CA Sandeep Kanoi
Where a search is initiated u/s 132 of the Act etc., the A.O shall issue a notice requiring the person searched etc. to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the Assessing Officer has to assess or reassess the total income of such assessment years. The decisive words used in the provisions are to ‘assessee or reassess the total income’. Thus, it is manifest that a duty has been cast on the Assessing Officer to determine the ‘total income’ of the assessee for such six assessment years. Obviously ‘total income’ refers to the sum total of income in respect of which a person is assessable. It covers not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undeclared ones, or unplaced material before the AO. The position which emerges on a reading of clauses (a) or (b) of sec. 153A(1) along with the first proviso is that the Assessing Officer is supposed to determine the ‘total income’ of the assessee in respect of the relevant six assessment years. Second proviso to sec. 153A(1) eclipses the afore discussed determination of ‘total income’. Such proviso mandates that any pending assessment or reassessment relating to any assessment year falling within the period of six years referred to in sub-sec. (1) on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. The effect of the second proviso is that any pending assessment or reassessment on the date of search for any assessment year falling within the period of relevant six assessment years shall abate and a fresh determination of ‘total income would be required. Now a question arises that what is the effect of second proviso on the assessments for any assessment years falling within the period of six assessment years, which are not pending on the date of search. We are unable to accept the contention urged on behalf of the Revenue for the reason that if both the pending and completed assessment were to be taken on same pedestal, then there was no need to enshrine second proviso to sec. 153A(1) providing that the pending assessments within the period of six assessment years shall abate. The effect of the second proviso in the entire setting of section is that the assessment for any assessment year which is not pending as on the date of search cannot include an item of income for which no incriminating material was found. Our view finds support from para no. 11 of the judgment in Chetan Das Lachman Das (supra), in which it has been held that : “Obviously an assessment has to be made under this section only on the basis of seized material.”
This brings us to the next contention put forth on behalf of the Revenue that since there is no specific mention of correlating addition with the incriminating material found during the course of search, the tribunal should not venture to make such a provision in the Act. We find this contention as bereft of merits. The major reason for our this decision is that we are not trying to legislate by inserting such a provision in the language of section 153A. In fact, the special bench of the tribunal in holding so has interpreted the provision in its existing form in this way so as to prohibit the making of any addition in the assessment for those years the assessment of which was not pending on the date of search. This view has been followed in several cases including Kabul Chawla (ITA No. 779/D/2013), to which one of us, namely ,the AM is party, Thus, we do not find any merit in the contention raised on behalf of the Revenue that the tribunal should not legislate. As it is a case of interpretation of the provision and not that of legislating, we find no force in the contention advanced on behalf of the Revenue. The same is jettisoned.
The next judgment relied on by the ld. AR is Anil Kumar Bhatia (supra). In that case, the Hon’ble High Court held that even if assessment order had already been passed in respect of one or any of the six relevant assessment years either u/s 143(1)(a) or 143(3) prior to the initiation of search, still the AO is empowered to reopen those proceedings u/s 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during the search. It is clear that the Hon’ble High Court dealt with a situation in which some incriminating material was found in respect of a non-pending assessment. It was in that background that the Hon’ble High Court held that sec. 153A applies if incriminating material is found even if assessments are completed. The question as to whether any addition can be made in respect of completed assessments when no incriminating material was found, was apparently left open. However, we find that there are sufficient indirect hints given by the Hon’ble Delhi High Court in the case of Anil Kumar Bhatia (supra) about not making of any addition in respect of an assessment year for which the assessment is already completed unless some incriminating material is found during the course of search. This can be seen from the following observations of the Hon’ble High Court :-
“20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. …”
The above extracted observations of the Hon’ble High Court, which are though obiter dicta, make the point clear that where an assessment order has already been passed for a year(s) within the relevant six assessment years, then also the A.O is duty bound to reopen those proceedings and reassess the total income but by ‘taking note of the undisclosed income if any, unearthed during the search’. The expression ‘unearthed during the search’ is quite significant to denote that in respect of completed or non- pending assessments, the Assessing Officer is albeit duty bound to assess or reassess the total income but there is a cap on the scope of additions in such assessment, being the items of income ‘unearthed during the search’. In other words, the determination of ‘total income’ in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. There is not and cannot be any quarrel over the proposition that the Assessing Officer has no option but to determine the total income of the assessee in respect of the relevant six assessment years. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-vis the years for which assessments are non-pending. In respect to the assessment years for which the original assessments have already been completed on the date of search, the total income shall be determined by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the ‘total income’ would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In the other scenario of the assessments pending on the date of search which would abate in terms of second proviso to sec. 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. In fact, this is the position which follows when we read the judgment of the Hon’ble Delhi High Court in Anil Kumar Bhatia (supra) in juxtaposition to the special bench order in the case of All Cargo Global Logistics Ltd.(supra).
Since the Special Bench has decided this issue in this manner, it is not possible for us to deviate from the same. There has to be some consistency in the view taken by the Tribunal. Once a Special Bench has decided a particular issue in a particular manner, then, that becomes binding on all the division benches across the country unless there is a contrary judgment of the Hon’ble Supreme Court or that of some High Court. As the ld. DR failed to point out any specific and direct judgment rendered by the Hon’ble High Court on the issue which is obtaining in the present appeal, we are disinclined to deviate from the Special Bench order in the case of All Cargo (supra). We, therefore, hold in principle that no addition can be made for any assessment year u/s 153A, the assessment for which is not pending on the date of search, unless any incriminating material is found in the course of search.
Having held so, we now need to examine the factual position of this case. At this stage, it is relevant to note that the assessment order is silent on both the counts as to whether (i) the assessment for AY 2003-04 was pending as on the date of search; and (ii) whether any incriminating material was found during the course of search having bearing on the addition so made. As this issue was not taken up before the AO/CIT(A), in our considered opinion, the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of the AO. We order accordingly and direct him to decide this issue afresh in the light of the above discussion. Our view in restoring the matter to the lower authorities is fortified by the judgment of the Hon’ble MP High Court in CIT vs. TollaramHassamal (2008) 298 ITR 22 (MP). Similar view was taken by the Hon’ble Allahabad High Court in the case of CIT vs. Sahara India (2012) 347 ITR 331 (All).
In the result, the appeal is allowed for statistical purposes.