No Assessment U/S 153A In Absence Of Incriminating Material Unearthed During The Course Of Search: Patna High Court

The Patna High Court has held that completed assessments can be interfered with by the Assessing Officer while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of the search.

The bench of Chief Justice K. Vinod Chandran and Justice Partha Sarthy has upheld the Tribunal’s Order and observed that the Tribunal was perfectly within the statutory framework in making a remand directing the Assessing Officer to carry out a re-assessment of the assessment year 2002-03, which stood completed as of the date of initiation of Section 153A proceedings if some incriminating material seized during the search is available.

In the assessment year 2002–03, the original assessment of the assessee or respondent was completed under Section 143(3). This was subsequently set aside by the 1st Appellate Authority under Section 263; there was a remand back to the Assessing Officer for carrying out a fresh assessment. A search was conducted on the premises of the assessee under Section 132(1). A Section 153A proceeding was initiated in pursuance of the search conducted.

The assessee contended before the Assessing Officer that there was no assessment pending as of the date of the search or the initiation of proceedings under Section 153A. For the assessment order to be abated, empowering the Assessing Officer to proceed with the assessment on the basis of the original records, disclosed income, and those found out on the search.

The Assessing Officer rejected the prayer of the assessee, especially since there was a remand made by the learned Commissioner of Income Tax. The remanded assessment proceeding, which was pending, was treated as abated, and an assessment order under Section 153A read with Section 143(3) of the Act was passed on December 29, 2006.

In the meantime, the remand order of the 1st Appellate Authority was challenged before the Tribunal by the assessee. The 1st Appellate Authority’s order was set aside by the Tribunal, reviving the order of the Assessing Officer.

The assessee challenged the order under Section 153 read with Section 143(3) of the Act before the 1st Appellate Authority, without success. The Tribunal, however, reversed the order of the 1st Appellate Authority and the Assessing Officer and held the assessment to have been completed as of the date of initiation of the proceeding under Section 153A of the Act. Hence, there were no proceedings pending on an assessment for it to abate as of the date of initiation of proceedings under Section 153A, was the finding.

The court noted that the assessment referred to in Section 153A enables the Assessing Officer to proceed for assessment when any such assessment for the previous six years is pending, treating the proceedings as having abated.

"In so proceeding with the assessment, the Assessing Officer would be entitled to reckon both disclosed and undisclosed income of the assessee. Insofar as they have completed the assessment, they do not abate, and for the purpose of re-assessing, there should be some incriminating material disclosed in the search, which alone can lead to the re-opening of the proceedings on the basis of the seized material, which has some relevance or nexus to the allegation of undisclosed income," the court said.

The court ruled that the assessee’s assessment for the relevant year was completed long before the search and consequent proceeding initiated under Section 153A. There was no question arising about the assessment's abatement under the second proviso to Section 153A.

Case Title: Assistant Commissioner of Income Tax Versus Satish Kumar Keshri

Case No.: Miscellaneous Appeal No. 823 of 2017

Citation: 2023 LiveLaw (Pat) 103

Date: 21-07-2023

Counsel For Petitioner: Archana Sinha

Counsel For Respondent: A.K.Rastogi

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