The Karnataka High Court recently held in an Income Tax Appeal that the provisions under Section 153A of the Income Tax Act, 1961 does not permit an Assessing Officer ( AO ) to reassess the income of an Assessee in the absence of objective incriminating evidence unearthed during the course of search under Section 132.
The instant Judgment was pronounced by the Karnataka HC for 3 separate Appeals filed against a Common Order passed by the Income Tax Appellate Tribunal, Bengaluru (ITAT). The ITAT had confirmed the Order of the Appellate Commissioner deleting the Assessed Income filed by Gokula Education Foundation (Medical), the parent Trust of M.S. Ramaiah Medical College.
Ready to Grow? Choose a Course That Fits Your Goals!
The deletion was contested by the Revenue Department which sought to enforce the provisions of Section 153A of the Act, vying to “reassess” the income.
The HC was faced with multiple questions of law in light of Section 153A of the Income Tax Act, 1961, primarily pertaining to whether the Tribunal had erred in deleting the assessed income instead of permitting the AO to reassess the same.
The Revenue Department cited the case of Canara Housing Development Co. Ltd. vs. DCIT (2024) to substantiate the argument that assessment order stands reopened when faced with proceedings under Section 153A of the Act and queried whether the AO has to redetermine the total income of the Assessee by considering all additions made subsequently.
The Division Bench of the Karnataka High Court comprising Justice S.G. Pandit and Justice C.M. Poonacha wholly relied on the case of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P) Ltd. (2023) to ascertain that the AO would be permitted to assume the jurisdiction to conduct block assessment or reassessment of the total income under Section 153A, only upon the discovery of incriminating evidence proving undisclosed income during Search under Section 132 or Requisition under Section 132A.
Ready to Grow? Choose a Course That Fits Your Goals!
The Apex Court had clarified in Abhisar Buildwell that, in the case that any incriminating evidence is found suggestive of undisclosed income, the AO shall be vested with the jurisdiction to assess or reassess the ‘total income’ of the Assessee in respect of each Assessment Year within six Assessment Years while enacting procedure under Section 132 or 132A.
The Apex Court stringently laid down that if the Revenue Department proceeds to conduct assessment/reassessment in the absence of incriminating material, it shall pave way for two Assessment Orders for the same Assessment Year which is impermissible in law.
In light of the binding power of the Judicial Precedent pronounced by the Supreme Court, the Karnataka High Court dismissed the Appeals, answering them in favour of the Assessee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
