TaxTMI 
TaxTMI 
Search and seizure assessments
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....fficer who may pursue the case with the DlT(lnv.) concerned. The DDIT(Inv.)/ ADIT(lnv.) should hand over the seized material to the Assessing Officer (before whom the cases get centralised) within a week of sending the Appraisal Report. 1.3 On receipt of the appraisal report and seized material, the Assessing Officer and Range Head should jointly scrutinize the appraisal report and seized material and prepare an Examination Note to decide: i. Cases where notices u/s 153A of the Income- tax Act, 1961 (the Act) are required to be issued. ii. Cases where notices u/s 153C of the Act are required to be issued. iii. Cases where notices u/s 148 of the Act are required to be issued. iv. Cases where seized material pertains to persons other than those whose cases have been centralised. 1.4 If necessary, confirmation may be obtained from the investigation wing for matching the names of entities as appearing in the warrant of authorisation as against the names appearing in the Panchnama prepared at the time of conclusion of search. 1.5 An action note, based on a comprehensive and methodical examination of seized material, in addit....
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...., bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to the person subjected to provisions of sec. 153C is sufficient. Sections 153A & 153C are applicable for six financial years proceeding the year of search. Notice for the year of search is to be issued u/s 143(2)/'142(1) of the Act. 1.9 The Assessing Officer should also explore the possibility of invoking the provisions of section 28lB of the Act so as to protect the interest of Revenue. This provision is applicable only during the pendency of the proceedings for assessment. After completion of assessment appropriate action for recovery must be taken. 1.10 Where, in the opinion of the Assessing Officer, any further enquiry by the Investigation Wing is to be carried out in respect of certain third parties, the same should be brought to the knowledge of the CIT (Central), who may, thereafter request the DlT(Inv.) for carrying out such enquiries. The DIT(lnv.) should, thereafter, carry out the necessary enquiries and inform the concerned Assessing officers of these third parties for taking appropriate action. Timelines should be clearly ....
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....and develop the assessment on the basis of preponderance of probabilities and draw conclusions on the basis of available evidence and facts of the case. The principles laid down by the Supreme Court in the cases of CIT v. Durga Prasad More 82 1TR 540 and Sumati Dayal v. CIT 214 ITR 801 to look into the surrounding circumstances and go behind the motive of the transactions in the light of human probabilities may be referred to. 2.6 Assessees are increasingly resorting to filing of affidavits to substantiate their claims. The Indian Code of Civil Procedure Order 19 r.l of the Indian Code reads as follows: "Any Court may at any time for sufficient reason order that any particular (act or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing, on such conditions as the Court thinks reasonable: Provided that where it appears to the Court that either party bona fide desires the production of a witness for cross-examination, and that such witness can be produced, an order shall not be made authorizing the evidence of such witness to be given by affidavit." 2.7 The Assessing Officer must, therefore, apply his mi....
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....of the enquiries, a final show cause notice should be given to the assessee, following the principles of natural justice, giving him adequate opportunity for furnishing the reply. The legal position with regard to the principle of natural justice have been laid down by the Supreme Court in Swadeshi Cotton Mills Co. Ltd. v. Union of India [1981] 1 SSC 664 [1981] 51 Comp Case 210 (SC), (page 712). 3.2 All the issues and evidence that is going to be relied upon in the assessment order should be made available to the assessee. The final show cause notice should be prepared in consultation with the Addl, CIT and should contain: i. The proposed structure of the order; ii. The evidence in possession of the department; iii. The case laws being relied upon; iv. The opportunity of rebuttal being provided to the assessee. 3.3 Where reliance is placed by the assessee on a case law, the Assessing Officer should ascertain the question which was before the Court, rather than relying solely on the ratio of the decision. The binding precedent for this is the Supreme Court decision in CIT v. Sun Engineering Works Pvt. Ltd. (198 ITR 297). It has b....
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.... put by Rule 46A of the Income Tax Rules, 1962 on the assessee's right to produce additional evidence before the CIT (Appeals) is also effective. In this regard the DIT(Audit) letter no. F. No. RA-9/Gen./99-2000/DIT/dated 20.5.1999 in respect of the mistakes committed by the Assessing Officers involving under/over assessments may be kept in mind. The Board has also issued instructions no. 21 dated 6.2.1969, no. 71 (F.91/47/69-ITJ (18) dated 5.7.1969 and No. 78. F.50/78/69-1T J (21) dated 11.7.1969 to the effect that a constant and corrective watch may be ensured as the PAC has been repeatedly expressing itself against the observed tendency on the part of the assessing officers to make high pitched assessments. The following typical omissions and commissions, as detailed below, were highlighted: i. Assessing, Officers make additions to sales or to gross profits or make disallowances out of expenses without giving any reasons or by giving utterly inadequate reasons; such additions are either almost entirely knocked off or substantially reduced. ii. Assessing Officers tinker with remuneration paid to the Directors of the company, applying highly subjective and unreal....
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....een initiated, it cannot be assumed that such a satisfaction was arrived at, in the absence of the same being spelt out by the order of the assessing authority (CIT v. Ram Commercial Enterprises Ltd. 246 ITR 568). This would also help identify the concealed income in the assessment order itself. Satisfaction must be similarly recorded for other penalty proceedings. 3.9 If any statutory approval has been obtained by the AO, the same should be indicated in the main body of the order. The AO should also ensure that at the final stage of computation of income, all the issues mentioned in the assessment order are covered in the computation. 3.10 It would be advisable for the AO to consult his higher authorities while making large additions. 4. Post Assessment Action 4.1 Cases with potential prosecution angle should be identified. While prosecution for technical matters should be launched as early as possible, in cases of concealment of income, proper watch may be kept on progress of appellate proceedings and prosecution should be launched at the earliest possible. It may be noted that prosecution proceedings can be launched even before the Penalisation of t....
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....n all Central charges. In view of the changes in the Act, a revised format is given as 'Annexure-1'. 5. The DGslT(Inv.)/CCsIT(Central) should hold seminars at the beginning of the calendar year for orienting the Assessing Officers with the guidelines and also to discuss various issues relating to search and seizure assessments. 6. These guidelines may be brought to the notice of all Commissioners of Income Tax, Range Heads and Assessing Officers handling assessments of search and seizure cases. ANNEXURE A-1 1. Range Addl./JCIT should also maintain a register for each search & seizure case incorporating the following details: Name of the Assessee Date of initiation and completion of search whether case covered by Section 153A/ 153C/ 148 Seizure made with break up Disclosure, if any u/s 132(4) Date of passing orders for centralisation (1) (2) (3) (4) (5) (6) Date of receipt of Appraisal Report Date of receipt of seized re cords including copies of warrant Date of application. If any, received for inspection and date on which inspection actually allowed Dat....