9911796707
TMI Blog2023 (4) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153 of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. In case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. Conclusion: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L.P.(CIVIL) NO. 8453 OF 2023 @ DIARY NO. 20983/2020) CIVIL APPEAL NO. 3045 OF 2023 (@ S.L.P.(CIVIL) NO. 8454 OF 2023 @ DIARY NO. 22709/2020) CIVIL APPEAL NO. 6593 OF 2021 CIVIL APPEAL NO.3043 OF 2023 (@ S.L.P.(CIVIL) NO. 6063 OF 2022) CIVIL APPEAL NO. 9097 OF 2022 CIVIL APPEAL NO. 741 OF 2023 CIVIL APPEAL NO. 6582 OF 2021 CIVIL APPEAL NO. 721 OF 2020 CIVIL APPEAL NO. 6611 OF 2021 R.P.(CIVIL) NO.223 OF 2023 in CIVIL APPEAL NO. 4484 OF 2018 DIARY NO. 25308/2020) CIVIL APPEAL NO. 9100 OF 2022 CIVIL APPEAL NO. 9106 OF 2022 CIVIL APPEAL NO. 9111 OF 2022 CIVIL APPEAL NOS. 565-566 OF 2023 CIVIL APPEAL NOS. 567-568 OF 2023 CIVIL APPEAL NO.824 OF 2023 (@ S.L.P.(CIVIL) NO. 2110 OF 2023) CIVIL APPEAL NO. 541 OF 2023 CIVIL APPEAL NO. 540 OF 2023 CIVIL APPEAL NO. 14702 OF 2015 CIVIL APPEAL NO. 17533 OF 2017 CIVIL APPEAL NO. 6596 OF 2021 CIVIL APPEAL NO. 7028 OF 2021 CIVIL APPEAL NO. 7029 OF 2021 CIVIL APPEAL NO. 6610 OF 2021 CIVIL APPEAL NO. 7030 OF 2021 CIVIL APPEAL NO. 6608 OF 2021 CIVIL APPEAL NO. 6594 OF 2021 CIVIL APPEAL NO. 7338 OF 2019 CIVIL APPEAL NO. 6609 OF 2021 CIVIL APPEAL NO. 6605 OF 2021 CIVIL APPEAL NO. 1505 OF 2020 CIVIL APPEAL NO. 734 OF 2020 CIVIL APPEAL NO. 7016 OF 2021 CIVIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional Solicitor General of India has appeared on behalf of the Revenue and S/Shri Arvind P. Datar, Kavin Gulati, Preteesh Kapoor, learned Senior Advocates and Shri Ved Jain, learned counsel have appeared on behalf of the respective assessees. 3.1 Shri N. Venkataraman, learned ASG has made the following submissions on behalf of the Revenue: i) It is submitted that under the Act, 1961, the charging section is section 4. It is submitted that thus the income tax is tax on total income. It is submitted that the term total income has been defined in section 2(45) of the Act, 1961, which means the total amount of income referred to in section 5 and computed in the manner laid down in the Act. It is submitted that as per section 5 of the Act, 1961, the total income of any previous year of a person who is a resident includes all income from whatever source derived. It is submitted that therefore the income tax is a tax on all income from whatever source derived in the case of a resident-assessee. Therefore, if any taxable income is left out, the resultant figure would be partial income and not total income . It is submitted that any interpretation of any provision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Gathering of documents and evidence from and based on third party sources. (v) It also collects information available in public domain and gets the same from informants, tax evasion petitions, etc. It is submitted that the information collected from all these sources, including search and seizure, is eventually to be used for assessing total income . iv) Shri N. Venkataraman, learned ASG has taken us to the scheme of assessment in a search case. It is submitted that for the period prior to 30/06/1995, initially, there was no special provision for assessment of search cases. Those assessments were made in accordance with the regular provisions relating to assessment of income, i.e., section 143(3) or section 147 of the Act, 1961. Therefore, the assessment took into considering the incriminating material found during the search as well as that coming to the AO s notice from any other source. It is submitted that thereafter the Finance Act, 1995 introduced a special procedure for assessment of search cases. A set of provisions comprising of Sections 158B to 158BG was introduced by Chapter XIV-B Special procedure for assessment of search cases. The salient features ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period. F. The income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. (vi) Section 158BB provides the computation mechanism of undisclosed income of the block period which is as follows: (i) What can be taxed under this Chapter is only undisclosed income of the block period. (ii) This undisclosed income should form part of the total income. However, this chapter permits independent and separate assessment for undisclosed income for the block period and therefore cannot include the total income forming part of the regular assessment. (iii) In other words, both the income forming part of the regular assessment/reassessment falling under Section 143/147 respectively, and the assessment on undisclosed income for block period would constitute together the total income. (iv) However, the streams of assessment are independent and separate. The regular assessment/reassessment would be under Section 143/147 respectively. Whereas, the assessment of undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E provides the time limit for competition of block assessment. Section 158BF refers to the inapplicability of the various provisions relating to interest and penalties, and section 158BG identifies the competent authorities who can pass block assessment orders. (v) It is submitted that the scheme under Chapter XIVB, referred to hereinabove, was in place for about eight years but failed to yield the desired outcome. Therefore, the same came to be replaced by another scheme by Finance Act, 2003. It is submitted that the salient features of the special procedure introduced in 2003 were as below: (i) The scheme of parallel assessments were given a go-by. There was to be a single assessment of total income , incorporating undisclosed income found during the search as well as that found from any other source. (ii) The concept of block period was given a go-by. The concept of assessment year as the temporal unit was restored. (iii) Assessment had to be made u/s 153A, not under Sections regularly employed for assessment/reassessment, i.e. Section 143(3)/147. (iv) Assessment u/s 153A was to be mandatory and automatic in a case where search had been conducted. (v) Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is submitted that therefore the spirit of the Act, 1961 is to assess the total income. The earlier regime allowed parallel assessments namely regular assessment/reassessment independently and simultaneously allowed assessment of undisclosed income for the block period under Chapter XIV-B. Whereas the new regime has abandoned the parallel assessment scheme and made it into one unified assessment, once a search gets initiated under section 132 or books or requisition under section 132A. It is submitted that in the absence of any search under section 132 or a requisition under section 132A, the assessment of total income should be carried out under section 143, 144 and 147, i.e., regular assessment, best judgment assessment and reassessment. It is submitted that prior to the new scheme, when a search gets initiated or a requisition happens, the normal assessment/reassessment was allowed to be carried on without any interference and a block assessment of undisclosed income was allowed to be made independently. However, the new scheme brought w.e.f. 01.06.2003 has dismantled this structure and Section 153A conceives the following sequence: a. The jurisdictional exercise of power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e., it must be read with the expression employed in Section 153A(1)(b) assess or reassess the total Income and finally with the expression notwithstanding appearing as the opening phrase u/s 153A(1) of the Act. (viii) It is submitted that the expression assessment or reassessment appearing in the second proviso and the expressions assess or reassess the total income appearing in Section 153A (1)(b) have been employed carefully by the Parliament to convey clear and distinct intentions. It is submitted that the expression assessment or reassessment appearing in the second proviso refers to the pending assessments under sections 143, 144 and 147 which would abate. It is submitted that whereas assess or reassess the total income appearing in Section 153A(1)(b) signifies not the pending assessment or reassessment, but the assessment to be made under section 153A for six assessment years. It is submitted that again the Parliament has been extremely careful in not employing the expression total income in the second proviso which expression has been carefully employed under section 153A(1)(b) of the Act, 1961. The omission in the second proviso and the inclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nating material from sources other than the search is excluded from assessment under section 153A, how can the same be brought to tax? It is submitted that the language and meaning of Section 153A is plain and unambiguous, i.e., if search under section 132 of the Act, 1961 is conducted in a case, assessment of total income for each of the six assessment years pending the assessment year relevant to the previous year in which such search is conducted, has to be made. It is submitted that therefore the decision of the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income Tax, (2012) 18 ITR (Trib.) 106 (ITAT/Mum) dated 06.07.2012 and the decision of the Delhi High Court in the case of Commissioner of Income Tax, Central-III v. Kabul Chawla, (2015) 61 taxmann.com 412 (Delhi) dated 28.08.2015 are not in consonance with the plain language and meaning of Section 153A and in the process, defeats the very purpose of the charging section of the Act. 4. Learned counsel appearing for the respective assessees have made the following submissions: i) It is submitted that the core issue that arises in the present set of appeals is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said provisions can be resorted to only in the circumstances stated therein. That section 132(1)(c) entitles the Revenue to carry out search in case the specified officer has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing etc. which have not been disclosed for the purpose of the Act. That object of both the provisions, namely, sections 132 and 132A is to unearth the income which the assessee has not or is not likely to disclose. It is submitted that since the assessment under section 153A is linked with search and requisition under sections 132 and 132A of the Act, 1961, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. iv) It is next submitted that now, in case time limit to make regular assessment under section 143(3) is pending or an assessment is underway as on the date of search, the said assessment shall get abated and the AO will have jurisdiction to carry out assessment in respect of such abated assessment dehors any incriminating material. However, in respect of completed/unabated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression undisclosed income has no bearing. vii) As regards the contention on behalf of the Revenue that earlier scheme of block assessment under Section 158BA envisaged assessment of undisclosed income whereas first proviso to Section 153A(1) envisages assessment of total income which manifests the intention of the legislation to bring to tax total income , under Section 153A of the Act de hors any incriminating material, it is submitted that the said submission is without appreciating the object behind introducing the 153A regime as well as without appreciating the fact that definition of total income under Section 2 is qualified by the expression unless the context otherwise requires. viii) It is submitted that the erstwhile scheme of block assessment under Section 158BA envisaged assessment of undisclosed income for two reasons. First reason was that there were two parallel assessments envisaged under the erstwhile regime i.e. (i) block assessment under Section 158BA to assess the undisclosed income and (ii) the regular assessment in accordance with the provision of the Act to make assessment qua income other than undisclosed income. Second reason was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A(1). Here, for the purpose of abated assessments, the expression total income shall undisputedly derive its meaning from definition of total income provided under Section 2 which means that the Revenue shall be permitted to make assessment qua total income. Had the expression total income not been used in the first proviso, the Revenue would have not been able to bring to tax income other than undisclosed income even qua the abated assessments. However, in contrast to abated assessments, in case of completed assessments, where no assessment was pending as on date of search, it is pertinent to mention that no two assessments were taking place in the first place itself. Only one assessment took place in the earlier block assessment regime wherein only undisclosed income could be brought to tax that too when incriminating material was unearthed. xii) It is further submitted that, in cases of unabated assessments where no incriminating material whatsoever was unearthed, no addition could be made in the erstwhile regime as well. It is humbly submitted that the intention of the Parliament was to never tinker with such category of cases in the 153A regime. This is because wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, when read in light of Sections 132 and 132A, shall mean the total income as per assessment order passed under Section 143(3) where assessment had been made earlier or; total income as per return where no assessment was made earlier but time limit to issue notice under Section 143(2) has expired. xv) Insofar as the words used total income in section 153A of the Act, 1961, it is submitted that before insertion of the new scheme of assessment under Section 153A, there was a concept of block assessment in respect of the search period. There was one assessment for the block period in respect of the undisclosed income found during the search. This undisclosed income was being taxed at a special rate of 60% and that is why, such income was being identified separately as against the regular income for each of the assessment year. The above concept was given a goby on introducing this new scheme of assessment under section 153A which provided that assessment will be made for each of the assessment year separately and the income found undisclosed during the search will be taxed at the normal rate. Hence, in section 153A, it has been stated that total income' will be assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng material, the legislature would have provided that in case of annulled assessments, in the case of unabated assessments, the AO shall on the basis of the additions made earlier will be empowered to reframe those assessments as well. It is submitted that restricting annulled assessments to only abated assessments, is putting the wheel back to a situation as if there was no search. 4.1 The submissions on behalf of the assessees in a tabulated form thus are as under: S. N Particulars Assessment u/s 143(3) pending and abated Reassessment u/s 147 pending and abated Unabated assessments i No Incriminating found in material search. AO entitled to assess entire income, a pending regular assessment stood abated. Scope of assessment u/s 153A must be restricted to grounds of reopening of assessment, which was pending on date of search and stood abated as a result of search. AO not entitled to go beyond scope of pending assessment. No assessment u/s 153A in absence of any incriminating material. Originally co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment u/s 153A could only be done in respect of issue A relating to which incriminating material is found during search. On conclusion of assessment u/s 153A, Revenue may, basis other information, proceed u/s 147 and/or 263. 4.2 Learned counsel for the respective assessees have relied upon the following decisions of this Court as well as various High Courts in respect of their submission that no addition can be made in respect of completed assessment in absence of incriminating material: Sl. No. Name of case Citation 1. Commissioner of Income Tax- III, Pune Vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) : (2018) 11 SCC 490 2. Principal Commissioner of Income Tax-4 Vs. Saumya Construction (2016) 387 ITR 529 (Gujarat) 3. Principal Commissioner of Income Tax, Ahmedabad Vs. Dipak Jashvantlal Panchal 2017 (2) TMI 862 (Gujarat) 4. Commissioner of Income Tax- I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of completed assessments/unabated assessments, whether the jurisdiction of AO to make assessment is confined to incriminating material found during the course of search under Section 132 or requisition under Section 132A or not, i.e., whether any 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 132 A of the Act, 1961 or not. 6. It is the case on behalf of the Revenue that once upon the search under Section 132 or requisition under Section 132A, the assessment has to be done under Section 153A of the Act, 1961 and the AO thereafter has the jurisdiction to pass assessment orders and to assess the total income taking into consideration other material, though no incriminating material is found during the search even in respect of completed/unabated assessments. 7. At the outset, it is required to be noted that as such various High Courts, namely, Delhi High Court, Gujarat High Court, Bombay High Court, Karnataka High Court, Orissa High Court, Calcutta High Court, Rajasthan High Court and the Kerala High Court have taken the view that no addition can be made in respect of comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word assess in Section 153 A is relatable to abated proceedings (i.e., those pending on the date of search) and the word reassess to completed assessment 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 153 A 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. 7.2 Thereafter in the case of Saumya Construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny assessment year which had abated under the second proviso would stand revived. The proviso thereto says, that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the, six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A, of the Act. Similarly, subsection (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of, the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning From the heading of section 153, the intention of the Legislature is clear, viz, to provide for assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme of block assessment under Section 158BA envisaged assessment of undisclosed income for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime, i.e., (i) block assessment under section 158BA to assess the undisclosed income and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the undisclosed income was chargeable to tax at a special rate of 60% under section 113 whereas income other than undisclosed income was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the undisclosed income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under Section 153A are triggered by conducting of a valid search under Section 132 of the Act, 1961. The ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to 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 153- B and Section 153-C, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. Civil Appeal Nos.7738-7739/2021, 7736-7737/2021, 7732-7735/2021 and 7740-7743/2021 15. Insofar as the aforesaid Civil Appeals preferred by the assessee M/s Kesarwani Zarda Bhandar Sahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 06.09.2016 passed in ITA Nos. 270/2014, 269/2014, 15/2015, 16/2015, 268/2014 and 17/2015, as also, against the order dated 21.09.2017 passed in the review applications. It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under Section 143(1)(a) or 143(3) of the Act, 1961 and to reassess the total income taking notice of undisclosed income even found during the search and seizure opera ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
