2017 (1) TMI 320 - HC - Income Tax

Non-deposition of tax - assessment under Section 153A - prosecution under Section 276C(2) - whether when notice has been issued under Section 153A on 18.09.2015, the earlier self assessment tax return submitted by the petitioner stands abated, therefore, petitioner is not liable to pay any tax to the respondent? - Held that - In the present case, it is true that a notice was issued under Section 153 of the Act. The petitioner was asked to furnish true and correct particulars of income including the income, which was included by the petitioner in the original return while finalizing the total income, meaning thereby, the return filed in response to the notice under Section 153A includes the income tax income (if any) in addition to income originally declared by the petitioner while filing the return under Section 139(1) of the Act. Meaning thereby, in short, it is as clear as noon of the day that even after filing of the return under Section 153 of the Income Tax Act, in fact, originally declared and demand raised thereon remains alive. There is no statutory provision under the Income Tax Act, 1961, which provides that in case search was conducted/assessment proceeding under Section 153A has been initiated then the tax, which remains unpaid by the assessee for the same period cannot be recovered from the assessee. In the considered opinion of this Court, the ground raised by the petitioner for quashment of complaint by taking into account Section 153A does not arise. The application for stay is rejected and the admission is declined.

Issues Involved:
1. Whether the issuance of notice under Section 153A of the Income Tax Act abates the earlier self-assessment tax return and the demand raised thereon.
2. Whether the petitioner is liable for prosecution under Section 276C(2) of the Income Tax Act for non-payment of outstanding tax.
3. Interpretation of Section 153A in the context of pending and completed assessments.

Issue-wise Detailed Analysis:

1. Abatement of Self-Assessment Tax Return:
The petitioner argued that the issuance of a notice under Section 153A of the Income Tax Act abates the earlier self-assessment tax return, thereby nullifying the tax liability declared in the original return. The petitioner contended that since the notice under Section 153A was issued, the earlier self-assessment tax return stands abated, and thus, no tax is payable.

However, the court clarified that Section 153A deals with assessments in case of search or requisition and does not provide for abatement of self-assessment tax returns. The statutory provisions under Section 153A necessitate the issuance of a notice requiring the submission of a return of income for six assessment years preceding the year of search. The court emphasized that the provision starts with a non-obstante clause, overriding Sections 139, 147, 148, 151, and 153, but does not nullify the tax liability declared in the original self-assessment return.

2. Liability for Prosecution under Section 276C(2):
The petitioner faced prosecution under Section 276C(2) for willful evasion of tax payment. The court noted that the petitioner had not paid the outstanding tax as per the original self-assessment return. Despite the issuance of a notice under Section 153A, the demand raised on the original return remains valid and enforceable. The court referenced the Allahabad High Court's decision in CIT vs. Shaila Agrawal, which elucidated that only pending assessments abate under Section 153A, not completed ones.

The court concluded that the complaint filed under Section 276C(2) for non-payment of the declared tax was justified, as there is no statutory provision that exempts the petitioner from paying the outstanding tax due to the initiation of proceedings under Section 153A.

3. Interpretation of Section 153A:
The court provided a detailed interpretation of Section 153A, emphasizing its applicability to pending assessments at the time of search. The provision mandates the assessment or reassessment of total income for six assessment years preceding the search. The second proviso to Section 153A specifies that only pending assessments on the date of search shall abate. The court reiterated that completed assessments, including self-assessment returns, do not abate and remain enforceable.

The court also referred to Circular No. 7 of 2003, which clarified that assessments or reassessments made under Section 153A are subject to interest, penalty, and prosecution. The court dismissed the petitioner's reliance on the abatement provision, stating that it applies only to pending assessments and not to self-assessment returns or completed assessments.

Conclusion:
The court dismissed the writ petitions, holding that the issuance of a notice under Section 153A does not abate the tax liability declared in the original self-assessment return. The petitioner remains liable for the outstanding tax and is subject to prosecution under Section 276C(2) for willful evasion of tax payment. The court's interpretation of Section 153A underscores that only pending assessments abate, while completed assessments, including self-assessment returns, remain enforceable.

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