Section 148 Notice Mandatory After Search Under Section 132 — ITAT Mumbai Quashes Assessment Framed Under Section 143(3)

Background and Overview

A significant jurisdictional ruling has emerged from ITAT Mumbai in the matter of Ashok Kumar Palresha Vs DCIT (ITAT Mumbai) concerning Assessment Year 2022-23. The Tribunal held that once a search under Section 132 of the Income Tax Act, 1961 is conducted on or after 01.04.2021 and before 01.09.2024, the Assessing Officer is legally obligated to proceed under the reassessment framework prescribed by Section 147 and Section 148. Framing an assessment under Section 143(3) following a Section 143(2) notice — without issuing the mandatory jurisdictional notice under Section 148 — renders the entire assessment bad in law and without jurisdiction.

This ruling is particularly relevant for assessees who were subjected to search proceedings during the intermediate statutory period and subsequently faced assessments through the ordinary scrutiny route rather than the special post-search reassessment mechanism.

Facts of the Case

The assessee, Shri Ashok Kumar Palresha, is an individual who filed his return of income for A.Y. 2022-23 on 03.11.2022 declaring total income of ₹1,17,49,740.

The Department processed the return under Section 143(1) of the Income Tax Act, 1961. Subsequently, a search and seizure action under Section 132 was conducted on 31.01.2023 as part of the broader Cipla Group search, which extended to connected persons including the assessee. The search pertained to F.Y. 2022-23, relevant to A.Y. 2023-24, while the assessment year in question — A.Y. 2022-23 — was the year immediately preceding the previous year in which the search took place.

During the search, the following assets were discovered:

  • Cash: ₹4,08,000
  • Jewellery: 4,372.97 grams, valued at ₹2,32,49,991

How the Assessing Officer Proceeded

After the search, rather than invoking the reassessment mechanism, the Assessing Officer selected the assessee's return for scrutiny by issuing a notice under Section 143(2). No notice under Section 148 was issued at any stage. The Assessing Officer subsequently completed the assessment on 25.06.2024 under Section 143(3), treating the entire cash amount and jewellery as unexplained money and unexplained assets under Section 69A, thereby making aggregate additions of ₹2,36,57,991.

Proceedings Before the CIT(A)

The assessee challenged the assessment order before the learned Commissioner of Income Tax (Appeals). The CIT(A) undertook a detailed examination of the jewellery addition by considering:

  • Wealth-tax returns of the assessee and family members
  • Records of an earlier search
  • Assessment proceedings for A.Y. 2015-16
  • Jewellery previously released by the Department
  • CBDT Instruction No. 1916

On the basis of this analysis, the CIT(A) found the assessee's explanation regarding the source of jewellery to be satisfactory and accordingly deleted the addition of ₹2,32,49,991. However, the cash addition of ₹4,08,000 was sustained.

The assessee then approached ITAT Mumbai against the sustained cash addition.

Jurisdictional Challenge Before the Tribunal

During the course of hearing, the assessee's counsel raised additional grounds directly challenging the jurisdiction of the Assessing Officer to frame any assessment under Section 143(3) in a post-search scenario without complying with Section 148.

Since these grounds went to the root of jurisdiction and required no fresh factual investigation, the Tribunal admitted them and proceeded to adjudicate on them.

The Core Question

Whether, after a search under Section 132 conducted on 31.01.2023, the Assessing Officer could legitimately proceed for A.Y. 2022-23 by issuing a notice under Section 143(2) and framing a regular assessment under Section 143(3), or whether the mandatory reassessment route under Section 147 read with Section 148 was the only legally permissible path.

Tribunal's Analysis of the Applicable Statutory Regime

The Legislative Shift Post-April 2021

The Tribunal first examined the evolution of the statutory framework governing post-search assessments:

  • Prior to 01.04.2021: Section 153A to Section 153C provided a special block assessment mechanism for cases arising from searches.
  • From 01.04.2021 onwards: The Finance Act, 2021 abolished the Section 153A route for new searches and brought search-related assessments within the reassessment framework under Section 147 to Section 151.
  • From 01.09.2024 onwards: The Finance (No.2) Act, 2024 introduced fresh block assessment provisions applicable to searches initiated on or after that date.

Since the search in the present case was conducted on 31.01.2023, it squarely fell within the intermediate period — after 01.04.2021 but before 01.09.2024 — and was therefore governed by the reassessment framework under Section 147 and Section 148.

Reading Section 147