2010 (2) TMI 690 - AT - Income Tax

Search and seizure - there can be three situations for making an assessment under section 153A, i.e., firstly, the reassessment of all completed assessments falling under the period of six assessment years; secondly, there could be pending assessment or reassessment of any assessment year falling in such period and in that case, such pending assessment shall abate and the assessee would be required to file a fresh return under section 153A and assessment or reassessment of such year shall be done under section 153A; thirdly, assessment for the year in which search is conducted (which has been disputed in the present appeal) - in case, any notice under section 153A is issued in case of such previous year, the same should be construed as issued under section 142(1) as the scope object of these two provisions on the aspect of requiring the assessee to file the return is same - Thus CIT(A) was not correct in law in holding that assessment for the previous year in which search took place or requisition was made had to be completed under the normal provisions of the Act In the present case, notice under section 143(2) has been issued on 6-3-2006 alter issue of notice under section 153A was issued , and in response to which the assessee vide its letter dated 12-11-2005 has stated that return of income for assessment year 2004-05, filed under section 139 of the Income-tax Act, 1961 filed on 1-11-2004 could be treated as return filed in response to notice under section 153A - t condition of time limit for service of notice under section 143(2) shall also apply to assessment/reassessment proceedings contemplated under section 153A and it would start from the end of the month in which return is filed in response to notice issued under section 153A/142(1) and, in case, no such notice has been issued, then, it shall be construed from the end of month in which return was filed - In the result, the appeal filed by the Revenue stand s allowed

Issues Involved:
1. Whether the assessment for the previous year in which a search is initiated under section 132 or requisition under section 132A is made has to be done in accordance with the provisions of section 153A/153B of the Income-tax Act, 1961.
2. If so, whether the time limit for service of notice under section 143(2) of the Act shall also apply and how such time limit shall be determined.

Issue-wise Detailed Analysis:

1. Assessment for the Previous Year in Which Search is Initiated:
The primary issue was whether the assessment for the previous year in which a search is initiated under section 132 or requisition under section 132A has to be conducted under the provisions of section 153A/153B. The Tribunal analyzed the provisions of section 153A, which allows the Assessing Officer to issue notice for six preceding assessment years and assess or reassess the total income for those years. The Tribunal noted that the section does not explicitly exclude the year in which the search took place from being assessed under section 153A. The Tribunal emphasized that section 153A starts with a non-obstante clause overriding sections 139, 147, 148, 149, 150, 151, and 153, and gives jurisdiction to the Assessing Officer to initiate assessment proceedings for six preceding years. The Tribunal held that the assessment for the year in which the search took place must also be completed under section 153A read with section 153B, as the provisions of section 153B(1)(b) prescribe a specific time limit for completing such assessments. The Tribunal concluded that the CIT(A) was incorrect in holding that the assessment for the year of search should be completed under the normal provisions of the Act.

2. Time Limit for Service of Notice under Section 143(2):
The second issue was whether the time limit for service of notice under section 143(2) applies to assessments under section 153A and how this time limit should be determined. The Tribunal held that the provisions of Explanation (i) to section 153A, which state that all other provisions of the Act shall apply to assessments made under section 153A, imply that the time limit for service of notice under section 143(2) is applicable. The Tribunal rejected the Revenue's contention that the time limit of 12 months for serving notice under section 143(2) does not apply to assessments under section 153A. The Tribunal clarified that the time limit for service of notice under section 143(2) should be considered from the date the assessee files a return in response to the notice issued under section 153A. In this case, the assessee's letter dated 12-11-2005, stating that the return filed on 1-11-2004 should be treated as a return filed in response to the notice under section 153A, was taken as the starting point for determining the time limit for service of notice under section 143(2). The Tribunal emphasized that the time limit for service of notice under section 143(2) must be exercised in a manner that allows the Assessing Officer to complete the assessment within the time limit prescribed under section 153B(1)(b).

Conclusion:
The Tribunal reversed the CIT(A)'s order on both aspects, holding that the assessment for the year in which the search took place must be completed under section 153A read with section 153B, and that the time limit for service of notice under section 143(2) applies to such assessments. The Tribunal directed the CIT(A) to decide the issue of addition on merits, as the CIT(A) had not addressed it due to the legal grounds raised by the assessee. The appeal filed by the Revenue was allowed, and the case was remanded to the CIT(A) for a decision on the merits of the addition made by the Assessing Officer.

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