TaxTMI 
TaxTMI 
2023 (4) TMI 1056
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....PPEAL NOS. 565-566 OF 2023 CIVIL APPEAL NOS. 567-568 OF 2023 CIVIL APPEAL NO.824 OF 2023 (@ S.L.P.(CIVIL) NO. 2110 OF 2023) CIVIL APPEAL NO. 541 OF 2023 CIVIL APPEAL NO. 540 OF 2023 CIVIL APPEAL NO. 14702 OF 2015 CIVIL APPEAL NO. 17533 OF 2017 CIVIL APPEAL NO. 6596 OF 2021 CIVIL APPEAL NO. 7028 OF 2021 CIVIL APPEAL NO. 7029 OF 2021 CIVIL APPEAL NO. 6610 OF 2021 CIVIL APPEAL NO. 7030 OF 2021 CIVIL APPEAL NO. 6608 OF 2021 CIVIL APPEAL NO. 6594 OF 2021 CIVIL APPEAL NO. 7338 OF 2019 CIVIL APPEAL NO. 6609 OF 2021 CIVIL APPEAL NO. 6605 OF 2021 CIVIL APPEAL NO. 1505 OF 2020 CIVIL APPEAL NO. 734 OF 2020 CIVIL APPEAL NO. 7016 OF 2021 CIVIL APPEAL NO. 7017 OF 2021 CIVIL APPEAL NO. 7015 OF 2021 CIVIL APPEAL NO. 6584 OF 2021 CIVIL APPEAL NO. 6589 OF 2021 CIVIL APPEAL NO. 7026 OF 2021 CIVIL APPEAL NOS. 9098-9099 OF 2022 CIVIL APPEAL NO. 3053 OF 2018 CIVIL APPEAL NO. 7014 OF 2021 CIVIL APPEAL NO. 6583 OF 2021 CIVIL APPEAL NO. 7027 OF 2021 CIVIL APPEAL NO. 6899 OF 2021 Connected Appeals filed by the Assessees CIVIL APPEAL NO. 15617 OF 2017 CIVIL APPEAL NO. 10267 OF 2017 CIVIL APPEAL NOS. 7738-7739 OF 2021 CIVIL APPEAL NOS. 7736-7737 OF 2021 CIVIL APPEAL NOS. 7732-7735 OF 2021 CIVIL APPEAL NO. 102....
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....section 2(45) of the Act, 1961, which means the total amount of income referred to in section 5 and computed in the manner laid down in the Act. It is submitted that as per section 5 of the Act, 1961, the 'total income' of any previous year of a person who is a resident includes all income from whatever source derived. It is submitted that therefore the income tax is a tax on all income from whatever source derived in the case of a resident-assessee. Therefore, if any taxable income is left out, the resultant figure would be 'partial income' and not 'total income'. It is submitted that any interpretation of any provision of the Act, 1961 which seeks to exclude any portion of the 'total income' from the ambit of taxation runs contrary to the scheme of taxation and hence is impermissible. It is submitted that thus the income tax is a tax on 'total income,' the assessee furnishes a return of 'total income' (as per Section 139 of the Act, 1961) and the AO assesses 'total income' only. ii) It is next submitted that while considering the issue involved, the manner and mode of passing assessment/re-assessment orders is required to be considered. It is submitted that sect....
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....prior to 30/06/1995, initially, there was no special provision for assessment of search cases. Those assessments were made in accordance with the regular provisions relating to assessment of income, i.e., section 143(3) or section 147 of the Act, 1961. Therefore, the assessment took into considering the incriminating material found during the search as well as that coming to the AO's notice from any other source. It is submitted that thereafter the Finance Act, 1995 introduced a special procedure for assessment of search cases. A set of provisions comprising of Sections 158B to 158BG was introduced by Chapter XIV-B - Special procedure for assessment of search cases. The salient features of Chapter XIV-B are as follows: (i) Any search initiated u/s 132 or 132A of the Act after 30th June, 1995, the AO shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B. (ii) It mandated the assessment of the total undisclosed income relating to the block period to be taxed at the rate specified under Section 113 of the Act as the income of the block period, irrespective of the previous year or years to which such income relates ....
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....What can be taxed under this Chapter is only undisclosed income of the block period. (ii) This undisclosed income should form part of the total income. However, this chapter permits independent and separate assessment for undisclosed income for the block period and therefore cannot include the total income forming part of the regular assessment. (iii) In other words, both the income forming part of the regular assessment/reassessment falling under Section 143/147 respectively, and the assessment on undisclosed income for block period would constitute together the total income. (iv) However, the streams of assessment are independent and separate. The regular assessment/reassessment would be under Section 143/147 respectively. Whereas, the assessment of undisclosed income for block period would be a separate assessment under Section 158BC(c). (v) Three things are therefore clear. The spirit of the Income Tax Act is to tax total income. The regular assessment/reassessment form one stream u/s 143/147 and, the block assessment of the undisclosed income as yet another stream of undisclosed income. (vi) As a result of two separate assessments f....
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....ereinabove, was in place for about eight years but failed to yield the desired outcome. Therefore, the same came to be replaced by another scheme by Finance Act, 2003. It is submitted that the salient features of the special procedure introduced in 2003 were as below: (i) The scheme of parallel assessments were given a go-by. There was to be a single assessment of 'total income', incorporating undisclosed income found during the search as well as that found from any other source. (ii) The concept of 'block period' was given a go-by. The concept of 'assessment year' as the temporal unit was restored. (iii) Assessment had to be made u/s 153A, not under Sections regularly employed for assessment/reassessment, i.e. Section 143(3)/147. (iv) Assessment u/s 153A was to be mandatory and automatic in a case where search had been conducted. (v) Assessments u/s 153A were to be made for each of the six assessment years preceding the assessment year relevant to the previous year in which the search was conducted. (vi) As mentioned above, the second proviso stipulated that assessment/reassessment for any assessment year (out of the 6 assessme....
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....osed income for the block period under Chapter XIV-B. Whereas the new regime has abandoned the parallel assessment scheme and made it into one unified assessment, once a search gets initiated under section 132 or books or requisition under section 132A. It is submitted that in the absence of any search under section 132 or a requisition under section 132A, the assessment of 'total income' should be carried out under section 143, 144 and 147, i.e., regular assessment, best judgment assessment and reassessment. It is submitted that prior to the new scheme, when a search gets initiated or a requisition happens, the normal assessment/reassessment was allowed to be carried on without any interference and a block assessment of undisclosed income was allowed to be made independently. However, the new scheme brought w.e.f. 01.06.2003 has dismantled this structure and Section 153A conceives the following sequence: a. The jurisdictional exercise of power to initiate proceedings u/s 153A would commence only upon initiation of a search u/s 132 or a requisition u/s 132A and not before that. b. Once a search gets initiated or a requisition is made, the assessment process under ....
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....earing as the opening phrase u/s 153A(1) of the Act. (viii) It is submitted that the expression "assessment" or "reassessment" appearing in the second proviso and the expressions "assess or reassess the total income" appearing in Section 153A (1)(b) have been employed carefully by the Parliament to convey clear and distinct intentions. It is submitted that the expression "assessment" or "reassessment" appearing in the second proviso refers to the pending assessments under sections 143, 144 and 147 which would abate. It is submitted that whereas "assess or reassess the total income" appearing in Section 153A(1)(b) signifies not the pending assessment or reassessment, but the assessment to be made under section 153A for six assessment years. It is submitted that again the Parliament has been extremely careful in not employing the expression 'total income' in the second proviso which expression has been carefully employed under section 153A(1)(b) of the Act, 1961. The omission in the second proviso and the inclusion under Section 153A(1)(b) is extremely significant. The omission under the second proviso is necessary since those pending assessments gets abated upon an....
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....t is submitted that the language and meaning of Section 153A is plain and unambiguous, i.e., if search under section 132 of the Act, 1961 is conducted in a case, assessment of 'total income' for each of the six assessment years pending the assessment year relevant to the previous year in which such search is conducted, has to be made. It is submitted that therefore the decision of the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income Tax, (2012) 18 ITR (Trib.) 106 (ITAT/Mum) dated 06.07.2012 and the decision of the Delhi High Court in the case of Commissioner of Income Tax, Central-III v. Kabul Chawla, (2015) 61 taxmann.com 412 (Delhi) dated 28.08.2015 are not in consonance with the plain language and meaning of Section 153A and in the process, defeats the very purpose of the 'charging section' of the Act. 4. Learned counsel appearing for the respective assessees have made the following submissions: i) It is submitted that the core issue that arises in the present set of appeals is, as to whether in respect of completed assessments/unabated assessments, whether the jurisdiction of assessing officer to make asse....
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....evenue to carry out search in case the specified officer has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing etc. which have not been disclosed for the purpose of the Act. That object of both the provisions, namely, sections 132 and 132A is to unearth the income which the assessee has not or is not likely to disclose. It is submitted that since the assessment under section 153A is linked with search and requisition under sections 132 and 132A of the Act, 1961, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. iv) It is next submitted that now, in case time limit to make regular assessment under section 143(3) is pending or an assessment is underway as on the date of search, the said assessment shall get abated and the AO will have jurisdiction to carry out assessment in respect of such abated assessment dehors any incriminating material. However, in respect of completed/unabated assessments, under section 153A of the Act, 1961, an assessment has to be made in relating to the search or requi....
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....he Revenue that earlier scheme of block assessment under Section 158BA envisaged assessment of "undisclosed income" whereas first proviso to Section 153A(1) envisages assessment of "total income" which manifests the intention of the legislation to bring to tax "total income", under Section 153A of the Act de hors any incriminating material, it is submitted that the said submission is without appreciating the object behind introducing the 153A regime as well as without appreciating the fact that definition of "total income" under Section 2 is qualified by the expression "unless the context otherwise requires." viii) It is submitted that the erstwhile scheme of block assessment under Section 158BA envisaged assessment of "undisclosed income" for two reasons. First reason was 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) the regular assessment in accordance with the provision of the Act to make assessment qua income other than undisclosed income. Second reason was that the undisclosed income was chargeable to tax at a special rate of 60% un....
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....expression "total income" shall undisputedly derive its meaning from definition of "total income" provided under Section 2 which means that the Revenue shall be permitted to make assessment qua total income. Had the expression "total income" not been used in the first proviso, the Revenue would have not been able to bring to tax income other than undisclosed income even qua the abated assessments. However, in contrast to abated assessments, in case of completed assessments, where no assessment was pending as on date of search, it is pertinent to mention that no two assessments were taking place in the first place itself. Only one assessment took place in the earlier block assessment regime wherein only undisclosed income could be brought to tax that too when incriminating material was unearthed. xii) It is further submitted that, in cases of unabated assessments where no incriminating material whatsoever was unearthed, no addition could be made in the erstwhile regime as well. It is humbly submitted that the intention of the Parliament was to never tinker with such category of cases in the 153A regime. This is because when no two assessments were taking place in respect of....
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....Sections 132 and 132A, shall mean the total income as per assessment order passed under Section 143(3) where assessment had been made earlier or; total income as per return where no assessment was made earlier but time limit to issue notice under Section 143(2) has expired. xv) Insofar as the words used 'total income' in section 153A of the Act, 1961, it is submitted that before insertion of the new scheme of assessment under Section 153A, there was a concept of block assessment in respect of the search period. There was one assessment for the block period in respect of the undisclosed income found during the search. This undisclosed income was being taxed at a special rate of 60% and that is why, such income was being identified separately as against the regular income for each of the assessment year. The above concept was given a goby on introducing this new scheme of assessment under section 153A which provided that assessment will be made for each of the assessment year separately and the income found undisclosed during the search will be taxed at the normal rate. Hence, in section 153A, it has been stated that 'total income' will be assessed. This means that while....
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....legislature would have provided that in case of annulled assessments, in the case of unabated assessments, the AO shall on the basis of the additions made earlier will be empowered to reframe those assessments as well. It is submitted that restricting annulled assessments to only abated assessments, is putting the wheel back to a situation as if there was no search. 4.1 The submissions on behalf of the assessees in a tabulated form thus are as under: S. N Particulars Assessment u/s 143(3) pending and abated Reassessment u/s 147 pending and abated Unabated assessments i No Incriminating found in material search. AO entitled to assess entire income, a pending regular assessment stood abated. Scope of assessment u/s 153A must be restricted to grounds of reopening of assessment, which was pending on date of search and stood abated as a result of search. AO not entitled to go beyond scope of pending assessment. No assessment u/s 153A in absence of any incriminating material. Originally concluded assessment which has attained finality cannot be disturbed more so when no material found in search. ii. No incriminating material found in search. + Infor....
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....mission that no addition can be made in respect of completed assessment in absence of incriminating material: Sl. No. Name of case Citation 1. Commissioner of Income Tax- III, Pune Vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) : (2018) 11 SCC 490 2. Principal Commissioner of Income Tax-4 Vs. Saumya Construction (2016) 387 ITR 529 (Gujarat) 3. Principal Commissioner of Income Tax, Ahmedabad Vs. Dipak Jashvantlal Panchal 2017 (2) TMI 862 (Gujarat) 4. Commissioner of Income Tax- II, Thane Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bombay) 5. Pr. Commissioner of Income Tax (Central), Bangalore and Ors. Vs. M/s. Delhi International Airport Pvt. Ltd. and Ors. (2022) 443 ITR 382 (Karnataka) 6. Commissioner of Income Tax (Central)-III Vs. Kabul Chawla (2016) 380 ITR 573 (Delhi) 7. Principal Commissioner of Income Tax, Central -2, New Delhi Vs. Meeta Gutgutia (2017) 395 ITR 526 (Delhi) 8. Chintels India Ltd. Vs. Deputy Commissioner of Income Tax - Circle -8, Delhi (2017) 397 ITR 416 (Delhi) 9. Sri. S.M. Kamal Pasha Vs. The Deputy Commissioner of Income....
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....se of Kabul Chawla (supra), which has been subsequently followed and approved by the other High Courts, referred to hereinabove. One another lead judgment on the issue is the decision of the Gujarat High Court in the case of Saumya Construction (supra), which has been followed by the Gujarat High Court in the subsequent decisions, referred to hereinabove. Only the Allahabad High Court in the case of Pr. Commissioner Of Income Tax v. Mehndipur Balaji, 2022 SCC OnLine All 444 : (2022) 447 ITR 517 has taken a contrary view. 7.1 In the case of Kabul Chawla (supra), the Delhi High Court, while considering the very issue and on interpretation of Section 153A of the Act, 1961, has summarised the legal position as under: Summary of the legal position 38. 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 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the prev....
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....of Kabul Chawla (supra) and after considering the entire scheme of block assessment under Section 153A of the Act, 1961, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no additional can be made by the AO and the AO has no jurisdiction to re-open the completed assessment. In paragraphs 15 & 16, it is held as under: "15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the' assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to ....
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....ssessment 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 connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, ....
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.... 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. 10. On a plain reading of Section 153A of the Act, 1961, it is evident that once search or requisition is made, a mandate is cast upon the AO to issue notice under Section 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Section 153A of the Act reads as under: "153A. Assessment in case of search or requisition - (1) Notwithstanding anything contained in Section 139, 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 ....
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.... 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 p....
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....osed 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 subsection (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: ....