PROFESSIONAL UPDATE JANUARY 12, 2016

ASSESSMENTS U/S 153A PURSUANT TO SEARCH PROCEEDINGS ARE LIMITED TO INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SUCH SEARCH:-

CIT vs. Kabul Chawla (Delhi High Court) 

Fact :-

Whether the assessment u/s 153A of the act pursuant to search operations for the years which stood assessed earlier is de-novo.

Whether pursuant to search operations, issuance of notice u/s 153A for the years which are already assessed does entail altogether a fresh exercise of making fresh assessment even on the issues which are not connected with the incriminating material unearthed during the course of search and seizure proceedings.

Brief Background:-

This issue ( as to whether search assessments are fresh assessments or limited assessments only w.r.t the seized material)  has been a matter of judicial controversy over the years leading to high end litigation across the country so far as different courts and tribunals have given divergent views on the matter.

As a matter of big relief, the Hon’ble HC held that the completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.

The legal position that emerges after the aforesaid judgment is that the assessments u/s 153A has to be essentially based on the documents unearthed during the course of search and seizure operations and a completed assessment becomes final unless some incriminating material is found in the course of search.

In other words, if any issue is accepted in original assessment order, the same cannot be once again re-considered while framing assessment under section 153A except if some evidence or material is found at the time of search in respect of such issue leading to the inference of undisclosed income.

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