S.153A Income Tax Act| Can Assessments Be Reopened If No Incriminating Material Is Found During Search? Supreme Court Reserves Judgment

The Supreme Court on Thursday reserved its judgment on whether in an assessment under section 153A of the Income Tax Act, besides the incriminating material found during search, such materials which the Assessing Officer has on hand and the third party records available can be relied on to assess total income, or whether the assessment has to confined only to the incriminating material seized during the search. The Court also discussed the issue whether there is no incriminating material seized during the search, then those assessments be reopened and reassessed under Section 153A.The bench of Justices M. R. Shah and Sudhanshu Dhulia was hearing a string of pleas on this issue arising on account of conflicting High Court judgments. On Wednesday, ASG Venkataraman had made submissions for the revenue.Senior Advocate for some of the assessees: "I have three basic submissions- one, your lordships have seen the second proviso (to section 153A), it is only the pending assessments that abate and the necessary corollary is that completed assessments do not abate. It is important that your lordships say this because in all of these judgments, the Revenue's contention has been that even concluded assessments abate and that has been rejected all over by all high courts. The ASG has accepted that concluded assessments do not abate but your lordships would have to clarify. Second submission is that right from Pooran Mal's case, the power under section 132 (of the IT Act) has been upheld as not violating Article 21 or 19(1)(g) on the ground that this is the power to prevent evasion of tax. And it has inbuilt safeguards. 132 uses the expression 'undisclosed income'. Two consequences follow. And as a result of a search, because it is a power only to prevent evasion, it cannot become a tool of a roving enquiry. In most cases, that is why the assessees are in appeal. The revenue contends that the moment there is a search, everything is at large and I can make a roving enquiry and keep digging for material even when there is no material, whether for reopening or incriminating material. The consequence that follows from Pooran Mal's case is that a search cannot be made a roving enquiry. The second consequence is the view taken by various High Court that under 153A, the triggering event is still a search under 132 and 132 has inbuilt, inherent safeguards and the requirement that it attacks only the undisclosed income. And since the triggering event, the jurisdictional event is a valid search...."Justice Shah: "Incriminating material can only be after search. Till the search...."Senior Advocate for the Assessees: "That will be my third submission because your lordships have to draw that balance. The Second submission, may I complete? All courts have taken the view that the triggering event is still a valid search, the idea is to assess undisclosed income. The third submission is because your lordships will have to balance the assessees' rights in the sense that there cannot be any roving enquiry as well as the department's powers. What about tangible material which is already available with the AO but which is not found as a result of the search- this was troubling your lordships. The answer is given by the Gujarat High Court, there your lordships held that the non obstante clause (in section 153A) does not mean that he loses his jurisdiction to reassess under 147. The non obstante clause overrides only to the extent of inconsistency. Then in my submission here what it is intended to override is the procedural aspect of 147, the substantive power as well as substantive safeguards of 147 Are still available to the assessing officer. In my humble submission, that will be the way to draw a balance between protecting the assessees' right As well as protecting the department's power in legitimate cases.Even without 147, even under 153A, the moment the word 'reassess' is used, in Kelvinator's case, the three-judge bench came to the conclusion that the word 'reassess' means that de hors the words 'reason to believe', power to reassess is distinct from the power to review. Therefore, at the moment the power to reassess is there, two consequences follow, as laid down by the three-judge bench- one, there cannot be a change of opinion, and two, there must be tangible material"ASG N. Venkataraman, for the Revenue: "Your Lordships can very well say that it is not supposed to be a roving enquiry. That is not my case. It also does not permit change of opinion. That is also not our case. Change of opinion is review alone. But assessment based on materials we already have is not review. That is only reassessment"Justice Shah to the ASG: "His submission is that in case of a completed assessment, there cannot be two assessments, one under 143 and another under 153A. Suppose some further material is found during a search, during the assessment under 153A, not undisclosed income but incriminating material, then that can be said to be reassessment...

S.153A Income Tax Act| Can Assessments Be Reopened If No Incriminating Material Is Found During Search? Supreme Court Reserves Judgment

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S.153A Income Tax Act| Can Assessments Be Reopened If No Incriminating Material Is Found During Search? Supreme Court Reserves Judgment

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