ITAT Visakhapatnam Invalidates Section 148 Reassessment Where Section 153A Should Have Been Invoked Post-Section 132A Requisition

Background of the Dispute

The Visakhapatnam Bench of the Income Tax Appellate Tribunal, in the case of Krishna Mohan Potluri Vs ACIT (ITAT Visakhapatnam), examined whether reassessment proceedings initiated under the new Section 148A / Section 148 framework could validly be triggered in a situation where a requisition under Section 132A had already been made during the period when Section 153A governed search and requisition assessments.

The controversy related to Assessment Year 2019-20 and arose from seizure of cash of Rs.28,00,000/- from the assessee during a vehicle check conducted by authorities on 27.11.2018. This ultimately led to a warrant under Section 132A dated 29.11.2018 and subsequent reassessment and penalty proceedings.

Two separate appeals were filed by the assessee:

  • One against the quantum assessment framed under Section 147 r.w.s. 144 based on a notice under Section 148, and
  • Another against the penalty order under Section 271AAC (though the grounds mistakenly refer to Section 271(1)(c) in the introductory part).

Both appeals challenged the very foundation of the reassessment in light of the statutory framework for search/requisition cases under Section 153A and the time limits prescribed by Section 153B.

Facts Leading to the Reassessment

Seizure of Cash and Section 132A Requisition

  • The assessee, an individual, had not filed a return of income for AY 2019-20.
  • On 27.11.2018, the assessee was intercepted by a flying squad team during the election period at a check post on Kothagudem Road, Abdullapuram Mandal.
  • Cash of Rs.28,00,000/- was found in the vehicle.
  • The assessee’s statement was recorded on the same date under Section 131.
  • Subsequently, on 29.11.2018, the Income Tax Department executed a warrant of authorization under Section 132A for requisition and seizure of the entire cash of Rs.28,00,000/-.

Subsequent Reassessment Proceedings

Despite the requisition under Section 132A during FY 2018-19, the Assessing Officer (AO) did not initiate search assessment proceedings under Section 153A. Instead:

  1. The AO issued a notice under Section 148A(b) on 02.03.2023.
  2. Thereafter, a notice under Section 148 was issued on 28.03.2023.
  3. Based on these proceedings, a reassessment order was passed under Section 147 r.w.s. 144, treating the entire cash of Rs.28,00,000/- as unexplained money under Section 69A, and
  4. Penalty was imposed under Section 271AAC on the said amount.

The assessee challenged both the reassessment and the penalty before the Commissioner of Income Tax (Appeals) and, upon dismissal, carried the matter in appeal to the ITAT.

Grounds Raised by the Assessee in the Quantum Appeal

The assessee’s quantum appeal essentially raised the following legal and factual issues (rephrased for clarity):