Case Law Details
PCIT Vs Surendra L Hiranandani (Bombay High Court)
Summary: The Bombay High Court dismissed the Revenue’s appeals under Section 260A of the Income Tax Act concerning the exercise of revisionary powers under Section 263 in assessments pursuant to search. The Revenue raised the question whether the Principal Commissioner of Income Tax could invoke Section 263 where an assessment order passed after a search was prejudicial to the interests of the Revenue despite there being no addition other than that arising from incriminating material in an unabated assessment year. The Court noted that the issue was covered by the Supreme Court’s decision in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell (P) Ltd. It observed that the Supreme Court held that completed or unabated assessments are not intended to be reopened unless incriminating material relating to the relevant assessment year is found during the search, and that the object of Section 153A is to bring to tax undisclosed income found during the search or requisition. Holding that the issue stood concluded by the Supreme Court decision in favour of the assessee, the High Court held that no substantial question of law arose and dismissed the appeals.
Core Issue. The principal issue before the Bombay High Court was whether the Principal Commissioner could invoke the revisional jurisdiction under section 263 to revise a search assessment completed under section 153A for an unabated assessment year, where the Assessing Officer had made no addition except on the basis of incriminating material found during the search.
Facts. A search was conducted under the Income-tax Act, pursuant to which assessments were completed under section 153A for the relevant assessment years. The assessment years involved were unabated/completed assessments, and while framing the assessments, the Assessing Officer confined the additions only to income arising from incriminating material discovered during the course of the search. The Principal Commissioner thereafter exercised revisional jurisdiction under section 263 on the ground that the assessment orders were erroneous and prejudicial to the interests of the Revenue. The Income Tax Appellate Tribunal set aside the revisional orders, holding that the Assessing Officer had correctly followed the settled legal position. Aggrieved thereby, the Revenue preferred appeals before the Bombay High Court under section 260A.
Submissions of the Parties
The Revenue contended that where a search assessment passed under section 153A is erroneous and prejudicial to the interests of the Revenue, the Principal Commissioner is empowered to exercise revisional jurisdiction under section 263, even if the Assessing Officer has not made additions beyond the incriminating material found during the search. According to the Revenue, the legality of the assessment order could still be examined under section 263.
The assessee submitted that the controversy stood concluded by the judgment of the Supreme Court in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell (P.) Ltd., wherein it was categorically held that in respect of completed or unabated assessment years, no addition can be made under section 153A unless incriminating material relating to the concerned assessment year is found during the search. Since the Assessing Officer had faithfully followed the law declared by the Supreme Court, the assessment order could not be regarded as erroneous or prejudicial to the interests of the Revenue so as to justify invocation of section 263.
Findings and Determination of the High Court
The Bombay High Court held that the issue was squarely governed by the decision of the Supreme Court in Abhisar Buildwell (P.) Ltd. The Court reiterated that the legislative scheme of section 153A contemplates abatement only of pending assessments, while completed or unabated assessments cannot be disturbed in the absence of incriminating material pertaining to the relevant assessment year. The object of section 153A is to assess undisclosed income unearthed during the search and not to reopen completed assessments without any incriminating material.
Applying the above principle, the Court observed that the Assessing Officer had correctly restricted the assessment to the income arising from incriminating material found during the search. Since the Assessing Officer had adopted the only legally permissible view in accordance with the law declared by the Supreme Court, the assessment order could not be characterized as erroneous. Consequently, the Principal Commissioner had no jurisdiction to invoke section 263 merely because he preferred a different view. Revisional jurisdiction cannot be exercised to unsettle an assessment which correctly applies the binding law laid down by the Supreme Court.
The Court further held that once the controversy stood concluded by the judgment in Abhisar Buildwell (P.) Ltd., no substantial question of law survived for consideration in the Revenue’s appeals.
Cases Relied Upon
The Court principally relied upon Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell (P.) Ltd. [(2023) 149 taxmann.com 399 (SC); 2023 (4) TMI 1056 (SC)]. Reference was also made to the order of the Mumbai Bench of the Tribunal in Shri Surendra L. Hiranandani v. Principal Commissioner of Income Tax, Central-I, Mumbai [2018 (2) TMI 2025 – ITAT Mumbai].
Outcome. The Bombay High Court dismissed the Revenue’s appeals, holding that where a search assessment relates to an unabated assessment year and the Assessing Officer has confined the assessment to income arising from incriminating material in accordance with the law laid down by the Supreme Court in Abhisar Buildwell (P.) Ltd., the assessment order cannot be revised under section 263. Since the Assessing Officer had adopted the correct legal view, no substantial question of law arose, and the Principal Commissioner was not justified in invoking revisional jurisdiction under section 263.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. These Appeals are filed under Section 260-A of the Income Tax Act, 1961. It assails the common judgment and order passed by the Income Tax Appellate Tribunal, ‘E-Bench’, Mumbai (“ITAT” for short) in Income Tax Appeal 3226/M/2017 & Ors. (for short “Impugned Order”). The Appeal No.2793 of 2018 pertains to A.Y. 2012-13 whereas Appeal No.2788 of 2018 pertains to A.Y. 20082009.
2. Heard learned counsel for the parties. The issues arising in these Appeals being similar and arising out of the common Impugned Order of the ITAT, we dispose of the Appeals by this order.
3. Mr. Akhileshwar Sharma would submit that the following substantial questions of law arises for consideration in these Appeals which are formulated as under:-
(a) Whether an assessment order pursuant to search and prejudicial to the interests of Revenue confers jurisdiction upon the Principal Commissioner of Income Tax to exercise power of review under Section 263 of the Income Tax Act, 1961 in the absence of any addition to the income made by the Assessing Officer other than that arising out of the incriminating material, in the assessment year where the original assessment was unabated?
4. Mr. Sharma, learned counsel for the Appellant in the course of his arguments would fairly submit that the legal issue formulated through the substantial question of law arose for consideration before the Supreme Court in Principal Commissioner of Income Tax, Central -3 Vs. Abhisar Buildwell (P) Ltd.1.
5. We have gone through the decision of the Supreme Court in Abhisar Buildwell (supra). It is apposite to refer to the findings recorded by the Supreme Court in paragraphs 11 and 12 of the said judgment.
6. In a nutshell, the Supreme Court has observed that the intention of the legislature seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume jurisdiction to assess or reassess the ‘total income’ for the entire six years block/assessment period. The intention does not seem to be to reopen the completed/unabated assessments, unless incriminating material is found with respect to the concerned assessment year. The object of Section 153A of the Act is to bring under tax the undisclosed income which is found during the course of search or pursuant to requisition. Therefore, only in a case where undisclosed income is found on the basis of incriminating material, the Assessing Officer would assume jurisdiction to assess or reassess the total income even in the case of completed/unabated assessment.
7. Fenil Bhatt, learned counsel for the Respondent would submit that the substantial questions of law as formulated in these Appeals stands covered by the decision of the Supreme Court in Abhisar Buildwell (supra) against the Revenue. In view thereof, the Appeals raises no substantial question of law and deserves to be dismissed.
8. In the given factual complexion, in our considered view, the decision of the Supreme Court in Abhisar Buildwell (supra) would squarely apply. Accordingly, the Assessing Officer having taken the correct view cannot be disturbed by the Principal Commissioner of Income Tax by taking recourse to Section 263 of the Income Tax Act, 1961.
9. As the above substantial question of law is fully covered by the Supreme Court decision in Abhisar Buildwell (supra) in favour of the assessee and against the Revenue and the same being applicable to the given factual matrix, no substantial question of law arises for consideration in the present Appeals.
10. In view of the above, the Appeal stands Dismissed.
Notes:
1 [2023] 149 taxmann.com 399 (SC)
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