Rajasthan High Court – Jaipur
Superb Infotech Pvt Ltd vs Deputy Commissioner Of Income Tax on 13 April, 2026
[2026:RJ-JP:13979-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Income Tax Appeal No. 43/2019
Superb Infotech Pvt. Ltd., Shop No.4/36, DDA Market,
Dakshinpuri Extension, New Delhi.
----Appellant
Versus
Deputy Commissioner of Income Tax, Central Circle, Faridabad.
----Respondent
For Appellant(s) : Mr. R.B. Mathur, Sr. Adv. assisted by
Ms. Rubal Bansal Maini,
Mr. Satvik Sareen &
Mr. Yug Singh &
Mr. Falak Mathur
For Respondent(s) : Mr. Siddharth Bapna
Mr. Sarvesh Jain (through V.C.)
Ms. Tanushka Saxena
HON'BLE THE ACTING CHIEF JUSTICE MR. SANJEEV PRAKASH SHARMA
HON'BLE MRS. JUSTICE SANGEETA SHARMA
JUDGMENT
Date of conclusion of arguments : 11.02.2026
Date on which judgment was reserved : 11.02.2026
Whether the full judgment or only
the operative part is pronounced : Full Judgment
Date of pronouncement : 13th.04.2026
REPORTABLE
(Per Hon'ble The Acting Chief Justice)
Facts And Legal Questions
1. The present Income Tax Appeal has been filed under Section
260A(1) of the Income Tax Act, 1961 (hereinafter referred to as
"Act of 1961") against the order dated 06.12.2018 passed by the
Income Tax Appellate Tribunal, Jaipur Bench (hereinafter referred
to as "ITAT") whereby, the ITAT rejected the appeal of the
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appellant company for the assessment year (hereinafter referred
to as "A.Y.") 2007-08 and upheld the action of the respondent in
issuing notice under Section 153C of the Act of 1961 by the
Assessing Officer (hereinafter referred to as "AO") and rejecting
the objections vide his order dated 21.07.2010, as also the order
dated 27.02.2013 passed by the Commissioner of the Income Tax
(Appeals) (Central), Jaipur rejecting the appeal preferred by the
appellant. Thus, all three orders are under challenge before this
Court.
2. The Division Bench of this Court on 26.08.2019 admitted the
present appeal on the following questions of law:
"1. Did the ITAT fall into error in holding that
the block assessment could be completed having
regard to the circumstances of this case and the
nature of documents seized under Section 153C
of the Income Tax Act;
2. Did the ITAT fall into error in holding that the
income derived from the property sold could be
taxed having regard to the fact that capital
asset which was an agricultural fall into the
description of Section 2(14)(iii) of the Act."
3. The case of the appellant company is that it had filed its
return of income for the A.Y. 2007-08 under Section 139(1) of the
Act of 1961, declaring the income as Rs.2,31,210/- on
29.10.2007.
3.1 A search operation was conducted on 17.09.2008 in
Kamdhenu Group of cases. However, no search was
conducted on the appellant or its offices. Proceedings under
Section 153C of the Act of 1961 were initiated against the
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appellant company and in pursuance to the said notice under
Section 153C of the Act of 1961, the AO had made
assessment on 28.12.2010 and came to tax a sum of
Rs.18,63,34,965/-, holding that the sale of agricultural land
by the assessee was an adventure in the nature of trade and
profit, amounting to income of assessee from the business.
4. The appeal challenging the said order of assessment dated
28.12.2010 as well as the notice dated 10.05.2010, came to be
rejected.
5. On directing for submission of reply, the respondent
(Revenue) averted that no reply is required, therefore, the case
was heard on merits.
Contentions
6. Mr. R.B. Mathur, learned Senior Counsel appearing on behalf
of the appellant company has vehemently argued that the case of
the appellant is akin to the judgment passed by the High Court of
Punjab & Haryana at Chandigarh in the case of Misty Meadows
Private Limited Vs. Union of India and Others1.
7. Learned Senior Counsel submitted that the notice under
Section 153C of the Act of 1961, ought not have been issued, as
there was no incriminating material found during the search.
There was neither any incriminating document nor any addition
was made on the basis of the documents, nor were those
documents related to the year under consideration. Although, the
documents which were found, were affecting the A.Y. 2008-2009
(abating year), but they too were not incriminating.
1 CWP No.5139 of 2024 (O&M), decided on 13.05.2024
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8. Learned Senior Counsel has invited our attention to the
provisions of Section 153C of the Act of 1961 and the judgment
passed by the Hon'ble Supreme Court in the case of
DY. Commissioner of Income Tax Central Circle 20 vs. M/S
U.K. Paints (Overseas) Ltd.2 in support of his submissions that
no assessment under Section 153C of the Act of 1961 could be
initiated without incriminating material. He further submits that
the impugned order passed by the AO on the basis of the notice
under Section 153C of the Act of 1961, does not make any
mention of the material found during search and on the basis of
which, notice under Section 153C of the Act of 1961 was issued.
The incriminating material which is spoken of would have to be
identified with respect to the A.Y. to which it relates or may be
likely to impact before initiation of proceedings under Section
153C of the Act of 1961. He also relies on the judgment passed by
the Hon'ble Supreme Court in the case of Principal
Commissioner of Income Tax Central-3 vs. Abhisar
Buildwell Private Limited3 and followed in the case of Misty
Meadows Private Limited (supra), which was delivered by one
of us (Sanjeev Prakash Sharma, J.) on 13.05.2024 in Punjab and
Haryana High Court. A Special Leave Petition4 (hereinafter referred
to as "SLP") preferred against the same was also dismissed on
15.01.2025 by the Supreme Court.
9. Learned Senior Counsel has also invited our attention to the
notice dated 10.05.2010 to submit that there was no satisfaction
2 Civil Appeal No.6634 of 2021, dated 25.04.2023
3 (2024) 2 SCC 433
4 Special Leave Petition (Civil) Diary No.55770/2024
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arrived at on the basis of any material for reopening of the
concluded assessments. All the documents which were seized
during search were belonging to the person searched under
Section 132(4A) of the Act of 1961 and nothing incriminating was
found in the documents. Merely mentioning that there is a
Partnership Deed and Dissolution Deed, cannot be said to be an
incriminating document to allege that any income has been
concealed. He also points out that the Tribunal while dismissing
the appeal, made an observation that the AO has not referred to
any material to indicate that the assessee is the owner of those
seized documents. He also relied on the judgment passed in the
case of Commissioner of Income Tax-III, Pune vs. Sinhgad
Technical Education Society5 to submit that the satisfaction
note qua year-wise was essential, but which has not been done.
10. Learned Senior Counsel submits that the purchase of land,
which was rural agricultural land and situated beyond 8 kilometres
from the municipal limits, was being used for agricultural
operations. It cannot be said to be a stock-in-trade and would be
held as a fixed asset and, therefore, does not qualify as a capital
asset as per Section 2(14) of the Act of 1961.
11. Learned Senior Counsel has submitted that AO could not
have treated the sale of agricultural land as an adventure in the
nature of trade and has wrongly added the same as taxable
income under business income. It is submitted that the AO was
having full knowledge of the said sale of land even earlier at the
5 (2018) 11 SCC 490
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time of original assessment and invocation of Section 153C of the
Act of 1961 was wholly unwarranted.
12. Learned Senior Counsel has invited our attention that under
Section 145(3) of the Act of 1961, by adding the said sale and
that the best judgment assessment was wholly unjustified. He
further submits that the ITAT had ignored the additional grounds
of appeal. It did not adjudicate the jurisdictional defects raised
under Section 153C of the Act of 1961 and the order was wholly
perverse when it gave a finding as under:
"We may clarify that since the land in question
was no more an agricultural land, therefore,
even if the income is not treated as business
income, the same is liable to tax as capital gain.
Accordingly, we modify the orders of authorities
below and direct the AO to assess the income
as capital gain."
13. Learned Senior Counsel submits that the judgment cited by
the ITAT, i.e., Assistant Commissioner of Income Tax,
Circle-3, Jaipur vs. Sunil Bansal6 was not applicable, as there
was no frequent sale/purchase transaction of agricultural land,
and therefore, it could not have been treated in the nature of
business.
14. The pre-conditions of Section 2(14) of the Act of 1961 were
duly satisfied and exemption was required to be given.
15. Learned Senior Counsel also relied on the judgment passed
in the case of Principal Commissioner of Income Tax Central
Jaipur vs. M/S Focal Point Builders and Promoters Pvt Ltd. 7
which has been upheld by the Supreme Court8.
6 2018 SCC OnLine ITAT 1097, dated 06.11.2018
7 D.B. Income Tax Appeal No.229/2016, decided by this Court on 20.12.2016
8 Diary No.42427/2017, decided on 24.09.2018
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16. Learned Senior Counsel has further relied on Kikabhai
Premchand KT vs. Commissioner of Income Tax (Central),
Bombay9, wherein it was held that:
".........as he derived no immediate pecuniary
gain the State cannot tax them, for under the
Income Tax Act the State has no power to tax a
potential future advantage. All it can tax is
income, profits and gains made in the relevant
accounting year."
17. Learned Senior Counsel has relied on following judgments:
(i)Principal Commissioner of Income Tax 19 Mumbai
vs. M/S Jogani and Dialani Land Developers and
Builders10
(ii)Commissioner of Income-tax vs. Nitish
Rameshchandra Chordia (and connected appeals) 11
18. On the other hand, while no written submissions were filed
by the respondent (Revenue), the learned counsel appearing for
the respondent has reiterated the submissions based on the
orders passed by the AO, CIT and ITAT to submit that the orders
passed do not warrant any interference. On the question of law,
learned counsel submits that no substantial questions of law can
be said to be made to be considered by this Court.
19. Learned counsel for the respondent submits that a
satisfaction note had been placed on record which reflects that
there is an application of mind by the AO for initiating proceedings
under Section 153C of the Act of 1961. The objections were
examined and the AO has rightly found that so far as the period of
9 (1953) 2 SCC 341
10 Special Leave Petition (Civil) Diary No. 40693/2019
11 2015 SCC OnLine Bom 8441
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limitation for bringing assessment or reassessment in case of
other persons referred to under Section 153C of the Act of 1961 is
concerned, the same would be governed by Section 153B(1)(ii) of
the Act of 1961 and he further submits that the AO is not
prevented from initiating proceedings under Section 153C of the
Act of 1961, if it has any books of account or documents or assets
seized which belong to the person other than the person referred
to Section 153C of the Act of 1961 and it holds jurisdiction over
such person.
Analysis
20. We have considered the above submissions.
21. Before discussing the case, it would be apposite to quote the
following relevant statutory provisions:
(a) Section 2(14)(iii) of the Act of 1961 defines "agricultural
land" as under:
"[(iii)agricultural land in India, not being land situate-
(a) in any area which is comprised within the
jurisdiction of a municipality (whether known as a
municipality, municipal corporation, notified area
committee, town area committee, town
committee, or by any other name) or a
cantonment board and which has a population of
not less than ten thousand [***]; or
[(b) in any area within the distance, measured
aerially,-
(I) not being more than two kilometres, from
the local limits of any municipality or
cantonment board referred to in item (a) and
which has a population of more than ten
thousand but not exceeding one lakh; or
(II) not being more than six kilometres, from
the local limits of any municipality or
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cantonment board referred to in item (a) and
which has a population of more than one lakh
but not exceeding ten lakh; or
(III) not being more than eight kilometres,
from the local limits of any municipality or
cantonment board referred to in item (a)
which has a population of more than ten lakh.
Explanation.- For the purposes of this sub-
clause, "population" means the population
according to the last preceding census of
which the relevant figures have been published
before the first day of the previous year;]]"
(b) The above definition also defines the following as a
"capital asset":
"(14) ["capital asset" means-
(a) property of any kind held by an assessee,
whether or not connected with his business or
profession;
(b) any securities held by a Foreign Institutional
Investor which has invested in such securities in
accordance with the regulations made under the
Securities and Exchange Board of India Act, 1992
(15 of 1992);
[(c) any unit linked insurance policy to which an
exemption under Clause (10D) of section 10 does
not apply [on account of the applicability of the
fourth and fifth provisos thereof],]
but does not include-
(i) any stock-in-trade [other than the
securities referred to in sub-clause (b)]],
consumable stores or raw materials held for
the purposes of his business or profession ;
[(ii) personal effects, that is to say, movable
property (including wearing apparel and
furniture) held for personal use by the
assessee or any member of his family
dependent on him, but excludes-
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(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
Explanation.- For the purposes of sub-
clause, "jewellery" includes-
(a) ornaments made of gold, silver,
platinum or any other precious metal or
any alloy containing one or more of such
precious metals, whether or not
containing any precious or semi-precious
stone, and whether or not worked or sewn
into any wearing apparel;
(b) precious or semi-precious stones,
whether or not set in any furniture, utensil
or other article or worked or sewn into any
wearing apparel ;]
.................
[(iv) 6½ per cent Gold Bonds, 1977, [or 7 per
cent Gold Bonds, 1980,] [or National Defence
Gold Bonds, 1980,] issued by the Central
Government;]
[(v) Special Bearer Bonds, 1991, issued by the
Central Government ;]
[(vi) Gold Deposits Bonds issued under the
Gold Deposit Scheme, 1999 [or deposit
certificates issued under the Gold Monetisation
Scheme, 2015] notified by the Central
Government.]
[[Explanation 1.]- For the removal of doubts,
it is hereby clarified that “property” includes
and shall be deemed to have always included
any rights in or in relation to an Indian
company, including a rights of management or
control or any other rights whatsoever.]
[Explanation 2.]- For the purposes of this
clause-
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(a) the expression “Foreign Institutional
Investor” shall have the meaning assigned
to it in clause (a) of the Explanation to
Section 115AD;
(b) the expression “securities” shall have
the meaning assigned to it in clause (h) of
Section 2 of the Securities Contracts
(Regulation) Act, 1956 [42 of 1956);]”
(c) Section 153C of the Act of 1961 provides as under:
“Section 153C. [(1)] [Notwithstanding anything contained in
section 139, section 147, section 148, section 149, section 151
and section 153, where the Assessing Officer is satisfied that,–
(a) any money, bullion, jewellery or other valuable
article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or
requisitioned, pertains or pertain to, or any information
contained therein, relates to,
a person other than the person referred to in section 153A,
then, the books of account or documents or assets, seized
or requisitioned shall be handed over to the Assessing
Officer having jurisdiction over such other person] [and that
Assessing Officer shall proceed against each such other
person and issue notice and assess or reassess the income
of the other person in accordance with the provisions of
section 153A, if, that Assessing Officer is satisfied that the
books of account or documents or assets seized or
requisitioned have a bearing on the determination of the
total income of such other person [for six assessment years
immediately preceding the assessment year relevant to the
previous year in which search is conducted or requisition is
made and] for the relevant assessment year or years
referred to in sub-section (1) of section 153A] :]
[Provided that in case of such other person, the reference
to the date of initiation of the search under section 132 or
making of requisition under section 132A in the second
proviso to [sub-section (1) of] section 153A shall be
construed as reference to the date of receiving the books of
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[2026:RJ-JP:13979-DB] (12 of 21) [ITA-43/2019]the Assessing Officer having jurisdiction over such other
person:]
[Provided further that the Central Government may by
rules made by it and published in the Official Gazette,
specify the class or classes of cases in respect of such other
person, in which the Assessing Officer shall not be required
to issue notice for assessing or reassessing the total income
for six assessment years immediately preceding the
assessment year relevant to the previous year in which
search is conducted or requisition is made [and for the
relevant assessment year or years as referred to in sub-
section (1) of section 153A] except in cases where any
assessment or reassessment has abated.]
[(2) Where books of account or documents or assets seized
or requisitioned as referred to in sub-section (1) has or
have been received by the Assessing Officer having
jurisdiction over such other person after the due date for
furnishing the return of income for the assessment year
relevant to the previous year in which search is conducted
under section 132 or requisition is made under section 132A
and in respect of such assessment year–
(a) no return of income has been furnished by such
other person and no notice under sub-section (1) of
section 142 has been issued to him, or
(b) a return of income has been furnished by such
other person but no notice under sub-section (2) of
section 143 has been served and limitation of serving
the notice under sub-section (2) of section 143 has
expired, or
(c) assessment or reassessment, if any, has been
made,
before the date of receiving the books of account or
documents or assets seized or requisitioned by the
Assessing Officer having jurisdiction over such other person,
such Assessing Officer shall issue the notice and assess or
reassess total income of such other person of such
assessment year in the manner provided in section 153A.]
[(3) Nothing contained in this section shall apply in relation
to a search initiated under section 132 or books of account,
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other documents or any assets requisitioned under section
132A on or after the 1st day of April, 2021.]”
22. As have come on record, the proceedings under Section
153C of the Act of 1961 were initiated based on a satisfaction note
which stated as under:
“Satisfaction note:
M/s Superb Infotech Pvt. Ltd.
On going through the document seized as per page no. 44
to 69 of annexure B-2 of Panchnama dated 17.09.2008
drawn during the search at C-13. Shushant Lok-1. Gurgaon,
Haryana in the case of M3M India Ltd., Sh. Basant Bansal,
Roop Bansal, Sh. Lal Chand Bansal, M/s Bench Mark Infotech
Pvt. Ltd., M/s Mangalan Multi Plex Pvt. Ltd., M/s Good Luck
Buildcon Pvt. Ltd., M/s Marigold Merchandise Pvt. Ltd., M/s
Martial Buildcon Pvt. Ltd., M/s Misty Meadows Pvt. Ltd., M/s
Focal Point Builders & Promoters Pvt. Ltd., it is seen that
these documents are Partnership Deed, Dissolution Deed and
miscellaneous papers which belong to M/s Superb Infotech
Pvt. Ltd.4119/6, 1st Floor, Naya Bazar, Delhi. On going
through these documents I am satisfied that to find any tax
implication on the basis of these documents it would be
better to examine these documents by Initiating assessment
proceedings in the case of M/s Supreb Infotech Pvt. Ltd. to
whom these documents pertains to rather than in the case of
persons as mentioned above in whose case the search u/s
132 of the Act, has been conducted at C-13, Shushant Lok-1,
Gurgaon, Haryana. There was no warrant of authorization u/s
132 of the Income-tax Act, 1961 and Rule 112(1) of the
income-tax Rules in the case of M/s Superb Infotech Pvt.
Ltd., therefore its case is not covered u/d 153A of the Act. In
view of it, I am satisfied that the documents mentioned
above belong to a person other than the person referred to in
section 153A i.e. M/s Superb Infotech Pvt. Ltd. Accordingly,
the case of M/s Superb Infotech Pvt. Ltd., is covered u/s
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[2026:RJ-JP:13979-DB] (14 of 21) [ITA-43/2019]Infotech Pvt. Ltd., in accordance with the provisions of
section 153A as laid down u/s 153C.
(Rajesh Kumar)
Assistant Commissioner of Income Tax
Central Circle, Alwar”
23. In the order of assessment, we find that there is no mention
of any Partnership Deed, Dissolution Deed or miscellaneous
papers. On the other hand, the AO passed an order under Section
143(3) read with Section 153A of the Act of 1961 on 28.12.2010,
mentioning as under:
“3. After examination of the return of income,
accompanying documents and the
details/documents/evidences filed during the course of
assessment proceedings, the following issues have emerged
which lead to following additions/disallowances.
3.1 Profit on sale of agriculture land:
During the year under consideration, the assessee has
declared profit on sale of agriculture land amounting to
Rs.18,63,34,965/- which the assessee has claimed exempt
while computing its taxable income. The assessee has been
in the business of sale and purchase of land. The company
has been incorporated during the year 2004-05 relevant to
A.Y. 2005-06. It has been seen during the assessment
proceedings for A.Y. 2005-06 to 2009-10 that the assessee
company has solely indulged in purchase & sale of
agricultural land around Gurgaon. Therefore, purchase &
sale of land by the assessee company is its business. In
view of the fact that the assessee is in the business of
purchase and sale of land and developing land projects, it
was asked vide notice u/s 142(1) dated 16.11.2010 that
why the profit on sale of agriculture land amounting to
Rs.18,63,34,965/- which it has claimed exempt, should not
be considered to be its business income and taxed
accordingly.
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[2026:RJ-JP:13979-DB] (15 of 21) [ITA-43/2019]3.2 The assessee had replied vide its letter dated
08.10.2010 that the land under consideration is agricultural
land which is not a capital asset within the meaning of the
definition of section 2(14) of the Income-tax Act, 1961. The
land is situated beyond 10 kilometers of the Municipal limits
of Gurgaon…….”
24. It appears the AO reexamined the matter while considering
the notice and proceeded to hold that it was an adventure of
business in the nature of trade and it was held that the profit
earned on sale of agricultural land would be an income from
business.
25. In the case of Union of India & Ors. vs. Misty Meadows
Private Limited12, the Hon’ble Supreme Court upheld the order
passed in the case of Misty Meadows (supra), where the
provisions of Section 153C of the Act of 1961 were examined and
after considering the law, it was held as under:
“30. Thus, we find that a particular procedure has been
prescribed, as above. Following the salutary principles of law
as laid down in Nazir Ahmad and followed in Rao Shiv
Bahadur Singh and Singhara Singh’s cases (supra), we
find that the respondents were obliged to compulsorily follow
the procedure for reassessment of the petitioner company in
the manner as prescribed under Section 153C(1) alone and
in no other manner. However, we find that the respondents
have invoked and initiated proceedings under Section 153A
of the Act, although neither there is any search initiated
under Section 132 of the Act as against the petitioner nor it
can be said that the search was conducted at its premises.
Similar view has been taken by Gujarat High Court in Hitesh
Ashok Vaswani and Subhash Khattar’s cases (supra).
Thus, the proceedings initiated under Section 153A are found
to be vitiated.”
12 Special Leave Petition (Civil) Diary No.55770/2024
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26. In the case of Abhisar Buildwell (supra), the Hon’ble
Supreme Court had held as under:
“12. It is submitted that prior to the new scheme, when a
search gets initiated or a requisition happens, the normal
assessment/reassessment was allowed to be carried on
without any interference and a block assessment of
undisclosed income was allowed to be made independently.
However, the new scheme brought w.e.f. 1-6-2003 has
dismantled this structure and Section 153-A conceives the
following sequence:
(a) The jurisdictional exercise of power to initiate
proceedings under Section 153-A would
commence only upon initiation of a search under
Section 132 or a requisition under Section 132-A
and not before that.
(b) Once a search gets initiated or a requisition is
made, the assessment process under every other
provision of the Income Tax Act would abate.
(c) This is clear by virtue of the expression
employed in Section 153-A(1) “Notwithstanding
anything contained in Sections 139, 147, 148,
149, 151 and 153.” Being a non obstante
provision, Section 153-A overrides all these
provisions.
……………
28. For the reasons stated hereinbelow, we are in complete
agreement with the view taken by the Delhi High Court in
Kabul Chawla and the Gujarat High Court in Saumya
Construction (P), taking the view that no addition can be
made in respect of completed assessment in absence of any
incriminating material.
……………….
34. If the submission on behalf of the Revenue that in case
of search even where no incriminating material is found
during the course of search, even in case of
unabated/completed assessment, the AO can assess or
reassess the income/total income taking into consideration
the other material is accepted, in that case, there will be two
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[2026:RJ-JP:13979-DB] (17 of 21) [ITA-43/2019]
assessment orders, which shall not be permissible under the
law. At the cost of repetition, it is observed that the
assessment under Section 153-A of the Act is linked with the
search and requisition under Sections 132 and 132-A of the
Act. The object of Section 153-A is to bring under tax the
undisclosed income which is found during the course of
search or pursuant to search or requisition. Therefore, only
in a case where the undisclosed income is found on the basis
of incriminating material, the AO would assume the
jurisdiction to assess or reassess the total income for the
entire six years block assessment period even in case of
completed/unabated assessment. As per the second proviso
to Section 153-A, only pending assessment/reassessment
shall stand abated and the AO would assume the jurisdiction
with respect to such abated assessments. It does not
provide that all completed/unabated assessments shall
abate. If the submission on behalf of the Revenue is
accepted, in that case, the second proviso to Section 153-A
and sub-section (2) of Section 153-A would be redundant
and/or re-writing the said provisions, which is not
permissible under the law.
…………………
36. In view of the above and for the reasons stated above, it
is concluded as under:
36.1. That in case of search under Section 132 or requisition
under Section 132-A, the AO assumes the jurisdiction for
block assessment under Section 153-A;
36.2. All pending assessments/reassessments shall stand
abated;
36.3. In case any incriminating material is found/unearthed,
even, in case of unabated/completed assessments, the AO
would assume the jurisdiction to assess or reassess the “total
income” taking into consideration the incriminating material
unearthed during the search and the other material available
with the AO including the income declared in the returns; and
36.4. In case no incriminating material is unearthed during
the search, the AO cannot assess or reassess taking into
consideration the other material in respect of completed
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[2026:RJ-JP:13979-DB] (18 of 21) [ITA-43/2019]respect of completed/unabated assessments, no addition can
be made by the AO in absence of any incriminating material
found during the course of search under Section 132 or
requisition under Section 132-A of the 1961 Act. However,
the completed/unabated assessments can be re-opened by
the AO in exercise of powers under Sections 147/148 of the
Act, subject to fulfilment of the conditions as
envisaged/mentioned under Sections 147/148 of the Act and
those powers are saved.”
27. In view of the above-mentioned judgments of the Supreme
Court, if we examine the present case as noticed above, there was
no incriminating material which can be said to have been found
during the search at the premises of another assessee. A
satisfaction note merely mentions about documents of Partnership
Deed, Dissolution Deed and miscellaneous papers belonging to the
present assessee company. However, it nowhere states that the
same were in relation to A.Y. 2007-08 or that there was any
income which could have been prima facie found to have been
concealed based on the said document.
28. The word “incriminating” must necessarily be understood to
mean of such a nature which creates a prima facie doubt of
involvement of the assessee conduct in concealment of income
with reference to the Act of 1961 and for the purpose of Section
153C of the Act of 1961.
29. We also noticed that virtually, the AO has reassessed the
income of the appellant for A.Y. 2007-08 based on the same
agriculture transaction which was already in knowledge at the
time of earlier assessment. Moreover, if in the earlier assessment,
something escaped from notice, the remedy lies elsewhere. The
recourse to Section 153C of the Act of 1961, is not available for
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[2026:RJ-JP:13979-DB] (19 of 21) [ITA-43/2019]correction of the assessment without any new incriminating
material.
30. Even if any document received is found belonging to another
assessee during the search, that itself would not be a ground to
initiate proceedings under Section 153C of the Act of 1961.
31. The contention that it was an adventure in the nature of
trade is also found to be misconceived. It is not that the land was
frequently sold and purchased and there is only a single
transaction of agriculture land, out of which, certain profits have
been received. The same would, therefore, not fall within the four
corners of capital gain, as it is not derived on immediate pecuniary
gain.
32. We also noticed that the assessee has not denied the
belonging of the documents. Mere finding of the documents would,
therefore, not create a conclusive opinion for holding that they are
incriminating and that there has been a concealment of income. In
tax13, the Delhi High Court noticed as under:
“12. This being the position the very first step prior to the
issuance of a notice under section 153C of the said Act has
not been fulfilled. Inasmuch as this condition precedent has
not been met, the notices under section 153C are liable to be
quashed. It is ordered accordingly. The writ petitions are
allowed as above. There shall be no order as to costs.”
The aforesaid judgment has been upheld by the Hon’ble
Supreme Court by dismissing the SLP (No.4659/2015) on
04.12.2017.
13 (2014) 367 ITR 112
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33. We therefore, hold that mere possession of documents
relating to another person would not establish that they did not
belong to the searched person and, therefore, the question of
invoking Section 153C of the Act of 1961 on such premise without
any satisfaction of the documents being of incriminating nature
does not arise. The satisfaction itself being vitiated, the entire
proceedings initiated are also vitiated in law.
34. On the facts of the present case, we also notice that there
has been gross perversity in assessing the agricultural income,
which would not fall within the definition of ‘capital gains’ as
provided under Section 2(14) of the Act of 1961.
35. In the case of Principal Commissioner of Income Tax 19
Mumbai (supra), the Hon’ble Supreme Court had dismissed the
SLP and the Bombay High Court in their judgment in the case of
The Pr. Commissioner of Income Tax-19 vs. M/s. Jogani &
Dialani Land14 had held as under:
“……….The submission made on behalf of the Appellant
completely ignores the fact that, it is always open to an
assessee to hold the same class of assets as investment and
also as stock-in-trade. There is no bar in law for a person
dealing in land to also have investment in land. Thus, there is
no substance in the above submission.”
36. The land falling within the Municipal limits even though
agriculture in nature would come within the ambit of Section 2(14)
(iii) and would be liable to pay capital gains tax. But the same not
coming within the four corners of the limit provided, was liable to
be exempted and the respondent could not have added the said
14 Income Tax Appeal No. 1720/2016
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[2026:RJ-JP:13979-DB] (21 of 21) [ITA-43/2019]
income and it would fall within the definition of rural agriculture
land. While considering the said aspect, it was necessary for the
revenue to reach to a conclusion whether there was any other
activity relating to the rural agriculture land. Subsequent uses of
land for non-agriculture purposes would not in any manner be a
reason to include capital gains for the seller.
37. Accordingly, both the questions of law are answered in
favour of the appellant. The present Income Tax Appeal succeeds
and all the three orders dated 21.07.2010, 27.02.2013 &
06.12.2018 are quashed and set-aside.
(SANGEETA SHARMA),J (SANJEEV PRAKASH SHARMA),ACTING CJ
AMIT/158
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