2023 (5) TMI 552 - HC - Income Tax

Scope of assessment u/s 153A - completed/unabated assessments - proof of incriminating material as found during search - HELD THAT - As decided in ABHISAR BUILDWELL P. LTD. 2023 (4) TMI 1056 - SUPREME COURT in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns and in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. Appeals disposed of.

Summary

Issues involved:
The legal issue involved in the instant case is the scope of assessment under Section 153A of the Income Tax Act.

Issue i:
The revenue raised the question of whether the Tribunal erred in not making an independent inquiry to determine the existence of incriminating materials in the seized materials.

Issue ii:
The revenue questioned whether the Tribunal overlooked the fact that the Supreme Court had admitted a special leave petition on a similar issue in a previous case.

Issue iii:
The revenue argued that the Tribunal was unjustified in adjudicating the matter in favor of the assessee by citing a case where a notice was issued under a different section.

Issue iv:
The revenue contended that the Tribunal made a gross error in relying on a judgment that involved a different section of the act.

Issue v:
The revenue reiterated the error in relying on the same judgment involving a different section of the act.

Issue vi:
The revenue questioned the Tribunal's justification in favoring the assessee based on a specific judgment.

Issue vii:
The revenue raised concerns regarding the Tribunal's observation that the addition made by the assessment officer was not based on any incriminating materials seized during the search operation.

The Hon'ble Supreme Court summarized the legal position in the case and held that in cases of search or requisition, the Assessing Officer assumes jurisdiction for block assessment under Section 153A. All pending assessments/reassessments stand abated, and if incriminating material is found, the AO can assess or reassess the total income. If no incriminating material is found, the AO cannot make additions in completed/unabated assessments. The completed/unabated assessments can be reopened under Sections 147/148, subject to conditions. The appeals and review petition by the Revenue were dismissed based on this legal position.