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2022 (4) TMI 807 - HC - Income TaxLegality and validity of the impugned notice issued u/s 148 seeking to reopen an assessment as undertaken u/s 153A - whether the law permits the Assessing Officer to reopen an assessment carried out u/s 153A of the Act by issuing a notice u/s 148? - HELD THAT - In the case on hand, the AO seeks to reopen the assessment for the assessment year 2013-14. The search was carried out on 07.08.2013. As a result of the search, notice u/s 153A of the Act was issued by the AO on 19.08.2014 for the year under consideration. AO framed the assessment vide order dated 28.03.2016 under Section 143(3) read with Section 153A - The consequence of notice under Section 153A (1) of the Act is that the assessee is required to furnish fresh return of income in each of the six assessment years in regard to which a notice has been issued. It is this return which is filed consequent to the notice which would be subject of assessment by the revenue for the first time in the case of abated assessment proceedings. Consequent to the notice under Section 153A of the Act, the earlier return that may be filed for the purpose of assessment which is pending would be treated as non est in law. Further, section 153A (1) of the Act itself provides that on filing of the return consequent to the notice, the provision of the Act will apply to the return of income so filed. Consequently, the return filed under Section 153A(1) of the Act is a return furnished under Section 139 of the Act. Consequently, the assessee is being assessed in respect of abated assessment for the first time under the Act. Therefore, the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section 153A of the Act. Whether the material found in the course of the survey in the premises of the builder could be used in Block Assessment of the assessee? - A block assessment under Chapter XIVB of the Act is for bringing to tax undisclosed income which is computed on the basis of evidence found as a result of search and/or other information as is available with the AO which is relatable to such evidence. Final conclusion on the issue in question is as under - (a) Unlike Chapter XIV-B which provided for a special procedure for assessment of search cases, Section 153A which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 w.e.f. 01.06.2003, does not provide that a search assessment has to be made on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the AO and relatable to the evidence found. The earlier Section 158BB which is not applicable in case of a search conducted after 31.05.2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are relatable to the evidence found. It is in such circumstances that this Court in the case of Cargo Clearing Agency 2008 (8) TMI 86 - GUJARAT HIGH COURT held that one cannot envisage escapement of undisclosed income once a search has taken place and material recovered on proceeding of which undisclosed income is brought to tax. To put it in other words, to contend that the undisclosed income has escaped assessment despite an assessment having been framed under Chapter- XIVB of the Act by adopting special procedure prescribed by the said chapter is to contend as observed by this Court in Cargo Clearing Agency (supra) is something which is inherently not possible. (b) Section 153A(1)(b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. The question, however, is whether the seized material can be relied upon to also draw the inference that there can be similar transactions throughout the period of six years covered by Section 153A. We have to remember that with the advent of Section 153A we are taken back to the pre-chapter XIV-B situation, where assessments were made on the basis of material and evidence collected during search. (c) To say that the assessment undertaken u/s 153A of the Act can never be reopened under Section 147 of the Act, would be an incorrect statement of law. The matters shall now be placed for further hearing so as to determine on facts whether any case has been made out by the Revenue for the purpose of reopening of the assessments undertaken u/s 153A of the Act.
Issues Involved:
1. Whether the Assessing Officer can reopen an assessment carried out under Section 153A of the Income Tax Act by issuing a notice under Section 148 of the Act. Detailed Analysis: 1. Reopening of Assessment under Section 153A by Issuing Notice under Section 148: Submissions on Behalf of the Writ Applicant: - The writ applicant argued that the search assessment (framed under Sections 153A/153C) cannot be reopened by issuing a reopening notice under Section 148. - The legislature has provided separate schemes for "assessment in case of search or requisition" and "reassessment" under Section 147. Both schemes operate in different scenarios. - Section 153A/153C are "non-obstante" clauses, meaning they override other provisions, including Section 147. - Once an assessment is framed under Section 153A, it is inherently not possible for any undisclosed income to escape assessment, thus making reassessment under Section 147 redundant. - The principle argument is supported by the High Court's decision in Cargo Clearing Agency (Gujarat) vs. Joint Commissioner of Income-tax, where it was held that once an assessment is framed under Section 158BA, there is no question of issuing notice under Section 148 for reopening such assessment. - The writ applicant emphasized that if a concluded assessment under Section 153A is reopened under Section 148, it would lead to endless proceedings, which is against the policy of law. Submissions on Behalf of the Revenue: - The Revenue argued that the scheme of Chapter-XIV-B cannot be compared with the Scheme of Chapter-XIV; both are different. - The principles of law in Cargo Clearing Agency (supra) are not applicable as it discussed the scheme of Chapter-XIV-B. - The Revenue highlighted distinctions between the two schemes, such as the period of assessment, special computation provisions, and the non-obstante clause. - The non-obstante clause in Section 153A merely dispenses with procedural aspects of Section 147, such as "reason to believe" and "approval." - The Revenue cited cases like CIT vs. Anil Kumar Bhatia, which explained the non-obstante clause in Section 153A. Court’s Analysis: - Section 153A starts with a non-obstante clause, overriding Sections 139, 147, 148, 149, 151, and 153, and applies to searches made after 31.05.2003. - The non-obstante clause in Section 153A should be understood as dispensing with procedural aspects of Section 147, not excluding its applicability entirely. - The Supreme Court in CIT vs. Vatika Township (P.) Ltd. and other cases emphasized that Chapter XIV-B is a complete code for assessing undisclosed income for the block period. - The High Court in Cargo Clearing Agency (supra) concluded that once a block assessment is framed, it is final unless disturbed in an appropriate proceeding before a higher forum. - The court noted that Section 153A does not provide for computation of income based on post-search inquiries, unlike Section 158BB. - The court concluded that the argument that Section 153A makes assessments infallible is without merit. It is possible to reopen an assessment under Section 153A using Section 147 if new material is found. Final Conclusion: - The court held that while Section 153A allows for the assessment of total income for six assessment years, it does not preclude reopening under Section 147 if new material is found. - The matters were to be placed for further hearing to determine if the Revenue made a case for reopening the assessments under Section 153A. Summary: The Gujarat High Court examined whether an assessment under Section 153A of the Income Tax Act can be reopened by issuing a notice under Section 148. The court analyzed the distinct schemes of Chapter XIV and Chapter XIV-B, concluding that while Section 153A assessments are comprehensive, they are not infallible and can be reopened under Section 147 if new material is discovered. The court emphasized the legislative intent and procedural aspects, ultimately deciding that reopening under Section 147 is permissible in specific circumstances.
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