New Delhi: In a landmark decision, the Supreme Court, while clarifying the scope of assessment under Section 153A of the Income Tax Act, 1961, has held that in cases where no incriminating material is found during a search, the assessing officer (AO) cannot assess or reassess the total income for completed/ unabated assessments. In such cases, the remedy would lie under sections 147/148 of the IT Act, subject to fulfilment of conditions, a division bench of Justices MR Shah and Sudhanshu Dhulia clarified on April 24.
Section 153A of the Income Tax Act, 1961, deals with the assessment of the income of any person in case of search or requisition. It empowers tax authorities to conduct a search and seizure operation if they have reason to believe that any person has undisclosed income or assets. However, the second proviso to Section 153A states that any pending assessment or reassessment relating to the said period shall abate.
AO can assess or reassess the income/total income taking into consideration the other material
The IT authorities contended that in case of search even where no incriminating material is found during the course of search, even in case of unabated/ completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material.
The apex court disagreed. “In that case, there will be two assessment orders, which shall not be permissible under the law,” it said.
The judges observed that the object of Section 153A is to bring under tax the undisclosed income found during the search or pursuant to search or requisition. “Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/ unabated assessment,” the bench noted.
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