The Karnataka High Court held that AO cannot disturb Assessment or Reassessment order while passing Section 153A order unless any incriminating Material is Seized during Search of Third Party.
The appellants are companies claiming to be in the business of infrastructure facilities, provider-operating and developing airport and related infrastructure at International Airport. Assessment orders were passed under Section 143(3) read with 153A of the Act, in consequence to a search and seizure operation conducted at the premises of the assessee. The Assessing Officer made certain additions and demanded tax thereon. The said assessment orders were challenged by the assessee before the Commissioner of Income Tax (Appeals), the said appeals came to be partly allowed. Hence, the Revenue as well as the assessee both preferred appeals before the Tribunal. The Tribunal allowed the appeals preferred by the assessee and quashed the assessment orders passed under Section 143 (3) read with 153A of the Act dismissing the appeals filed by the Revenue.
The Revenue argued that the conditions for issuance of notice under Section 153A of the Act being well settled, merely on the ground that no incriminating material was seized by the Department, the proceedings initiated under Section 153A of the Act cannot be held to be unjustifiable.
The assessee argued that the Tribunal has rightly allowed the appeals filed by the assessee. The judgment of this Court in the case of Commissioner of Income Tax .v. M/s Lancy Constructions is squarely applicable to the present case. The Tribunal having considered the said judgment has concluded that in the absence of any incriminating material, proceedings under Section 153A of the Act cannot be initiated and concluded and assessment cannot be reopened.
The division bench of Justice S.Sujatha and Justice Ravi V. Hosmani held that the Assessing Officer while passing the order under Section 153A read with Section 143[3] of the Act, ordinarily cannot disturb the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings.
As regards the pending assessments are concerned only one assessment shall be made separately for each assessment year on the basis of the income unearthed – 60 –
during search and any other material existing or brought on the record of the Assessing Officer. Even in the absence of any incriminating material abated assessment or reassessment could be done. The returns filed under Section 139 of the Act gets replaced by the returns filed under Section 153A[1] of the Act. Pending proceedings in appeal, revision/application shall not abate subsequent to initiation of Section 153A proceedings. Further, recording of satisfaction under Section 153A may not be necessary unlike Section 153C of the Act which mandates recording of satisfaction.
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