TMI Blog2007 (12) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, on the other hand, vehemently contends that once a search is conducted, the preceding six years assessment of the searched person and any other person whose valuables and/or books, or documents are found during search are ripped open and the assessments/reassessments shall be framed afresh. As the issue under consideration is new and no direct legal precedents are available on the point, we take aid from the principles of statutory interpretation and also from a judgment of the Hon'ble Jharkhand High Court in the case of Abhay Kumar Shroff vs. CIT [ 2007 (2) TMI 169 - JHARKHAND HIGH COURT] , where the new provisions of assessments of search cases have fallen for consideration although in a different context. The basic principle of interpretation of a statute is that where the words of a statute are clear, plain or unambiguous, the Courts should give effect to that meaning irrespective of consequences. As we have seen above, the language of s. 153A is not unambiguous and is not susceptible to only one meaning. In the circumstances, the principle of literal construction is of no help. We, therefore, would like to take recourse to other guiding rules like rule of harmo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. For that the learned CIT(A) erred in dismissing the ground challenging the action of the AO in adding back the items of regular assessment in the proceedings under s. 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. 2. For that the learned CIT(A) erred in dismissing the ground challenging the validity of assessment framed under s. 153C r/w s. 144. 3. For that the learned CIT(A) erred in confirming the disallowance of sales-tax payment amounting to Rs. 38,411. 4. For that the learned CIT(A) erred in confirming the disallowance of donation amounting to Rs. 38,171. 5. For that the learned CIT(A) erred in confirming the action of the AO in partly disallowing the deduction claimed under s. 80HHC being Rs. 64,22,953." The Revenue, on the other hand, has raised the following sole ground of appeal: "That on the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting provisions of brokerage and commission amounting to Rs. 1,13,75,000, the liability to pay the amount did not accrue to the assessee during the year." 3. Brief facts relating to the disposal of this case are that a sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the words "assess or reassess" appearing in the first proviso does not mean that all the preceding assessments which have attained finality would be ripped open. He then submitted that the Departmental interpretation that all preceding six years are automatically reopened and the fresh assessments are to be made once a search action under s. 132 is taken would lead to absurd results and cause grave injustice when as a result of search nothing incriminating was found. The learned counsel also filed before us extracts from the book "Principles of Statutory Interpretation" by the Hon'ble Justice G.P. Singh and made following submissions- (a) If out of two provisos, the later is repugnant to the earlier one, the later prevails. (b) The provisions of one section of a statute cannot be used to defeat those of another unless it is impossible to effect reconciliation between them. (c) The marginal note to s. 153A states "assessment in case of search", indicates that only that income is required to be assessed which is hidden from the Department. The learned counsel also relied upon a Supreme Court judgment in the case of C.A. Abraham vs. ITO (1961) 41 ITR 425 (SC) for the propositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment if no regular assessment was made; or reassessment in case a regular assessment under s. 143(3) or 144 or assessment or reassessment under s. 147 was made for any of the stipulated six assessment years. The assessment or reassessment under s. 153A is thus apart from an earlier determination of total income under s. 143(1) or a regular assessment under s. 143(3) or 144; or assessment or reassessment under s. 147. Sec. 153A also envisages a reassessment after assessment or reassessment under s. 153A on account of an earlier search. Consequential amendments made to ss. 234A and 234B make this further clear. First the relevant portion of s. 234A may be seen. A plain reading of sub-s. (3) of s. 234A shows that it refers to a situation when notice under s. 153A requiring return of income for any assessment year is issued after the determination of income under s. 143(1) or the completion of a regular assessment under s. 143(3) or s. 144 for that assessment year based on a return filed earlier under s. 139 or 142. In this regard it is important to note that as per Expln. 3 to s. 234A(1), such earlier regular assessment includes even an assessment made for the first time und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome as a result of search' in s. 158BB. The total income which has been referred to in s. 153A is defined in s. 2(45) r/w s. 5. Total income means the total amount of income computed in the manner laid down in the Act, and there are no good reasons why the word "assessment" or "reassessment" occurring in s. 153A should be restricted in the manner suggested so as to include only escaped income or undisclosed income. Instead, it encompasses all income from whatever source. It is immaterial whether income is disclosed or not; or the source of such income is disclosed or not. It is also immaterial whether such income is based on entries recorded in regular books or entries not recorded in regular books. It is, therefore, clear that the total income assessed under s. 153A means all incomes of whatever nature from whatever source. The learned CIT-Departmental Representative further submitted that in its normal sense "to assess" means "to fix the amount of tax or to determine such amount". The process of reassessment is to the same purpose and is included in the connotation of the term "assessment" as seen from s. 2(8) of the Act which defines assessment as "assessment includes reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were a return required to be furnished under s. 139" in s. 153A(a), therefore, do not envisage that the provisions of ss. 147, 148 and 149 would govern s. 153A. Even in case of assessment or reassessment under s. 147 what is assessed is the total income of the year including the escaped income. As pointed out earlier, the meaning of 'assess' or 'reassess' in s. 147 is not restricted so as to exclude the earlier assessed income. 7. We have heard the rival submissions and carefully perused the case laws cited. The undisputed facts in the instant case is that the search action under s. 132 of Act was conducted on Sri Jayant Kumar Jain, one of the directors of the assessee company, on 26th March, 2004. Therefore, new provisions relating to the assessment in case of search comprising of ss. 153A to 153C, which were brought on the statute book by the Finance Act, 2003 w.e.f. 1st June, 2003, apply to the assessee's case. These provisions replace the special procedure contained in Chapter XIV-B for assessment of search cases, whereby the undisclosed income detected as a result of search was assessed separately as the income of the block period and such income was taxed separately at a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 8. A reading of s. 153A reveals apparent contradiction in the first proviso and the second proviso. The first proviso provides that the assessment or reassessment shall be done by the AO in respect of each assessment year falling within six assessment years preceding the year of search. The second proviso, on the other hand, provides that the assessment/reassessment pending on the date of search shall abate. In other words, the assessments which are not pending, shall hold the field. The assessee contends that the concluded assessments cannot be disturbed by the AO and even under the new scheme, only undisclosed income detected in the course of search can be added and charged to tax. The Department, on the other hand, vehemently contends that once a search is conducted, the preceding six years assessment of the searched person and any other person whose valuables and/or books, or documents are found during search are ripped open and the assessments/reassessments shall be framed afresh. 9. As the issue under consideration is new and no direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of most IT Acts is that the word 'assessment' is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act imposing liability upon the taxpayer. The Indian IT Act is no exception in this respect.....'." Further, the Hon'ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd., has held in the context of reopening of assessments that stale issues should not be reiterated beyond a particular stage and lapse of time must induce repose in and set at rest judicial and quasi controversies as it must in other spheres of human activity. 13. In view of the above discussions, it is possible to effect reconciliation of the two provisos appended to s. 153A by restricting the meaning of the term "assess or reassess" appearing in the first proviso. After the search, in our considered opinion, the total income of the assessee is to be recomputed on the basis of the undisclosed income unearthed during search and the same is to be added with the regular income assessed under s. 143(3) or computed under s. 143(1) for each of the six preceding assessment years. Where any prepai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, 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 s. 132 or requisition under s. 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under s. 132 or requisition shall not abate. Save as otherwise provided in the proposed s. 153A, s. 153B and s. 153C, all other provisions of this Act shall apply to the assessment or reassessment made under s. 153A. It is also clarified that assessment or reassessment made under s. 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." A reading of the abovementioned circular clearly indicates that the appeal, revision etc. arising out of earlier assessments shall not abate. In other words, there is no merger of the earlier assessments with the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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