2020 (12) TMI 826 - HC - Income Tax

Assessment u/s 153A - Whether the Appellate Tribunal has erred in law and on facts in holding that the addition and/or disallowance made during assessment under section 153A should be based on incriminating documents or evidences gathered during a search or from a requisition when the only requirement in section 153A is initiation of a search or making a requisition and not presence of relevant evidences/documents? - Tribunal has placed reliance on the decision of this High Court in the case of PCIT Vs. Saumya Construction 2016 (7) TMI 911 - GUJARAT HIGH COURT for the purpose of addressing the preliminary issue whether the assessment could have been framed under Section 153A in respect of the concluded proceedings in the absence of incriminating materials found during the course of search HELD THAT - We are of the view that having regard to the facts of this particular case, the reliance placed on the decision of this Court in the case of Saumya Construction could be said to be justified. In such circumstances, this Tax Appeal fails and is hereby dismissed. Revenue invited our attention to certain observation made by the Appellate Tribunal wherein as observed that there is no differentiation found in the intent of the Legislature to discriminate whether the assessments were originally framed under Section 143(1) or Section 143(3) or Section 147 of the Act. According to Mr. Bhatt, this observation made by the Appellate Tribunal is not the correct proposition of law. Mr. Bhatt tried to explain fine distinction between the nature of the assessment under Section 143(1) and Section 143(3) respectively of the Act. Prima facie, we find substance in what has been pointed out by Mr. Bhatt to us. Section 143(1) and Section 143(3) are quite independent, the nature of assessment also differs. In such circumstances, we may only say that we do not agree with such observation made by the Tribunal.

Summary

Issues:
1. Interpretation of Section 153A of the Income Tax Act, 1961 regarding the requirement of incriminating documents for additions/disallowances.
2. Justification of the Appellate Tribunal's decision in light of the provisions of Section 153A for reassessment of total income.
3. Consideration of the term "total income" under Section 2(45) and Section 5 of the Act for making additions/disallowances based on documents from a search or requisition.

Analysis:
1. The appeal concerned the interpretation of Section 153A of the Income Tax Act, 1961, specifically regarding the necessity of incriminating documents or evidence for making additions or disallowances during assessment. The Revenue contended that the Appellate Tribunal erred in holding that additions/disallowances under Section 153A should be based on such incriminating materials. The High Court referred to a prior decision and found the reliance on it justified, leading to the dismissal of the appeal.

2. The second issue revolved around the Appellate Tribunal's decision concerning the provisions of Section 153A for reassessment of total income. The Tribunal's decision was challenged by the Revenue, arguing that the Tribunal ignored the requirements of Section 153A for assessing or reassessing the total income for relevant assessment years following a search. The High Court upheld the Tribunal's decision based on the specific facts of the case, resulting in the dismissal of the appeal.

3. The third issue involved the consideration of the term "total income" as defined in Section 2(45) read with Section 5 of the Act for making additions or disallowances based on documents obtained from a search or requisition. The Revenue pointed out discrepancies in the Tribunal's observations regarding assessments under Section 143(1) and Section 143(3) of the Act. The High Court acknowledged the distinction between these assessments as highlighted by the Revenue but clarified that such observations did not impact the dismissal of the appeal based on the proposed questions of law.