Search Assessment under Section 153 A & Section 153 C

Search Assessment under Section 153 A & Section 153 C

This article covers some of the basic but important issues faced by the Assessing Officer in Search assessment.  It also covers the judicial history of the issue and stands taken by the Department. the Income Tax Act and assessment of true income of the assessee is the most important task of the A.O. in Central Charge

This article covers the challenges faced at the time of search assessment and how to proceed in that situation. Section 153A, 153B, and 153C are the most important sections for Search assessment. This Section is used by Financial Act 2003. It replaced the provisions relating to block assessment contained in Chapter XIV-B. Section 153A is relevant for the assessment of the case in which a search was initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May 2003. Section 153B is for the Time limit to be followed in the completion of assessment under section 153A and 153C.

 Section 153C provides that where search is conducted against a person and undisclosed assets/documents indicating undisclosed income are found as belonging to “other person” other than “searched person”, then the proceedings u/s 153C would be undertaken against “other person” and all the provisions of section 153A would be applicable to such proceeding. 

Assessment in case of search or requisition.

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [and for the relevant assessment year or 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

Therefore, this date on which documents seized/ impounded handed over to the Assessing Officer of “other person” is relevant only in the context of identification of A.Ys., which requires to be abated.

Satisfaction for Assessment Proceedings:

There is no requirement of recording satisfaction floating proceedings u/s 153A. Since no search under Section 132(1) of the Act can be initiated without a satisfaction note being recorded by the Conducting Officer of such a “searched person”. Second satisfaction by the A.O. having jurisdiction over such “other person” that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such “other person” for the relevant A.Ys. The satisfaction has to be recorded in writing before the issuance of notice u/s 153C to such “other person”.

Search Year Assessment:

7th year of Assessment to be selected as per “CBDT Guidelines for manual selection of returns for Complete scrutiny during the financial-year” by sending notice u/s 143(2) as per the timeline provided in the Act. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure the complete absence of notice itself.

Abatement of Assessment:

As per Second Proviso of Section 153A that any assessment or reassessment relating to any of the assessment years falling within the said period of six assessment years, pending on the date of initiation of the search, shall abate.

Incriminating Material:

The controversy, whether A.O. while making the assessment in search cases restrict addition only to incriminating material found during the search, leads to litigation of more than 100 cases SLP filed and pending at Supreme court.