2017 (4) TMI 57 - HC - Income Tax

Scope of Section 153A - whether AO has power to reassess return of Assessee not only for the undisclosed income found during search operation but also in regard to assessment order already finalized or stood processed under Sectin 143(1)? - Held that - As is evident Section 153A commenced with the words notwithstanding anything contained in Section 139, 147, 148, 149, 151 and 153, meaning thereby whatever has been provided in the aforesaid provisions that will not bar Assessing Officer in proceeding with the assessment or reassessment of total income for six assessment years, immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. The word assess or reassess not only suggest but show that power under Section 153A includes reassessment and that would be done only when assessment has already been finalized. There is inherent hint in Section 153A and there is no reason to restrict its scope. We find that this issue has now been finalized by a Division Bench of this Court in Commissioner of Income Tax Vs. Raj Kumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT wherein held that the reasons given by the Tribunal that no material was found during the search cannot be sustained, since we have held that the Assessing Officer 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. The judgment and order of Tribunal to this extent is hereby set aside and the additions made by Assessing Authority which were deleted by Tribunal by taking otherwise view with respect to the scope of Section 153A are restored. - Decided in favour of revenue

Summary

Issues:
Scope of Section 153A of the Income Tax Act, 1961 regarding the power of the Assessing Officer to reassess the total income of the assessee.

Analysis:
The case involved appeals filed by the Income Tax Department under Section 260-A of the Income Tax Act, 1961, arising from a judgment and order deciding Income Tax Appeals for various assessment years. The appeals were related to M/S Kesarwani Zarda Bhandar, a firm manufacturing branded chewing tobacco. The appeals concerned the power of the Assessing Officer under Section 153A to reassess the total income of the assessee for specific assessment years.

The Assessing Officer had issued a notice under Section 153A requiring the assessee to file returns of income for certain assessment years. The issue revolved around whether the Assessing Officer had the authority to reassess the returns not only for undisclosed income found during a search operation but also in regard to assessment orders already finalized or processed under Section 143(1) of the Act.

The crux of the matter was the interpretation of Section 153A of the Income Tax Act, which was inserted by the Finance Act, 2003. The section empowered the Assessing Officer to issue notices and assess or reassess the total income for six assessment years preceding the relevant assessment year of the search operation. The section explicitly mentioned that the Assessing Officer could reassess the total income, including undisclosed income, even if the assessee had filed returns before the search date.

The High Court analyzed the legislative intent behind Section 153A and referred to relevant case law, including a decision by a Division Bench of the Court. The Division Bench had held that the Assessing Officer could reopen assessment proceedings and reassess the total income, considering both undisclosed income found during the search and material available at the time of the original assessment.

Based on the Division Bench's decision, the High Court concluded that the Assessing Officer had the authority to reassess the returns of the assessee for undisclosed income found during the search operation and material available at the time of the original assessment. Therefore, the High Court set aside the Tribunal's order and restored the additions made by the Assessing Authority, ruling in favor of the Revenue and against the Assessee.

In summary, the judgment clarified the scope of Section 153A, affirming the Assessing Officer's power to reassess total income for specific assessment years, including undisclosed income found during search operations and material available at the time of the original assessment.