2012 (12) TMI 786 - HC - Income Tax

Assessment in case of search or requisition - Notice u/s 153A - assessee contested on no material which would implicate in the earning of any undisclosed income was unearthed during the search - Held that - There exists sufficient and relevant material which could form the basis of the satisfaction note and the reason to believe that the petitioner has earned income which was not disclosed to the income tax authorities. Section 153A was introduced by the Finance Act, 2003 w. e. f. 01.06.2003 and it provides for assessment in the case of search or requisition. It is mandatory for the assessing officer, whenever there is a search under section 132, to issue notice to the person searched requiring him to furnish the returns of income for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted. There is an Explanation to the section which provides that all other provisions of the Income Tax Act shall apply to the assessment made under this section, which means that the provisions of section 142, 143, etc. are applicable and these provisions ensure that reasonable opportunity is afforded to the petitioner to put forth his case. Therefore, unable to accept the contention of the petitioner that he would be put to harassment because of the notices issued under section 153A. The section is couched in mandatory language which implies that once there is a search, the assessing officer has no option but to call upon the assessee to file the returns of the income for the earlier six assessment years. It is not merely the undisclosed income that will be brought to tax in such assessments, but the total income of the assessee, including both the income earlier disclosed and income found consequent to the search, would be brought to tax. There is also a time limit for completion of the assessment under section 153A which is prescribed in section 153B. In these circumstances the petitioner s contention that he would be put through unnecessary harassment is a non-starter. He has to face the assessment proceedings and participate in them, in case he has evidence or material to show that he has not earned any income which is not disclosed to the income tax authorities or to rebut the material gathered during the search, it is perfectly open to him to do so - while a certain degree of hardship which would occur to any assessee whose premises are searched, that does not afford it any higher right or confer greater remedies, or expand the scope of a limited jurisdiction under Article 226. The present petition is therefore speculative, and misconceived - writ dismissed - costs quantified at Rs.75,000/- payable to the Prime Minister‟s relief fund to be paid by assessee.

Summary

Issues:
Challenge to search and seizure operation under section 132 of the Income Tax Act, 1961. Direction sought against consequential action post search, including section 153A notice issuance.

Analysis:
The petitioner, an individual residing abroad, challenged the search and seizure operation conducted at his property in India, seeking to quash the proceedings under section 132 of the Income Tax Act, 1961, and to prevent any further action based on the search, including actions pursuant to the notice issued under section 153A of the Act. The petitioner argued that no inculpatory evidence was found during the search implicating him in any undisclosed income, emphasizing his non-resident status and inability to earn undisclosed income in India. However, the court found merit in the department's actions, stating that there was sufficient material to justify the satisfaction note and the belief that the petitioner had undisclosed income. The court highlighted the mandatory nature of section 153A, requiring the assessing officer to issue notices post-search for the preceding six assessment years, assessing both disclosed and undisclosed income. The court emphasized that the petitioner's participation in the assessment proceedings was essential, with provisions ensuring a fair opportunity to present his case and challenge any findings. The judgment dismissed the petitioner's contentions of harassment, noting the availability of appeal remedies and the necessity for active participation in the assessment process.

The court further discussed the limited scope of interference in such matters through Article 226 petitions, cautioning against speculative and delaying tactics through repeated legal challenges. The judgment emphasized the importance of following due process and participating in assessment proceedings, rather than attempting to avoid or delay them through legal maneuvers. The court dismissed the writ petition, imposing costs on the petitioner payable to the Prime Minister's relief fund, emphasizing the need for compliance within a specified timeline. The judgment underscored the importance of engaging in the assessment process, debunking the petitioner's apprehensions of harassment and highlighting the legal safeguards available to challenge any adverse findings during the assessment.