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TMI Blog2019 (4) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is in the proceedings initiated U/s 153A of the Act. Neither the assessee nor the Assessing Officer has brought this fact to notice of ld. CIT(A) that a search and seizure action U/s 132 was carried out in the case of the assessee during the pendency of the assessment proceedings. The impugned order passed by the Assessing Officer as well as the ld. CIT(A) would otherwise not survive being nonest. Accordingly, the total income of the assessee would be determined in the proceedings initiated U/s 153A of the Act and there would be no consequence of the proceedings before us. Since the order of the ld. CIT(A) is not valid as the assessment proceedings itself stood abated and the question of validity of the assessment for want of notice U/s 143(2) of the Act does not arise. Accordingly, we set aside the order of the ld. CIT(A) as well as the assessment order passed by the Assessing Officer. - ITA No. 1134/JP/2018 - - - Dated:- 5-3-2019 - SHRI RAMESH C SHARMA, AM AND SHRI VIJAY PAL RAO, JM For The Revenue : Shri B.K. Gupta (CIT) For The Assessee : Shri O.P. Bhateja (ITP) ORDER PER: VIJAY PAL RAO, J.M. This appeal by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring that owing to the search seizure action in the case of the assessee carried out on 27.08.2017, the pending assessment u/s 143(3) got abated in accordance with the provisions of 2nd proviso to section 153A(1) of the Income tax Act. 7. Whether on the facts and circumstances of the case and in law, it was not incumbent upon the CIT(A) to decide the merits of the additions to the total income of the assessee made by the assessing officer despite holding the assessment u/s 143(3) to be invalid in the absence of any notice u/s 143(2) of the Income tax Act issued by ITO, Ward-4, Bhilwara. The appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2. The assessee e-filed its return of income on 28/9/2015 declaring total income of Rs. NIL. The said return was filed by the assessee with the ITO, Ward (3), Bhilwara, accordingly, a notice U/s 143(2) of the Income Tax Act, 1961 (in short the Act) was issued by the ITO, Ward (3), Bhilwara on 10/5/2016. A notice U/s 142(1) of the Act was also issued on 11/5/2016 fixing the hearing of scrutiny assessment on 26/5/2016. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention as raised before the ld. CIT(A) and submitted that when the ITO Ward (3), Bhilwara was not having the jurisdiction over the assessee at the time of issuing notice U/s 143(2) of the Act then the assessment completed by the ITO Ward (4), Bhilwara without issuing the fresh notice U/s 143(2) of the Act is invalid for want of jurisdiction. In support of his contention, he has relied upon the series of decisions on the point that an assessment completed without issuing notice U/s 143(2) of the Act is invalid. 6. We have considered the rival submissions as well as the relevant material on record. On carefully perusal of the record, we note that there was a search and seizure action U/s 132 of the Act in the case of the assessee on 27/8/2017. This fact is revealed by the revenue in grounds No. 5 and 6 raised in this appeal. The assessee has not disputed the fact of search and seizure action U/s 132 of the Act on 27/8/2017. It is also not in dispute that on the date of search on 27/8/2017, the assessment for the year under consideration was pending. Though, the validity of the assessment is challenged by the assessee, however, once there is a search U/s 132 of the Act and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made 28[and for the relevant assessment year or years]:] 28 [ Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- ( a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; ( b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and ( c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search. This issue was initially considered by the Hon ble Delhi High Court in the case of CIT Vs. Anil Kumar Bhatia 352 ITR 493 and held in para 22 as under: 22. In the light of our discussion, we find it difficult to uphold the view of the Tribunal expressed in Para 9.6 of its order that since the returns of income filed by the assessee for all the six years under consideration before the search took place were processed under Section 143(1)(a) of the Act, the provisions of Section 153A cannot be invoked. The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 143(1)(a). The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and arguments before the departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment or reassessment of the assessee which are pending on the date of initiation of search or making requisition shall abate. Therefore, the Assessing Officer is empowered to assess or reassess the total income of six assessment years relevant to the immediately preceding assessment year relevant to the previous year in which the search or requisition was made. The term assess in Section 153A is used in respect of the assessments which are pending as on the date of search and got abated whereas the term reassess is used in respect of those assessment years where the assessment was already completed and was not pending as on the date of search, therefore, in order to ensure that there cannot be more than one assessment order for the same assessment year determining total income of the assessee in respect of six assessment years only one determination of total income has been provided U/s 153A of the Act. The Hon ble Jurisdictional High Court in the case of Jai Steel (India), Jodhpur Vs. ACIT 219 Taxman 223 had also occasion to consider this issue in para 14 to 24 as under: 14. It would be relevant to notice the provisions of Section 153A of the Act, which reads as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation. - For the removal of doubts, it is hereby declared that- ( i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; ( ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 15. A plain reading of the above provision would reveal that if a search or requisition is initiated after 31.05.2003, the AO is under an obligation to issue notice to such person, who has been subjected to search/requisition to furnish the return of income of six years immediately preceding the year of search. The AO is then required to assess or reassess total income of the said six years and, out of the six years, if any assessment or reass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext of Sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. 19. The underline purpose of making assessment of total income under Section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, inasmuch as, once a assessment or reassessment is 'pending' on the date of initiation of search or requisition and in terms of Section 153A a return is filed and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under Section 153A of the Act would be the assessment for the said year. 20. The necessary corollary of the above second pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition shall abate . Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Assessing Officer U/s 153A of the Act in respect of the assessments which were pending as on the date of search would be as his original jurisdiction for framing the regular assessment and not as a reassessment. The only consequence of the search and seizure action U/s 132 of the Act in respect of assessment pending on the date of search is that the pending assessment shall stand abated and there cannot be two assessment orders. The second proviso also makes it clear that the assessment or reassessment if any relating to six assessment years referred into in sub-section (1) of Section 153A of the Act on the date of initiation of search U/s 132 or requisition U/s 132A of the Act, as the case may be, shall abate and as per sub-section (2) of Section 153A of the Act if any proceedings or any order of assessment or reassessment made U/s 153A of the Act is annulled in appeal or any other legal proceedings then the assessment or reassessment relating to any assessment year which has abated under the second proviso would stand revive. Thus, any proceedings of assessment or reassessment falling within six years prior to the search or acquisition stand abated, the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Thus, it is a consistent view taken by the Hon ble Delhi High Court as well as the Hon ble Jurisdictional High Court that there will be only one assessment order in respect of each of six assessment years in which both the disclosed and undisclosed income would be brought to tax. The assessment or reassessment pending on the date of search shall abate and total income for such assessment years will have to be computed by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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