Ideal Appliances Co. Pvt . Ltd vs. DCIT (ITAT Mumbai)

DATE: December 31, 2016 (Date of pronouncement)
DATE: February 6, 2016 (Date of publication)
AY: 2005-06 to 2009-10
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S. 153A: Law on whether an assessment made u/s 143(1) can be said to have abated & whether an assessment u/s 153A can be made in the absence of incriminating material explained

On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

(i) Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

(ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

(iii) The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ‘total income’ of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”.

(iv) Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously 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.

(All Cargo Global Logistics Ltd vs. DCIT [2012] 137 ITD
(Mum.)(SB), Shri Govind Agarwal v. ACIT being ITA No: 3389/Mum/2011 dated 10.01.2014, SKS Ispat and Power Limited
vs. DCIT CC 45 (ITA 8746/M/12 and ITA 8747/M/12), [2013 36 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT [2012] 28 328 (Mumbai –Trib.) in the case of Gurinder Singh Bava vs. DCIT CIT vs. Kabul Chawla vide ITA Nos. 707/2014 and others, dated 28.8.2015 followed)

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