Tracing Powers of AO to Make Assessment U/s 153A W.R.T Presence or Absence of Incriminating Material

Ajay Kumar Srivastava
Principal Commissioner of Income
Tax (Central),
Lucknow
taxalogue@incometax.gov.in

Sh. Ajay Kumar Srivastava is an IRS officer of 1988 batch currently posted as Principal Commissioner of Income Tax (Central), Lucknow. He has done M.Sc(Biochemistry) and has worked in I.T Deptt at various levels dealing with assessment, administration, I&CI, Investigation, ITAT, Intl. Tax, and Central etc. He has also worked in the field of International taxation for 5 years.

Executive Summary A view is being frequently propounded by assessees before the courts that the powers of an AO to make assessment u/s 153A are restricted to those issues which emanate from the evidences found in search only. It is being argued that the AO cannot embark upon assessment on any other issue, which either has no relevance or nexus to evidence found during search or is based merely on the re-appreciation/examination of an entry already recorded in books or document already made available to AO or any claim/relief already claimed and allowed by AO prior to search, whether u/s 143(1) or 143(3). There are contradictory decisions of the Courts on the issue. Therefore, it has become necessary to trace the power of AO to make assessment u/s 153A, w.r.t presence or absence of incriminating material.

The following discussion is only an attempt to provide some insight into the various nuances, which could be relevant to understand the controversy and take a view while framing assessments as well as in the pleadings before various judicial forums.

1. After going through various decisions of the courts and the rationale considered by such courts to decide on this issue, it is necessary for the better understanding of the powers of the AO to make assessment u/s 153A to analyze and seek answers to certain pertinent questions/issues:

(i) Why the issue of notice u/s 153A for 6 AYs is automatic in cases where search is initiated without requirement of recording of any satisfaction/reference to seized material unlike section 147?

(ii) When issue of notice u/s 153A is independent of seizure of any material, then can a restriction be inferred in the powers of AO to assess the total income that the addition is to be based on seized evidences only?

(iii) Whether the nexus of seized material is essential for making assessment of total income u/s 153A?

1.1 The language of section 153A makes it very clear that there is no explicit or intended requirement of seizure of incriminating material during the search u/s 132(1) before issuing the notices u/s 153A. The jurisdiction of section 153A is automatic from the moment a search is initiated. There is no requirement of examination of seized material or recording any satisfaction w.r.t availability of seized material before issue of notice u/s 153A. In my opinion, the intention of legislature in allowing so could be that the initiation of search itself is subject to recording of satisfaction u/s 132(1) by the PDIT(Inv) on grounds that:

(i) Upon issue of summons u/s 131(1), the assessee has failed to produce or would not produce the books of accounts or other documents so requisitioned; or

(ii) The assessee is in possession of money, bullion jewellery, article or thing which represents wholly or partly in come has not been or would not be disclosed for the purposes of the Act.

Hence a conjoint reading of section 153A and 132(1) would clearly imply that a satisfaction to issue notice u/s 153A is already deemed to be imported from the satisfaction recorded by PDIT(Inv) at the time of issuing warrants u/s 132(1). The existence of satisfaction recorded by PDIT(Inv) is liable to be challenged before courts. Hence, until such satisfaction for issue of warrants u/s 132(1) are held invalid by any court, the satisfaction recorded by PDIT(Inv) shall continue to hold the fort for purposes of 153A also and it is for this reason there is no further requirement of recording any belief or satisfaction by AO for issue of notice u/s 153A.

As may be noted from the conditions of recording the satisfaction of PDIT(Inv), one of the conditions is regarding books or other documents which were not produced or would not have been produced on issue of summons. Thereby implying that post search, while the AO is making assessment, it has to examine the correctness of income disclosed not only based on what material has been gathered during search but also based on these books or documents which in the opinion of PDIT(Inv) would not have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. In fact, there are numerous instances when even the books of accounts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfaction by PDIT(Inv) in respect of income being fully or partly not disclosed for the purposes of the Act. Hence, even if some income/ entry is disclosed in books or audited accounts, the AO is mandated to examine whether such income / entry was disclosed fully or partly and/ or represents its real nature and source for the purposes of the Act. This inter alia would mean that even the entries disclosed in accounts which might represent income fully or partly would in itself be an incriminating material for which a search was initiated. When the non-production of books or other documents can give rise to a belief for initiating search u/s 132(1), then it may be counterproductive to conclude that the power of AO is restricted to assessment based only on incriminating material found in search, irrespective of any other item of income which might have remained fully or partly undisclosed for the purposes of the Act, based upon the entries already appearing in such books, if any.

1.2 It is the ‘assessment of total income’ which is required to be made u/s 153A. The total income as defined u/s 2(45) would be the total income computed as per section 5 of the Act. The word ‘assessment’ cannot have a different meaning for different purposes under the same Act, unless restricted by specific provisions. The process of assessment for the purposes of the Act is wide enough to include every kind of enquiry/examination for discovery, quantification and assessment of any income wholly or partly for the purposes of the Act. Hence, the process of ‘assessment of total income’ u/s 153A can neither be restrictive nor have a different connotation for assessment under section 153A vis a vis 143(3) or 147. As per the scheme under the Act, the satisfaction recorded u/s 132(1) and the results of search are intended to be brought to a logical conclusion by initiating the proceedings u/s 153A without any further act of the AO. Hence it is in the scheme of the Act that after issuance of notice u/s 153A, the next action of the AO must follow the examination of all aspects for which a search has been initiated. Hence, it cannot be said that the AO u/s 153A cannot proceed to examine the books of accounts or documents, entries which were produced before him subsequently, wherein might also represent income wholly or partly, which has not been disclosed for the purposes of the Act. Hence, it may be contrary to the scheme of the provisions of 132(1) r/w 153A, if it were to be held that power of AO is restricted only to make assessment the evidence found during search. The provisions of 153A not only require assessment of undisclosed income but total income also. The expression ‘total income’ would include the income emanating from disclosed items, income emanating from partly or wrongly disclosed items as well as income emanating from undisclosed items. U/s 153A, no distinction is made for assessment of total income in the cases which were earlier completed u/s 143(1), the cases which were earlier completed u/s 143(3)/147 or the cases where no return was filed prior to search. Thus, in all the three categories, it is as per the scheme of the Act that the total income of the assessee as defined u/s 2(45) needs to be assessed for all the 6 AYs for which the AO is mandated to issue notice u/s 153A.

1.3 Further u/s 153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There can also be a situation where neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The section also envisages the issue of notice u/s 153A whether or not any evidences were found for that year. It is also implicit that u/s 153A, the items of total income which could be assessed u/s 153A in abated proceedings cannot be different for the cases which could not be abated such as I) where no proceedings were pending; or ii) where earlier assessments were completed u/s 143(3)/147; or iii) where earlier assessments were not made at all. The only caveat could be that before making any addition to the total income, the AO must bring on the record how such items are falling into the category of total income for the purposes of the Act. Thus, if it were to be held that no addition can be made without any incriminating material in respect of the years covered by section 153A, then it would lead to an absurd consequence whereby the powers granted to issue notices u/s 153A would be rendered otiose in cases which got abated for any particular AY. In the absence of any seized material, AO may not be able to proceed to make any assessment of any other item of total income implying that the process of making assessment of total income as envisaged in section 153A fails in abated cases. However, a statute can never be interpreted in a manner to make it redundant.

1.4 Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of search, or on the basis of any other post-search material or information available with the AO though such assessment cannot be arbitrary. The provisions section of 147 and section 153A, though have different conditions to assume jurisdiction but both operate to make the assessment of total income only. The Memorandum explaining the provisions of Finance (No. 2) Bill of 2009 while inserting explanation 3 to section 147 reads as under:

“Some courts have held that the Assessing Officer has to restrict the reassessment proceedings only to issues in respect of which the reasons have been recorded for reopening the assessment. He is not empowered to touch upon any other issue for which no reasons have been recorded. The above interpretation is contrary to the legislative intent.

Therefore to articulate the legislative intent clearly, explanation 3 has been inserted in section 147 to provide that assessing officer may examine, assess or reassess any issue relevant to income which comes to his notice subsequently in the course of proceedings under this section, notwithstanding that the reasons for such issue has not been included in the reasons recorded under subsection(2) of section 148”.

Hence, even in absence of any explanation u/s 153A also similar to the explanation 3 u/s 147, the intention of the legislature and the scheme of the Act for making assessment u/s 153A where search u/s 132 is initiated, is same i.e. in order to make assessment of total income, after having assumed the jurisdiction to assess total income, the powers of AO shall not remain restricted to mere those material which were seized during search but shall also include the assessment of income based on any entry already recorded prior to search or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A.

1.5 There is divergence of judicial opinion on the question of whether assessment u/s 153A can be restricted to only the incriminating material seized during the search or whether the AO can also take a view based on something which might be noticed otherwise during the course of assessment proceedings u/s 153A? Some of the conflicting opinions expressed in judicial verdicts are as under:

(a) Allahabad High Court in Raj Kumar Arora 367 ITR 517 has held that there is no requirement of incriminating material for invoking provisions of 153A.

(b) The Delhi High Court in Kabul Chawla 380 ITR 573 (Del) held that assessment u/s 153A on an issue could not have been made unless backed by some incriminating material found during the search. The department has not accepted the decision in case of Kabul Chawla and the SLP was filed was subsequently withdrawn due to low tax effect.

© However, the same Delhi High Court in case of Dayawanti Gupta Vs CIT 390 ITR 496(Del) in para 16 has observed that:

“Section 153A, which provides for an assessment in case of search, and was introduced by the Finance Act, 2003 with effect from 1-6-2003, does not provide that a search assessment has to be made strictly on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found. The earlier section 158BB which is not applicable in case of a search conducted after 31-5-2003, provided that the computation of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or information as are available with the Assessing Officer, provided they are related to the materials found. Section 153A(1)(b) requires assessment or reassessment of total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. This, however, does not mean that the assessment under section 153A can be arbitrary or made without any relevance or nexus with the seized material ”.

(d) Filatex India Ltd Vs CIT-IV 229 Taxman 555 (Delhi)

Whether during assessment under section 153A, additions need not be restricted or limited to incriminating material found during course of search and, hence, argument of assessee that addition under section 115JB was not justified in order under section 153A as no incriminating material was found concerning said addition had to be rejected – Held, yes.

(e) Sunny Jacob jewelers and wedding center Vs DCIT 362 ITR 664 (Ker)

Whether there is no requirement under provisions of Act requiring department to collect information and evidence for each and every year for six previous years in order to initiate proceedings under section 153A – Held, yes

(f) CIT Vs Anil Kumar Bhatia 352 ITR 493(Delhi)

Whether even if 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) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search – Held, yes

(g) CIT-II Vs continental warehousing corporation 235 Taxman 568 (SC)

The High Court by impugned order held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding – Whether Special Leave Petition filed against impugned order was to be granted – Held, yes

(h) Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.)Ltd. 256 Taxman 63(SC)

High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent additions made by Assessing Officer on said basis were not justified – Whether SLP against said impugned order was to be allowed – Held, yes.

(i) The dismissal of SLP by supreme court in case of PCIT vs Meeta Gutgutia wherein also the same views were expressed as in Kabul Chawla, would also not lead to conclusion that the question decided by Delhi High court against the revenue in Meeta Gutgutia is settled because the SLP has already been admitted by SC for hearing on the same question in several other cases such as Continental warehousing, Best Infrastructure(supra).

(j) Further, Supreme Court in Sinhgad Tech Edu Society 397 ITR 344(SC) held that no notice u/s 153C could be invoked unless there was incriminating material is also of no consequence as the provisions of section 153C has been amended w.e.f 1/4/2005 and that the decision of Sinhgad Tech Edu society was for period prior to 1/4/2005.

1.6 The sum and substance of all the decisions above could only indicate that the question of whether the AO has powers u/s 153A to assess total income as defined u/s 2(45) dehors the incriminating material also, has not at all become final and the same is yet pending final adjudication before the SC in SLPs admitted. Hence the arguments made in preceding paragraphs can be pitched up to support the revenues’ contention before courts.

2. Now next set of questions which are required to be answered are:

(I) What constitutes incriminating material for the purpose of making an assessment of total income u/s 153A?

(ii) Whether the mere fact that an entry has been considered in any earlier proceedings or that the entry/ income is recorded in accounts in the manner which is later found to be different from its true nature and source could take away its character of being incriminating for the purpose of making an assessment u/s 153A?

2.1 The ‘incriminating material’ can be in any form such as evidence in the nature of i) a document, content of any document; ii) an entry in books of account; iii) an asset; iv) a statement given on oath; v) absence of any fact claimed earlier but coming to notice during search; vi) absence of books being found during search; or vii) absence of the office/ business premises as claimed during returns filed or any other documents, etc. In short, any fact/ evidence which could suggest that the documents/ transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/ make belief based on non-existent facts or suppressed/ misrepresented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as also held by apex court in B Kishore Kumar Vs DCIT 234 Taxman 771(SC) as under:

High Court by impugned order held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents – Whether Special Leave Petition filed against impugned order was to be dismissed – Held, yes

Hence even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s 153A.

2.2 Since the proceedings under the Act are civil in nature, even the circumstantial evidences based on preponderance of probability will constitute incriminating material enough to make an assessment of income and fasten the tax liability as held by in Sumati Dayal Vs CIT 214 ITR 801(SC). It will therefore include any circumstantial material also, which directly or indirectly, proves that the earlier evidence submitted was only a make belief and such new material has a bearing on the assessment of total income of any assessee, even if such income was earlier admitted as correct in absence of any such adverse facts available at the time of earlier assessment.

The requirement of incriminating material is not specifically mentioned in the Act. However, w.e.f. 1/4/2005 the provisions of section 153C have been amended so as to allow the invocation of proceedings u/s 153C if any document, an entry or an asset is found in relation or pertaining to a person other than the searched person, which has a bearing on the assessment of total income as per the provisions of the I T Act. Hence the word “incriminating”, as used by the courts in context of section 153C, needs to be applied in the context of section 153A also which has to be seen as something which can have a bearing on the assessment of correct total income u/s 2(45) as per provisions of the Act.

2.3 The expression ‘have a bearing on determination’ as used u/s 153C also has a wide connotation which implies that the nexus of the seized documents/ assets to income should only be a logical nexus to the ultimate process of determination of total income and that such evidence need not be in the nature of direct hard evidence. Applying the same principles, the incriminating material for the purposes of section 153A also has to be necessarily construed to be in the nature of a prima facie evidence only (including a circumstantial evidence) and not a hard evidence. The use of the expression ‘books of accounts’ u/s 153C again suggests that even the entries recorded in the books of accounts, which have not been correctly recorded or camouflaged would also partake the character of incriminating material, if the same has a bearing on the determination of income which has not been already disclosed in the return filed, if any. Hence, the entries in the regular books of accounts would also trigger the assessment u/s 153A/C, if there is some prima facie evidence that the entry recorded therein is camouflaged, or incorrect, wholly or partially, and such entries have a bearing on determination of total income of such person. The definition under clause (ii) of 271AAB(c) also defines undisclosed income as “any income based on entry in books of accounts wholly or partly false and would not have been found to be so, had the search not been conducted”. This clearly implies that any entry even recorded in the books, which is found to be wholly or partly false along with having a bearing on determination of income based on evidence gathered during search, would also be in the nature of incriminating material. Further, recently introduced section 270A, which is also applicable to search asstt. for AYs other than specified years, mandates to levy penalty even in cases where the expenses had been claimed in the books without any evidence or where the entries recorded in the books were found to be false. This also supports the contention that mere recording of an entry in the books of accounts does not take away its incriminating character, if such entry was without evidence or had been falsely recorded in the books of accounts. The same principle will also hold good for the documents submitted earlier in relation to entries recorded in the books but later found that the documents were not genuine or manipulated or camouflaged. Supreme Court in Sinhgad Tech Edu Society or Delhi High Court in Kabul Chawla never considered the implication of section 270A and 271AAB as explained above while considering as to what material would constitute incriminating for the purposes of assessment of total income under section 153A/C.

2.4 The provisions of section 153A/153C are not the normal assessment provisions like 143(3); rather they are curative provisions to plug the mischief of evasion of taxable income based on evidences found in pursuance to search. Hence, if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search, then such material/ facts coming to fore now will definitely constitute an incriminating material. In consequence of the same the earlier recorded entries/earlier admitted documents and evidence shall have no force as genuine evidence. If it were held not to be so, then the purpose of 153A would be defeated as it would fail to prevent the mischief, which it sought to prevent just because the entries were already recoded in the books or some documents had already been accepted. Hence applying the Hayden’s rule of mischief, the mere fact that such entries are recorded in the books of accounts or some fabricated or colourful documents have already been accepted as correct, will not prevent such material or entry from being incriminating, if the circumstances suggest otherwise. The Hayden’s rule of mischief has been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal).

The incriminating material can be from the search or even from subsequent surveys or any other enquiries. Recently i n C I T C h e n n a i v s A j i t S Kumar 9 3 Taxman.com294(SC), the court in the context of section 158BB has upheld the use of information collected in a survey in case of connected person carried along with search in other person for the purpose of making asstt. u/s 158BB. Provisions of 158BB are Pari Materia to section 153A.

The Delhi High court in PCIT Vs Kabul Chawla in para 37(iv) observed as under:

“iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this Section only on the basis of seized material.”

The Delhi High court has thus explained the underlying principle that though the assessment may not be based on seized evidence only but the addition cannot be arbitrary. There can be no dispute on this proposition. It has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found. Thus, any entry already recorded in the books which is not true in its nature or source and any information even coming to the AO post search shall constitute incriminating material for the purpose of making an assessment u/s 153A.

3. Even if it is accepted that the AO does has powers to consider other aspects which were not directly emanating from seized material or that the AO had some basis to disturb earlier findings, it would still be necessary to seek answers to the following questions:

(i) Whether the change of opinion based on material is permissible while making assessment?

(ii) What are the conditions and to what extent the AO can dislodge the claims already accepted/claimed/allowed, etc. in earlier proceedings?

(iii) Whether u/s 153A, the AO can disturb the findings arrived on an issue, whether explicitly or otherwise, in earlier assessments concluded u/s 147/143(3) when it is found that the AO has been misled by placing evidences due to suppression or misrepresentation of facts, which were subsequently found to be doubtful based on evidences gathered?

3.1 There is a distinction between a mere change of opinion and a change of opinion based on fresh facts. The latter would imply that the earlier conclusions of the AO were misled by placing evidence on suppression or misrepresentation of material facts. An order passed by the AO relying upon such make belief documents, suppressed or misrepresented facts, which were later found to be not true, shall become void or voidable, as the case may be. Under such circumstances, the acceptance of any claim, relief etc. in any earlier order shall also have no binding force in any subsequent proceedings and the change of opinion would be permissible. The Courts have accepted the principle that any fraud practiced on the court is always a ground for vacating the judgment, as where the court is deceived or misled as to material circumstances, or its process is abused, resulting in the rendition of a judgment, which would not have been given if the whole conduct of the case had been fair”.

The Madras High Court in case of L. Mohanam vs Mohamed Idris on 24 June, 2011 in O.S.A.No.310 of 2010 has observed as under:

19. In support of his contention, the learned senior counsel for the appellant/plaintiff relied on the decision of the Hon’ble Supreme Court in Hamza Haji V. State of Kerala and another reported in (2006) 7 SCC 416, wherein it has been observed that a decision obtained by playing a fraud on Court is liable to be set aside on the basic principle that the party who secured such a decision by fraud cannot be allowed to enjoy its fruits. The learned senior counsel also relied on the observation of the Hon’ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A.V.Papayya Sastry and Others Vs. Govt. Of Andhra Pradesh and others reported in (2007) 4 Supreme Court Cases 221 also, the Hon’ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-est and nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration, Gorakhpur Vs. Bhagwan Das (dead) By Lrs reported in (2008) 8 Supreme Court Cases 511, the Hon’ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest Court, is a nullity in the eye of law.

Section 44 of the Evidence Act also enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a Court to consider and decide the question whether a prior adjudication is vitiated by fraud.

Thus, the above propositions of law abundantly make clear that the AO also being a quasi-judicial authority, while functioning under the Act, shall also be bound by similar principles of jurisprudence. Hence, for the purposes of assessment of total income u/s 153A also, any findings given in respect of any claim/relief in earlier proceedings shall stand vacated by operation of legal principles (as held by the Apex court above), where it is found that in earlier proceedings the AO has been misled by suppression or misrepresentation of material facts or by producing only make belief documents, which were not found to be genuine subsequently based on emergence of new facts during enquiries. Hence the view that the AO cannot rescind from accepting the documents admitted earlier is not a gospel truth which can be applied in each and every circumstance.

3.2 Further the Apex court in ITO Vs. Techspan India (P.) Ltd. 92 taxmann.com 361 (SC) observed as under:

Whether before interfering with proposed re-opening of assessment on ground that same is based only on a change of opinion, Court ought to verify whether assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is basis of alleged escapement of income that was taxable; if assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to Assessing Officer any opinion on questions that are raised in proposed re-assessment proceedings – Held, yes – Whether every attempt to bring to tax income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where order of assessment does not address itself to a given aspect sought to be examined in re-assessment proceedings – Held, yes

In view of the above, applying the same principle in the present context also, it can be safely concluded that in the absence of any categorical finding on the genuineness of a claim in an earlier assessment having being accepted on make belief documents/evidences only, it cannot be said that the A.O. has expressed any opinion on the correctness or otherwise of the items/entries disclosed in the return of income already filed prior to the search. The judicial view is very clear wherein it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. Hence, if any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s 153A.

In view of the above, it is clear that if there is some material noticed subsequently whether found during search or otherwise, the findings of earlier assessments can be dislodged, irrespective of whether such earlier assessment was under 143(1) or 143(3)/147.

Source- CBDT Taxalogue Magazine Jul – Oct 19 | Volume 1 | Issue 1