Under the Income-tax Act, whenever a search is conducted under section 132 or books of account or other documents or any assets are requisitioned under section 132A, provision of section 153A comes into operation. This section, inter-alia, provides for assessment or reassessment of total income in respect of each assessment year falling within a period of six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or books of account, etc are requisitioned. Time limit for completion of such assessment or reassessment is provided in section 153B. 

There were a number of questions relating to revival of proceedings and time limits which remain ambiguous. With the view to providing clarity and reducing disputes, amendments have been carried out to provide that –

(i) if any proceeding initiated under section 153A or any order of assessment or reassessment made under sub-section (1) of this section has been annulled in any appeal or other legal proceeding, the abated assessment or reassessment relating to any assessment year shall stand revived and if such order of annulment is set aside, such revival shall cease to have effect.

(ii) that time limit for completion of such assessment or assessment shall be one year from the end of the month in which the abated assessment revives or within the period already specified in section 153 or in sub-section (1) of section 153B, whichever is later.

(iii) the period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in sub-section (2) of section 153A till the date of the receipt of the order, setting aside the order of such annulments, by the Commissioner, shall be excluded in computing the period of limitation for the purposes of this section.

Subsection (1) of section 153C provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer  having jurisdiction over such other person. The Assessing Officer shall then proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Accordingly, the provisions of newly inserted subsection (2) of section 153A shall also apply in case of annulment of assessment order or proceeding u/s 153C of Income tax Act.

To illustrate, suppose, in the case of an assessee, a search proceeding under section 132 is initiated on 10th April, 2007. The last of authorization related to this search is also issued during the financial year 2007-08. As on the date of the search, assessment for assessment year 2005-06 was pending. In the given situation,-

  • ? in accordance with the provision of second proviso to renumbered subsection (1) of section 153A, the assessment for assessment year 2005-06 shall abate;
  • ? assessment or reassessment with respect to each of the six assessment year, i.e., from assessment year 2002-03 to assessment year 2007-08 shall be required to be made under first proviso to renumbered sub-section (1) of section 153A; and
  • ? the time limit for completion of these assessments shall be 31st December, 2009 under clause (a) of sub-section (1) of section 153B. 
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Let us assume that the proceeding under section 153A is annulled in an appeal or legal proceeding by an order dated 3rd August, 2007 which is received by the Commissioner on 29th August, 2007. In such a situation,-

 

  • ? the assessment with respect to any of the six assessment years (from assessment year 2002-03 to assessment year 2007-08), if already completed under first proviso to renumbered sub-section (1) of section 153A, shall automatically become annulled due to this order;
  • ? no order of assessment or reassessment with respect to any of the six assessment year (from assessment year 2002-03 to assessment year 2007- 08) can be made under first proviso to renumbered sub-section (1) of section 153A as the proceeding under section 153A has been annulled;
  • ? the proceeding for assessment year 2005-06 which has been abated under second proviso to renumbered sub-section (1) of section 153A, shall revive under new sub-section (2); and ? the order in respect of this assessment can be made at any time before 31st December, 2007 (normal time limit under section 153) or 31st August, 2008 [new time limit under sub-section (4) of section 153], whichever is later.
  •  the order in respect of this assessment can be made at any time before 31st December, 2007 (normal time limit under section 153) or 31st August, 2008 [new time limit under sub-section (4) of section 153], whichever is later.

 

Let us now assume that this order of annulment has been set aside and such order has been received by the Commissioner on 3rd February, 2008. In such a situation,-

• the assessment with respect to any of the six assessment year (from assessment year 2002-03 to assessment year 2007-08), if already completed under first proviso to renumbered sub-section (1) of section 153A, shall automatically get revived as the proceeding under section 153A has got revived;

• order of assessment or reassessment with respect to any of the six assessment years (from assessment year 2002-03 to assessment year 2007- 08), if not already made, can now be made under first proviso to renumbered sub-section (1) of section 153A as the proceeding under section 153A has got revived;

• the time limit for making such order of assessment or reassessment, which was 31st December, 2009 under clause (a) of sub-section (1) of section 153B, shall get extended by a period starting from 3rd August, 2007 and ending on 3rd February, 2008 (i.e., six months) under the provision of new clause (vii) in Explanation occurring after sub-section (1) of section 153B; and

• the proceeding for assessment year 2005-06 which had got revived under new sub-section (2) of section 153A will again get abated due to the provision of its proviso.If assessment order has already been made with respect to this assessment proceeding, that assessment order will get annulled automatically. 

Applicability: These amendments have been made applicable with retrospective effect from 1st June, 2003.

Note: Above is the Analysis of Amendment made by The Finance Act, 2008.

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