The Supreme Court, on last week stayed the operation of the Delhi High Court’s judgment in Dayavanti Gupta vs. CIT wherein the Court confirmed block assessment even in the absence of incriminating material found during the course of search under the provisions of section 153A of the Income Tax Act.
The question before the High Court was that whether an assessment u/s 153A can be made even if no incriminating material has been found during s. 132 search proceedings.
Impugning additions made by the department before the High Court, the assessee contended that no materials were found during the course of search. Assessee, therefore, submitted that the assessment is without any basis in the absence of incriminating materials. It was submitted that for completing a block assessment, founded on search proceedings and notice under Section 153A, the assessing officer has to base the order on fresh materials found during the search, in the form of books of accounts, articles seized, or other similar materials. In this case, the revenue could not substantiate its plea that the assesses had concealed their income, because nothing suspect which could result in an addition to the income assessed during the previous years was in fact seized or taken into custody.
However, a division bench of Justice Ravindra Bhatt and Deepa Sharma overruled the above contentions and observed that after amendment in 2003, the provisions of section 153A does not provide that a search assessment has to be made strictly on the basis of evidence found as a result of search or other documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found.
“Section 153A(1)(b) requires assessment or reassessment of total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. The question, however, is whether the seized material can be relied upon to also draw the inference that there can be similar transactions throughout the period of six years covered by Section 153A,” the bench said.
Read the full text of the Order below.
