Income Tax Act, 1961 – ss.153A, 132, 132A – Assessment u/s.153A – Scope of – Whether in respect of completed assessments/unabated assessments, the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search u/s.132 or requisition u/s.132A or not – Held: In case of search u/s.132 or requisition u/s.132A, the AO assumes the jurisdiction for block assessment u/s.153A – All pending assessments/reassessments shall stand abated – 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 including the income declared in the returns – 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 assessments/unabated assessments– Thus, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the search u/s.132 or requisition u/s.132A – View taken by the Delhi High Court in Kabul Chawla and the Gujarat High Court in Saumya Construction case is agreed with.
Income Tax Act, 1961 – s.153A – Object and purpose of – Discussed.
Dismissing the appeals and the review petition, the Court
HELD: 1.1 That prior to insertion of Section 153A in the statute, the relevant provision for block assessment was under Section 158BA of the Act, 1961. The erstwhile scheme of block assessment under Section 158BA envisaged assessment of ‘undisclosed income’ for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e.,
(i) block assessment under section 158BA to assess the ‘undisclosed income’ and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the ‘undisclosed income’ was chargeable to tax at a special rate of 60% under section 113 whereas income other than ‘undisclosed income’ was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the ‘undisclosed’ income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections 153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. [Para 9.1][932-G-H; 933-A-D]
1.2 As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, 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 153A, the assessment or re-assessment, 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 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, 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 subsection (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 concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is 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 153A 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 reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. [Para 11][935-A-H; 936A]
1.3 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 assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A 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 153A, 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, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or re-writing the said provisions, which is not permissible under the law. [Para 12][936-B-E]
1.4 This Court is in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla and the Gujarat High Court in the case of Saumya Construction, taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material. In case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A. All pending assessments/reassessments shall stand abated. 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. 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 assessments/unabated assessments. Meaning thereby, in 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 132A of the Act, 1961. 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. [Paras 8 and 14][932-E; 936-G-H; 937-A-B]
Commissioner of Income Tax, Central-III v. Kabul Chawla (2015) 61 taxmann.com 412 (Delhi) dated 28.08.2015; Principal Commissioner of Income Tax-4 v. Saumya Construction (2016) 387 ITR 529 (Gujarat) – approved.
All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income Tax (2012) 18 ITR (Trib.) 106 (ITAT/Mum) dated 06.07.2012; Commissioner of Income Tax- III, Pune v. Sinhgad Technical Education Society (2017)
397 ITR 344 (SC) : (2018) 11 SCC 490 : [2017] 8 SCR 463; Principal Commissioner of Income Tax, Ahmedabad v. Dipak Jashvantlal Panchal 2017 (2) TMI
862 (Gujarat); Commissioner of Income Tax- II, Thane v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay); Pr. Commissioner of Income Tax (Central), Bangalore and Ors. v. M/s. Delhi International Airport Pvt. Ltd. and Ors. (2022)
443 ITR 382 (Karnataka); Commissioner of Income Tax (Central)-III v. Kabul Chawla (2016) 380 ITR 573 (Delhi); Principal Commissioner of Income Tax, Central-2, NewDelhi v. Meeta Gutgutia (2017) 395 ITR
526 (Delhi); Chintels India Ltd. v. Deputy Commissioner of Income Tax – Circle -8, Delhi (2017) 397 ITR 416 (Delhi); Sri. S.M. Kamal Pasha v. The Deputy Commissioner of Income-Tax Central Circle – 6 (3) (2) Bangalore (2022 (8) TMI 966 (Karnataka); Principal Commissioner of Income Tax-2 v. Jay Infrastructure and Properties Pvt. Ltd. 2016 (10) TMI 1022 (Gujarat); Smt. Jami Nirmala v. Principal Commissioner of Income Tax (2021) 437 ITR 573 (Orissa); Smt. Smrutisudha Nayak v. Union of India (2021) 439 ITR 193 (Orissa); Commissioner of Income Tax, Kolkata v. Veerprabhu Marketing Limited (2016) 388 ITR 574 (Calcutta); Principal Commissioner of Income Tax-2, Kolkata v. M/s. Salasar Stock Broking Ltd. 2016 (8) TMI 1131 (Calcutta); Pr. Commissioner of Income Tax-Central, Jaipur v. Smt. Daksha Jain, Sirohi 2019 (8) TMI 474 (Rajasthan); Dr. A.V. Sreekumar v. The Commissioner of Income Tax, Kochi and Assistant Commissioner of Income Tax, Calicut (2018) 404 ITR 642 (Kerala); Pr. Commissioner Of Income Tax v. Mehndipur Balaji 2022 SCC OnLine All 444 : (2022) 447 ITR 517 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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