The Supreme Court ruled that the assessment under Section 153A of the Income Tax Act is linked with the search and requisition under Sections 132 and 132A of the Act.
Facts
The core issue involved in the batch of appeals is the scope of assessment under section 153A of the Income Tax Act, 1961. According to the Revenue, the Assessing Officer is competent to consider all the material that is available on record, including that found during the search, and make an assessment of ‘total income’. Some of the High Courts have agreed with the said proposition. However, according to the respective assessees and as per some of the High Courts’ decisions, if no assessment proceeding is pending on the date of initiation of the search, the AO may consider only the incriminating material found during the search and is precluded from considering any other material derived from any other source.
Submissions
N. Venkataraman, ASG appearing for the Revenue submitted that under the Act, 1961, the charging section is section 4.
He contended that thus the income tax is tax on ‘total income.’ 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 was further 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.
He argued 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’.
Counsel appearing for the respective assessees submitted that the core issue that arises in the appeals is, as to whether in respect of completed assessments/unabated assessments, whether the jurisdiction of assessing officer to make assessment is confined to incriminating material found during the course of search under Section 132 of the Act or not, i.e., whether any addition can be made by the assessing officer in absence of any incriminating material found during the course of search under section 132 of the Act, 1961 or not.
They submitted that the assessment under section 153A is a special procedure for assessment in consequence of search and is distinct from regular scrutiny assessment under section 143(3) or reassessment under section 147 of the Act, 1961.
Decision
The division bench of Justice M.R. Shah and Justice Sudhanshu Dhulia said that While considering the issue involved, one has to consider the object and purpose of insertion of Section 153A in the Act, 1961 and when there shall be a block assessment under Section 153A of the Act, 1961.
The court further said that 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.
The bench observed that the foundation for making search assessments under Sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.
The court further observed that 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.
It was also observed by the court that only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate.
The bench held that in case of search under Section 132 or requisition Section 132A, the AO assumes the jurisdiction for block assessment under section 153A.
The court ordered that 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.
Case title: Principal Commissioner of Income Tax v/s Abhisar Buildwell P. Ltd.
Citation: CIVIL APPEAL NO. 6580 OF 2021
