Madras High Court
Zigma Global Environ Solutions Pvt Ltd vs Union Of India on 13 July, 2026
Author: C.Saravanan
Bench: C. Saravanan
2026:MHC:3255
W.P.Nos.50601 & 25340 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 02.03.2026
Pronounced on 13.07.2026
CORAM
THE HON'BLE MR JUSTICE C. SARAVANAN
W.P.Nos.50601 & 25340 of 2025
and
W.M.P Nos.28520, 56662, 56664 & 56665 of 2025
W.P.No.50601 of 2025
Zigma Global Environ Solutions Pvt. Ltd.
Rep. by its Authorized representative
Having office at:
201, 202-161/1-14 Brindavan Orchid,
Indira Gandhi Street
Selvam Nagar Thindal (KEL), Erode - 638012. … Petitioner(s)
Vs
1. Union of India
Through the Secretary, Ministry of Finance,
Department of Revenue,
North Block, New Delhi-110 001.
2. Assistant Commissioner of Income Tax
Central Circle-2, Main Building,63, Racecourse
Road, Coimbatore, Tamil Nadu 641018
3. Branch Manager
State Bank of India
No. 1087/A-F, Krishna Towers, Avinashi Road,
Coimbatore-641 037.
4. Branch Manager
Indian Overseas Bank Kannusamy Street,
Coimbatore-641 002. … Respondent(s)
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W.P.No. 25340 of 2025
M/S.Zigma Global Environ Solutions Pvt Ltd
Through Sh.B.Dharmaraj, S/o.Late Shri K.
Boopathy 201, 202- 161/1 to 14, Brindhavan
Orchid Indira Gandhi Street Selvam nagar
Thindal(KEL) Erode 638 012, Tamil Nadu India.
… Petitioner(s)
Vs
1. Union of India, Through the Secretary,
Ministry of Finance, Department of Revenue,
North Block, new Delhi – 110 001.
2. Assistant Commissioner of Income Tax
Central Circle-2, Main Building, 63 Race
Course Road, Coimbatore, Tamil Nadu 641018
3. Additional Commissioner of Income Tax
Central Range, Main Building, 63 Race Course
Road, Coimbatore, Tamil Nadu 641018.
… Respondent(s)
Prayer in W.P.No.50601 of 2025: Writ Petition filed under Article 226 of the
Constitution of India, for issuance of a Writ of Certiorarified Mandamus calling
for the records of the 2nd respondent in issuing the impugned notices dated
20.12.2025 bearing (i) ITBA/COM/F/17/2025-26/1083924011(1) and (ii)
ITBA/COM/F/17/2025-26/1083923572(1) under section 226(3) of the Income
Tax Act, 1961 to the 3rd and 4th Respondent respectively and to quash the same
as being arbitrary, illegal and passed without authority of law and application of
mind and consequentially direct the 3rd and 4th Respondent tode-freeze the
bank accounts of the Petitioner bearing account nos. (a) 38986891561, (b)
39167084574, (c) 3872357701, (d) 38987079443 and (e) 00000031231314594
with the 3rd Respondent and (a) 267002000000009, (b) 267033000000003 and
(c) 267033000000004 with the 4th Respondent.
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Prayer in W.P.No.25340 of 2025: Writ Petition filed under Article 226 of the
Constitution of India, for issuance of a Writ of Certiorari quashing the impugned
assessment order No.ITBA/ AST/ S/ 143 (3)/ 2024 25/ 1075349670 (1) dated
31.03.2025 passed by Respondent No. 2 under Section 143(3) of the Act, for AY
2023-24, which stands vitiated for being passed in flagrant violation of the
binding directions dated 17.03.2025 issued by Respondent No. 3 and in
contravention of the mandatory procedure under Section 148 of the Act.
W.P.No.50601 of 2025
For Petitioner(s) : Mr.R.Parthasarathy, Senior Counsel
for Mr.Rahul Balaji in both Wps
For R1 and R2 : Mr.A.P.Srinivas, Senior Standing Counsel, and
Mr.A.N.R.Jayaprathap, Junior Standing Counsel
W.P.No.25340 of 2025
For Petitioner(s) : Mr.R.Parthasarathy, Senior Counsel
for Mr.Rahul Balaji in both Wps
For R1 to R3 : Mr.A.P.Srinivas, Senior Standing Counsel, and
Mr.A.N.R.Jayaprathap, Junior Standing Counsel
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COMMON ORDER
In these writ petitions, the petitioner has challenged the impugned
Assessment Order dated 31.03.2025 passed under Section 143(3) of the Income
Tax Act, 1961 (hereinafter referred to as an Act), for the Assessment year 2023-
2024 along with the consequential proceeding notice dated 20.12.2025 issued
under Section 226(3) of the Act.
2. By the 2nd mentioned notice, the petitioner’s bank accounts maintained
with the 3rd and 4th respondents in W.P.No.50601 of 2025 were sought to be
attached.
3. The petitioner had earlier challenged the impugned Assessment Order
dated 31.03.2025 by filing an appeal before the Appellate Commissioner under
Section 246A of the Act. Thereafter, the present writ petitions were filed on
26.12.2025 and 09.07.2025.
4. Under these circumstances, the petitioner was directed to elect either to
pursue the Appellate remedy before the Appellate Commissioner or to proceed
with the writ petitions before this Court, particularly in W.P.No.25340 of 2025,
wherein the impugned assessment order dated 31.03.2021 is under challenge.
5. The petitioner elected to pursue the Writ remedy. Thus, the appeal was
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dismissed as withdrawn and an order dated 10.02.2026 was passed to that effect
by the Appellate Commissioner.
6. The facts on record reveal that the petitioner had filed a regular Return
of Income under Section 139(1) of the Act on 28.12.2023 for the Assessment
Year 2023-2024.
7. Even before the aforesaid return could be either processed under
Section 143(1) of the Act by way of intimation or by way of Scrutiny
Assessment under Section 143(3), a search was conducted between 05.04.2024
and 12.04.2024 at the Petitioner’s premises.
8. Pursuant to the search conducted, following notices were issued to the
Petitioner:-
Notice dated Under Section Reply dated
26.06.2024 Under Section 143(2) 22.08.2024
13.08.2024 Under Section 142(1) 09.09.2024
24.10.2024 Under Section 142 (1) 24.09.2025
9. In this background, the impugned Assessment Order was passed on
31.03.2024 long before the expiry of limitation on 31.12.2025 prescribed
under Section 153(1) of the Act.
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10. After the impugned order came to be passed on 31.03.2025, the
petitioner had earlier moved an application under Section 154(2)(b) on
05.04.2025 for its rectification, which was supplemented by another
representation dated 14.05.2025. The said application came to be rejected by an
order dated 31.10.2025.
11. Subsequently, the petitioner moved another Supplementary
Application for rectification of the Assessment Order dated 31.03.2025 on
18.04.2025 and 28.11.2025, which were also dismissed by an order dated
18.12.2025.
12. During the interregnum, the petitioner also approached the Principal
Chief Commissioner of Income Tax on 18.04.2025 and filed a grievance petition
against the alleged high-pitched demand confirmed in the impugned assessment
order dated 31.03.2025, seeking to declare the said assessment order as null and
void and for stay of all recovery proceedings.
13. It appears that no orders have been passed by the Principal Chief
Commissioner of Income Tax in response to the aforesaid application, seeking to
declare the Impugned Assessment Order dated 31.03.2025 as null and void
pursuant to the application / petition dated 18.04.2025.
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14. The petitioner has not separately challenged the three rectification
Orders dated 31.10.2025, 18.12.2025 and 20.12.2025. However, in these writ
petitions, while referring to the applications for rectification, the petitioner has
taken a categorical stand that once a search was conducted, the assessment ought
to have been treated as one involving escaped income, and therefore, the only
course available with the Assessing Officer was to follow the procedure
prescribed by law by issuing a notice under Section 148A of the Act, which
would precede the issuance of a notice under Section 148.
15. It is submitted that once income has escaped assessment, there is no
scope for passing a regular Scrutiny Assessment under Section 143(3) of the
Act.
16. The learned Senior Counsel for the petitioner drew the attention to the
amendments to Sections 147, 148 and 151 of the Act, as in force between
01.04.2021 and till 31.08.2024 after they were amended by the Finance Act,
2021 and Finance (No.2) Act, 2024 respectively.
17. The learned Senior Counsel for the petitioner further referred to the
Memorandum explaining the provisions of the Finance Bill, 2021, which
introduced a slew of amendments to the provisions of the Act relating to
assessment and reassessment.
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18. The learned Senior Counsel would draw the attention of this court to
the following passages from the said Memorandum explaining the provisions of
the Finance Bill, 2020 – 2021, which read as under:-
“Income escaping assessment and search assessments
Under the Act, the provisions related to income escaping
assessment provide that if the Assessing Officer has reason to
believe that any income chargeable to tax has escaped
assessment for any assessment year, he may assess or reassess
or re-compute the total income for such year under section
147 of the Act by issuing a notice under section 148 of the Act.
However, such reopening is subject to the time limits
prescribed in section 149 of the Act.
In cases where search is initiated u/s 132 of the Act or books
of account, other documents or any assets are requisitioned
under section 132A of the Act, assessment is made in the case
of the assessee, or any other person, in accordance with the
special provisions of sections 153A, 153B, 153C and 153D, of
the Act that deal specifically with such cases. These provisions
were introduced by the Finance Act, 2003 to replace the block
assessment under Chapter XIV-B of the Act. This was done
due to failure of block assessment in its objective of early
resolution of search assessments. Also, the procedural issues
related to block assessment were proving to be highly
litigation-prone. However, the experience with this procedure
has been no different. Like the provisions for block
assessment, these provisions have also resulted in a number of
litigations.
Due to advancement of technology, the department is now
collecting all relevant information related to transactions of
taxpayers from third parties under section 285BA of the Act
(statement of financial transaction or reportable account).
Similarly, information is also received from other law
enforcement agencies. This information is also shared with the
taxpayer through Annual Information Statement under section
285BB of the Act. Department uses this information to verify
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the information declared by a taxpayer in the return and to
detect non-filers or or those who have not disclosed the
correct amount of total income. Therefore, assessment or
reassessment or re-computation of income escaping
assessment, to a large extent, is information-driven.
In view of the above, there is a need to completely reform the
system of assessment or reassessment or re-computation of
income escaping assessment and the assessment of search
related cases.
The Bill proposes a completely new procedure of assessment
of such cases. It is expected that the new system would result
in less litigation and would provide ease of doing business to
taxpayers as there is a reduction in time limit by which a
notice for assessment or reassessment or re-computation can
be issued. The salient features of new procedure are as
under:-
(i) The provisions of section 153A and section 153C, of the
Act are proposed to be made applicable to only search
initiated under section 132 of the Act or books of accounts,
other documents or any assets requisitioned under section
132A of the Act, on or before 31st March 2021.
(ii) Assessments or reassessments or in re-computation in
cases where search is initiated under section 132 or
requisition is made under 132A, after 31st March 2021,
shall be under the new procedure.
(iii) Section 147 proposes to allow the Assessing Officer
to assess or reassess or re-compute any income escaping
assessment for any assessment year (called relevant
assessment year).
(iii) Before such assessment or reassessment or re-
computation, a notice is required to be issued under section
148 of the Act, which can be issued only when there is
information with the Assessing officer which suggests that
the income chargeable to tax has escaped assessment in the
case of the assessee for the relevant assessment year. Prior
approval of specified authority is also required to be
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obtained before issuance of such notice by the Assessing
Officer.
(iv) It is proposed to provide that any information which
has been flagged in the case of the assessee for the relevant
assessment year in accordance with the risk management
strategy formulated by the Board shall be considered as
information which suggests that the income chargeable to
tax has escaped assessment. The flagging would largely be
done by the computer based system.
(v) Further, a final objection raised by the Comptroller
and Auditor General of India to the effect that the
assessment in the case of the assessee for the relevant
assessment year has not been in accordance with the
provisions of the Act shall also be considered as
information which suggests that the income chargeable to
tax has escaped assessment.
(vi) Further, in search, survey or requisition cases
initiated or made or conducted, on or after 1 st April, 2021,
it shall be deemed that the Assessing officer has
information which suggests that the income chargeable to
tax has escaped assessment in the case of the assessee for
the three assessment years immediately preceding the
assessment year relevant to the previous year in which the
search is initiated or requisition is made or any material is
seized or requisitioned or survey is conducted.
(vii) New Section 148A of the Act proposes that before
issuance of notice the Assessing Officer shall conduct
enquiries, if required, and provide an opportunity of being
heard to the assessee. After considering his reply, the
Assessing Office shall decide, by passing an order, whether
it is a fit case for issue of notice under section 148 and
serve a copy of such order along with such notice on the
assessee. The Assessing Officer shall before conducting
any such enquiries or providing opportunity to the assessee
or passing such order obtain the approval of specified
authority. However, this procedure of enquiry, providing
opportunity and passing order, before issuing notice under
section 148 of the Act, shall not be applicable in search or
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requisition cases.
(viii) The time limitation for issuance of notice under
section 148 of the Act is proposed to be provided in section
149 of the Act and is as below:
• in normal cases, no notice shall be issued if three years
have elapsed from the end of the relevant assessment
year. Notice beyond the period of three years from the
end of the relevant assessment year can be taken only in
a few specific cases.
• in specific cases where the Assessing Officer has in his
possession evidence which reveal that the income
escaping assessment, represented in the form of asset,
amounts to or is likely to amount to fifty lakh rupees or
more, notice can be issued beyond the period of three
year but not beyond the period of ten years from the end
of the relevant assessment year;
• Another restriction has been provided that the notice under
section 148 of the Act cannot be issued at any time in a
case for the relevant assessment year beginning on or
before 1st day of April, 2021, if such notice could not
have been issued at that time on account of being
beyond the time limit prescribed under the provisions of
clause (b), as they stood immediately before the
proposed amendment.
• Since the assessment or reassessment or re-computation in
search or requisition cases (where such search or
requisition is initiated or made on or before 31 March
2021) are to be carried out as per the provision of
section 153A, 153B, 153C and 153D of the Act, the
aforesaid time limitation shall not apply to such cases.
• It is also proposed that for the purposes of computing the
period of limitation for issue of section 148 notice, the
time or extended time allowed to the assessee in
providing opportunity of being heard or period during
which such proceedings before issuance of notice under
section 148 are stayed by an order or injunction of any
court, shall be excluded. If after excluding such period,
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time available to the Assessing Officer for passing
order, about fitness of a case for issue of 148 notice, is
less than seven days, the remaining time shall be
extended to seven days.
(ix) The specified authority for approving enquiries,
providing opportunity, passing order under section 148A of
the Act and for issuance of notice under section 148 of the
Act are proposed to be–
(a) Principal Commissioner or Principal Director or
Commissioner or Director, if three years or less than three
years have elapsed from the end of the relevant assessment
year;
(b) Principal Chief Commissioner or Principal Director
General or where there is no Principal Chief
Commissioner or Principal Director General, Chief
Commissioner or Director General, if more than three
years have elapsed from the end of the relevant assessment
year.
(x) Once assessment or reassessment or re-computation
has started the Assessing officer is proposed to be
empowered (as at present) to assess or reassess the income
in respect of any issue which has escaped assessment and
which comes to his notice subsequently in the course of the
proceeding under this procedure notwithstanding that the
procedure prescribed in section 148A was not followed
before issuing such notice for such income.
These amendments will take effect from 1st April, 2021.
[Clauses 35 to 40 and 42 to 43]
19. It is therefore submitted that the Impugned Assessment Order goes to
the very root of the matter. It is submitted that the Impugned Assessment Order
was without jurisdiction and is consequently liable to be quashed. In support of
this plea, the learned Senior Counsel also advanced supplementary arguments
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through written statements on the legal issues.
20. It was further submitted that it is a settled principle of law that
circulars relied by the Board in F.No.225/72/2024/ITA-II dated 03.05.2024 for
justifying the Scrutiny Assessment, do not supersede the provisions of the Act,
nor are Courts bound by such circulars when they are in contradiction with the
Act. In support of this submission, the Petitioner relies on the following case
laws:
i. Ishwar Chand VsThe Union of India through its
Secretary of Finance, Department of Revenue (2024:
PHHC:119312-DB).
ii. UCO Bank, Calcutta Vs Commissioner of Income Tax,
W.?. (1999) 4 SCC 599iii. Kerala Financial Corporation Vs Commissioner of
Income Tax (1994) 4 SCC 375iv. State Bank of Travancore Vs Commissioner of Income
Tax, Kerala (1986) 2 SCC 11
21. It is submitted that the Respondent-Department has pursuant to the
very same search action and material, invoked proceedings under Section 148 of
the Act for Ays. 2021-22 and 2022-23, thereby consciously recognizing and
applying the special reassessment framework governing search-triggered
assessments under the post-Finance Act, 2021 regime.
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22. It is further submitted that the Respondent having accepted the
applicability of the said statutory route for different Assessment Years, the
failure to adopt the identical jurisdictional procedure for the subject AY 2023-24
constitutes a patent inconsistency and a legally impermissible departure from the
governing statutory scheme.
23. It is submitted that statutory powers must be exercised uniformly,
consistently, and in accordance with the legislative framework, and any selective
or differential invocation of jurisdiction in respect of the same search
proceedings and common material is ex facie arbitrary, violative of Article 14 of
the Constitution, and vitiates the impugned action.
24. It is therefore submitted that the Respondent cannot approbate and
reprobate by treating the same search as warranting proceedings under Section
148 for certain years while bypassing the mandatory reassessment mechanism
for the year in question and such inconsistent exercise of power amounts to a
colorable and jurisdictionally defective assumption of authority.
25. The Learned Senior Counsel for the Petitioner submits that Section
292BB of the Act is merely a deeming provision intended to cure defects in the
service of an otherwise validly issued notice and cannot be invoked to supply the
complete absence of a mandatory jurisdictional notice itself. The provision
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presupposes the existence of a notice duly issued under the statute and operates
only to preclude technical objections as to mode, timing, or manner of service
where the assessee has participated in the proceedings.
26. It is submitted that it is settled law that a legal fiction cannot be
extended to create jurisdiction where none exists, nor can it breathe life into a
non-existent or unissued notice, since jurisdictional preconditions must be
strictly satisfied in fact and in law. It is further submitted that Jurisdiction being
a creature of statute, any defect therein strikes at the root and is incurable by
consent, waiver, or acquiescence.
27. The Learned Counsel relied on the judgement of the Hon’ble Supreme
Court in Kanwar Singh Saini Vs High Court of Delhi, (2012) 4 SCC 307,
wherein it was held that an objection as to jurisdiction may be raised at any stage
of the proceedings, even in appeal. Any contrary view would permit
acquiescence to defeat the mandate of the statute, which is impermissible in law.
Reliance was also placed on the following authorities:
(a) Pr. Commissioner of Income Tax Vs Maruti Suzuki India
Limited, (2020) 18 SCC 331 wherein it was held by the Hon’ble
Supreme Court that Participation in the proceedings by the
appellant in the circumstances cannot operate as an estoppel
against law.
(b) Commissioner of Income Tax Vs Laxman Das Khandelwal 2021
18 SCC 691, The Hon’ble Supreme Court observed that for
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Section 292BB to apply, the notice must have emanated from the
department. It is only the infirmities in the manner of service of
notice that the Section seeks to cure. The Section is not intended
to cure complete absence of notice itself.
(c) Sumit Balkrishna Gupta Vs Assistant Commissioner of Income-
tax, Circle 16(2), Mumbai 2019 SCCOnline Bom 13178, it was
concluded by the Hon’ble Bombay High Court that the issue of a
notice under Section 148 of the Act is a foundation for reopening
of assessment. Section 292B of the Act cannot be invoked to
correct a foundational / substantial error as it is meant so as to
meet the jurisdictional requirement.
28. Accordingly, it is submitted that where the foundational statutory
notice itself has not been issued or served as required, Section 292BB has no
application and cannot validate proceedings that are void ab initio.
29. It is submitted that the decisions relied by the Respondent are wholly
irrelevant and misconceived, as the said judgments pertains to the pre-Finance
Act, 2021 assessment framework and was rendered in the context of the
erstwhile statutory scheme governing ordinary reassessment proceedings.
30. It is further submitted that the cases relied by the Respondent neither
dealt with any search conducted under Section 132 of the Act nor considered the
jurisdictional consequences flowing from a post-01.04.2021 search or the
operation of the special, self-contained reassessment mechanism introduced by
Parliament.
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31. It is submitted that in the present matter, which squarely emanates
from a search conducted after the legislative overhaul, the special statutory
procedure necessarily governs the field, and the mere fact that the time limit to
complete an assessment under Section 143(3) may otherwise have been
available cannot, in law, justify bypassing the mandatory assessment regime as
delineated hereinabove.
32. It is further submitted that any such attempt to proceed under the
general provision, in derogation of the statutorily prescribed special procedure,
is ex facie unlawful, jurisdictionally defective, and unsustainable.
33. It is submitted that the accounts sought to be attached by the
Respondent includes cash credit/ overdraft/working capital accounts which
represent credit facilities extended by the bank to the petitioner, and for an
attachment to be valid, there must exist, at the time it becomes operative, a
legally enforceable debt. Whereas, in the present case, the bank is the creditor,
and the petitioner is the debtor; consequently, no amount is due or payable by
the bank to the petitioner, and therefore no attachable debt exists.
34. In this connection, reliance was placed on the decision of this Court in
K.M.Adam Vs. The Income Tax Officer (1958) 33 ITR 26, wherein it was
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held that cash credit and overdraft account are not amenable to attachment under
the Act as the Revenue has no authority to recover its dues out of monies
belonging to the bank, and the attachment order was held to be beyond the
jurisdiction of the assessing officer.
35. It is further submitted that the above decision of this Court was also
relied upon by the Division Bench of the Bombay High Court in Sargam Foods
Pvt. Ltd. Vs State of Maharashtra 2010 SCC Online Bom 947.
36. It is therefore submitted that a meaningful reading of the language
employed in Section 226 (3) of the Act, does not suggest that the account like
the Cash Credit or the overdraft is capable of being attached as the bank does not
become a debtor. In this regard, the following decisions were also cited :-
i. Kaneria Granito Vs Assistant Commissioner of Income
Tax 2016 SCCOnline Guj 10313ii. M/s. Kundlas Loh Udyog Vs Union of India, before the
Hon’ble High Court of Himachal Pradesh in CMPMO
No.418 of 2024.
37. The learned Senior Counsel for the petitioner further drew the
attention of this Court to a recent decision of the Division Bench of the
Rajasthan High Court in Shyam Sunder Khandelwal vs. Assistant
Commissioner of Income Tax and other connected writ petitions in D.B Civil
Writ Petition No.18363 of 2019, dated 19.03.2024.
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38. It is submitted that the Department unsuccessfully challenged the said
decision before the Hon’ble Supreme Court by filing Special Leave Petition
(Civil) Diary No.75521 of 2025. It is submitted that the Hon’ble Supreme Court
dismissed the said petition not only on the ground of limitation but also on
merits, holding that the order passed by the Rajasthan High Court did not
warrant any interference.
39. A specific reference was made to Paragraph Nos. 23 to 43 of the said
judgment.
40. Defending the impugned order, the learned Senior Standing Counsel
for the Income Tax Department submits that the Petitioner’s Case was selected
under Para No.2(ii) of the Compulsory Scrutiny Norms as laid down by the
Board in F.No.225/72/2024/ITA-II dated 03.05.2024. The Para No.2(ii) of the
guidelines as stipulated by the Board is reproduced as under :-
“2(ii) Search & seizure/requisition on or after 01.04.2021:
Assessments in search & seizure cases/requisitions cases
u/s. 132/132A conducted on or after 01.04.2021.
The cases shall be selected for scrutiny with prior
administrative approval of Pr.CIT/Pr.DIT/CIT/DIT are
concerned, who shall ensure that such cases are transferred
to Central Charges u/s. 127 of the Act within 15 days of
service of notice u/s.143(2)/142(1) of the Act by the
Jurisdictional Assessing Officer concerned.
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41. It is submitted that in the Petitioner’s case the Assessment Order was
passed on 31.03.2025 u/s.143(3) of the Act for the Assessment Year 2023-24,
after approval was accorded by the Additional Commissioner of Income Tax,
Central Range, Coimbatore in ITBA/COM/F/17/2024-25/ 1075348502(1) dated
31.03.2025.
42. It is submitted that Section 148 is not applicable to the Impugned
Assessment Order, since it is a scrutiny assessment u/s.143(3) for the A.Y.2023-
2024.
43. It is further submitted that when the time is available for completion of
Original assessment, original assessment can be done only u/s.143(3). It is
submitted that during the original assessment, the return filed by the assessee,
account books, any other information available with the department including
the materials obtained during the search will be considered in the original
assessment.
44. It is submitted that prior to 01.4.2021, during the assessments
u/s.153A and 153C regime, original assessments were done for the Relevant
Assessment Year of search which falls beyond the block period of six years.
Thus the relevant assessment year is the criteria and materials obtained in the
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search are not the criteria.
45. It is further submitted that even during the search regime, original
assessments were present and in almost all the cash and jewellery seizure cases
during the search, original assessment was done.
46. It is submitted that there is no mandate under the Act that when
materials were seized in the search, reopening of assessment has to be done. It
depends on the relevancy of the Assessment Year and time limit available for
the completion of the Original Assessment.
47. It is submitted that when the original assessment is completed or the
time for original assessment is expired, then if any material comes to the
possession and knowledge of the department including the seized materials, then
reopening of assessment u/s.147 can be done subject to the procedure
contemplated u/s.148 to 153. On the other hand, if the time limit is available for
the completion of original assessment, then original assessment can be done and
there is no necessity of reopening of assessment.
48. In this regard, the learned Senior Standing Counsel for the respondents
drew the attention of this Court to the following decisions:-
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i. Commissioner of Income Tax Vs. K.M.Pachayappan, dated
04.07.2007 reported in [2008] 304 ITR (Madras)
ii. Commissioner of Income – Tax Vs. Qatalys Software
Technologies Ltd dated 29.07.2008 reported in [2009] 308
ITR 249 (Madras)
iii. Commissioner of Income Tax Vs. TCP Limited, dated
06.04.2009 reported in [2010] 323 ITR 346 (Madras)
iv. Jasmine Towels (P) Ltd. Vs. Assistant Commissioner of
Income Tax dated 11.12.2025 reported in [2025] 181
taxmann.com 674 (Madras)
49. The learned Senior Standing Counsel for the respondents also drew
the attention of this Court to the recent decisions of the Division Bench of this
Court in T.C.A.No.865 of 2010 [The Commissioner of Income-tax-I Vs
M/s.Super Spinning Mills Ltd.,] and in T.C.A.No.394 of 2012 [Jasmine
Towels (P) Ltd.,], rendered on 08.11.2024 and 11.12.2025 respectively.
50. It is submitted therein that the Division Bench has held that merely
because search proceedings were conducted after the return was filed, the
assessment proceedings need not necessarily be completed under Section 147 of
the Income Tax, 1961.
51. It is further submitted by the learned Senior Standing Counsel for the
respondents that since the time limit for completing the assessment was
available up to 31.03.2025, the return filed by the petitioner was assessed after
following due process of law and within the limitation prescribed under Section
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153 of the Act, as in force with effect from 01.04.2021.
52. That apart, the learned Senior Standing Counsel for the respondents
also drew attention to Section 124(3) of the Act, and submitted that once the
petitioner had submitted to the jurisdiction by participating in the assessment
proceedings, it is not open to the petitioner to challenge the assessment on the
ground of lack of jurisdiction.
53. The learned Senior Standing Counsel for the Income Tax department
further drew the attention of this Court to Section 292BB of the Act. Section
292BB of the Act reads as follows:-
“Notice deemed to be valid in certain circumstances.
292BB. Where an assessee has appeared in any proceeding or
co-operated in any inquiry relating to an assessment or
reassessment, it shall be deemed that any notice under any
provision of this Act, which is required to be served upon him,
has been duly served upon him in time in accordance with the
provisions of this Act and such assessee shall be precluded
from taking any objection in any proceeding or inquiry under
this Act that the notice was—
(a) not served upon him; or
(b) not served upon him in time; or
(c) served upon him in an improper manner:
Provided that nothing contained in this section shall apply
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where the assessee has raised such objection before the
completion of such assessment or reassessment.”
54. It is also submitted that the proviso to Section 292BB makes the legal
position clear in this regard.
55. I have considered the arguments advanced by the learned Senior
Counsel for the petitioner and the learned Senior Standing Counsel for the
respondents / Income Tax Department.
56. The point for consideration in these writ petitions is whether the 2 nd
respondent ought to have proceeded against the petitioner under Section 148 of
the Act (hereinafter referred to as Act), as in force with effect from 01.04.2021
and as modified by Finance Act No.2 of 2024 with effect from 31.08.2024 or
proceeded with a Scrutiny Assessment under Section 143(3) of the Act, as was
done in these cases?
57. The argument of the Learned Senior Counsel for the petitioner is that
under the changed scenario with effect from 01.04.2021, once a search has been
conducted under Section 132 of the Act, or where requisition of information is
made under Section 132A results in information which suggests, that the
income chargeable to tax, has escaped assessment, the procedure under
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Section 148 has to be mandatorily followed.
58. The above submission though plausible in view of the scheme of the
provisions of the Act with effect from 01.04.2021 is impermissible in view of
the fact that :-
a) Unlike the regimes preceding 01.04.2021, which is followed by the
regimes succeeding 01.09.2024, there is no express bar for
invocation of machinery under Section 143(3) of the Act when a
search under Section 132 is initiated; and
b) The Legislature has categorically clarified the application of Section
143(3) of the Act to a search conducted under Section 132, in
view of the substitutions made in Sub-section (8) to Section 132
vide Finance Act, 2022, w,e,f, 01.04.2022.
59. For the sake of convenience, Section 132(8) of the Act is extracted
below :-
(8) The books of account or other documents seized under
sub-section (1) [or sub-section (1-A)] shall not be
retained by the authorised officer for a period exceeding
thirty days from the date of the [order of assessment or
reassessment or recomputation under sub-section (3) of
section 143 or section 144 or section 147 or] [section
153-A or clause (c) of section 158-BC] unless the reasons
for retaining the same are recorded by him in writing and
the approval of the [Chief Commissioner, Commissioner,
Director General or Director] for such retention is
obtained:
Provided that the [Chief Commissioner, Commissioner,
Director General or Director] shall not authorise the
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period exceeding thirty days after all the proceedings under
the Indian Income-tax Act, 1922 (11 of 1922), or this Act in
respect of the years for which the books of account or other
documents are relevant are completed .
60. Although not cited, there are few decisions of the Tribunals which are
also in favour of the proposition which the Petitioner seeks to persuade the Court
to quash the Impugned Order. They are as follows :-
(a) Homelife Buildcon (P.) Ltd. Vs. DCIT, ITA No.
880/Chd./2024
(b) Jamna Das Nikkamal Jain Saraf Pvt. Ltd. Vs. DCIT, ITA
No.403/Chd./2025)
(c) Montage Enterprises Pvt. Ltd., Vs DCIT, ITA
No.5458/Del/2025
(d) Prasad Shet Vs DCIT, ITA No.1593/Bang/2026
61. The Tribunals have taken the view that once a search has been
conducted, the only option available to the Assessing Officer is to invoke the
machinery under Section 148 of the Act for income escaping assessment, as the
Assessing Officer is deemed to have information suggesting Income having
escaped assessment for three Assessment Years immediately preceding the
Assessment Year relevant to the Previous Year in which the search is initiated in
terms of Explanation-2 to Section 148.
62. The above cases also proceeded on the footing that the Revenue could
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have only invoked the machinery provisions under Section 148, since the time
limit for issuing notice under Section 143(2) had already expired.
63. The decisions of the Tribunals at best have a persuasive value and are
not binding on the High Courts and the Supreme Court, whether in their
appellate jurisdiction or special jurisdiction or writ jurisdiction.
64. Although the decisions of the Tribunals referred to supra were
informative, in my view, the ratio laid therein is incorrect insofar as the said
decisions seek to exclude the application of Section 143(3) of the Act, if the
limitation to issue a notice under Section 143(2) is otherwise available.
65. Though the views taken by the Tribunal in the above cases were also
attempted to be canvassed by the Learned Senior Counsel for the Petitioner in
the present case, I am unable to subscribe to the views of the Tribunal or accept
the contentions of the Petitioner.
66. The case of the petitioner is that the 2 nd respondent ought to have
proceeded against the petitioner only under Section 148 and not under Section
143(3) of the Act, since a search was conducted at the premises of the Petitioner
under Section 132 of the Act, between 05.04.2024 and 12.04.2024.
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67. In the facts of the present case, the Return of Income was filed on
28.12.2023 during the Financial Year 2023-2024. The due date for filing a
regular return is prescribed in Explanation 2 to Section 139(1). The time limit
can be extended from time to time by an official notification. The last date of the
Financial Year 2023-2024 was 31.03.2024.
68. Normally, the procedure for Assessment begins with the filing of a
Self-Assessed Return of Income under Section 139(1) of the Act, or a Belated
Return under Section 139(4) of the Act, or a Revised Return of Income under
Section 139(5) of the Act, within the stipulated time followed by a notice under
Section 143(2) of the Act.
69. The return filed under Section 139 could either culminate in an
intimation under Section 143(1) or a Scrutiny Assessment under Section 143(3)
of the Act after complying with the procedure under Section 143(2) of the Act,
or a proceeding under Section 147 read with Section 143(3) of the Act, after a
Section 148 notice is issued where income has escaped assessment under
70. As per Section 143(2) of the Act, where a return has been furnished
under Section 139, or in response to a notice under Section 142(1), if the
Assessing Officer or the prescribed Income Tax Authority, as the case may be,
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shall serve on the assessee a notice before an “Assessment Order” under Section
143(3) is passed, requiring the assessee, to either:-
i. attend the office of the Assessing Officer; or
ii. produce or cause to be produced before such Assessing Officer
any evidence on which the assessee may rely in support of
the Return.
71. This is to rule out that the assessee has not
i. understated the income; or
ii. has computed excess loss; or
iii. not under-paid the tax.
72. Function of Section 143(2) of the Act is to ensure that there is no
violation of the Principles of Natural Justice while passing a Scrutiny
Assessment Order under section 143(3) of the Act.
73. However, a notice under Section 143(2) for framing an assessment
under Section 143(3) cannot be issued after expiry of three months from the
end of the financial year in which the return is furnished. For the sake of clarity,
Section 143(2) and Section 143(3) of the Act are reproduced below:
Section 143(2) Section 143(3)
Where a return has been furnished under On the day specified in the notice
section 139, or in response to a notice issued under sub-section (2), or
under sub-section (1) of section 142, the as soon afterwards as may be,
after hearing such evidence as the
Assessing Officer or the prescribed income-
assessee may produce and such
tax authority, as the case may be, if, other evidence as the Assessing
considers it necessary or expedient to Officer may require on specified
ensure that the assessee has not understated points, and after taking into
the income or has not computed excessive account all relevant material
which he has gathered, the
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loss or has not under-paid the tax in any Assessing Officer shall, by an
manner, shall serve on the assessee a notice order in writing, make an
requiring him, on a date to be specified assessment of the total income or
loss of the assessee, and
therein, either to attend the office of the
determine the sum payable by
Assessing Officer or to produce, or cause to him or refund of any amount
be produced before the Assessing Officer due to him on the basis of such
any evidence on which the assessee may assessment.
rely in support of the return:
Provided that no notice under this sub-
section shall be served on the assessee
after the expiry of [three] months from the
end of the financial year in which the
return is furnished.
74. In the facts of the present case, a notice under Section 143(2) of the
Act was issued on 26.06.2024, to the Petitioner. Thus, the said Notice under
Section 143(2) issued on 26.06.2023 was in time.
75. The last date for passing a Scrutiny Assessment under Section 153(1)
of the Act shall be twenty-one months from the end of the Assessment Year in
which the income was first assessable i.e., on 31.12.2025. Thus the impugned
Assessment Order was in time.
POSITION PRIOR TO 01.04.2021
76. Earlier, in the case of a search initiated under Section 132 of the Act
or requisition under Section 132-A of the Act, a proceedings against the
“searched person” like the petitioner and any “other person” [i.e., the person
other than the “searched person”] were to be completed under Section 153A to
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Section 153C respectively.
77. This has been done away with effect from 01.04.2021 for search under
Section 132 of the Act and/or requisition of documents under Section 132A of
the Act after 01.04.2021 vide Finance Act, 2021 with effect from 01.04.2021.
Vide Finance Act, 2021 many of the provisions in Chapter XIV of the Act
were amended by the Finance Act, 2021.There has been a paradigm shift with
effect from 01.04.2021 vide Finance Act, 2021 for Assessment, Reassessment
and Re-computation of Income.
78. Section 153A to 153C of the Act are not applicable to the period in
dispute in view of Section 153C(3) of the Act, in case of search under Section
132 and/or Requisition of Documents under Section 132A of the Act after
01.04.2021. Section 153C(3) of the Act is reproduced below:-
“(3) Nothing contained in this section shall apply in relation
to a search initiated under section 132 or books of account,
other documents or any assets requisitioned under section
132A on or after the 1st day of April, 2021.”
79. Thus, avenue for assessment under Section 153A and Section 153C of
the Act is not available in the case of Search under Section 132 and/or
Requisition of Documents under Section 132A of the Act after 01.04.2021.
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80. A provision similar to that which existed earlier under Chapter XIV-
B of the Act for Block Period prior to 31.03.2003 has been now re-introduced
with effect from 01.09.2024 vide Finance Act 2023 with retrospective effect
from 01.09.2024. In this case, the court is not concerned with the above
amendments with effect from 01.09.2024 and therefore no opinion is expressed
on the same.
81. Earlier, under the 2nd proviso to Section 153A of the Act, an
assessment or reassessment, if any, relating to any assessment year falling within
the period of six assessment years pending on the date of initiation of the search
under Section 132 or making of requisition under Section 132-A, as the case
may be, in case of a searched person would have stood abated.
82. This legal position was also clarified by the Hon’ble Supreme Court in
CIT vs. Abhisar Buildwell (P) Ltd., (2024) 2 SCC 433.In Paragraph 33, the
Hon’ble Supreme Court observed as under :-
33. As per the provisions of Section 153-A, in case of a search
under Section 132 or requisition under Section 132-A, the
AO gets the jurisdiction to assess or reassess the “total
income” in respect of each assessment year falling within six
assessment years. However, it is required to be noted that as
per the second proviso to Section 153-A, the assessment or
reassessment, if any, relating to any assessment year falling
within the period of six assessment years pending on the
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of requisition under Section 132-A, as the case may be,
shall abate. As per sub-section (2) of Section 153-A, if any
proceeding initiated or any order of assessment or
reassessment made under sub-section (1) has been annulled
in appeal or any other legal proceeding, then,
notwithstanding anything contained in sub-section (1) or
Section 153, the assessment or reassessment relating to any
assessment year which has abated under the second proviso
to sub-section (1), shall stand revived with effect from the
date of receipt of the order of such annulment by the
Commissioner. Therefore, the intention of the legislation
seems to be that in case of search only the pending
assessment/reassessment proceedings shall abate and the
AO would assume the jurisdiction to assess or reassess the
“total income” for the entire six years’ period/block
assessment period. The intention does not seem to be to
reopen the completed/unabated assessments, unless any
incriminating material is found with respect to assessment
year concerned falling within last six years preceding the
search. Therefore, on true interpretation of Section 153-A of
the 1961 Act, in case of a search under Section 132 or
requisition under Section 132-A and during the search any
incriminating material was found, even in case of
unabated/completed assessment, the AO would have the
jurisdiction to assess or reassess the “total income” taking
into consideration the incriminating material collected
during the search and other material which would include
income declared in the returns, if any, furnished by the
assessee as well as the undisclosed income. However, in case
during the search no incriminating material is found, in case
of completed/unabated assessment, the only remedy
available to the Revenue would be to initiate the
reassessment proceedings under Sections 147/48 of the Act,
subject to fulfilment of the conditions mentioned in Sections
147/148, as in such a situation, the Revenue cannot be left
with no remedy. Therefore, even in case of block assessment
under Section 153-A and in case of unabated/completed
assessment and in case no incriminating material is found
during the search, the power of the Revenue to have the
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saved, otherwise the Revenue would be left without remedy.
83. In other words, the pending assessment proceedings, if any, would
have stood abated and would have been required to be assessed under Section
153A of the Act in the case of the “Searched Person” and under Section 153C
of the Act in the case of the “Other Person” i.e., the person other than the
“Searched Person”.
84. The above case was rendered in the context of Section 153A to 153C
of the Act, as it stood prior to its amendment with effect from 01.04.2021 as per
which nothing contained in Section 153C of the Act shall apply to Search
initiated under Section 132 or books of account, other documents or any assets
requisitioned under Section 132A on or after 01.04.2021.
85. Therefore, the ratio of the Hon’ble Supreme Court in Abhisar
Buildwell (P) Ltd rendered in the context of Section 153A and Section 153C
read with section 153B of the Act, are of no relevance and do not apply to the
facts of the present case in view of the amendment to the Act with effect from
01.04.2021 vide Finance Act, 2021.
86. Since, the avenue for Assessment under Section 153A and Section
153C read with Section 153B of the Act, does not exist after 01.04.2021, either
in the case of the “searched person” or any “other person” under Section 132
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of the Act or any “other person” in case of requisition of documents under
Section 132A of the Act after 01.04.2021. Assessment, Re-assessment or Re-
computation as the case maybe has to be in conformity with the provision of
Chapter XIV of the Act, as amended vide Finance Act, 2021.
NOTICE UNDER SECTION 148 OF THE ACT: –
87. Issuance of a notice under Section 148 of the Act as amended vide
Finance Act, 2021 with effect from 01.04.2021 has to normally precede a notice
and an Order under sub Section (b) and (d) to Section 148A of the Act, except in
case of
i. a search initiated under Section 132 of the Act; or
ii. in the case of a requisition of documents under Section 132A of
the Act,
After 01.04.2021.
88. However, such a Notice and an Order under Section 148A (b) and
Section 148A (d) of the Act has been dispensed with, in the case of a search or
requisition of documents made after 01.04.2021 under Section 132 and Section
132A of the Act respectively. It would however not mean that, in case of every
search or requisition of documents made under these provisions after 01.04.2021
would mandate assessment to be completed only by issuance of a Section 148
notice under Section 147 of the Act. I shall explain this position in the ensuing
paragraphs.
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89. To explain the above legal position, it will be useful to refer to main
part of Section 148 of the Act, as amended vide Finance Act, 2021 with effect
from 01.04.2021 which is reproduced below:
Section 148:Issue of Notice where Income Has Escaped
Assessment:-
Before making the assessment, reassessment or
recomputation under section 147, and subject to the
provisions of section 148A, the Assessing Officer shall serve
on the assessee a notice, along with a copy of the order
passed, if required, under clause (d) of section 148A,
requiring him to furnish within such period, as may be
specified in such notice, a return of his income or the
income of any other person in respect of which he is
assessable under this Act during the previous year
corresponding to the relevant assessment year, in the
prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed;
and the provisions of this Act shall, so far as may be, apply
accordingly as if such return were a return required to be
furnished under section 139:
90. As per the 1st proviso to Section 148 of the Act, no notice shall be
issued unless:
i. there is/are information with the Assessing Officer which
suggests that the income chargeable to tax has escaped
assessment in the case of the assessee for the relevant
assessment year; and
ii. the Assessing Officer has obtained prior approval of the
specified authority under Section 151 of Act to issue such
notice.
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91. However, under 2nd proviso to Section 148 of the Act, no such prior
approval is required to be obtained from the “Specified Authority” under Section
151 of Act as is required under 1st proviso to Section 148 of the Act, if an order
under Section 148A(d) has been passed with the prior approval of such
“Specified Authority” under Section 151 of Act.
92. The 3rd proviso to Section 148 of the Act, was inserted by the Finance
Act, 2023, w.e.f. 01.04.2023. Discussion on the 3 rd proviso to Section 148 of the
Act is not relevant to the facts of the present case. Therefore, I am refraining to
give any opinion on the same.
93. For the sake of clarity, 1st, 2nd and 3rd proviso to Section 148 of the Act
are reproduced below:-
1st Proviso to Section 148 of 2nd Proviso of Section 148 3rd Proviso of
the Act. of the Act. Section 148 of the
Act.
Provided that no notice under Provided further that no Provided also that
this Section shall be issued such approval shall be any return of
unless there is information required where the income, required to
with the Assessing Officer
Assessing Officer, with the be furnished by an
which suggests that the
income chargeable to tax prior approval of the assessee under this
has escaped assessment in specified authority, has section and
the case of the assessee for passed an order under furnished beyond
the relevant assessment year clause (d) of section 148A the period allowed
and the Assessing Officer has to the effect that it is fit shall not be deemed
obtained prior approval of case to issue a notice to be a return under
the specified authority to
under Section. section 139.
issue such notice:
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94. Explanation 1 to Section 148 of Act explains when it can be
construed that information(s) suggests that the income chargeable to tax has
escaped assessment. Explanation 1 to Section 148 of Act applies both for
Section 148 and Section 148A of the Act.
95. Instances specified in Explanation 1 to Section 148 of the Act are not
attracted in the case of search under Section 132 of the Act or requisition of
documents under Section 132A of the Act, after 01.04.2021.
96. If the instances specified under Explanation 1 to Section 148 are
attracted, a Notice under section 148 has to be issued after following the
procedure under Section 148A of the Act.
97. Under Clause (i) to Explanation 2 to Section 148 of the Act, an
Assessing Officer shall be deemed to have information which suggests that the
income chargeable to tax has escaped assessment under the following
circumstances, namely:
(i) where a search is initiated under Section
132; or on or after the 1st day
(ii) books of account, other documents or any of April, 2021
assets are requisitioned under section
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98. Clauses (ii), (iii) & (iv) to Explanation 2 to Section 148 of the Act are
not relevant for the purpose of this discussion. Therefore, no opinion is
expressed with respect to Clause (ii) to Clause (iv) to Explanation 2 to Section
148 of the Act. For the sake of clarity, Explanation 1 and 2 to Section 148 of
the Act are also reproduced below:
Explanation 1 Explanation 2
For the purposes of this Section 148 and For the purposes of this section, where, –
Section 148A, the information with the (i) a search is initiated under section 132
Assessing Officer which suggests that the or books of account, other documents
income chargeable to tax has escaped
or any assets are requisitioned under
assessment means,-
section 132A, on or after the 1st day of
(i) any information [***] in the case of April, 2021, in the case of the assessee;
the assessee for the relevant or
assessment year in accordance with (ii) a survey is conducted undersection
the risk management strategy 133A, other than under sub-section
formulated by the Board from time to (2A) 20[***] of that section, on or
time;*or after the 1st day of April, 2021, in the
(ii) any audit objection to the effect that case of the assessee; or
the assessment in the case of the (iii) the Assessing Officer is satisfied,
assessee for the relevant assessment with the prior approval of the
year has not been made in accordance Principal Commissioner or
with the provisions of this Act; or Commissioner, that any money,
(iii) any information received under an bullion, jewellery or other valuable
agreement referred to in section 90 or article or thing, seized or
section 90A of the Act; or requisitioned under section 132 or
(iv)any information made available to the section 132A in case of any other
Assessing Officer under the scheme
person on or after the 1st day of April,
notified under section 135A; or
2021, belongs to the assessee; or
any information which requires action in
(iv) the Assessing Officer is satisfied, with
consequence of the order of a Tribunal or
prior approval of Principal
a Court.
Commissioner or Commissioner, that
any books of account or documents,
seized or requisistioned under Section
132 or section 132A in case of any
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other person on or after the 1st day of
April, 2021, pertains or pertain to, or
any information contained therein,
relate to, the assessee.
the Assessing Officer shall be deemed to
have information which suggests that the
income chargeable to tax has escaped
assessment in the case of the assessee
where the search is initiated or books of
account, other documents or any assessts
are requisitioned or survey is conducted
in the case of the assessee or money,
bullion, jewellery or other valuable article
or thing or books of account or documents
are seized or requisitioned in case of any
other person.
99. Clause (i) to Explanation 2 to Section 148 of the Act, has been
provided to ensure that if after an intimation under Section 143(1) or a Scrutiny
Assessment under Section 143(3) of the Act is made and thereafter a search
under Section 132 of the Act is initiated or a requisition of document is made
under Section 132A of the Act, after 01.04.2021, a Notice under Section 148 of
the Act has to be issued, as the Assessing Officer is deemed to have information
which suggests that the income has escaped assessment in the case of where
such search is initiated against the searched person or any other person or books
of accounts documents are seized or requisitioned.
100. Issuance of a notice under Section 148 of the Act, whether by
following the procedure under Section 148A (a) to (d) of the Act or without
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following it in terms of the proviso to it, will apply, only if such procedure is
warranted, where:-
i. The time for completing the assessment under Section 153 in
response to Return of Income has already expired and there is
information available in the hands of the Assessing
Officer/Authority that the income has escaped assessment; orii. An assessee has not filed a Return of Income leading to an inference
that income has escaped assessment; oriii. After Return of Income filed under Section 139 of the Act, either
results in
a) an intimation under Section 43(1) of the Act or;
b) where a Scrutiny Assessment under Section 143(3)
is made within the limitation under Section 153(1) of the Act
and thereafter, a search or requisition is made under Section
132 and Section 132A of the Act respectively after
01.042021.
101. It is for the last mentioned instance the expression “if required, under
clause (d) of Section 148A” has been employed under Section 148 of the Act.
102. It is for this purpose w.e.f 01.4.2021 in Section 148A of the Act, it
has been expressly made clear that, before issuing a notice under Section 148 of
the Act, where “information which suggests, that the income chargeable to
tax, has escaped assessment” the Assessing Officer shall follow the procedure
under Section 148A.
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103. Clause (a) to Proviso to Section 148A of the Act complement Clause
(i) to Explanation 2 to Section 148 of the Act as it also makes it clear that the
procedure under Section 148A of the Act will not apply where a search is
initiated under Section 132 or books of account, other documents or any assets
are requisitioned under Section 132A, in the case of the assessee on or after the
1st day of April, 2021.
104. The function of Clause (a) to Proviso to Section 148A of the Act, is
to exclude the application of the procedure under Section 148A (a) to (d) of the
Act where a search is initiated under Section 132 or books of account, other
documents or any assets are requisitioned under Section 132A, in the case of the
assessee on or after the 1st day of April, 2021. Similarly, Clause (b) to (c)
Proviso to Section 148A of the Act, apply under the circumstances stipulated
therein .
105. For the sake of clarity, both main part of Section 148A and proviso to
it are reproduced below in the following Tabulation:
Section 148A of the Act
The Assessing Officer shall before Proviso to Section 148A of the Act.
issuing any notice under Section Provided the proviso of this section shall
148, – not apply in a case where, –
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(a) conduct any enquiry, if (a) a search is initiated under section
required, with the prior 132 or books of account, other
approval of specified authority documents or any assets are
under Section 151 of the Act; requisitioned under section 132A in
the case of the assessee on or after
the 1st day of April, 2021; or
(b) provide an opportunity of being (b) the Assessing Officer is satisfied,
heard to the assessee, [***] by with the prior approval of the
serving upon him a notice to Principal Commissioner or
show cause within such time, as
Commissioner that any money,
may be specified in the notice,
being not less than seven days bullion, jewellery or other valuable
and but not exceeding thirty article or thing, seized in a search
days from the date on which under section 132 or requisitioned
such notice is issued, or such under section 132A, in the case of
time, as may be extended by him any other person on or after the 1st
on the basis of an application in day of April, 2021, belongs to the
this behalf, as to why a notice
assessee; or
under section 148 should not
sbe issued on the basis of
information which suggests that
income chargeable to tax has
escaped assessment in his case
for the relevant assessment year
and results of enquiry
conducted, if any, as per clause
(a);
(c) consider the reply of assessee (c) the Assessing Officer is satisfied,
furnished, if any, in response to with the prior approval of the
the show-cause notice referred Principal Commissioner or
Commissioner that any books of
to in clause (b);
account or documents, seized in a
search under section 132 or
requisitioned under section 132A, in
case of any other person on or after
the 1st day of April, 2021, pertains
or pertain to, or any information
contained therein, relate to, the
assessee.
(d) decide, on the basis of material (d) the Assessing Officer has received
available on record including any information under the scheme
reply of the assessee, whether notified under section 135A
or not it is a fit case to issue a
pertaining to income chargeable to
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notice under section 148, by tax escaping assessment for any
passing an order, with the prior assessment year in the case of the
approval of specified authority, assessee.
within one month from the end
of the month in which the reply
referred to in clause (c) is
received by him, or where no
such reply is furnished, within
one month from the end of the
month in which time or
extended time allowed to
furnish a reply as per clause (b)
expires:
106. As per Section 148B of the Act, no order for assessment or re-
assessment or re-computation under Section shall be passed by an Assessing
Officer below the rank of the Joint Commissioner, in respect of an assessment
year to which clause (i) to Clause (iv) of explanation 2 to Section 148 applies
except with the prior approval of the Additional Commissioner or Additional
Director or Joint Commissioner or Joint Director.
107. Clause (i) to Explanation 2 to Section 148 specifically applies to a
case of search under Section 132 and requisition of books of accounts,
documents or any assets of an Assessee under Section 132A.Section 148B is
extracted below:-
“No order of assessment or reassessment or recomputation
under this Act shall be passed by the Assessing Officer below
the rank of Joint Commissioner, in respect of an assessment
year to which clause (i) or Clause (ii) or clause (iii) or clause
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(iv) of Explanation 2 to Section 148 apply except with the
prior approval of the Additional Commissioner or Additional
Director or Joint Commissioner or Joint Director.”
108. Thus it is clear, that there is no scope for proceeding under Section
148A of the Act, as:-
i. Section 148 is subject to Section 148A; and
ii. Under Clause (a) to the 1st proviso to Section 148A of the Act there
is an embargo in the case of the assesseewhere a search is
initiated under section 132 or books of account, other documents
or any assets are requisitioned under section 132A on or after the
1st day of April, 2021.
109. The purpose of the Proviso to Section 148 of the Act i.e., a Notice
under Section 148 of the Act is to ensure that Section 148 Notice is not issued
unless the Assessing Officer has information which suggest that income
chargeable to tax has escaped assessment in the case of the assessee for the
relevant assessment year and the Assessing Officer has obtained prior approval
of the Specified Authority under Section 151 of the Act.
110. Under Explanation 2(i) to Section 148 of the Act, the Assessing
Officer is deemed to have information which suggest that the income chargeable
to tax has escaped assessment in the case of the assessee where the search is
initiated or books of account, other documents or any assets are requisitioned or
survey is conducted in the case of the assessee or money, bullion, jewellery or
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other valuable article or thing or books of account or documents are seized or
requisitioned in the case of any other person.
111. Thus, a notice under Section 148A(b) of the Act is to be issued in a
case of an assessee in case of a search under Section 132 of the Act or
requisition of information under Section 132A of the Act the time period under
Section 153 has expired.
112. A main part of Section 148A and clause (a) to the 1st proviso to
Section 148A, as extracted supra, cannot read together in isolation with Section
148 of the Act.
113. Issuance of a notice under Section 148, the procedure under Section
148A is dispensed with where a search under Section 132 is involved, or books
of account, other documents or any assets are requisitioned under Section 132A.
114. Under those circumstances, the procedure contemplated under
Section 148A of the Act has to be followed. However, where such information is
gathered in the course of search after an intimation under Section 143(1) of the
Act or scrutiny assessment under Section 143(3) of the Act, the proceeding
under Section 148A of the Act can be dispensed with and it is precisely for this
reason, in Section 148 of the Act, the expression “subject to the provisions of
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Section 148A of the Act” is used.
115. The clarification of the Board vide its Circular in
F.No.225/72/2024/ITA-II dated 03.05.2024, is also in line with the intent of the
legislation.
116. Thus, there is no scope for entertaining any doubt that procedure
under Section 143(3) has to follow a search initiated under Section 132 of the
Act, provided it is within the limitation prescribed thereunder.
117. Therefore, a notice under Section 148 of the Act, as amended with
effect from 01.04.2021, is to be issued for making an assessment, reassessment
or re-computation under Section 147 of the Act, in the case of an Assessee who
is searched under Section 132 or where books of account or other documents or
any assets of such Assessee are requisitioned under Section 132A on or after
01.04.2021, only when the proceedings either under Section 143(1) and/or
Section 143(3) have been completed or the limitation under Section 143(2) has
expired.
118. Thus, the legal position that emerges is as under:
i. In respect of a search conducted under Section 132 of the Act and
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to 30.03.2021, the proceedings were to be governed by Sections
153A to 153C of the Act;
ii. With effect from 01.04.2021, the new tax regime came into force;
iii. Where, after an intimation under Section 143(1) of the Act and/or a
Scrutiny Assessment under Section 143(3) of the Act, a search is
conducted on or after 01.04.2021 or where the time for issuance
of an intimation under Section 143(1) of the Act or for
completing the assessment under Section 143(3) of the Act, in
response to the return has already expired, in the case of a search
under Section 132 of the Act or a requisition under Section 132A
of the Act, the proceedings have to be completed by issuing a
notice under Section 148, without following the procedure
prescribed under Section 148A(a) to (d) of the Act;
iv. Where the period for issuance of an intimation under Section 143(1)
of the Act or for passing a Scrutiny Assessment order under
Section 143(3) of the Act has not expired under Section 153 of
the Act, the return shall be processed under Section 143(1) of the
Act or assessed under Section 143(3) of the Act, as the case may
be. In the latter case, the mandatory procedure prescribed under
Section 148A(a) to (d) of the Act shall be complied with, subject
to the proviso to Section 148 of the Act.
119. The decision of the Rajasthan High Court, rendered in Shyam
Sunder Khandelwal Vs Assistant Commissioner of Income Tax [D.B. Civil
Writ Petition Nos.18363 & 20306 of 2019, dated 19.03.2024], is of no
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relevance, as it deals with the provisions, as they stood prior to the above
amendments, in the context of Sections 153A and 153C read with Section 153B
of the Act, as they stood prior to the substitution by the Finance Act, 2021.
120. That apart, the petitioner has participated in the proceedings without
demur. Thus, the challenge to the impugned assessment order and consequential
recovery proceedings also cannot be countenanced. Therefore, on this count also
there is no merit in the challenge to the impugned Assessment Order dated
31.03.2025.
121. Consequently, these writ petitions are liable to be dismissed and are
accordingly dismissed. No costs. Connected miscellaneous petitions are closed.
13.07.2026
av / raja / jen
Neutral Citation : Yes
Note : This case was thereafter listed on 21.07.2026 and 27.07.2026
under the caption “For Clarification” and the same was finally
clarified on 27.07.2026.
To
1.The Secretary,
Ministry of Finance, Department of Revenue,
North Block, New Delhi-110 001.
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2.The Assistant Commissioner of Income Tax
Central Circle-2, Main Building,63,
Racecourse Road, Coimbatore,
Tamil Nadu – 641 018.
3.The Branch Manager,
State Bank of India, No.1087/A-F,
Krishna Towers, Avinashi Road,
Coimbatore-641 037.
4.The Branch Manager,
Indian Overseas Bank,
Kannusamy Street,
Coimbatore – 641 002.
5.The Additional Commissioner of Income Tax,
Central Range, Main Building,
63 Race Course Road, Coimbatore,
Tamil Nadu 641018.
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C.SARAVANAN J.
av / raja
Pre-delivery Order in
W.P.Nos.50601 & 25340 of 2025
13.07.2026
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