Income tax search assessment u/ss 132/153A vs reassessment u/s 147; late 153B deadline voids assessment.

Where a valid search u/s 132 is conducted on the assessee, the special assessment regime u/s 153A-153D overrides the general reassessment power u/s 147; the plea that the search was on "another person" was rejected as contrary to the panchnama, and the assessee was held to be a searched person. Although the year of search (AY 2018-19) is not within the six preceding years referred to in s.153A, the limitation in s.153B(1) expressly governs both the six years and the relevant year of search; therefore, the statutory outer time limit (ending 31.12.2019) was mandatory. The assessment framed on 25.03.2023 was held time-barred and void ab initio and was quashed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the assessee was a "person searched" in a search conducted under section 132, so as to trigger the special assessment code under sections 153A to 153D and the limitation under section 153B, thereby excluding recourse to reassessment under section 147.

(ii) Whether, for the assessment year relevant to the previous year in which the search was conducted, the assessment was required to be completed within the time limit prescribed under section 153B(1)(b), and if so, whether the assessment made under section 147 was time-barred and void.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Status of assessee as a "person searched" and consequent applicability of the special search assessment regime

Legal framework (as applied by the Court): The Court treated sections 153A to 153D as a special code for assessments in search cases with overriding effect over general assessment/reassessment provisions, including section 147, once a valid search under section 132 is conducted on the assessee.

Interpretation and reasoning: On examining the panchnama dated 05 January 2018, the Court found that (a) the search authorization covered the assessee, (b) the searched locker stood in the assessee's name, (c) the search was resumed and concluded in the assessee's presence, and (d) gold coins and jewellery were found and seized from that locker. On these recorded facts, the Court rejected the contention that the search was on "another person/third party" and held that the assessee was one of the persons searched.

Conclusions: The assessee was a valid "searched person"; therefore, the special provisions governing search assessments and their limitation regime were attracted, and the Revenue's contrary argument was rejected.

Issue (ii): Whether the assessment for the year of search was time-barred under section 153B and whether section 147 could be used to bypass that limitation

Legal framework (as applied by the Court): The Court applied section 153B(1)(b) as prescribing a mandatory outer time limit for completing assessment/reassessment for the assessment year relevant to the previous year in which the search was conducted, computed as 21 months from the end of the financial year in which the last authorization was executed. The Court further applied the principle that the general reassessment power under section 147 cannot override or circumvent the special search regime and its limitation.

Interpretation and reasoning: The Court noted that although section 153A covers six assessment years preceding the year of search and, on that limited point, the assessment year corresponding to the year of search does not fall within those "six preceding years"; hence, the contention that the assessment for that year had to be framed under section 153A was rejected. However, the Court held that section 153B nonetheless expressly governs the limitation not only for the six preceding years but also for the assessment year relevant to the year of search. Since the last panchnama was drawn on 05 January 2018, the financial year of execution was FY 2017-18, and 21 months from 31 March 2018 expired on 31 December 2019. The assessment order having been passed on 25 March 2023 was held to be far beyond the statutory deadline. The Court held that invoking section 147 in such circumstances amounted to an impermissible attempt to bypass the special limitation scheme under section 153B, rendering the assessment a nullity.

Conclusions: The assessment was barred by limitation under section 153B(1)(b) and was invalid and void ab initio. Consequently, the assessment was quashed, and the additions did not survive; the merits of the additions were not adjudicated as they became infructuous.

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