S. 158BA(2) Abatement Not Automatic Unless Case Falls Under Block Assessment Scheme: Orissa HC Refuses to Quash Scrutiny Assessment after Search [Read Order]

In a recent ruling, the Orissa High Court held that abatement under Section 158BA(2) is not automatic just because a search is conducted, and it applies only when the case actually falls under the block assessment scheme of Chapter XIV-B for undisclosed income.

The court refused to quash a scrutiny assessment passed under Section 143(3) after search.

Saroj Kumar Sahoo filed a writ petition challenging the assessment order passed for AY 2022-23 under Section 143(3) read with Sections 260 and 144 along with penalty proceedings. Earlier, an assessment order dated 21.03.2024 was set aside by the High Court and the matter was sent back for fresh decision.

While the fresh proceedings were pending, a search under Section 132 was conducted between 26.11.2024 and 28.11.2024. Still, the Assessing Officer continued the scrutiny and passed the assessment order raising huge demand.

The petitioner argued that since assessment was pending on date of search, it stood abated under Section 158BA(2) and the officer had no jurisdiction to pass order under Section 143(3). He relied on Supreme Court judgment in Abhisar Buildwell.

The Division Bench comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman observed that Section 158BA must be read along with the entire scheme of Chapter XIV-B which deals with assessment of total undisclosed income as a result of search.

The court observed that abatement under Section 158BA(2) operates in the context of block assessment of undisclosed income and cannot be applied in isolation. The court observed that the Panchanama showed that the search was conducted in the names of certain companies and juristic entities, and not in the name of the petitioner in his individual capacity.

The impugned assessment order was framed against the petitioner in his individual status pursuant to scrutiny selection of his return which related to disclosed income.

The court observed that nothing was placed on record to demonstrate that any incriminating material relating to the petitioner’s undisclosed income for AY 2022-23 was found during the search. It also pointed out that the plea of abatement under Section 158BA had not been raised before the Assessing Officer during the assessment proceedings.

The court held that the petitioner failed to establish that the case fell within the block assessment framework under Chapter XIV-B so as to attract automatic abatement. The court declined to exercise writ jurisdiction holding that disputed questions of fact were involved and that no case was made out for interference under Articles 226 and 227 of the Constitution.

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