rs. 2,40,500/- declared in the subject assessment year. The assessee has not placed copy of bank evidencing the source of loan of the loaner. Therefore, source of the loan remains unsubstantiated. These HUF has been created to route the entries and in fact HUF does not have any income but income has been created for the sake of filing ITR. Therefore, HUF is not capable to make advances to the assessee and it is own of the assessee which has been routed through cheque. Similar is the position in the case of M/s Jitendera Enterprises and Lalit Garg HUF. Since source of advancement of loan not placed nor the capacity proved. Assessee failed to prove the capacity of loaner, source of advancement of loan remained unexplained, hence, the investment in plot Rs. 13,50,000/- is added to the returned income of the assessee. Further, stamp duty paid Rs. 1,32,500/- (stamp duty Rs. 120000/- and registration charges Rs. 12500/- on purchase of the said plot. Assessee shares comes Rs. 66,250/-. Assessee has not explained the soruces of payment thereof, Therefore, same has been paid out of the unaccounted sources, therefore, total addition of Rs. 14,16,250/- is made to her returned income for the year under consideration.
Further, on perusal of the saving bank account no. 214801000004378 with Bank of Baroda, and HDFC saving bank account no. 5010001738156 it was noticed that certain cash deposit were made. The assessee has not explained the source of cash deposit in her saving bank account. Therefore, cash deposit of Rs. 8,87,000/- remained unexplained, hence, added to the returned income of the assessee for the year.
The assessee has placed the narration of credit entry made with Bank of Baroda mentioned as aforesaid. On perusal of the same, it was found by the AO that assessee has received huge gift of Rs. 25,00,000/- on 28.2.2015 through RTGS, however, neither the name of the person from gift received, identity and genuineness of the transaction and capacity of the donor proved. In the absence thereof, receipt of gift of Rs. 25 lacs is nothing but unaccounted cash routed through this way, hence, added to the returned income of the assessee. In view of above, the income of the assessee was assessed at Rs. 60,12,450/-. Against the above, assessee appealed before the Ld. CIT(A), who vide impugned order dismissed the appeal of the assessee. Aggrieved with the impugned order of the Ld. CIT(A), Assessee is in appeal before us.
Ld. AR for the assessee submitted that the notice u/s. 148 and consequent order passed u/s. 147(143(3) are illegal, invalid and without jurisdiction. As search action u/s. 132 of the Act was carried out on 6.6.2018, i.e. prior to the issuance of notice u/s. 148 dated 19.12.2018, thus, on the date of issuance of notice u/s. 148, the case of the assessee was already covered by the provisions of section 153A of the Act, which gets triggered immediately upon initiation of search. It was further submitted that once a search is initiated, AO is mandatorily required to proceed in accordance with section 153A and assess or reassess the total income for the six assessment years preceding the year of search. To support his view, he relied upon the decision of the Hon’ble Delhi high court in the case of CIT vs. Kabul Chawla [2016] 380 ITR 573.
Ld. DR could not controvert the aforesaid proposition of the Ld. DR, but he relied upon the order of the Ld. CIT(A).
We have heard the rival contentions and perused the records. It is noted that in both the captioned appeals, a search action u/s 132 has been carried out on 06.06.2018 (and subsequent dated in June 2018), and thereafter, the assessment proceedings u/s 147 has been initiated by the AO by issuing Notice u/s 148 of the Act on 19.12.2018. As search action u/s 132 of the Act was carried out on 06.06.2018, i.e., prior to the issuance of notice u/s 148 dated 19.12.2018. Thus, it is abundantly clear that on the date of issuance of notice u/s 148, the case of the assessee was already covered by the provisions of section 153A of the Act, which gets triggered immediately upon initiation of search. It is further noted that section 153A of the Act begins with a non obstante clause, overriding, inter-alia, sections 147 and 148 of the Act. Accordingly, once a search is initiated, the AO is mandatorily required to proceed in accordance with section 153A and assess or reassess the total income for the six assessment years preceding the year of search. This view is fortified by the decision of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax (Central) -III Versus Kabul Chawla, [2016] 380 ITR 573, wherein it has been held as under-
“37.On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
1. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii .............”
In view of the above precedent, the AO ceases to have jurisdiction to invoke section 147 for such years. In the present case, despite the search having been conducted on 06.06.2018, the AO proceeded to issue notice u/s 148 on 19.12.2018 and thereafter completed the assessments u/s 147/143(3) on 13.12.2019 and 17.12.2019 respectively in both the cases. Such assumption of jurisdiction is contrary to the express scheme of section 153A and is thus not tenable in the eyes of law.
Further, the ITAT Mumbai in the case of State Bank of India vs. DCIT, [2013] 22 ITR 609 has categorically held that once a search is initiated, the Assessing Officer cannot proceed under section 147/148 for the six assessment years covered under section 153A, and any such assessment is liable to be quashed as being without jurisdiction and nullity in law. The relevant finding of the Tribunal are reproduced as under:-
“20.Applying the ratio of the above decisions to the facts of the present case, we find that there is no dispute that the original assessment for the assessment year 2001-02 was completed under section 143(3) on February 13, 2004 determining the total income at Rs. 26,35,49,42,360. Thereafter, a search and seizure action was initiated in the assessee's case by the Department on July 2, 2005 on which date the assessment for the assessment year 2001-02 was not pending. Therefore, in view of the non obstante clause with which sub-section (1) of section 153A opens, the Assessing Officer has no jurisdiction to issue notice under section 148 of the Act in respect of those six assessment years which falls within the exclusive jurisdiction of section 153A of the Act and accordingly the Assessing Officer was not justified in issuing notice under section 148 on August 28, 2006 and in completing the impugned assessment under section 143(3) read with section 147 of the Act on October 31, 2006. The Assessing Officer instead of complying with the requirement of section 153A proceeded with the provisions of section 147/148 which are not applicable in the assessment under section 153A of the Act, therefore, the impugned assessment completed under section 143(3) read with section 147 of the Act is a nullity and as such the assessment order dated October 31, 2006 passed under section 143(3) read with section 147 of the Act is illegal, arbitrary, wholly without Jurisdiction and, hence, the same is quashed.’’
In our view, the case in hand is squarely covered by the aforesaid decision of State Bank of India (supra), inasmuch as in both cases, the notice u/s 148 has been issued after the date of search, and the Assessing Officer has attempted to complete assessment under section 147 despite the applicability of section 153A, which is not tenable in the eyes of law. Therefore, the ratio laid down therein applies to the present cases. Hence, respectfully following the aforesaid precedents, we hold that the notice issued u/s. 148 in both the captioned cases and the consequent assessment orders passed u/s. 147/143(3) deserve to be quashed as being invalid and without jurisdiction. Thus, we hold and direct accordingly. As a result thereof, the legal grounds raised by the assessee stand allowed in the aforesaid manner.
In the result, both the Assessee’s appeals are allowed in the very terms.