TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 911
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....ch is different from earlier procedure u/s 158BC r.w.s. 158BB of the Act and by reading into the section, the words 'the incriminating material found during the course of search' which are not there in section 153A? [C] Whether the Tribunal erred in relying on the ITAT order in Sanjay Aggarwal Vs. DCIT (2014) 47 Taxmann.Com 210 (Del) which has interpreted undisclosed income unearthed during the search to imply incriminating material, as against the finding of the Delhi High Court in Filatex India Ltd. Vs. CIT-IV (2015) 229 Taxman 555 (Delhi) wherein it is held that during the assessment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search?" 2. The assessment year is 2006-07 and the relevant accounting period is the previous year 2005-06. The assessee - M/s Saumya Construction Pvt. Ltd. is engaged in the business of construction and development of properties, trading in fabrics and garments. A search and seizure operation was carried out on 07.10.2009 and an assessment came to be framed under section 143(3) read with section 153A(1)(b) of the Act on 30.12.2011 determining the total income of the respondent assessee at ....
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....elated to the evidence found. It was submitted that section 153A of the Act has two trigger points after which there is a mandate on the Assessing Officer to issue notice for assessment in each of the six years prior to the date of the search. It was submitted that the Tribunal, while holding that the addition should be based upon the incriminating material, found during the search under the new procedure provided under section 153A, failed to appreciate that the new procedure is different from the earlier procedure under section 158BC read with section 158BB of the Act. 3.1 Reference was made to the decision of the Delhi High Court in the case of Commissioner of Income Tax v. Anil Kumar Bhatia, [2012] 211 Taxman 453, to point out that the court has discussed the distinction between the previous scheme under Chapter XIV of the Act which provided for what is popularly known as 'block assessment' and the new scheme under section 153A to 153C of the Act, whereby the single block assessment concept was given a go-bye. It was submitted that the new scheme envisages assessment of the total income whether by way of assessment or reassessment. Such income would, therefore, include the inc....
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....ing for the sake of argument that additions or disallowances can be made only on the basis of incriminating material found during the search or requisition, once any incriminating material is found, it would be sufficient to make additions and disallowances in relation to each of the six assessment years and not only in respect of the assessment year in relation to which such material is found. It was submitted that in the present case, it is not as if no incriminating material has been found during the search, the case of the respondent is that no incriminating material is found in relation to the year under consideration. Once, some incriminating material is found, it would enure for all the six assessment years and hence, it cannot be said that there was no incriminating material found during the course of the search. 3.3 It was contended that once section 153A of the Act is invoked, resort to section 147 is prohibited, under the circumstances, the Assessing Officer, thereafter, cannot reopen the assessment under section 147 of the Act. It is in these circumstances that section 153A of the Act envisages assessment of the total income which would include reopening of the assessm....
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....uation and left the question open. Reference was made to the decision of the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income-tax, [2013] 36 taxmann.com 523 (Rajasthan), wherein the court did not accept the argument of the revenue that the Assessing Officer is free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under section 153A of the Act as the same is not borne out from the scheme of the said provision which is essentially in the context of search and/or requisition. The court held that the provisions of section 153A to 153C cannot be interpreted to be a further innings for the Assessing Officer and/or the assessee beyond the provisions of sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. Reliance was placed upon the decision of the Bombay High Court in the case of Commissioner of Income-tax v. Sinhgad Technical Education Society, [2015] 378 ITR 84 (Bom.) and the decision of the Delhi High Court in Commissioner of Income-tax (Central)-III v. Kabul Chawla, [2015] 61 taxmann.com 412, ....
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....arch is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is ....
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....ating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of section 153A says that such proceedings "shall abate". The reason is not far to seek. Under section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the „total income of the assessee ‟ in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". ....
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....keting) have resulted in additions, which have been upheld. It is not the case of the appellant-assessee that initiation of proceedings under Section153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant-assessee is that the addition, which is the subject matter of questions No.(ii) and (iii),was/is not justified in the assessment order under Section 153A, as no incriminating material was found concerning the addition under Section 115 JB of the Act. The said argument has no substance and has to be rejected. Under Section 153A of the Act, the additions need not be restricted or limited to the incriminating material, which was found during the course of search. There cannot be multiple assessments, once Section 153A of the Act is applicable. Section 153A(1) postulates one assessment, computing the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. Total income is assessed or reassessed in the order under Section 153A of the Act and the Section applies notwithstanding Sections 139, 147, 148, 149, ....
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....unts or other documents relevant to the assessment had not been produced in the course of original assessment and, found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of Section 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. 19. The underline purpose of making assessment of total income under Section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, inasmuch as, once a assessme....
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....case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated." 8. In Commissioner of Income Tax (Central)-III v. Kabul Chawla, the Delhi High Court after considering its earlier decisions in the case of Commissioner of Income Tax v. Anil Kumar Bhatia (supra), Commissioner of Income Tax v. Chetan Das Lachman Das, (2012) 211 Taxman 61, Filatex India Ltd. v. Commissioner of Income Tax-IV (supra) decision of the Karnataka High Court in the case of Canara Housing Development Company v. Deputy Commissioner of Income Tax (supra) as well as the other decisions, held thus: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately pr....
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....9, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassess....
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....ooks of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Incometax Act, 1922 (11 of 1922 ), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be disclosed for the purposes of the Indian Income- tax Act, 1922 (11 of 1922 ) or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) the Director General or Director] or the Chief Commissioner or Commissioner, as the case may be, may authorise any Deputy Director, Deputy Commissioner, Assistant Director, Assistant Commissioner or Income- tax Officer, or (B) such Deputy Director or Deputy Commissioner, as the case may be, may authorise any Assistant Director, Assistant Commissioner or In....
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....therwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii)" 11. Section 132A of the Act provides for "Power to requisition books of account, etc." and to the extent the same is relevant for the present purpose, reads thus: "132A. Powers to requisition books of account, etc. (1) Where the Director General or Director or the Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that - (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of sec. 131 of this Act, or a notice under subjection (4) of section 22 of the Indian Incometax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by an....
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.... which is not likely to be made available by issue of summons or by visiting, in ordinary course, the premises concerned. The authorities under the Act have powers to summon persons and documents and have to resort to search and seizure when there is evidence of undisputed documents or assets which have not been and would not have been disclosed in the ordinary course. 13. Similarly, under section 132A of the Act, the authorizing authority would acquire the jurisdiction to authorize an officer to requisition books of account or other documents or assets which have been taken into custody by an officer or authority under any law and thereafter to proceed to deal with the assets provided in the manner provided under section 132 and 132B only where the authorizing authority has in consequence of any information in his possession reason to believe that such assets represent wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act by any person from whose possession or control such assets had been taken into custody by the officer or authority from whom these were requisitioned. 14. Essentially, therefore, both the provisions ....
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....n the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, subsection (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be....
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....se of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the....