# PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3 v. ABHISAR BUILDWELL P. LTD

- **Citation:** [2023] 7 S.C.R. 899
- **Court:** Supreme Court of India
- **Decided:** 2023-04-24
- **Case number:** Civil Appeal No. 6580 of 2021
- **Bench:** M. R. Shah, Sudhanshu Dhulia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/principal-commissioner-of-income-tax-central-3-v-abhisar-buildwell-p-ltd-37529
- **Pages:** 40

## Headnote

Income Tax Act, 1961 - ss.153A, 132, 132A - Assessment
u/s.153A - Scope of - Whether in respect of completed assessments/
unabated assessments, the jurisdiction of AO to make assessment is
confined to incriminating material found during the course of search
u/s.132 or requisition u/s.132A or not - Held: In case of search
u/s.132 or requisition u/s.132A, the AO assumes the jurisdiction for
block assessment u/s.153A - All pending assessments/reassessments
shall stand abated - In case any incriminating material is found/
unearthed, even in case of unabated/completed assessments, the
AO would assume the jurisdiction to assess or reassess the 'total
income' taking into consideration the incriminating material
unearthed during the search and the other material available
including the income declared in the returns - In case no
incriminating material is unearthed during the search, the AO cannot
assess or reassess taking into consideration the other material in
respect of completed assessments/unabated assessments- Thus, in
respect of completed/unabated assessments, no addition can be made
by the AO in absence of any incriminating material found during
the search u/s.132 or requisition u/s.132A - View taken by the Delhi
High Court in Kabul Chawla and the Gujarat High Court in Saumya
Construction case is agreed with.
Income Tax Act, 1961 - s.153A - Object and purpose of -
Discussed.
Dismissing the appeals and the review petition, the Court
HELD: 1.1 That prior to insertion of Section 153A in the
statute, the relevant provision for block assessment was under
Section 158BA of the Act, 1961. The erstwhile scheme of block
assessment under Section 158BA envisaged assessment of
'undisclosed income' for two reasons, firstly that there were two
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parallel assessments envisaged under the erstwhile regime, i.e.,
(i) block assessment under section 158BA to assess the
'undisclosed income' and (ii) regular assessment in accordance
with the provisions of the Act to make assessment qua income
other than undisclosed income. Secondly, that the 'undisclosed
income' was chargeable to tax at a special rate of 60% under
section 113 whereas income other than 'undisclosed income' was
required to be assessed under regular assessment procedure
and was taxable at normal rate. Therefore, section 153A came to
be inserted and brought on the statute. Under Section 153A
regime, the intention of the legislation was to do away with the
scheme of two parallel assessments and tax the 'undisclosed'
income too at the normal rate of tax as against any special rate.
Thus, after introduction of Section 153A and in case of search,
there shall be block assessment for six years. Search
assessments/block assessments under Section 153A are
triggered by conducting of a valid search under Section 132 of
the Act, 1961. The very purpose of search, which is a prerequisite/
trigger for invoking the provisions of sections 153A/153C is
detection of undisclosed income by undertaking extraordinary
power of search and seizure, i.e., the income which cannot be
detected in ordinary course of regular assessment. Thus, the
foundation for making search assessments under Sections 153A/
153C can be said to be the existence of incriminating material
showing undisclosed income detected as a result of search. [Para
9.1][932-G-H; 933-A-D]
1.2 As per the provisions of Section 153A, in case of a search
under Section 132 or requisition under Section 132A, the AO
gets the jurisdiction to assess or reassess the 'total income' in
respect of each assessment year falling within six assessment
years. However, it is required to be noted that as per the second
proviso to Section 153A, the assessment or re-assessment, if
any, relating to any assessment year falling within the period of
six assessment years pending on the date of initiation of the search
under Section 132 or making of requisition under Section 132A,
as the case may b

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PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3
v.
ABHISAR BUILDWELL P. LTD.
(Civil Appeal No. 6580 of 2021)
APRIL 24, 2023
[M. R. SHAH AND SUDHANSHU DHULIA, JJ.]
Income Tax Act, 1961 - ss.153A, 132, 132A - Assessment
u/s.153A - Scope of - Whether in respect of completed assessments/
unabated assessments, the jurisdiction of AO to make assessment is
confined to incriminating material found during the course of search
u/s.132 or requisition u/s.132A or not - Held: In case of search
u/s.132 or requisition u/s.132A, the AO assumes the jurisdiction for
block assessment u/s.153A - All pending assessments/reassessments
shall stand abated - In case any incriminating material is found/
unearthed, even in case of unabated/completed assessments, the
AO would assume the jurisdiction to assess or reassess the 'total
income' taking into consideration the incriminating material
unearthed during the search and the other material available
including the income declared in the returns - In case no
incriminating material is unearthed during the search, the AO cannot
assess or reassess taking into consideration the other material in
respect of completed assessments/unabated assessments- Thus, in
respect of completed/unabated assessments, no addition can be made
by the AO in absence of any incriminating material found during
the search u/s.132 or requisition u/s.132A - View taken by the Delhi
High Court in Kabul Chawla and the Gujarat High Court in Saumya
Construction case is agreed with.
Income Tax Act, 1961 - s.153A - Object and purpose of -
Discussed.
Dismissing the appeals and the review petition, the Court
HELD: 1.1 That prior to insertion of Section 153A in the
statute, the relevant provision for block assessment was under
Section 158BA of the Act, 1961. The erstwhile scheme of block
assessment under Section 158BA envisaged assessment of
'undisclosed income' for two reasons, firstly that there were two
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parallel assessments envisaged under the erstwhile regime, i.e.,
(i) block assessment under section 158BA to assess the
'undisclosed income' and (ii) regular assessment in accordance
with the provisions of the Act to make assessment qua income
other than undisclosed income. Secondly, that the 'undisclosed
income' was chargeable to tax at a special rate of 60% under
section 113 whereas income other than 'undisclosed income' was
required to be assessed under regular assessment procedure
and was taxable at normal rate. Therefore, section 153A came to
be inserted and brought on the statute. Under Section 153A
regime, the intention of the legislation was to do away with the
scheme of two parallel assessments and tax the 'undisclosed'
income too at the normal rate of tax as against any special rate.
Thus, after introduction of Section 153A and in case of search,
there shall be block assessment for six years. Search
assessments/block assessments under Section 153A are
triggered by conducting of a valid search under Section 132 of
the Act, 1961. The very purpose of search, which is a prerequisite/
trigger for invoking the provisions of sections 153A/153C is
detection of undisclosed income by undertaking extraordinary
power of search and seizure, i.e., the income which cannot be
detected in ordinary course of regular assessment. Thus, the
foundation for making search assessments under Sections 153A/
153C can be said to be the existence of incriminating material
showing undisclosed income detected as a result of search. [Para
9.1][932-G-H; 933-A-D]
1.2 As per the provisions of Section 153A, in case of a search
under Section 132 or requisition under Section 132A, the AO
gets the jurisdiction to assess or reassess the 'total income' in
respect of each assessment year falling within six assessment
years. However, it is required to be noted that as per the second
proviso to Section 153A, the assessment or re-assessment, if
any, relating to any assessment year falling within the period of
six assessment years pending on the date of initiation of the search
under Section 132 or making of requisition under Section 132A,
as the case may be, shall abate. As per sub-section (2) of Section
153A, if any proceeding initiated or any order of assessment or
reassessment made under sub-section (1) has been annulled in
appeal or any other legal proceeding, then, notwithstanding
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anything contained in sub-section (1) or section 153, the
assessment or reassessment relating to any assessment year
which has abated under the second proviso to subsection (1),
shall stand revived with effect from the date of receipt of the
order of such annulment by the Commissioner. Therefore, the
intention of the legislation seems to be that in case of search
only the pending assessment/reassessment proceedings shall
abate and the AO would assume the jurisdiction to assess or
reassess the 'total income' for the entire six years period/block
assessment period. The intention does not seem to be to reopen the completed/unabated assessments, unless any
incriminating material is found with respect to concerned
assessment year falling within last six years preceding the search.
Therefore, on true interpretation of Section 153A of the Act, 1961,
in case of a search under Section 132 or requisition under Section
132A and during the search any incriminating material is found,
even in case of unabated/completed assessment, the AO would
have the jurisdiction to assess or reassess the 'total income'
taking into consideration the incriminating material collected
during the search and other material which would include income
declared in the returns, if any, furnished by the assessee as well
as the undisclosed income. However, in case during the search
no incriminating material is found, in case of completed/unabated
assessment, the only remedy available to the Revenue would be
to initiate the reassessment proceedings under sections 147/48
of the Act, subject to fulfilment of the conditions mentioned in
sections 147/148, as in such a situation, the Revenue cannot be
left with no remedy. Therefore, even in case of block assessment
under section 153A and in case of unabated/completed assessment
and in case no incriminating material is found during the search,
the power of the Revenue to have the reassessment under
sections 147/148 of the Act has to be saved, otherwise the
Revenue would be left without remedy. [Para 11][935-A-H; 936A]
1.3 If the submission on behalf of the Revenue 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 is accepted,
PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3
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in that case, there will be two assessment orders, which shall not
be permissible under the law. At the cost of repetition, it is
observed that the assessment under Section 153A of the Act is
linked with the search and requisition under Sections 132 and
132A of the Act. The object of Section 153A is to bring under tax
the undisclosed income which is found during the course of 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. As per the second proviso to Section 153A, only
pending assessment/reassessment shall stand abated and the AO
would assume the jurisdiction with respect to such abated
assessments. It does not provide that all completed/unabated
assessments shall abate. If the submission on behalf of the
Revenue is accepted, in that case, second proviso to section 153A
and sub-section (2) of Section 153A would be redundant and/or
re-writing the said provisions, which is not permissible under
the law. [Para 12][936-B-E]
1.4 This Court is in complete agreement with the view taken
by the Delhi High Court in the case of Kabul Chawla and the
Gujarat High Court in the case of Saumya Construction, taking
the view that no addition can be made in respect of completed
assessment in absence of any incriminating material. In case of
search under Section 132 or requisition under Section 132A, the
AO assumes the jurisdiction for block assessment under section
153A. All pending assessments/reassessments shall stand abated.
In case any incriminating material is found/unearthed, even, in
case of unabated/completed assessments, the AO would assume
the jurisdiction to assess or reassess the 'total income' taking
into consideration the incriminating material unearthed during
the search and the other material available with the AO including
the income declared in the returns. In case no incriminating
material is unearthed during the search, the AO cannot assess
or reassess taking into consideration the other material in respect
of completed assessments/unabated assessments. Meaning
thereby, in respect of completed/unabated assessments, no
addition can be made by the AO in absence of any incriminating
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material found during the course of search under Section 132 or
requisition under Section 132A of the Act, 1961. However, the
completed/unabated assessments can be re-opened by the AO
in exercise of powers under Sections 147/148 of the Act, subject
to fulfilment of the conditions as envisaged/mentioned under
sections 147/148 of the Act and those powers are saved. [Paras 8
and 14][932-E; 936-G-H; 937-A-B]
Commissioner of Income Tax, Central-III v. Kabul
Chawla (2015) 61 taxmann.com 412 (Delhi) dated
28.08.2015; Principal Commissioner of Income Tax-4
v. Saumya Construction (2016) 387 ITR 529 (Gujarat)
- approved.
All Cargo Global Logistics Ltd. v. Deputy Commissioner
of Income Tax (2012) 18 ITR (Trib.) 106 (ITAT/Mum)
dated 06.07.2012; Commissioner of Income Tax- III,
Pune v. Sinhgad Technical Education Society (2017)
397 ITR 344 (SC) : (2018) 11 SCC 490 : [2017] 8
SCR 463; Principal Commissioner of Income Tax,
Ahmedabad v. Dipak Jashvantlal Panchal 2017 (2) TMI
862 (Gujarat); Commissioner of Income Tax- II, Thane
v. Continental Warehousing Corporation (Nhava Sheva)
Ltd. (2015) 374 ITR 645 (Bombay); Pr. Commissioner
of Income Tax (Central), Bangalore and Ors. v. M/s.
Delhi International Airport Pvt. Ltd. and Ors. (2022)
443 ITR 382 (Karnataka); Commissioner of Income
Tax (Central)-III v. Kabul Chawla (2016) 380 ITR 573
(Delhi); Principal Commissioner of Income Tax,
Central-2, NewDelhi v. Meeta Gutgutia (2017) 395 ITR
526 (Delhi); Chintels India Ltd. v. Deputy Commissioner
of Income Tax - Circle -8, Delhi (2017) 397 ITR 416
(Delhi); Sri. S.M. Kamal Pasha v. The Deputy
Commissioner of Income-Tax Central Circle - 6 (3) (2)
Bangalore (2022 (8) TMI 966 (Karnataka); Principal
Commissioner of Income Tax-2 v. Jay Infrastructure and
Properties Pvt. Ltd. 2016 (10) TMI 1022 (Gujarat); Smt.
Jami Nirmala v. Principal Commissioner of Income Tax
(2021) 437 ITR 573 (Orissa); Smt. Smrutisudha Nayak
v. Union of India (2021) 439 ITR 193 (Orissa);
PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3
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Commissioner of Income Tax, Kolkata v. Veerprabhu
Marketing Limited (2016) 388 ITR 574 (Calcutta);
Principal Commissioner of Income Tax-2, Kolkata v.
M/s. Salasar Stock Broking Ltd. 2016 (8) TMI 1131
(Calcutta); Pr. Commissioner of Income Tax-Central,
Jaipur v. Smt. Daksha Jain, Sirohi 2019 (8) TMI 474
(Rajasthan); Dr. A.V. Sreekumar v. The Commissioner
of Income Tax, Kochi and Assistant Commissioner of
Income Tax, Calicut (2018) 404 ITR 642 (Kerala); Pr.
Commissioner Of Income Tax v. Mehndipur Balaji 2022
SCC OnLine All 444 : (2022) 447 ITR 517 - referred
to.
Case Law Reference
[2017] 8 SCR 463
 referred to
Para 4.2
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6580
of 2021.
From the Judgment and Order dated 05.08.2019 of the High Court
of Delhi at New Delhi in Income Tax Appeal No. 240 of 2018.
With
Civil Appeal Nos. 4264 of 2018, 2648 of 2020, 6585 of 2021, 3044,
3045 of 2023, 6593 of 2021, 3043 of 2023, 9097 of 2022, 741 of 2023,
6582 of 2021, 721 of 2020, 6611 of 2021, R. P. (Civil) No. 223 of 2023 in
Civil Appeal No. 4484 of 2018, 9100, 9106, 9111 of 2022, 565-566, 567568, 824, 541, 540 of 2023, 14702 of 2015, 17533 of 2017, 6596, 7028,
7029, 6610, 7030, 6608, 6594 of 2021, 7338 of 2019, 6609, 6605 of 2021,
1505, 734 of 2020, 7016, 7017, 7015, 6584, 6589, 7026 of 2021, 90989099 of 2022, 3053 of 2018, 7014, 6583, 7027, 6899 of 2021, 15617,
10267 of 2017, 7738-7739, 7736-7737, 7732-7735 of 2021, 10266, 10268
of 2017 and 7740-7743 of 2021.
N Venkataraman, A.S.G., Arijit Prasad, Kavin Gulati, Prateesh
Kapoor, Arvind P. Datar, Salil Aggarwal, Sr. Advs., S A Haseeb, Zoheb
Hussain, Ms. Gargi Khanna, Ms. Niranjana Singh, Prahlad Singh, Rajan
Kumar Choursia, Prashant Singh II, Ms. Alka Agarwal, Raghvendra
Shukla, Ms. Shruti Shivkumar, V. Chandrashekhar Balaji, Ms. Amritha
Chandra Mouli, Rahul Vijaya Kumar, Raj Bahadur Yadav, Amrish Kumar,
Mrs. Anil Katiyar, Pawanshree Agrawal, Ms. Soumya Dhankani,
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Ms. Shubhangi Negi, Praveen Swarup, Salil Kapoor, Sumit Lalchandani,
Ms. Ananya Kapoor, Sanat Kapoor, Rahul Tomar, Chandr Pratap Singh,
Ajay Kumar Giri, Ms. Sheena Taqui, Ms. Akansha Saini, Dhvanit Chopra,
Shiv Vinayak Gupta, Mrs. Bina Gupta, Ved Jain, Nischay Kantoor,
Ms. Richa Mishra, Subodh S. Patil, Sameer Rohatgi, Kartikey Singh,
Sourabh Tandon, Ms. Ranjeeta Rohatgi, M/s. Khaitan & Co., Atul
Shankar Mathur, Mrs. Priya Singh, Shubhankar, Ms. Apoorva Jha, Pratap
Venugopal, Ms. Surekha Raman, Sandeep Bagmar, Akhil Abraham Roy,
Nishith Patel, Abhishek Anand, Ms. Unnimaya S., M/s. K J John and
Co, Ms. Kavita Jha, Rohit Jain, Aniket D Agrawal, Vaibhav Kulkarni,
Rupesh Kumar, Ms. Pankhuri Shrivastava, Ms. Neelam Sharma,
Bhargava V. Desai, Rahul Gupta, Siddhartha Chowdhury, Mahir
Aggarwal, Deepanshu, Praveen Swarup, Siddharth Ranka, A. Karthik,
Arsh Khan, Vikas Mehta, Tarun Gupta, Prakul Khurana, Rajat Sharma,
Abhishek Sharma, Atul Kumar, Yatinder Chaudhary, Davinder Singh
Khurana, Manoj Rajpoot, Vikrant, Dr. Rakesh Gupta, Ambhoj Kumar
Sinha, Somil Agarwal, Anshul Mittal, Subas Chandra Acharya, Akash
Agarwala, Harsh Raj Singh, Advs. for the appearing parties.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. As common question of law and facts arise in this group of
appeals, they are being disposed of by this common judgment and order.
Civil Appeal No. 6580 of 2021 and other connected appeals as
mentioned above have been preferred by the Revenue. However Civil
Appeal No. 15617 of 2017 and other allied appeals as mentioned above
have been preferred by the respective assessees challenging the order
passed by the respective High Courts taking the view that in case any
incriminating material is found during search then even completed
assessments can be assessed or reassessed taking into consideration
the incriminating material and other material in possession of the Assessing
Officer.
1.1 For the sake of convenience, Civil Appeal No. 6580 of 2021
filed by the Revenue be treated and considered as the lead matter.
2. The core issue involved in the present batch of appeals is the
scope of assessment under section 153A of the Income Tax Act, 1961
(hereinafter referred to as the 'Act, 1961'). According to the Revenue,
the Assessing Officer (hereinafter referred to as the 'AO') is competent
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to consider all the material that is available on record, including that
found during the search, and make an assessment of 'total income'.
Some of the High Courts have agreed with the said proposition. However,
according to the respective assessees and as per some of the High Courts'
decisions, if no assessment proceeding is pending on the date of initiation
of the search, the AO may consider only the incriminating material found
during the search and is precluded from considering any other material
derived from any other source.
3. Shri N. Venkataraman, learned Additional Solicitor General of
India has appeared on behalf of the Revenue and S/Shri Arvind P. Datar,
Kavin Gulati, Preteesh Kapoor, learned Senior Advocates and Shri Ved
Jain, learned counsel have appeared on behalf of the respective assessees.
3.1 Shri N. Venkataraman, learned ASG has made the following
submissions on behalf of the Revenue:
i) It is submitted that under the Act, 1961, the charging section is
section 4. It is submitted that thus the income tax is tax on 'total
income.' It is submitted that the term 'total income' has been
defined in section 2(45) of the Act, 1961, which means the total
amount of income referred to in section 5 and computed in the
manner laid down in the Act. It is submitted that as per section 5
of the Act, 1961, the 'total income' of any previous year of a
person who is a resident includes all income from whatever source
derived. It is submitted that therefore the income tax is a tax on
all income from whatever source derived in the case of a residentassessee. Therefore, if any taxable income is left out, the resultant
figure would be 'partial income' and not 'total income'. It is
submitted that any interpretation of any provision of the Act, 1961
which seeks to exclude any portion of the 'total income' from the
ambit of taxation runs contrary to the scheme of taxation and
hence is impermissible. It is submitted that thus the income tax is
a tax on 'total income,' the assessee furnishes a return of 'total
income' (as per Section 139 of the Act, 1961) and the AO assesses
'total income' only.
ii) It is next submitted that while considering the issue involved,
the manner and mode of passing assessment/re-assessment orders
is required to be considered. It is submitted that section 139 of the
Act, 1961 requires an assessee to furnish his return of total income
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for the previous year. The return is processed under section 143(1).
Sub-sections (2) and (3) contain provision for assessment of 'total
income' by the AO. It is submitted that there is a possibility that
income chargeable to tax has escaped assessment in the first
instance. Section 147 of the Act, 1961 enables the AO to assess
or reassess the case and bring to tax such income also. Thus, the
Act, 1961 contains elaborate machinery to facilitate determination
of 'total income' and collection of tax thereon.
iii) It is further submitted that the AO, in order to determine 'total
income' correctly, needs to collect information from the assessee
as well as third parties. The Statute contains many provisions
enable the Department to collect information relating to the
assessee, directly as well as indirectly, so as to enable it to detect
tax evasion and make proper assessment of 'total income'. Section
132 of the Act, 1961 is such a provision which enables to conduct
'search and seizure'. It is submitted that section 132 of the Act,
1961 is a tool for collecting information relating to tax evasion by
an assessee. There are other provisions to ensure that the
assessees are assessed correctly on their 'total income', namely,
sections 142, 131, 133, 133A and 285BA. It is submitted that apart
from this, the Department keeps getting information relating to
assessee from various sources, viz.:
(i) Suspicious Transaction Report from the Financial Intelligence
Unit (FIU)
(ii) Information from other taxation authorities viz. GST, and
Law Enforcement Agencies, viz. ED, etc.
(iii) Information from foreign tax jurisdictions under Automatic
Exchange of Information as well as on request basis under
Tax Treaties and International conventions.
(iv) Gathering of documents and evidence from and based on
third party sources.
(v) It also collects information available in public domain and
gets the same from informants, tax evasion petitions, etc.
It is submitted that the information collected from all these
sources, including search and seizure, is eventually to be used for
assessing 'total income'.
PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-3
v. ABHISAR BUILDWELL P. LTD. [M. R. SHAH, J.]
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iv) Shri N. Venkataraman, learned ASG has taken us to the scheme
of assessment in a search case. It is submitted that for the period
prior to 30/06/1995, initially, there was no special provision for
assessment of search cases. Those assessments were made in
accordance with the regular provisions relating to assessment of
income, i.e., section 143(3) or section 147 of the Act, 1961.
Therefore, the assessment took into considering the incriminating
material found during the search as well as that coming to the
AO's notice from any other source.
It is submitted that thereafter the Finance Act, 1995
introduced a special procedure for assessment of search cases.
A set of provisions comprising of Sections 158B to 158BG was
introduced by Chapter XIV-B - Special procedure for assessment
of search cases. The salient features of Chapter XIV-B are as
follows:
(i) Any search initiated u/s 132 or 132A of the Act after 30th
June, 1995, the AO shall proceed to assess the undisclosed
income in accordance with the provisions of Chapter XIV-B.
(ii) It mandated the assessment of the total undisclosed income
relating to the block period to be taxed at the rate specified under
Section 113 of the Act as the income of the block period,
irrespective of the previous year or years to which such income
relates and irrespective of the fact whether regular assessment
for any one or more of the relevant assessment years is pending
or not.
(iii) Section 158B(a) defines "block period"-
"block period" means the period comprising previous years
relevant to six assessment years preceding the previous year in
which the search was conducted under section 132 or any
requisition was made under section 132A and also includes the
period up to the date of the commencement of such search or
date of such requisition in the previous year in which the said
search was conducted or requisition was made:
Provided that where the search is initiated or the requisition is
made before the 1st day of June, 2001, the provisions of this clause
shall have effect as if for the words "six assessment years," the
words "ten assessment years" had been substituted;"
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(iv) Section 158B(b) defines "Undisclosed Income":
"undisclosed income" includes any money, bullion, jewellery
or other valuable article or thing or any income based on any
entry in the books of account or other documents or transactions,
where such money, bullion, jewellery, valuable article, thing,
entry in the books of account or other document or transaction
represents wholly or partly income or property which has not
been or would not have been disclosed for the purposes of this
Act, or any expense, deduction or allowance claimed under
this Act which is found to be false."
(v) Consequently, post 30-06-1995, Assessing Officers are allowed
to assess:
A. Undisclosed income
B. For the block period which is 6 years if the search is prior to
01.06.2001 and 10 years post 01.06.2001.
C. At the rate specified in Section 113.
D. The explanation to Section 158B(a) also mandated that the
assessment made under this Chapter shall be in addition to the
regular assessment in respect of each previous year included in
the block period.
E. The total undisclosed income relating to the block period shall
not include the income assessed in any regular assessment as
income of such block period.
F. The income assessed in this Chapter shall not be included in
the regular assessment of any previous year included in the block
period.
(vi) Section 158BB provides the computation mechanism of
undisclosed income of the block period which is as follows:
(i) What can be taxed under this Chapter is only undisclosed income
of the block period.
(ii) This undisclosed income should form part of the total income.
However, this chapter permits independent and separate
assessment for undisclosed income for the block period and
therefore cannot include the total income forming part of the regular
assessment.
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(iii) In other words, both the income forming part of the regular
assessment/reassessment falling under Section 143/147
respectively, and the assessment on undisclosed income for block
period would constitute together the total income.
(iv) However, the streams of assessment are independent and
separate. The regular assessment/reassessment would be under
Section 143/147 respectively. Whereas, the assessment of
undisclosed income for block period would be a separate
assessment under Section 158BC(c).
(v) Three things are therefore clear. The spirit of the Income Tax
Act is to tax total income. The regular assessment/reassessment
form one stream u/s 143/147 and, the block assessment of the
undisclosed income as yet another stream of undisclosed income.
(vi) As a result of two separate assessments for computation of
total income and taxation on it, Section 158BB allowed the following
exclusions in computing the undisclosed income of block period to
be assessed u/s 158BA which are:
a. Assessment under Section 143 (assessment), Section 144
(best judgment assessment), and Section 147 (reassessment).
b. Where returns have been filed u/s 139 or notices have been
issued u/s 142(1) or u/s 148, but assessments have not been
made till the date of search requisition, based on the income
disclosed in such returns.
c. Likewise, Section 158B(b) (Clauses c to f) proceeds to
excludes other possible permutations. The bottom line being, if
the income is either disclosed or period for disclosure is yet to
get over, or assessed or reassessed or gets settled before the
settlement commission, or an assessment of undisclosed income
has been made already under clause c of section 158C.
d. Section 158BB(3) imposed the burden on the assessee to
prove that any undisclosed income had already been disclosed
in any return of income filed by the assessee, before the
commencement of search or of the requisition, as the case
may be.
e. In short, assessment on undisclosed income for block period
is an independent assessment from the rest of the assessments
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all of which put together would rest in assessment in total
income.
(vii) Section 158BC provides the procedure for block
assessment and determine the undisclosed income of the block
period in the manner laid down in Section 158BB and the
provisions of Section 142, Sub-Sections 2 and 3 of Section
143, Section 144 and Section 145 of the Act and the AO would
proceed to pass an assessment order and determine the tax
payable u/s 158BC(c) of the Act. In other words, the order of
assessment on undisclosed income of block period gets passed
u/s 158BC(c) of the Act and the manner of computation shall
be in accordance with Section 158BB of the Act.
(viii) Section 158BD provides the assessment of undisclosed
income of any other person. Section 158BE provides the time
limit for competition of block assessment. Section 158BF refers
to the inapplicability of the various provisions relating to interest
and penalties, and section 158BG identifies the competent
authorities who can pass block assessment orders.
(v) It is submitted that the scheme under Chapter XIV-B, referred
to hereinabove, was in place for about eight years but failed to
yield the desired outcome. Therefore, the same came to be
replaced by another scheme by Finance Act, 2003. It is submitted
that the salient features of the special procedure introduced in
2003 were as below:
(i)
The scheme of parallel assessments were given a go-by.
There was to be a single assessment of 'total income',
incorporating undisclosed income found during the search
as well as that found from any other source.
(ii)
The concept of 'block period' was given a go-by. The
concept of 'assessment year' as the temporal unit was
restored.
(iii)
Assessment had to be made u/s 153A, not under Sections
regularly employed for assessment/reassessment, i.e.
Section 143(3)/147.
(iv)
Assessment u/s 153A was to be mandatory and automatic
in a case where search had been conducted.
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(v)
Assessments u/s 153A were to be made for each of the
six assessment years preceding the assessment year
relevant to the previous year in which the search was
conducted.
(vi)
As mentioned above, the second proviso stipulated that
assessment/reassessment for any assessment year (out
of the 6 assessment years referred to above) pending on
the date of the initiation of the search would abate and a
single assessment would be made u/s 153A only.
It is submitted that the following are the salient features of Section
153A of the Act, 1961:
(i) Section 153A is a non-obstante provision to Sections 139,
147, 149, 151 and 153 and the jurisdictional cause of action to
initiate proceeding under this Section would be where a search
is initiated u/s 132 or books of accounts, other documents or
any assets are requisitioned u/s 132 of the Act after 31st May,
2023.
(ii) The jurisdictional requirement to initiate proceedings u/s
153A would be a search u/s 132 or a requisition u/s 132A.
(iii) To permit the AO to issue notices for each assessment
year falling within six assessments years.
(iv) Assess or reassess the total income of six assessment
years immediately preceding the assessment year relevant to
the previous years in which such a search is conducted or
requisition is made.
(v) The AO shall assessee or reassess in respect of each
assessment year falling within six assessment years and not
as a block, and for relevant assessment year/years.
(vi) Section 153A(2) states that if an order of assessment or
reassessment made u/s 153A(1) stands annulled in appeal or
any other legal proceeding, the assessments and reassessments
which had abated under the second proviso to Sub pending on
the date of initiation of such u/s 132 or requisition u/s 132A
shall abate.
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(vii) Section 153A(2) states that if an order of assessment or
reassessment made u/s 153A(1) stands annulled in appeal or
any other legal proceeding, the assessments and reassessments
which had abated under the second proviso to Sub-Section 1
shall stand revived w.e.f. the date of receipt of the order of
such annulment.
(viii) This revival is notwithstanding anything contained under
Sub-Section 1 of Section 153A or Section 153. The proviso to
Section 153A(2) states that such a revival shall again cease to
have effect if the order of annulment which gave rise to said
revival is set aside.
(vi) It is submitted that therefore the spirit of the Act, 1961 is to
assess the total income. The earlier regime allowed parallel
assessments namely regular assessment/reassessment
independently and simultaneously allowed assessment of
undisclosed income for the block period under Chapter XIV-B.
Whereas the new regime has abandoned the parallel assessment
scheme and made it into one unified assessment, once a search
gets initiated under section 132 or books or requisition under section
132A. It is submitted that in the absence of any search under
section 132 or a requisition under section 132A, the assessment
of 'total income' should be carried out under section 143, 144 and
147, i.e., regular assessment, best judgment assessment and
reassessment. It is submitted that prior to the new scheme, when
a search gets initiated or a requisition happens, the normal
assessment/reassessment was allowed to be carried on without
any interference and a block assessment of undisclosed income
was allowed to be made independently. However, the new scheme
brought w.e.f. 01.06.2003 has dismantled this structure and Section
153A conceives the following sequence:
a. The jurisdictional exercise of power to initiate proceedings
u/s 153A would commence only upon initiation of a search
u/s 132 or a requisition u/s 132A and not before that.
b. Once a search gets initiated or a requisition is made, the
assessment process under every other provision of the
Income Tax Act would abate.
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c. This is clear by virtue of the expression employed in Section
153A(1) "Notwithstanding anything contained in Section 139,
147, 148, 149, 151 and 153." Being a non-obstinate provision,
Section 153A overrides all these provisions.
It is submitted that to what extent does the override operate is
also brought clearly by Section 153A in the following manner:
I.
153A(1)(b) allows assessment and reassessment of total
income of Six assessment years immediately preceding
the assessment year relevant to the previous year in
which such a search is conducted or requisition is made
and for the assessment year/years.
II.
Parliament has chosen the expressions "asses" or
"reassess" the total income.
III.
It is the total income and not the undisclosed income
that requires to be assessed u/s 153A. The expression
"undisclosed income" which was defined under
erstwhile scheme Section 158B(b) has not found a
reference or mention under the new scheme.
IV.
Likewise, each year in the six years in question needs
to be assessed independently and not as a block which
again was defined under the erstwhile scheme u/s
158B(a), which is conspicuous by its absence under
the new scheme.
V.
Therefore, twin conditions need to be satisfied under
Section 153A(1)-
A. Assessments have to be completed year wise and
not for block period and
B. Assessments have to be made for the total income
and not just for the undisclosed income.
(vii) It is submitted that once this is evident and clear, the scope of
interpretation of the second proviso to section 153A(1) read with
Section 153A(2) becomes clear and unambiguous. It is submitted
that as per the scheme of Section 153A of the Act, 1961, two
parallel assessments have to be avoided. Therefore, any
assessment under Section 143, 144 and 147 pending on the date
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of initiation of search u/s 132 or making of requestion u/s 132A
has to abate, and the same needs to be subsumed into Section
153A(1). The second proviso using the expression "shall abate"
should be read with the expressions "assessment" or
"reassessment" employed in the very same proviso, i.e., it must
be read with the expression employed in Section 153A(1)(b)
"assess or reassess the total Income" and finally with the
expression "notwithstanding" appearing as the opening phrase u/
s 153A(1) of the Act.
(viii) It is submitted that the expression "assessment" or
"reassessment" appearing in the second proviso and the
expressions "assess or reassess the total income" appearing in
Section 153A (1)(b) have been employed carefully by the
Parliament to convey clear and distinct intentions. It is submitted
that the expression "assessment" or "reassessment" appearing in
the second proviso refers to the pending assessments under
sections 143, 144 and 147 which would abate. It is submitted that
whereas "assess or reassess the total income" appearing in Section
153A(1)(b) signifies not the pending assessment or reassessment,
but the assessment to be made under section 153A for six
assessment years. It is submitted that again the Parliament has
been extremely careful in not employing the expression 'total
income' in the second proviso which expression has been carefully
employed under section 153A(1)(b) of the Act, 1961. The omission
in the second proviso and the inclusion under Section 153A(1)(b)
is extremely significant. The omission under the second proviso is
necessary since those pending assessments gets abated upon an
initiation of a search under section 132 or a requisition under section
133, since the total income is to be assessed or reassessed again
consequent to search or requisition. However, when it comes to
section 153A(10(b) it authorises the AO to assess or reassess the
'total income' consequent to search or requisition.
(ix) It is submitted that once a search or requisition is initiated, all
pending assessments or reassessments would abate. They would
get subsumed into the assessment/reassessment to be passed under
section 153(1)(b) and the AO will pass one assessment order for
each of the six assessment years subsuming all pending
assessments and reassessments and such an order under section
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153(1)(b) would be for the 'total income' for each of the six
assessment years. It is submitted that should the order of
assessment or reassessment under sub-section 1 get annulled,
the abated proceedings shall stand revived.
(x) Making above submissions, it is submitted that the assessment
under section 153A is not a block assessment; it is not confined to
any undisclosed income; it is not confined only to any incriminating
material seized on account of initiation of search under section
132 or requisition under section 132A; the jurisdictional fact or
requirement to pass orders under section 153A(1)(b) is initiation
of a search under section 132 or requisition under section 132A
and not the seizure of any incriminating material finding out an
undisclosed income. It is submitted that in the absence of any
statutory mandate, any interpretation that the scope of assessment
under section 153A should be limited to the incriminating material
found during the search is wholly erroneous and unsustainable,
particularly considering the fact that Section 153A requires
assessment of 'total income' and the statute bars resort to the
regular provisions, viz., section 143(3)/147 for assessing the income
that may be relatable to the material coming on the AO's record
from sources other than the search.
(xi) It is submitted that when section 153A requires assessment
of 'total income', can it be interpreted so as to exclude a part of
the 'total income' while making the assessment? It is submitted
that if income based on incriminating material from sources other
than the search is excluded from assessment under section 153A,
how can the same be brought to tax? It is submitted that the
language and meaning of Section 153A is plain and unambiguous,
i.e., if search under section 132 of the Act, 1961 is conducted in a
case, assessment of 'total income' for each of the six assessment
years pending the assessment year relevant to the previous year
in which such search is conducted, has to be made. It is submitted
that therefore the decision of the Special Bench of the Tribunal in
the case of All Cargo Global Logistics Ltd. v. Deputy
Commissioner of Income Tax, (2012) 18 ITR (Trib.) 106
(ITAT/Mum) dated 06.07.2012 and the decision of the Delhi
High Court in the case of Commissioner of Income Tax,
Central-III v. Kabul Chawla, (2015) 61 taxmann.com 412
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(Delhi) dated 28.08.2015 are not in consonance with the plain
language and meaning of Section 153A and in the process, defeats
the very purpose of the 'charging section' of the Act.
4.