s.153A does not authorize de novo assessment. Non-pending assessments do not abate. Additions must be confined to search material
S. 153A provides that where a search is initiated u/s 132 the AO shall “assess or reassess the total income of six assessment years immediately preceding the assessment year” relevant to the previous year in which the search is conducted or requisition is made. The 1st Proviso states that the AO shall “assess or reassess the total income in respect of each assessment year falling within such six assessment years” while the 2nd Proviso states that the assessment or reassessment relating to the said six assessment years “pending” on the date of initiation of the search under section 132 shall “abate“. In the assessee’s case, search action was initiated and assessments under s. 153A were framed for six assessment years making various additions. The assessee claimed that the additions were not tenable as regular returns had been filed where the particulars relating to the additions had been disclosed and the same had been accepted u/s 143 (1) and also that no material had been found during the search to justify the additions. The revenue claimed that the effect of the Provisos to s. 153A was that all assessments abate and there had to be a de novo assessment in which the AO was not confined to the material found during the search. HELD rejecting the claim of the Revenue:
(i) S. 153A does not authorize the making of a de novo assessment. While under the 1st Proviso, the AO is empowered to frame assessment for six years, under the 2nd Proviso, only the assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. There can be two assessments for the same assessment year. Assessments which are not pending before the AO on the date of search but are pending before an appellate authority will survive.
(ii) An assessment can be said to be “pending” only if the AO is statutorily required to do something further. If a s. 143 (2) notice has been issued, the assessment is pending. However, the assessment in respect of a return processed u/s 143 (1) is not “pending” because the AO is not required to do anything further about such a return.
(iii) The power given by the 1st Proviso to “assess” income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings.
(iv) On facts, as the returns had been processed u/s 143 (1), the assessments were not “pending” and as no material was found during the search, the additions could not be sustained.