Article covers 5 Issues In Income Tax Search & Seizure Operations which includes Issues In Income Tax Search & Seizure Operations Search Assessment 1. Where the Assessing Officer of the Searched and Other Person Is Same 2. Whether the Assessee Can Lodge the New Claims, Claim Deductions and claim Reliefs 3. Whether Notice Under Section 143(2) Required For Completion Of Proceedings Under Section 153A? 4. Whether Conditions of Section 132 has to be Complied With? and 5. Whether AO can include the items in assessment proceedings under section 153A which are corresponding to the original assessment proceedings.
THE SUPREME COURT IN CASE OF THE SUPER MALLS (P) LIMITED V SC
There can be two eventualities. It may so happen that the Assessing Officer of the searched person is different from the Assessing Officer of the other person and in the second eventuality, the Assessing Officer of the searched person and the other person is the same. Where the Assessing Officer of the searched person is different from the Assessing Officer of the other person, there shall be a satisfaction note by the Assessing Officer of the searched person and as observed hereinabove that thereafter the Assessing Officer of the searched person is required to transmit the documents so seized to the Assessing Officer of the other person. The Assessing Officer of the searched person simultaneously while transmitting the documents shall forward his satisfaction note to the Assessing Officer of the other person and is also required to make a note in the file of a searched person that he has done so. However, as rightly observed and held by the Delhi High Court in the case of GANPATI FINCORP (SUPRA), the same is for the administrative convenience and the failure by the Assessing Officer of the searched person, after preparing and dispatching the satisfaction note and the documents to the Assessing Officer of the other person, to make a note in the file of a searched person, will not vitiate the entire proceedings under Section 153C of the Act against the other person. At the same time, the satisfaction note by the Assessing Officer of the searched person that the documents etc. so seized during the search and seizure from the searched person belonged to the other person and transmitting such material to the Assessing Officer of the other person is mandatory. However, in the case where the Assessing Officer of the searched person and the other person is the same, it is sufficient by the Assessing Officer to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, then the requirement of Section 153C of the Act is fulfilled. In case, where the Assessing Officer of the searched person and the other person is the same, there can be one satisfaction note prepared by the Assessing Officer, as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the Assessing Officer of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself
DECISION IN CASE OF JSW STEELS LIMITED V HIGH COURT
The major issues arising in this consideration is as follows-
1. That there was no specific inhibition or restriction on the assessee to make a new claim, deduction, exemption and/or relief which was not claimed in the original assessment;
2. That under Section 153A of the said Act, a return filed is deemed to be a return filed under Section 139(1) of the Act;
3. That the provisions of the said act would apply accordingly.
4. That once assessment got abated, the assessee was at liberty to make such claim/ addition as per normal assessment proceedings because the assessment got abated and therefore the AO retained original jurisdiction as well as jurisdiction conferred on him under Section 153A of the said Act which was in consequence to search under Section 132 of the said Act.
The two crucial aspects noticed while assessing the section 153(1) of the act comes out as follows
“notwithstanding” in sub-section (1)
The use of non obstante clause in sub-section (1) of Section 153-A i.e., use of the expression “notwithstanding” is indicative of the legislative intent that provisions of Section 153-A(1) would have overriding effect over the provisions contained in Sections 139, 147, 148, 149, 151 and 153.
2 Return filed in pursuance of the notice under section 153(!) shall be treated as the return filed under section 139(1) of the said act
To take up the said issue it becomes imp to reproduce the second proisio to the section 153(1) of the income tax act
Provided that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending 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:
Considering the judgement of this court in case of the continental warehousing limited the judgement of this court is produced as follows
From the above discussion and precedence, the scheme of assessment u/s 153A of the Act in case of search, the AO shall issue notice to searched person requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of subsection (1) of section 153A and clause (b) postulates assessment or reassessment of the total income of six years immediately preceding the assessment year relevant to the previous year in which such search is conducted. The first proviso mandates that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso postulates that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) is pending on the date of initiation of the search u/s 132 of the Act shall abate. In the present case before us, however, though the second proviso to sub-section (1) of section 153A would not apply in the first three years of this case, yet, as far as the second three year period is concerned (which are pending before us), the assessments were pending. The proceedings in relation thereto abate. Now the entire assessment in relation to the second phase of three years can be made. The pending assessment in that case may be undertaken u/s 153A of the Act. The abatement of pending assessment is for the purpose of avoiding two assessments for the same year i.e. one being regular assessment and the other being search assessment u/s 153A of the Act. In other words, these two assessments merge into one assessment. It means that completed assessments stand on different footing from the pending assessments. Hence, in so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A of the Act merge into one and in that case only one assessment for the remaining set of years, where assessment is pending, is to be made separately on the basis of search materials and the regular material existing or brought on record before the AO/Revenue. It means that the assessee can make any new claim in the return of income filed u/s 153A of the Act or even during the course of assessment proceedings undertaken u/s 153A of the Act. In our view, and in view of the second proviso to Section 153A (1) of the Act, once assessment get abated it is opened both way i.e. for the Revenue to make any additions apart from seized material even regular items declared in the return can be subject matter if there is doubt about the genuineness of those items and similarly the assessee also can lodge new claim, deduction or exemption or relief which remained to be claimed in regular return of income, because assessment was never made in the case of the assessee in such situation. Hence, we allow this issue of assessee s appeals.
Alternative views has been taken in case of the various judgements relating to the applicability of the said provision
JUDGEMENTS IN THE FAVOUR OF THE ASSESSEE
1. SUMANLATA BANSAL V ACI, CENTRAL CIRCLE 8 MUMBAI ITA nos.525 TO 530
2. INCOME TAX OFFICER V INCOME TAX OFFICER (DELHI HIGH COURT)
1. ACIT V M/s G.M INFRASTRUCTURE ITA NO 133/IND/2008 ITAT INDORE
2. CIT V PAWAN GUPTA & ORS (2009) 223 CTR 487
The issue has been squarely covered in the decision RAJAN TELECOM INDIA PRIVATE LIMITED V DCIT where it has been held that the mere issue of the warrant of the authorisation under form 45 will not initiate the proceedings under section 153A of the income tax act unless the search has been initiated under section 132 and all the conditions contained therein has been complied with it.
The ITAT In case of the ANIL P KHIMANI V DICT has given the beautiful judgement and squarely covered this issue that in case of the assessments are completed and return is processed under the section 143(1) of the income tax act the additions made under section 143 read with the section 153A of the act has to be confined only to the material available on the record made during the course of the search and cannot include the terms made during the course of the original assessment proceedings.
However if any assessment is pending on the date of the initiation of the search then the assessments pending on the date of the initiation of the search shall abate and this gives the right to both the parties that is the assessee can make the adjustments in the return of income file in response to the notice and also AO can make the adjustments even not confined to the material available on the record.
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