Introduction
The distinction between reassessment proceedings under sections 147/148 of the Income-tax Act, 1961, and block/search-linked assessments under section 153C has been a persistent battleground before the Income Tax Appellate Tribunal (ITAT) and the High Courts. In Raj Kumar More v. Income Tax Officer (ITA No. 1157/KOL/2026, AY 2019-20), the ITAT “D” Bench, Kolkata, delivered a decisive ruling on this jurisdictional question. The Tribunal quashed a reassessment that had produced an addition of ₹51,45,00,000, holding that where the foundation of reopening is incriminating material seized in a search on a third party, the Assessing Officer must invoke section 153C—a special provision carrying a non-obstante clause—and cannot resort to section 148. The decision reinforces the primacy of search-based assessment machinery and the appellate right to raise pure legal issues at any stage.
Facts of the Case
The assessee, Raj Kumar More, filed his return for AY 2019-20 on 25.09.2019, declaring total income of ₹20,32,130. His case was subsequently reopened by notice under section 148. The assessee complied, filing a return on 14.08.2024 declaring the same income as originally returned.
The trigger for reopening was material found and seized during a search under section 132(1) conducted on 30 November 2018 at the premises of a third party, finance broker Shri Om Shankar Kasera. The Assessing Officer treated loan transactions amounting to ₹51,45,00,000 from Kasera as unexplained, because the assessee failed to furnish supporting documents such as loan confirmations, dates of availing loans, repayment details, interest rates, and modes of repayment. The assessment was framed on 28.03.2025 under section 147, assessing income at ₹51,65,32,130, with the addition made under section 69A read with section 115BBE.
Before the Tribunal, the assessee raised additional grounds dated 27.8.2026. These challenged the initiation under section 148 as bad in law because the information was gathered in the November 2018 search—prior to April 2021—and proceedings ought to have been initiated under section 153C. A further ground alleged that the notice under section 148A(b) dated 21/03/2023, requiring compliance by 28/03/2023, did not allow the clear seven days mandated in law, relying on Satish Kumar v. PCIT (Jharkhand High Court, WP 2640/2023). It was also contended that a letter dated 31/03/2023 extending compliance to 12/04/2023 could not survive, having been issued after the original notice period had lapsed.
Reasoning
The Tribunal’s analysis proceeded in two distinct stages: admission of the additional ground and adjudication on merits.
On admission, the Bench observed that the additional ground challenged the very jurisdiction of the Assessing Officer to initiate proceedings under section 147/148 and to frame the assessment. It held this to be purely a legal issue, with all facts already available in the appeal folder and no further verification required. The Tribunal affirmed that an assessee may raise a legal issue before an appellate authority for the first time even if not raised before lower authorities, relying on Jute Corporation of India Ltd. v. CIT (187 ITR 688), National Thermal Power Co. Ltd. v. CIT ([1998] 229 ITR 383), and PCIT v. Britannia Industries Ltd. ([2017] 396 ITR 677 (Cal)). The additional ground was accordingly admitted.
Turning to merits, the Tribunal recorded the learned AR’s submission that reopening under section 147 and the notice under section 148 were invalid because the proceeding should have been initiated under section 153C. The basis was incriminating material found during the search on Om Shankar Kasera on 30 November 2018. The AR argued that even the amended provisions of section 149 affirmed this position, and that section 153C constitutes an exclusive code beginning with a non-obstante clause that overrides all other provisions relating to assessment or reassessment.
The Tribunal found itself bound by a consistent line of authority. In DCIT v. Nawal Kumar Kanodia (ITA No. 1952/Kol/2025), the co-ordinate Bench held that where incriminating material forming the basis of proceedings under section 147/148 was found and seized during the search on the Kasera and Sanwaria Group on 30.11.2018, the proceedings to assess escaped income must be under section 153C, the special provision overriding other provisions. The Bench noted that Shyam Sunder Khandelwal v. ACIT had been approved by the Apex Court in ACIT v. Pramod Jain ([2025] 163 taxmann.com 762 (SC)). In DCIT v. Ajay Jalan, the Tribunal emphasised that where incriminating documents relating to an assessee are found in a search on another person, the section to open the assessee’s case is section 153C. In DCIT v. Suresh Kumar Banthia, the Bench recorded that a search under section 132 was conducted on finance brokers Kasera and Sanweria on 30.11.2018, during which documents were impounded and statements recorded under section 132(4) regarding the modus operandi of arranging loans.
The assessee’s counsel also relied on Sri Dinakara Suvarna v. DCIT ([2022] 143 taxmann.com 362 (Karnataka)), where the special leave petition was dismissed ([2023] 151 taxmann.com 489), Shyam Sunder Khandelwal v. ACIT ([2024] 161 taxmann.com 255 (Rajasthan)), Sejal Jewellery v. Union of India ([2025] 171 taxmann.com 846 (Bombay)), and ACIT v. Pramod Jain (SC), as well as the Tribunal’s own decision in Maan Steel & Power Limited v. DCIT (ITA Nos. 1167, 2354 & 2609/Kol/2025, order dated 26.06.2026).
The cumulative effect of these precedents is clear: section 153C is the exclusive gateway where the source of the Revenue’s information is a search on a third party. Invoking section 148 in such circumstances is not a mere procedural irregularity but a jurisdictional defect that renders the proceedings void ab initio. The Tribunal’s reasoning thus rests on the statutory architecture of the Act—the non-obstante character of section 153C—rather than on factual disputes about the loan transactions. Because the jurisdictional challenge succeeded, the assessment order dated 28.03.2025 could not stand.
Conclusion
The ITAT Kolkata allowed the assessee’s appeal, quashing the proceedings initiated under section 148 and annulling the assessment framed under section 147. The ruling underscores that the choice between section 153C and section 148 is not discretionary where the trigger is third-party search material; the special provision must prevail. It also reaffirms the settled appellate principle that pure legal issues going to the root of jurisdiction may be raised for the first time before the Tribunal. For taxpayers facing reassessment founded on search material of another person, the decision offers a potent jurisdictional defence.