2014 (8) TMI 642 - HC - Income Tax

Assessment u/s 153A Invocation of power of revision u/s 263 - Whether the CIT can invoke the power u/s 263 of the Act to review the order of assessment passed by the Assessing Authority Held that - In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer 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. 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. If the commissioner has come across any income that the assessing authority has not taken note of while passing the earlier order, the material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of proceedings - the reasoning given by the Tribunal is not justified - The Commissioner did not have jurisdiction to initiate any proceedings u/s 263 of the Act Decision in the case of COMMISSIONER OF INCOME TAX vs. ANIL KUMAR BHATIA 2012 (8) TMI 368 - DELHI HIGH COURT relied upon - Decided in favour of Assessee.

Summary

Issues Involved:
1. Jurisdiction of the Commissioner of Income Tax to invoke Section 263 of the Income Tax Act, 1961 after initiation of proceedings under Section 153A.
2. Scope of assessment under Section 153A in relation to undisclosed income and other incomes.

Detailed Analysis:

Jurisdiction of the Commissioner of Income Tax to Invoke Section 263:
The primary issue revolves around whether the Commissioner of Income Tax can exercise powers under Section 263 of the Income Tax Act, 1961, to review an assessment order once proceedings under Section 153A have been initiated. The Tribunal upheld that the Commissioner could invoke Section 263 if the assessment order is erroneous and prejudicial to the revenue. However, the High Court disagreed, stating that once Section 153A proceedings are initiated, any previous assessment order stands reopened. Consequently, there is no valid assessment order for the Commissioner to review under Section 263. The High Court emphasized that the condition precedent for invoking Section 263 is the existence of an erroneous order, which is not applicable once Section 153A proceedings are underway.

Scope of Assessment under Section 153A:
The High Court elaborated on the scope of Section 153A, which mandates the Assessing Officer to assess or reassess the total income for six assessment years preceding the year of search. This includes income disclosed in earlier returns, undisclosed income unearthed during the search, and any other income not previously disclosed. The Tribunal had limited the scope of Section 153A to only undisclosed income found during the search, relying on the judgment of the Special Bench of ITAT, Mumbai. However, the High Court clarified that Section 153A allows the Assessing Officer to consider all types of income to determine the total income of the assessee for the relevant years. The High Court concluded that the Tribunal's reasoning was incorrect and that the Commissioner had no jurisdiction to initiate proceedings under Section 263 once Section 153A proceedings had commenced.

Conclusion:
The High Court ruled in favor of the assessee, setting aside both the Tribunal's and the Commissioner's orders. The Assessing Authority was directed to proceed with the assessment under Section 153A, considering all relevant incomes, including those disclosed in earlier returns, unearthed during the search, and any other income that comes to notice. The substantial question of law was answered in favor of the assessee, reinforcing that the Commissioner cannot invoke Section 263 once Section 153A proceedings are initiated.

Order:
1. The appeal is allowed.
2. The impugned order and the order passed by the Commissioner are set aside.
3. The Assessing Authority is directed to proceed with the assessment under Section 153A, considering all relevant incomes.
4. No costs.

This judgment delineates the boundaries of the Commissioner's jurisdiction under Section 263 in the context of Section 153A proceedings, emphasizing the comprehensive scope of assessment under Section 153A.