Title: Reassessment under Section 147 upheld; Writ petition dismissed as Section 153C inapplicable without incriminating material

Issue

Whether the assessment proceedings against the petitioner should have been initiated under Section 153C (assessment of income of any other person) of the Income Tax Act, 1961, instead of Section 147 (income escaping assessment), given that a search and survey operation was conducted at various finance brokers.

Facts

Previous Litigation: The petitioner had earlier challenged an assessment order dated February 01, 2024. The Court set aside that order and remanded the matter for a fresh decision after granting a personal hearing via video conferencing.
Fresh Order: Pursuant to the remand, the Assessing Officer (AO) passed a fresh assessment order on June 10, 2024, under Section 147 read with Sections 260 and 144B.
Petitioner’s Contention: The petitioner argued that since the assessment relied on information from a search/survey operation, the proceedings should have been mandatory under Section 153C (Search Assessment) rather than Section 147 (Reassessment).
Basis of Assessment: The assessment was based on information received from the Investigation Wing (ADIT) available on the Insight portal and evidence collected post-search, not necessarily incriminating material found during the search belonging to the petitioner.

Decision

Held in favour of Revenue (Procedural Validity upheld)

Prerequisites for Section 153C: The Court analyzed Section 153C and held that it can only be invoked when specific conditions are met:
1. The AO of the searched person must be satisfied that seized assets/documents belong to the “other person” (petitioner).
2. This satisfaction must be recorded and transmitted to the AO of the “other person.”
3. The AO of the “other person” must be satisfied that the material has a bearing on the total income.
Absence of Satisfaction Note: There was nothing on record to show that the AO of the searched person recorded satisfaction that incriminating material belonging to the petitioner was found.
Applicability of Section 147: Citing the Supreme Court judgment in Pr. CIT v. Abhisar Buildwell (P.) Ltd., the Court reiterated that if no incriminating material is found during a search, the only remedy available to the Revenue to assess completed assessments is to initiate proceedings under Section 147/148.
Writ Jurisdiction: The Court dismissed the writ petition, noting that the petitioner raised this jurisdictional issue for the first time in the second round of litigation to avoid the statutory appellate forum.
Alternative Remedy: The petitioner was relegated to the statutory appellate remedy under Section 246 (Commissioner Appeals).

Key Takeaways

Section 153C is Conditional: Proceedings under Section 153C are not automatic merely because a search occurred. They require a specific finding that incriminating material belonging to the third party was seized. Absent this, Section 153C cannot be invoked.

Section 147 as the Residual Remedy: When search operations do not yield incriminating material sufficient to trigger Section 153A/153C, or if the assessment is unabated, the Revenue retains the power to reassess income under Section 147, provided the standard conditions for reassessment are met.

Appellate Route First: Courts are reluctant to entertain writ petitions on jurisdictional grounds if the petitioner has bypassed the standard appellate hierarchy (CIT(A)), especially when factual disputes are involved.

APPELLATE TRIBUNAL SAFEMA, NEW DELHI

Deputy Commissioner of Income-tax (BPU)

Anku Nivesh Niryat (P.) Ltd.

BALESH KUMAR and Rajesh Malhotra, Member

MP-PBPT-958/KOL/2024 (Stay)
FPA-PBPT-279/KOL/2024

NOVEMBER 13, 2025

Manmeet S. Arora, S.P.P., Yash Batra, Jasman and Camran Iqbal, Advs. for the Appellant. Aneesh Mittal and Ms. Komal Mittal, Advs. for the Respondent.

ORDER

1. This Order disposes of the Appeal No. FPA-PBPT-279/KOL/2024 filed by the DCIT (BPU) Kolkata DCIT against the Order dated 27.06.2024 (Impugned Order) passed by the Adjudicating Authority, Office of the Competent Authority and Administrator, Kolkata, under Section 26 (3) of the Prohibition of Benami Property Transaction Act, 1988 (PBPTA). The Impugned Order has not allowed Reference dated 12.06.2023 and has not confirmed the Provisional Attachment Order dated 01.06.2023 (PAO) u/s 24 (4) (b) (i). Therefore, the impugned property at Floor No. 5, Ward No. 23, Premises No. 5, Joginder Kaviraj Row, Kolkata Municipal Corporation, P.S. – Posta, Kolkata – 700007 has been held as not a Benami Property within the meaning of Section 2 (8) of PBPTA.

2. Ld. Counsel for the Appellant Department submitted that the Respondent company M/s ANKU NIVESH NIRYAT PRIVATE LIMITED (hereinafter also referred to as ANNL/Benamidar ‘BD’) is a Private Limited Company incorporated with authorized share capital of Rs. 50,00,000/- and paid-up capital of Rs. 23,30,000/- on 28 August 1995 having registered address at 10A, Hospital Street, 1st Floor, Room No-104 Kolkata, West Bengal, 700072. He further submitted that Respondent Smt. PUNAM PATNI and Sh. RATAN MALA JAIN are the Directors of the company since 02 March 2009 (hereinafter also referred to as Beneficial owner ‘BO’).

3. Ld. Counsel for the Appellant submitted that a survey operation was conducted and it was found that ANNL had paid Rs. 72,36,000/- to Sh. Hitendra Kumar Dubey, Authorized Director of M/s Sunfast Marketing Pvt. Ltd., for acquiring a property at Floor No. 5, Ward No. 23, Premises No. 5, Joginder Kaviraj Row, Kolkata Municipal Corporation, P.S. – Posta, Kolkata – 700007 (hereinafter referred to as Benami Property), through the deed of conveyance on 07.03.2017 registered at the Office of Additional Registrar of Assurance-II, Kolkata (ARA-II). Smt. Punam Patni represented ANNL as Authorized Director and Purchaser. Further, it was also informed that the purchase transaction was funded through share capital/premium from several paper Companies. As per the submission of the Respondent Company before the Adjudicating Authority, it was stated that other Companies had transferred the amounts over a period of time beginning from 2013 to 2017. While going through the financial analysis of the connected Companies, it has also been found that the Companies namely M/s Turmoil Mercantile Pvt. Ltd. and M/s Rashmi Commodeal Pvt. Ltd., which acted as sources of payment to ANNL are having unregistered PAN and the rest of the Companies were clearly not having any business and have been used as intermediaries for transfer of funds. Ld. Counsel submitted that to determine the financial creditworthiness of the Respondent Company ANNL a financial analysis of the Company was done which revealed that it has no real creditworthiness. Some of the major pointers towards determining the genuineness of a Company such as total revenue, sales, income, net profits, profit before taxes were either NIL or negligible or shown to be in loss. The funds thus received by the Company were from fictitious sources. ANNL itself is a shell Company. Being merely a shell Company, it acted as a conduit to facilitate laundering of unaccounted or ill-gotten wealth of promoters who were ultimately controlling and managing the affairs of ANNL.

4. Ld. Counsel for Appellant submitted that the Respondent company ANNL was not worthy enough to enter high value property transaction. It had acted merely as a Benamidar in respect of the said property transaction. Therefore, after obtaining due approval of the Approving Authority on 16.09.2022 for conducting necessary discreet as well as open enquiries/ investigation in respect of ANNL, summons was issued u/s 19 of the PBPTA to the principal officer/director of ANNL on 21.12.2022.

5. Ld. Counsel for the Appellant submitted that the Show Cause Notice (SCN) u/s 24(1) of PBPTA dated 31.03.2023 was issued, besides PAO u/s 24(3) of PBPTA dated 31.03.2023. ANNL filed its written submissions dated 20.04.2023. The sole contention raised in the reply was with regard to the retrospective applicability of the Act of 1988 through an amendment which came into force on 01.11.2016. It was contended that 90% of the investments in the said property were made before 01.11.2016. However, the Respondent BD admitted that the last payment of Rs.7,36,000/- was made in January 2017 to meet the terms of the agreement for sale signed in 2013. It is further pertinent to mention here that the sale deed got registered on 07.03.2017. The Respondent BD further stated that the Respondent BO(s) are the shareholders of the Company.

6. Ld. Counsel for the Appellant argued that the Ld. Adjudicating Authority has relied upon the Judgment dated 23.08.2022 of the Hon’ble Supreme Court in the matter of Union of India v. Ganpati Dealcom (P.) Ltd. (SC)/(2023) 3 SCC 315 to hold that the transactions which occurred for flow of funds to ANNL before 01.11.2016 could not be brought under the purview of the Amended Act. Ld. Counsel stated that out of 6 such transactions, 5 of these were ruled out from being taken into reckoning as Benami in the Impugned Order. This accounted for 90% of the payment which had been made by ANNL towards the payment for the impugned property. It was held in the Impugned Order that only the transaction of Rs.7,36,000/- made after 01.11.2016 could come up into consideration for being regarded as Benami, but since it was continuation of the process of payment started in the year 2013 and the Deed of Conveyance was signed on 07.03.2017, the impugned property was not held as Benami. Ld. Counsel further argued that the Order dated 18.10.2024 of the Hon’ble Supreme Court in Review Petition (Civil) No. 359 of 2023/Union of India v. Ganpati Dealcom (P.) Ltd.313/[2025] 474 ITR 354 (SC) in Civil Appeal No. 5783 of 2022 in the matter of Ganpati Dealcom (P.) Ltd.(supra) has held the following:

“6. A challenge to the constitutional validity of a statutory provision cannot be adjudicated upon in the absence of a lis and contest between the parties. We accordingly allow the review petition and recall the judgment dated 23 August 2022. Civil Appeal No 5783 of 2022 shall stand restored to file for fresh adjudication before a Bench to be nominated by the Chief Justice of India on the administrative side.

7. Where any other proceedings have been disposed of by relying on the judgment of this Court in Ganpati Dealcom Private Ltd (supra), liberty is granted to the aggrieved party to seek a review in view of the present judgment.”

7. Ld. Counsel therefore pleaded to set aside the Impugned Order and remand the matter for De-Novo proceedings to the Adjudicating Authority.

8. Ld. Counsel for the Respondents has strongly refuted these allegations, submitting that the purchase of the property was a bona fide commercial transaction funded entirely through the Respondent Company’s own disclosed sources, reflected in its audited balance sheets. The Respondent emphasized that its accounts are duly audited, returns filed regularly under the Income Tax Act, and statutory filings made under the Companies Act. It has also been submitted that the Appellant’s characterization of the Company as a “shell entity” or “paper company” is baseless and made without any independent verification. The Respondent further stated that all payments were made through banking channels, and no fund was contributed by the Directors personally. The Respondent also pointed out that the income generated from the property is being shown in its books and returns, and therefore, the Company holds and enjoys the property in its own right, negating the allegation of any Benami element.

9. Ld. Counsel for the Respondents submitted that the office premises was acquired for the Company’s own use from legitimate and disclosed sources. The entire consideration was paid through banking channels from the Company’s own reserves. All payments and financial transactions related to the purchase were fully accounted for, and relevant documents were provided to the Authorities. The Appellant, however, ignored these records and wrongly presumed that the funds used originated from undisclosed or fictitious entities. It was further emphasized that all Companies involved in share transactions or financial dealings with the Respondent were active, compliant with tax filings, operating businesses and not paper or shell entities. Finally, Ld. Counsel for the Respondents contended that the Appellant had failed to produce any cogent evidence proving that the property was held for the benefit of any other person. Since the Respondent Company had purchased and held the property in its own name, for its own business purposes, the fundamental ingredients of a “Benami transaction” were not satisfied, and the burden of proof, which rested with the Appellant, remained undischarged. He therefore pleaded to uphold the Impugned Order and dismiss the Appeal.

10. We have considered the rival submissions and the material on record. The Hon’ble Supreme Court in the Order dated 18.10.2024 (supra) has recalled its earlier Judgment dated 23.08.2022 and has granted liberty to the aggrieved party to seek a review where a matter has been disposed of relying upon the Judgment dated 23.08.2022. We quote the following paragraph from the Impugned Order dated 27.06.2024:

“Further, as regards the sources of such investments it is clearly seen that the capital formation had taken place by the sale of pre-existing shares held/recorded in the books of accounts of ‘ANNL’. Even if we accept that such sale of preexisting shares were actually shares of fictitious companies as has been elaborately discussed by the Initiating Officer, the said transactions cannot be brought under the purview of the Amended Act as because such transactions took place much before 01.11.2016 when the Amended Act came into force and which as per the Hon’ble Supreme Court’s judgement in the case of Ganpati Dealcom Pvt. Ltd. cannot be applied retrospectively.”

We therefore find that the Impugned Order has relied upon the Judgment dated 23.08.2022 (supra) to disallow the Reference, not to confirm the PAO dated 01.06.2023 and not to hold the impugned property as Benami. In view of the aforementioned observations and discussions, we are unable to agree with the Impugned Order and cause an intervention.

11. We therefore set aside the Impugned Order and remand the matter to the Adjudicating Authority for De-Novo proceedings, to decide the matter afresh on merit.