2023 (10) TMI 569 - HC - Income Tax

Jurisdiction in Tax Reassessments Without Incriminating Material: Case Analysis

The Principal Commissioner Of Income Tax Versus Sandeep Agarwal (HUF)

The case focused on the jurisdiction of the Revenue to reassess completed/unabated assessments for specific years without incriminating material from ... Assessment u/s 153A - re-open the completed/unabated assessments - absence of any incriminating material found during the course of the search - ITAT deleted the additions - Availability of alternive remedy to the revenue for assessment u/s 147/148 - HELD THAT:- As on true interpretation of Section 153A in case of a search u/s 132 or requisition u/s 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, 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. 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. Thus, the view is based upon the decision of the Division Bench of this Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd.[2015 (5) TMI 656 - BOMBAY HIGH COURT] finds support in Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] - Considering this position, the only question which arises for determination would have to be answered against the Revenue. Issues involved:The judgment involves issues related to the jurisdiction of the Revenue to reassess completed/unabated assessments for the Assessment Years 2010-11 and 2011-12 in the absence of search proceedings yielding any incriminating material.Comprehensive Details:Issue A:The appellant questioned whether the ITAT was correct in deleting the additions made in the assessment order, which were upheld by the CIT (Appeals).Issue B:The appellant raised concerns about the ITAT deleting the addition based on the absence of incriminating documents, despite the Assessment being made for the first time.Issue C:The appellant challenged the deletion of additions on account of Long term capital gains and commission paid, related to bogus transactions in penny stocks, which were based on information from the investigation wing.The judgment primarily focused on determining whether the Revenue had the jurisdiction to reassess completed/unabated assessments for the mentioned Assessment Years without any incriminating material found during search proceedings. The Court emphasized that the absence of incriminating material during the search was crucial to assessing the Revenue's jurisdiction. The ITAT's decision, supported by previous court rulings, concluded that without incriminating material, the Revenue lacked the jurisdiction to make additions to completed or unabated assessments. The Supreme Court's interpretation of Section 153A highlighted the necessity of incriminating material for reassessment, providing clarity on the Revenue's powers in such cases. The appellant's references to other court decisions were deemed irrelevant due to the lack of incriminating material in the present case. Ultimately, the judgment dismissed the appeal, favoring the Assessee based on established legal principles and Supreme Court rulings. The Court clarified the application of reassessment proceedings under Sections 147 and 148 of the IT Act, keeping all contentions open for both parties.