TMI Blog2021 (11) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... reassess income of such other person in accordance with the provisions of Section 153A. Assessing Officer while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Co-ordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd., supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, the Assessing Officer is empowered to assess or reassess the total income of six assessment years i.e., the income which was returned in the earlier return, the income which was unearthed during search and also any income which was not disclosed in the earlier return or which was not unearthed during the search by separate assessment orders but in our considered view the completed assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r proceedings under Section 153A of the Act by following the judgment of this Court in the case of CIT V/s. Lancy Constructions? In ITA Nos.380/2018, 382/2018 to 385/2018: 1. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in allowing the depreciation on capitalization of expenditure incurred during the assessment year 2007-08 and 2008-09? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in restoring the file to assessing authority as for disallowance made by assessing authority in respect of Section 14A read with Rule 8D of the Act? 3. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in setting aside disallowance made under Section 40[a][ia] for non deduction of TDS on payments made to Director s towards sitting fees by holding that the amendment will apply for A.Y.2014-15 onwards? In ITA No.381/2018: 1. Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in law in holding that incriminating material is necessary condition for proceedings under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Development Company. .v. Deputy Commissioner of Income Tax Central Circle-I [2014 (49) Taxxman.com 98] inter alia citing other judgments which would be discussed infra. 6. Learned counsel for the assessee argued that the Tribunal has rightly allowed the appeals filed by the assessee. The judgment of this Court in the case of Commissioner of Income Tax .v. M/s Lancy Constructions [2016 (237) Taxman 728], is squarely applicable to the present case. The Tribunal having considered the said judgment has concluded that in the absence of any incriminating material, proceedings under Section 153A of the Act cannot be initiated and concluded and assessment cannot be reopened. 7. Distinguishing the judgment of Canara Housing Development Company supra, learned counsel submitted that the judgments of various Hon ble High Courts on this aspect would indicate that the assessing officer while making assessment under Section 153A of the Act could make addition only on the basis of some incriminating material unearthed during the course of search or requisition of documents. In the absence of such incriminating documents found during the search, any addition made by the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153A of the Act starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. Therefore, the Commissioner by virtue of the power conferred under Section 263 of the Act gets no jurisdiction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise the power of the jurisdiction. 11. On the contrary, it is expressly provided under Section 153A of the Act the Assessing Officer shall assess or reassess the total income of six assessment years which means the said total income includes income which was returned in the earlier re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessing officer to upset or disturb a concluded assessment. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in the case of the searched person, the same reason would hold good as in the case of any other person. It has been held that detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded but at the same time, search can be at three stages: (i) when reassessment is reinitiated; (ii) at the stage during the course of reassessment; (iii) where reassessment is altered by a different assessment in respect of the searched person or in respect of a third party. 13. In Principal Commissioner of Income Tax and Another V/s. BMR Energy Ltd. (ITA No.358/2018 and connected cases DD.08.01.2019), a coordinate bench of this Court has held that the judgment reported in the case of Canara Housing Development Company supra was not even considered in M/s Lancy Constructions supra and the latter decision was discussed at the stage of admission without even notice to the assessee. It has been observed that in M/s Lancy Construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, Section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under Section 132 or requisition under section 132A, as the case may be, shall abate. Sub-Section (2) of Section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-Section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under Sections 147 and 148 of the Act have been removed by the non obstante clause under Section 153A of the Act. Consequently, we are of the opinion that in cases where the assessment or reassessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question in the negative. It referred to the decision of this Court in CIT v. Anil Kumar Bhatia (supra) and came to the conclusion that once proceedings are initiated under Section 153A of the Act the legal effect was that even where an assessment order is passed, it would stand reopened. In the eye of law there was no order of assessment. It meant that the AO shall assess or reassess the total income of six assessment years. Once the assessment is reopened, the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the total income of each year and then pass the assessment order. 27. It is important to note that Canara Housing was also a case where some material was unearthed during the search. Further, the High Court was clear that the addition to the income already disclosed would have to be based on some material unearthed during the search. This is clear from the observation in para 9 of the decision to the effect: The AO is empowered to reopen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/re-assessment proceedings which are pending on the date of search/requisition. Section 153A(2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12- 2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the materials gathered in the course of the proceedings under Section 153A of the Act establish that the reliefs granted in the final assessment/reassessment were contrary to the facts coming during the course of Section 153A proceedings. 26. In the light of these judgments, we have analyzed Section 153A of the Act vis- -vis the material on record. Strong reliance was placed by the Revenue on the Canara Housing Development Company supra, in support of the contention that search under Section 132 of the Act is sine qua non for initiation of proceedings under Section 153A of the Act but it is not dependent on any undisclosed income being unearthed during search. There is no cavil on this proposition that search under Section 132 or requisition under 132A is a condition precedent for invoking Section 153A of the Act, the assessing officer can assess or re-assess the total income with respect to six assessment years separately immediately preceding the assessment year relevant to the previous years in which the search was conducted or requisition was made but the controversy rests on whether the incriminating material is a condition precedent for invoking Section 153A?. 27. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belong or belongs to a person other than the person referred to in Section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Section 153A. 30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Co-ordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd., supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good. As observed in Canara Housing Development Company supra, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns filed under Section 139 of the Act gets replaced by the returns filed under Section 153A[1] of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of Section 153A proceedings. Further, recording of satisfaction under Section 153A may not be necessary unlike Section 153C of the Act which mandates recording of satisfaction. For the reasons aforesaid, substantial question of law in ITA Nos.322/2018 to 324/2018, 354/2018 and 355/2018, substantial question of law No.1 in ITA Nos.380/2018, 382/2018 to 385/2018 and 197/2021 to 199/2021 and substantial question of law Nos.1 and 2 in ITA No.381/2018 are answered in favour of the assessee and against the Revenue. Substantial question of Law No.2 in ITA Nos.380/2018, 383/2018 to 385/2018 is squarely covered by the ruling of the coordinate Bench of this Court in ITA No.352/2018 and connected matters (DD 25.05.2021) wherein the said substantial question of law has been answered in favour of the assessee and against the Revenue. Substantial question of law No.2 in ITA No.382/2018 and substantial question of law No.3 in ITA Nos.380/2018, 383/2018 to 385/2018 does not arise for our con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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