2024 (2) TMI 340 - HC - Income Tax

Validity of assessment passed u/s 153A pursuant to search and seizure - Assessment of completed assessment which was not abated - as argued no assessment proceedings were pending as on the date of initiation of proceedings u/s 153A - HELD THAT - As the assessment referred to in Section 153A enables the AO to proceed for assessment, when any such assessment for the previous six years is pending, treating the proceedings to have abated. In so proceeding with the assessment, AO would be entitled to reckon both disclosed and undisclosed income of the assessee. Insofar as completed assessment, they do not abate and for the purpose of re-assessing, there should be some incriminating material disclosed in the search, which alone can lead to reopening of the proceedings on the basis of the seized material, which has some relevance or nexus to the allegation of undisclosed income. The assessee s assessment for the relevant year stood completed as on 06.06.2003 long before the search and consequent proceeding initiated u/s 153A and there is no question arising of the relevant assessment to abate under the second proviso to Section 153A. Tribunal was perfectly within the statutory framework, in making a remand directing the AO to carry out re-assessment of the assessment year 2002-03, which stood completed as on the date of initiation of Section 153A proceedings, if some incriminating material seized during the search is available. We bow to the proposition as declared by KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT and affirmed by the Hon ble Supreme Court of India in ABHISAR BUILDWELL P. LTD. 2023 (4) TMI 1056 - SUPREME COURT and answer the question framed in favour of the assessee and against the Revenue.

Summary

Issues Involved:
1. Interpretation of Section 153A of the Income Tax Act, 1961 regarding abatement of assessment proceedings pending at the time of search and seizure.

The judgment of the High Court of Patna pertained to an appeal arising from the order of the Income Tax Appellate Tribunal for the assessment year 2002-03. The main issue revolved around whether the ITAT was justified in finding the assessment passed under Section 153A of the Act bad, considering no assessment proceedings were pending at the time of initiation of proceedings under Section 153A. The original assessment of the assessee was completed under Section 143(3) of the Act in 2003, which was later set aside, leading to a search under Section 132(1) and initiation of Section 153A proceedings. The Assessing Officer passed an assessment order under Section 153A, which was challenged by the assessee before the Tribunal. The Tribunal held that the assessment was completed as on the date of initiation of proceedings under Section 153A, based on legal principles outlined in relevant judgments. The High Court affirmed this position, rejecting the appeal filed by the Revenue.

The Tribunal's decision was based on the legal position emerging from Section 153A of the Act, which mandates the issuance of a notice to the person searched for filing returns for preceding assessment years. Assessments pending at the time of search abate, and the Assessing Officer is empowered to compute total income for those years afresh. The Assessing Officer can assess and reassess total income for the relevant years based on seized material. Completed assessments can only be interfered with if there is incriminating material found during the search. In this case, since the assessment for the relevant year was completed before the search and initiation of Section 153A proceedings, there was no question of abatement. The Tribunal's decision aligns with the statutory framework and legal principles established by higher courts.

The judgment referenced a key legal principle from the High Court of Delhi, affirmed by the Supreme Court, which clarified the process of assessment and reassessment under Section 153A. It emphasized the importance of incriminating material in reopening completed assessments and highlighted the merging of original and Section 153A assessments. The High Court of Patna concurred with this legal position, ruling in favor of the assessee and rejecting the Revenue's appeal. The Chief Justice and Justice Partha Sarthy both agreed with this decision, upholding the Tribunal's findings and legal interpretation.

Overall, the judgment provided a comprehensive analysis of the application of Section 153A in the context of abatement of assessment proceedings, emphasizing the significance of incriminating material in reassessment and aligning with established legal principles from higher courts.