2016 (6) TMI 378 - HC - Income Tax

Validity of assessment u/s 153A - addition in pursuance to notice issued under Section 153A - Is not the Tribunal erroneous in holding that addition in pursuance to notice issued under Section 153A can be made only if incriminating material is found and seized in case where there is also abatement of regular assessment proceedings, and are not, such an approach and the resultant conclusion perverse and uncalled for ? - Held that - On a reading of Section 153A(1) it is categoric and clear that once a notice is issued and the Assessing Officer has required the assessee to furnish return for a period of six assessment years as contemplated under clause (b) then the assessee has to furnish all details with respect to each assessment year since the same is treated as a return filed under section 139. It is true that as per the first proviso, the Assessing Officer is bound to assess or reassess the total income with respect to each assessment year following the six assessment years specified in sub-clauses (a) and (b) of Section 153A. However, even if no documents are unearthed or any statement made by the assessee during the course of search under section 132 and no materials are received for the aforespecified period of six years, the assessee is bound to file a return, is the scheme of the provision. Even though the second proviso to Section 153A speaks of abatement of assessment or reassessment pending on the date of the initiation of search within the period of six assessment years specified under the provision that will also not absolve the assessee from his liability to submit returns as provided under Section 153A(1)(a). This being the scheme of the provisions of the Act, the Appellate Tribunal ought to have considered the issue with specific reference to the facts involved in the case and as provided under Section 153A. However, we find that the Tribunal without appreciating the facts and circumstances has proceeded purely on the basis that the cases at hand were covered under the Special Bench decision in All Cargo Logistics Ltd. (2012 (7) TMI 222 - ITAT MUMBAI(SB) ). In our view the course adopted by the Tribunal was not the proper one to decide the question with regard to the sustainability of the order passed by the First Appellate Authority. Therefore, we are of the considered opinion that the Tribunal has not adopted the right method to decide the issue with regard to the question framed in these appeals and therefore, it is only necessary to remand the matter to the Tribunal for fresh consideration.

Issues Involved:
1. Whether the Tribunal erred in holding that additions pursuant to notice under Section 153A can be made only if incriminating material is found and seized.
2. Whether the Tribunal's approach puts an artificial cap on Section 153A despite the Assessing Officer's power to assess/reassess income for six prior years.

Issue-wise Detailed Analysis:

1. Tribunal's Holding on Incriminating Material and Section 153A:
The appeals challenged the Tribunal's decision that additions under Section 153A can only be made if incriminating material is found during a search. The Tribunal dismissed 84 appeals on this basis, which was contested by the Revenue. The Revenue argued that the Tribunal's interpretation was erroneous and perverse, as Section 153A does not explicitly require incriminating material for assessments. The Revenue emphasized that the Assessing Officer has the power to assess or reassess income for six prior years regardless of whether incriminating material is found, as per the statutory provisions.

2. Artificial Cap on Section 153A:
The Revenue contended that the Tribunal's approach artificially limits the scope of Section 153A. They argued that the Assessing Officer is empowered to issue notices and reassess income for six prior years following a search, as stipulated in Section 153A. The Revenue highlighted that the Tribunal's requirement for incriminating material is not supported by the language of Section 153A, which does not mention "incriminating material." The Tribunal's interpretation was seen as expanding the scope of the provision unnecessarily.

Facts and Proceedings:
The assesses, partnership firms engaged in chit and money lending businesses, were subject to a search under Section 132. Notices under Section 153A were issued for assessment years 2002-2003 to 2007-2008, and assessments were completed. The assesses argued before the Commissioner of Income Tax (Appeals) that assessments under Section 153A should be based on incriminating materials found during the search. The CIT(A) ruled in favor of the assesses, and the Tribunal upheld this decision. The Revenue then appealed to the High Court.

Revenue's Arguments:
The Revenue argued that the Tribunal's decision was flawed as it imposed an unwarranted restriction on Section 153A. They pointed out that the provision allows the Assessing Officer to assess or reassess income for six prior years following a search, without the necessity of incriminating material. The Revenue cited several judgments to support their position, including the Supreme Court's ruling in Salem Co-operative Central Bank Ltd. v. Commissioner of Income-Tax and the Division Bench decision in Commissioner of Income-Tax v. Hotel Meriya, which upheld the validity of search operations and the use of statements made during searches as evidence.

Assessee's Arguments:
The assesses argued that Section 153A assessments should be based on materials unearthed during the search. They cited the Special Bench decision in All Cargo Logistics Ltd and the Delhi High Court's ruling in Commissioner of Income Tax v. Kabul Chawla, which supported the view that concluded assessments could only be reopened based on specific incriminating materials found during the search.

Court's Analysis:
The Court examined Section 132 and Section 153A of the Income Tax Act. It noted that Section 132 allows for the use of statements made during a search as evidence and does not require incriminating material to be specified. Section 153A empowers the Assessing Officer to issue notices and assess income for six prior years following a search, treating the returns filed as if they were under Section 139. The Court found that the Tribunal erred in relying solely on the Special Bench decision without considering the specific facts and provisions of the case.

Conclusion:
The Court set aside the Tribunal's order and remanded the cases for fresh consideration. It directed the Tribunal to re-evaluate the issues based on the principles laid down in relevant judgments and the statutory provisions of the Income Tax Act. The Court clarified that the common question regarding the Appellate Authority's power to receive evidence in appeal, concluded by the Tribunal in 84 cases, remains undisturbed. The appeals were disposed of accordingly.

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