Income Tax Act, 1961

--Search and seizure--Assessment under section 153ABooks of account or other documents not produced during original assessment--In the previous years relevant to assessment years 2004-05 to 2008-09, the assessee had been operating the CFS at JLNP Trust. Such CFS was also operated at Chennai in the previous year relevant to assessment year 2009-10. The facts for assessment years 2004-05 to 2006-07 are somewhat similar. Original assessment for assessment year 2004-05 was competed on 30-12-2006 under section 143(3). The return for assessment year 2005-06 under section 143(1). Return for assessment year 2006-07 was also processed under section 143(1). Thus no proceeding was pending for these years on 10-7-2009 when search was conducted under section 132(1). Thus, no books of accounts or other document were made available by the assessee as return was proceed under section. It is argued by the assessee that an assessment under section 153A is different from regular assessment. It is made only where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-5-2003. In the course of search, generally incriminating documents, etc., or unaccounted assets are found. Thus, assessment under section 153A can be made only when books of account, incriminating documents or unaccounted assets are found or seized. Therefore, this provision is inextricably linked with the provision contained in section 132(1), which means that existence of books of account, incriminating documents or unaccounted assets is or are sine qua non of making the assessment under this provision. Therefore, if nothing is found in the course of search, there will be no purpose served by making assessment or reassessment under section 153A. Held : If any books of account or documents relevant to assessee are not produced in original assessment and are found in the course of search, the same would be taken into account while making assessment or reassessment of total income under section 153A(1)(b). The same position would be for undisclosed income or assets found during the search. Further, in respect of all six assessments, assessing officer has to make assessment or reassessment of total income and in doing so there is no fetter on his powers, i.e., he is not restricted to the consideration of only incriminating materials or undisclosed valuables. Accordingly, there is no disconnect between proviso 1 and proviso 2. The pending assessments are intended to be abated for the simple reason of avoiding multiplicity of proceedings and that is what has been explained in the Board circular that erstwhile provision regarding search assessment under Chapter XIV-B led to parallel proceedings, being regular assessment proceedings and computation of undisclosed income.

The provision of section 153A comes into operation if a search or requisition is initiated after 31-5-2003. On satisfaction of this condition, the assessing officer is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is 'shall' and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is 'shall' and, therefore, the assessing officer has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words, pending proceedings will not be proceeded with thereafter. The assessment has now to be made under section 153A(1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. [Para 52] The question now is : what is the scope of assessment or reassessment of total income under section 153A(1)(b) and the first proviso? For answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in the opinion of Tribunal such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. [Para 53] An assessment or reassessment under section 153A is made in a case where search is initiated and conducted. Tribunal's finding inter alia is that when books of account, other documents relevant to assessment, which were not produced before the assessing officer in regular assessment proceedings, or undisclosed income or asset is found in search, the same can be used for making assessment or reassessment in pending and completed assessments. Obviously a search is undertaken for discovering undisclosed income or asset. It is also undertaken to find books of account or other documents which had not been produced or which would not have been produced in the course of assessment. Therefore, taking into consideration all such books, documents, income or asset for making assessment under section 153A does not produce in any manner absurd or irrational result. It also does not cause any mischief. [Para 55] Interpretation placed by this Bench does not violate any principle of natural justice. Further, it does not produce irrational, absurd or wholly unjust results, rather it produces a very valid result that undisclosed income or asset, books of account or documents not produced in the course of regular assessment should be taken into account. Therefore, charge of ultra vires will not arise out of such interpretation. [Para 55(c)] Reading section 153A in isolation and as interpreted by the standing counsel would have the effect that in case of an assessment, which is not pending and where nothing is found, the same may be reopened. Such interpretation will produce a result that an assessment which has come to an end and for which there is no cause of reopening shall revive simply because a search has been conducted. This will not be harmonious interpretation of various provisions of sections 132(1) and 153A. [Para 55(d)] This Bench is not reading down the provision but reading it alongside the provision contained in section 132(1) as a consequence of which these proceedings come into existence. A harmonious interpretation of the two provisions does not amount to reading down the instant provision. [Para 55(e)] This Bench has read the words employed in sections 153A and 132(1) as they exist, and harmonized the two provisions. This does not amount to supply of casus omissus. Tribunal has not supplied any words which are not there or omitted any words which are there. What Tribunal has done is only the reading of two sections together, which are inextricably linked with each other. [Para 55(f)] Provisions in section 153A also do not confer any arbitrary or unbridled power on the assessing officer. However, that is not the real issue. The real issue is whether there is any sanctity of completed assessment in respect of which nothing has been found in search. When one looks to any other provisions regarding reopening of assessment, one finds that there are certain preconditions to be satisfied for doing so. The precondition in this case is the initiation and conducting of the search. The avowed purposes of search have already been stated. In cases decided under section 147 or 263, the scope of assessment is narrower than the scope of original assessment. This is because matter which has been discussed and debated in assessment, which has become final, and for which there is no reason to agitate again in the reassessment, there is no reason to reopen them. This consideration would be applicable in the reassessment under section 153A and guidelines can be clearly discerned in the provision contained in section 132(1). [Para 55(g)] Abatement takes place only in respect of a pending assessment. There is no word in the provision to the effect that even completed assessments abate. Therefore, sanctity of such assessment should be maintained except when something is found in search which goes against such sanctity. The sanctity is violated not only on detection of undisclosed income or asset but also when books of account or other documents which should have been produced in original assessment as they were relevant to the assessment, have not been produced, but found in the course of search. [Para 55(h)] It has not held that the assessment can be made only for those years in respect of which books or assets, etc., are found. One has come to the clear finding that assessment/reassessment for all six years will have to be made. The real question is the scope of reassessment which is not pending, for which one has read provisions of section 132(1) and section 153A together. Thus, the total income under reassessment may be the same as in the original assessment or may be higher than that, depending upon the materials which are uncovered in the course of search. Issue of notice for six years and computing reassessment for these years even if no material is found in the course of search for some years does not amount to harassment, etc., and even if it does so, the same has to be ignored in view of the clear statutory provision. [Para 55(i)] Second proviso to section 153A uses the words 'pending on the date of initiation of search' and provides that assessment so pending shall abate. The provision does not use the words 'completed assessment'. Further, the question which has been referred in respect of scope of assessment under section 153A and whether it encompasses additions, not based on incriminating material found in the course of search. The question uses the words 'incriminating material' which again finds no mention either in section 132(1) or 153A. Thus, analysis of various scenarios regarding completed assessments does not fall within the ambit of the question posed. Therefore, this question may have to be decided by the Division Benches in the respective cases depending on the facts of the case. Thus, question is answered as under: (a) In assessments that are abated, the assessing officer retains the original jurisdiction as well as jurisdiction conferred on under section 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means—(i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.[Para 58]