2017 (3) TMI 42 - HC - Income Tax

Scope of assessment u/s 153A - Held that - Considering the decision of the Delhi High Court in the case of CIT Vs. Kabul Chawla reported in 2015 (9) TMI 80 - DELHI HIGH COURT it is held that the Assessing Officer while framing the assessment under Section 153A of the Act for the block period may make addition considering the incriminating material found for the year under consideration only which was collected during the search.

Summary

Issues involved:
1. Interpretation of Section 153A of the Income Tax Act regarding assessing undisclosed income.
2. Scope of Section 153A in assessing total income for the block period.

Detailed Analysis:
Issue 1: The first issue revolves around the interpretation of Section 153A of the Income Tax Act concerning the assessment of undisclosed income. The High Court analyzed whether the Assessing Officer, while framing assessments under Section 153A, can consider only the incriminating material found during the search or requisition. The court referred to previous decisions, including the case of CIT Vs. Kabul Chawla, to establish that the Assessing Officer is mandated to assess the total income for the assessment year based on incriminating material discovered during the search or requisition. The court emphasized that the purpose of Section 153A is to tax undisclosed income identified during the search or requisition, extending beyond the earlier block assessment regime. It was clarified that any additions or disallowances should be made solely on the basis of material collected during the search or requisition, and if no incriminating material is found for a specific assessment year, the previous assessment must be reiterated.

Issue 2: The second issue pertains to the scope of Section 153A in assessing the total income for the block period. The court examined whether the Assessing Officer is limited to assessing only undisclosed income or if the assessment should cover the total income of the six assessment years preceding the relevant year. The court referenced the Division Bench's decision in the case of Principal Commissioner of Income Tax -4 Vs. Saumya Construction Pvt., highlighting that the assessment under Section 153A is linked to the search or requisition conducted under Sections 132 and 132A of the Act. The court reiterated that the assessment should be connected to incriminating material discovered during the search or requisition, and any assessment under Section 153A must be made in relation to the material disclosed during the search or requisition. Additionally, the court emphasized that each of the six assessment years should be assessed separately, and if no incriminating material is found for a particular year, no additions or disallowances can be made for that year under Section 153A.

In conclusion, the High Court dismissed the Tax Appeal based on the interpretations provided in previous judgments and upheld the Assessing Officer's authority to assess the total income for the block period based on incriminating material found during the search or requisition, as mandated by Section 153A of the Income Tax Act.