Income Tax Act | Completed/Unabated Assessments Cannot Be Reopened by AO If No Incriminating Material Is Found During Search: Supreme Court

The Supreme Court has reiterated that in view of the judgment of the Supreme court in Principal Commissioner of Income Tax vs. Abhisar Buildwell Pvt. Ltd.,2023 LiveLaw (SC) 346, an Assessing Officer (AO) cannot make additions to assessee’s income in respect of completed/unabated assessments if no incriminating material has been found during the course of search under Section 132 or requisition under Section 132A of the Income Tax Act, 1961. However, the bench comprising Justices C.T. Ravikumar and Manoj Misra said that in terms of the said judgment, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions mentioned under the said provisions.

Therefore, the court said that the AO’s powers under Sections 147/148 of the Income Tax Act were saved in terms of Supreme Court’s judgment in Abhisar Buildwell (2023).

The top court was hearing an appeal against the decision of the Delhi High Court which had dismissed the appeals filed by the Revenue Department against the order of the ITAT where the additions made by the AO were deleted. The High Court had noted that the assessment of the assessee had attained finality prior to the date of search and no incriminating documents or materials had been found and seized at the time of search. Accordingly, the court held that no additions could be made under Section 153A of the Act as the cases of the respondent-assessee were of non-abated assessments.

In the appeal filed before the Apex Court, the counsel for the Revenue Department and the assessee, King Buildcon Pvt. Ltd, pointed out that the appeal was squarely covered by the decision of the Supreme Court in Abhisar Buildwell (2023).

Noting that no incriminating material was found during the search, and in light of the law laid down in Abhisar Buildwell (2023), the Supreme Court dismissed the appeal. The bench, however, said, “However, in view of the decision in Abhisar’s case (supra), completed/unabated assessments could be re-opened by the AO in exercise of powers under Sections 147/148 of the Income Tax Act subject to fulfilment of the conditions envisaged under Sections 147/148 of the Income Tax Act and hence, such powers are saved in terms of the said judgment.”

“Subject to the above, the appeal stands dismissed,” the court added.

The top court in Abhisar Buildwell (2023) had dealt with the scope of assessment under Section 153A of the Income Tax Act, 1961 (Assessment in case of search or requisition). It had ruled that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under Section 153A and all pending assessments/ reassessments shall stand abated. It was held that even in cases of unabated/completed assessments, if any incriminating material was found/unearthed during the search, 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.

In case no incriminating material is unearthed during the search/ requisition, the AO cannot assess or reassess the income taking into consideration the other material in respect of completed assessments/unabated assessments, the Apex Court had said. The bench had, however, ruled that the powers of the AO under Sections 147/148 of the Income Tax Act were saved. Therefore, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under the said provisions, it was held.

Sections 147 / 148 of the Act deal with AO’s power to assess or reassess income if any income chargeable to tax in the case of an assessee has escaped assessment for any assessment year.

Case Title: Principal Commissioner of Income Tax vs King Buildcon Pvt. Ltd.

Citation : 2023 LiveLaw (SC) 532

Counsel for the Appellant: Mr. Balbir Singh, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Shashank Bajpai, Adv. Mr. Ashok Panigrahi, Adv. Mr. Durga Dutt, Adv. Mr. Rupender Sinhmar, Adv. Mr. Ak Kaul, Adv.

Counsel for the Respondent: Mr. Gautam Jain, Adv. Mr. Rahul Gupta, AOR

Income Tax Act, 1961: Sections 132, 132A, 147, 148, 153A- The Supreme Court has reiterated that in view of the judgment of the Supreme court in Principal Commissioner of Income Tax vs. Abhisar Buildwell Pvt. Ltd., [(2023) SCC Online SC 481], an Assessing Officer (AO) cannot make additions to assessee’s income in respect of completed/unabated assessments if no incriminating material has been found during the course of search under Section 132 or requisition under Section 132A of the Income Tax Act, 1961. However, the bench said that in terms of the said judgment, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions mentioned under the said provisions-Therefore, the court said that AO’s powers under Sections 147/148 of the Income Tax Act were saved in terms of Supreme Court’s judgment in Abhisar Buildwell (2023).

Click Here To Read/Download Judgment