2014 (10) TMI 255 - HC - Income Tax

Assessment u/s 153A Scope of total income u/s 2(45) - Addition made for gifts made Held that - Under section 153A of the Act, the AO is bound to issue notice to the assessee to furnish return for each AY falling within six AYs immediately preceding the AY relevant to the previous year in which such search is conducted or requisition is made - under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved - even though an assessment order has been passed u/s 143(1)(a) or u/s 143(3) of the Act, the AO would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation - The fetter imposed upon the Assessing Officer u/s 147 and 148 of the Act have been removed by the non obstante clause u/s 153A. In cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the AO would be competent to reopen the assessment proceeding already made and determine the total income of the assessee - the reasons given by the Tribunal that no material was found during the search cannot be sustained, since it has been held that the AO has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment - relying upon CIT v. Anil Kumar Bhatia 2012 (8) TMI 368 - DELHI HIGH COURT - the Tribunal has committed an error in dismissing the appeal of the Revenue thus, the order of the Tribunal is set aside and the matter is remitted back for re-consideration Decided in favour of revenue.

Issues Involved:
1. Whether the Income-tax Appellate Tribunal erred in law by dismissing the appeal of the Department and holding that no addition can be made for gifts in the assessment completed under section 153A unless some incriminating material was found during the course of search.
2. Whether the Tribunal's order ignored the provisions of law as contained in section 153A which required the Assessing Officer to assess or reassess the total income.

Issue-Wise Detailed Analysis:

Issue 1: Tribunal's Dismissal Based on Lack of Incriminating Material
The Tribunal dismissed the Revenue's appeal by relying on a decision from the co-ordinate Bench of the Tribunal of Delhi in the case of Anil Kumar Bhatia v. Asst. CIT. The Tribunal held that since no incriminating materials related to the gift deeds were found during the search, no addition regarding the gifts could be made in the assessment proceedings under section 153A of the Income-tax Act, 1961. The Tribunal concluded that the process of return under section 143(1) was completed prior to the search, and the gift deeds were considered in that process. Therefore, the Tribunal held that no addition could be made on the gifts in the assessment under section 153A.

Issue 2: Ignoring Provisions of Section 153A
The High Court analyzed the provisions of section 153A, which was introduced by the Finance Act, 2003, effective from June 1, 2003, along with sections 153B and 153C. Section 153A provides for the assessment in cases of search or requisition, requiring the Assessing Officer to issue a notice to the assessee to furnish returns for each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted. The Assessing Officer is mandated to assess or reassess the total income of these years. The Court emphasized that section 153A starts with a non obstante clause, overriding the normal assessment procedures under sections 139, 147, 148, 149, 151, and 153.

The Court noted that under the block assessment procedure of Chapter XIV-B, only undisclosed income found during the search was assessed, while regular assessment proceedings were preserved. However, section 153A allows the Assessing Officer to reassess the total income, including both disclosed and undisclosed income, for the six assessment years. This provision removes the fetters imposed by sections 147 and 148, allowing the Assessing Officer to reopen and reassess even previously completed assessments.

The High Court concluded that the Tribunal erred in dismissing the Revenue's appeal based on the lack of incriminating material found during the search. The Court held that the Assessing Officer has the authority to reassess the total income, including any undisclosed income, even if the original assessment was completed under section 143(1)(a) or section 143(3). The Tribunal's reliance on the decision in Anil Kumar Bhatia was misplaced, as the Delhi High Court had set aside that decision.

Conclusion:
The High Court set aside the Tribunal's order and remitted the matter back to the Tribunal to reconsider the appeal of the Department afresh on the merits. The Court clarified that the Assessing Officer is empowered under section 153A to reassess the total income, including undisclosed income, notwithstanding the completion of the original assessment. The appeal was allowed, and the question of law was answered accordingly.

← Previous Next →