Section 153A — Assessment in Case of Search or Requisition

Section 153A of the Income-tax Act, 1961, deals with the assessment of income in cases where a search is initiated under section 132 or books of account, other documents, or any assets are requisitioned under section 132A. This section mandates that the Assessing Officer shall issue a notice to the taxpayer requiring them to furnish returns of income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition is made. The significance of this section lies in its ability to reopen past assessments and bring to tax any undisclosed income found during the search. The statutory test involves the issuance of a notice and the subsequent assessment or reassessment of income. The burden of proof lies with the taxpayer to explain any discrepancies or undisclosed income. Practically, this section is crucial for the tax authorities to ensure compliance and uncover tax evasion.

Common Litigation Flashpoints

1. Validity of the search operation
2. Scope of assessment under section 153A
3. Inclusion of income not related to search findings
4. Time limits for issuing notices and completing assessments

Judgments on Section 153A — Assessment in Case of Search or Requisition

• DCIT, CC-1(2), Kolkata vs M/s Chaman Metallics Ltd — ITAT,
  Once the assessee has submitted documents relating to identity, genuineness of the transaction, and credit-worthiness, the AO must conduct an inquiry before invoking Section 68.
• GM Modular Private Limited vs Principal Commissioner of Income Tax – 1 and Ors — HC,
  A bona fide claim based on a binding judicial precedent cannot attract penal consequences even if the precedent is later reversed.
• Principal Commissioner of Income Tax, Central-3 vs Abhisar Buildwell P. Ltd. — SC,
  In the absence of incriminating material, the AO cannot assess or reassess completed/unabated assessments under Section 153A.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Commissioner of Income Tax (Central)-III vs Kabul Chawla — HC,
  Additions to income under Section 153A can only be made based on incriminating material found during the search.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.
• PR. COMMISSIONER OF INCOME TAX CENTRAL-2 NEW DELHI vs MEETA GUTGUTIA PROP. M/S FERNS 'N' PETALS — HC,
  Completed assessments can be interfered with by the AO under Section 153A only on the basis of some incriminating material unearthed during the course of search.