sec. 147 & 148 of the IT Act.

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Upadhyay (Querist)
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20 July 2011 Case: A survey action was undertaken at the office of a Chartered Accountant and all the client's files were seized. Based on these cases of all such clients were reopened. Is this a valid reason for reopening? I need case law(s) on this issue..

Thanx...

U S Sharma

U S Sharma (Expert)
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20 July 2011 on primary looks there must have been some interconnection with all files, or common loans,

if any such clue is found by department then they are right to open these files.

Upadhyay

Upadhyay (Querist)
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21 July 2011 interconnection is not relevant.....147/148 can be invoked only when there is any additional material/info on records.....the files of these clients, whose cases were reopened, contained all IT data, ROI and computation...already filled with the dept....

anyways, my question is, 'can my case be reopened, i.e.147/148 can be invoked, based on the data found during the course of survey at the place of 3rd party......? if yes, which sec/ case law gives such permission...??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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23 July 2025 Section **147** and **148** of the **Income Tax Act** pertain to the **reopening of assessments**. Reopening of an assessment can occur under certain circumstances, and the reason for reopening must be supported by **new information** or **material evidence** that was not previously available during the original assessment.

### **Section 147: Reassessment of Income**

Section 147 provides that if the **Assessing Officer (AO)** has **reason to believe** that income has escaped assessment, he may reopen the assessment by issuing a notice under **Section 148**. The reopening of the case can be done under two broad conditions:

1. **Income has escaped assessment** – i.e., the income was not assessed in the original assessment due to reasons like non-disclosure or incorrect claim by the taxpayer.
2. **New information/material** comes to the AO’s notice, which leads the AO to believe that some income has escaped assessment.

### **Section 148: Issuance of Notice**

Section 148 prescribes the procedure for reopening of assessments. If the AO has reason to believe that income has escaped assessment, he can issue a notice under this section.

### **Case Based on Survey Information:**

In your specific case, where **survey action** was undertaken at the office of a **Chartered Accountant** and **client files** were seized, the **reopening of assessments** (u/s 147/148) would depend on **whether any new information** (material or otherwise) was obtained during the survey, which gives the AO a valid reason to believe that income has escaped assessment.

### **Legal Position:**

The **reopening** of assessments based solely on the documents or files **seized in a survey** (without any clear link to an existing under-assessment or income escapement) might not be justified unless there’s **additional material or information** that was not previously available.

#### **Key Principles:**

1. **New information** is essential: The reopening of cases under Section 147 can happen only if there is **new tangible material** that was not earlier available to the AO.
2. **Survey findings** can be used for reopening cases if they reveal **undisclosed income**, **false deductions**, or **incorrect claims**.

If the **survey findings** merely show **files or records** that were already in the department’s knowledge or part of the original assessment, reopening would not be valid.

However, if the survey leads to **discovery of new facts**, such as **unreported income**, **false claims**, or **undisclosed transactions**, the AO can use this information to reopen the cases of those clients.

#### **Case Laws:**

1. **I.P. Agarwal (HUF) v. ITO (2011) 338 ITR 221 (Delhi HC):**

* In this case, the Delhi High Court held that if new material information or evidence is found after the survey or search, it may provide a valid ground for reopening of assessment under **Section 147**.

2. **Shivakumar (HUF) v. CIT (2000) 245 ITR 92 (SC):**

* This case clarified that the reopening of a case is not justified merely on the basis of **general suspicion** or **third-party information** unless the material found during the survey provides a direct **link** to an income escaping assessment.

3. **CIT v. Bhagwan Construction Co. (2007) 292 ITR 310 (Gujarat HC):**

* This case involved reopening of a case based on **documents seized during a survey**. The Court ruled that if the documents indicate that **income had escaped assessment**, the AO could legitimately issue a notice under **Section 148**.

4. **CIT v. S. Ramaswamy (2008) 308 ITR 211 (SC):**

* Here, the **Supreme Court** held that if the AO found information that was **not previously available**, they could invoke Section 147. The finding of new material is key in reopening cases.

### **Conclusion:**

* **Yes**, your case can be reopened under **Section 147/148** based on the data found during the course of a survey at a third-party’s place **if it leads to the discovery of material evidence** showing that income has escaped assessment.

* **Interconnection** is **not a mandatory requirement**, but the AO needs to find **specific, tangible material** from the survey that justifies the reopening.

* If there is **additional material** that points to **incorrect or undisclosed income**, the AO can **reopen the assessments**.

* **Case laws** support the idea that information from surveys and searches can be used for reopening cases if they reveal **new facts** or **undisclosed income**.

In your case, it will depend on what the survey reveals and whether the information leads to a **valid reason to believe** that income has escaped assessment.

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