ITAT Mumbai Quashes Reassessment In Nanne Gulzar Case, Holds Section 153C Mandatory In Search Matters

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) held on 15 June that the Revenue must assess additions arising from search material only under Section 153C of the Income Tax Act and cannot invoke the reassessment provisions under Sections 147/148.

Vice President Saktijit Dey and Accountant Member Prabhash Shankar allowed the appeals filed by Nanne Gulzar & Company and set aside the reassessment proceedings initiated by the Department. The Bench held:

“As per the scheme and object of section 153C r.w.s 153A, the AO has no discretion or choice to invoke the provisions of section 147/148 instead of section 153C r.w.s. 153A of the Act.”

Nanne Gulzar & Company challenged the reassessment after the Assessing Officer relied entirely on material and statements arising from a search and seizure operation conducted in the case of the Allanasons Group, along with statements recorded from the company's partner, Mohammad Saleem. Despite this, the Assessing Officer proceeded under Sections 147/148 and completed the assessment under Section 143(3).

The Tribunal compared the present assessment with that of Nanne Gulzar & Company's partner, who also faced search proceedings, and noted that the Assessing Officer had framed that assessment under the search assessment provisions. It further found that both assessments relied on identical seized material and statements recorded during the search.

Further, the Bench relied on the Bombay High Court ruling in Sejal Jewellery v. Union of India and reiterated that Sections 153A and 153C operate through a non-obstante clause and override the general reassessment provisions under Sections 147 and 148.

It held that once the Assessing Officer finds that seized material pertains to a person other than the searched person, he must initiate proceedings under Section 153C and cannot choose the reassessment route.

The Tribunal found that the entire basis of the additions in the case of Nanne Gulzar & Company came from search material and statements recorded during search proceedings. It therefore held that the Assessing Officer adopted an incorrect jurisdictional provision. Reiterating this conclusion, it observed:

“Hence, notice issued under s. 148 of the Act and proceedings under section 147 of the Act by the AO are illegal and void ab initio.”

Accordingly, the ITAT quashed the reassessment notice, the assessment order, and all consequential proceedings, holding them to be without jurisdiction and bad in law.

Appearance for Assessee: Shri Abhinav Vijh, CA. & Shri Atul Vijh, AR

Appearance for Revenue: Shri Swapnil Choudhari, (Sr. AR.)