CIT v. Smt. Shaila Agarwal - Taxpublishers.in

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The Tax Publishers2012 TaxPub(DT) 0018 (All-HC) : (2012) 043 (I) ITCL 0035 : (2012) 346 ITR 0130 : (2012) 246 CTR 0266 : (2012) 204 TAXMAN 0276 : (2012) 065 DTR 0041 INCOME TAX ACT, 1961 --Search and seizure--Assessment under section 153AScope of second proviso to section 153A(1)--The assessee filed return for the assessment year 2002-03 which was taken-up for scrutiny and various additions were made. The additions were upheld by CIT(A). After the decision of the appeal by Commissioner (Appeals) a search under section 132 was carried out. A notice under section 153A was issued to the assessee, as a result of search and seizure, calling the assessee to file return for six assessment years including assessment year 2002-03. The Tribunal, hearing the appeal against the order of CIT(A) allowed the appeals accepting the arguments made on behalf of assessee that once a notice under section 153A had been issued after search and seizure operations, as per the provisions of section 153A, all the assessments of the six preceding assessment years prior to the date of search have to abate and that even the completed and concluded assessments should stand merged in the fresh assessment to be made by the AO under section 153A in pursuance of the search. The assessment was completed, the assessment order was passed. The appeal was also decided by CIT (A) much before the initiation of search under section 132. The proceedings for assessment or reassessment were not pending on date of search and thus according to the second proviso of section 153A, only the pending assessment or reassessment is to abate. The assessments, which had become final are not liable to abate. The second appeal filed before the ITAT is not continuation of the proceedings of assessment. Held: The second proviso to section 153A of the Act refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the second proviso to section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. A plain reading of section 153A would show that where notice under this section is issued as result of any search under section 132, assessment or reassessment if any relating to any assessment year falling within the period of six assessment years referred to under section 153, pending on the date of initiation of search under section 132 or requisition under section 132A shall abate. The words, pending on the date of initiation of search under section 132, or making of requisition under section 132A, as the case may be, has to be assigned simple and plain meaning. Where the assessment or re-assessment is finalised, there are no pending proceedings to be abated, and restored to the file of the AO. To abate means to diminish or to take away. The word 'abatement' has been defined in the Concise Law Dictionary (P. Ramanatha Aiyer) as follows:- Abatement. AbatementÃ¢â‚¬ means, in respect of any chargeable accounting period, ending on or before the 31-3-1947 a sum which bears to a sum equal to- (a) in the case of a company, not being a company deemed for the purposes of section 9 to be a firm, six per cent of the capital of the company on the first day of the said period computed in accordance with Schedule II, or one lakh of rupees, whichever is greater, or (b) in the case of a firm having- (i) nor more than two working partners, one lakh of rupees, or (ii) three working partners, one and a half of rupees, or (iii) four or more working partners, two lakh of rupees, or (c) in the case of a Hindu undivided family, two lakhs of rupees, or (d) in any other case, one lakh of rupees,- The same proportion as the said period bears to the period of one year and, in respect of any chargeable accounting period beginning after the 31-3-1947, such sum as may be fixed by the annual Finance Act. [Business Profits Tax Act (21 of 1947), S.2 (1)] Removal or destruction, (as) of a nuisance; failure; premature end, suspension or diminution, (as) of an action or of a legacy. The action of abating; being abated. [O.XXII, R.1, CPC (5 of 1908)]; decrease [Section12 (3) (b) (i), Specific Relief Act (47 of 1963)]. Of An Action Or Suit: In civil law an abatement of a suit is a complete termination of it. Abatement of a matter or cause is caused by the same becoming defective on account of the death of the parties materially interested. (Ency. of the Laws of England) A suspension or termination of proceedings for want of proper parties or due to some technical defect. The abatement of the main action abates proceedings ancillary or collateral to it. In Criminal Law: Abatement of proceedings connotes their termination without any decision on merits and without the assent of the prosecutor. (Ency. of the Laws of England) In Revenue Law: Abatement is a deduction from or refunding of duties on goods damaged during importation or in store.Ã¢â‚¬ [Para 12] The word 'abatement' is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/ suit; abatement of legacies; abatement of nuisance; and all actions for such nature, which have the pendency or continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. The word 'pending' occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words 'on the date of initiation of the search', and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. The pendency of an appeal in the Tribunal against the order of assessment against which an appeal has been decided by Commissioner (Appeals) is not a continuation of the proceedings of assessment. An appeal under the IT Act lies to the Appellate Tribunal on a question of law. Even if it is pending on the date of search, no such intention has indicated by the Tribunal arises out of the provisions of second proviso to Section 153A, to abate the proceedings, which have been completed, or concluded, and to restore assessment to the file of the AO [Paras 12, 13, 14 & 15] Court did not find force in the submission of Shri Ashish Bansal that where a notice under section 153A has been given after the search operations under section 132, for filing assessment for the block period of 6 years, and if such period includes any of the assessment year, the abatement of assessment and re-assessment proceedings, to give way to reassessment considering the additions in the assessment under section 153A, will also include the assessment or re-assessment, which has been completed. If as a result of search, some undisclosed income is found to have escaped assessment, the assessing officer, may initiate steps for reassessment after sanction of competent authority, within the prescribed period of limitation. [Para 16] The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. [Para 19] There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty. For the aforesaid reasons, the Income Tax Appellate Tribunal erred in law in abating the regular assessment proceedings, which had become final, and restoring them as a consequence of search under section 132, and notice under section 153A of the Act to the file of the AO. [Paras 20 & 21] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0018 (All-HC) : (2012) 043 (I) ITCL 0035 : (2012) 346 ITR 0130 : (2012) 246 CTR 0266 : (2012) 204 TAXMAN 0276 : (2012) 065 DTR 0041

INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153AScope of second proviso to section 153A(1)--The assessee filed return for the assessment year 2002-03 which was taken-up for scrutiny and various additions were made. The additions were upheld by CIT(A). After the decision of the appeal by Commissioner (Appeals) a search under section 132 was carried out. A notice under section 153A was issued to the assessee, as a result of search and seizure, calling the assessee to file return for six assessment years including assessment year 2002-03. The Tribunal, hearing the appeal against the order of CIT(A) allowed the appeals accepting the arguments made on behalf of assessee that once a notice under section 153A had been issued after search and seizure operations, as per the provisions of section 153A, all the assessments of the six preceding assessment years prior to the date of search have to abate and that even the completed and concluded assessments should stand merged in the fresh assessment to be made by the AO under section 153A in pursuance of the search. The assessment was completed, the assessment order was passed. The appeal was also decided by CIT (A) much before the initiation of search under section 132. The proceedings for assessment or reassessment were not pending on date of search and thus according to the second proviso of section 153A, only the pending assessment or reassessment is to abate. The assessments, which had become final are not liable to abate. The second appeal filed before the ITAT is not continuation of the proceedings of assessment. Held: The second proviso to section 153A of the Act refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the second proviso to section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate.

A plain reading of section 153A would show that where notice under this section is issued as result of any search under section 132, assessment or reassessment if any relating to any assessment year falling within the period of six assessment years referred to under section 153, pending on the date of initiation of search under section 132 or requisition under section 132A shall abate. The words, pending on the date of initiation of search under section 132, or making of requisition under section 132A, as the case may be, has to be assigned simple and plain meaning. Where the assessment or re-assessment is finalised, there are no pending proceedings to be abated, and restored to the file of the AO. To abate means to diminish or to take away. The word 'abatement' has been defined in the Concise Law Dictionary (P. Ramanatha Aiyer) as follows:- Abatement. AbatementÃ¢â‚¬ means, in respect of any chargeable accounting period, ending on or before the 31-3-1947 a sum which bears to a sum equal to- (a) in the case of a company, not being a company deemed for the purposes of section 9 to be a firm, six per cent of the capital of the company on the first day of the said period computed in accordance with Schedule II, or one lakh of rupees, whichever is greater, or (b) in the case of a firm having- (i) nor more than two working partners, one lakh of rupees, or (ii) three working partners, one and a half of rupees, or (iii) four or more working partners, two lakh of rupees, or (c) in the case of a Hindu undivided family, two lakhs of rupees, or (d) in any other case, one lakh of rupees,- The same proportion as the said period bears to the period of one year and, in respect of any chargeable accounting period beginning after the 31-3-1947, such sum as may be fixed by the annual Finance Act. [Business Profits Tax Act (21 of 1947), S.2 (1)] Removal or destruction, (as) of a nuisance; failure; premature end, suspension or diminution, (as) of an action or of a legacy. The action of abating; being abated. [O.XXII, R.1, CPC (5 of 1908)]; decrease [Section12 (3) (b) (i), Specific Relief Act (47 of 1963)]. Of An Action Or Suit: In civil law an abatement of a suit is a complete termination of it. Abatement of a matter or cause is caused by the same becoming defective on account of the death of the parties materially interested. (Ency. of the Laws of England) A suspension or termination of proceedings for want of proper parties or due to some technical defect. The abatement of the main action abates proceedings ancillary or collateral to it. In Criminal Law: Abatement of proceedings connotes their termination without any decision on merits and without the assent of the prosecutor. (Ency. of the Laws of England) In Revenue Law: Abatement is a deduction from or refunding of duties on goods damaged during importation or in store.Ã¢â‚¬ [Para 12] The word 'abatement' is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/ suit; abatement of legacies; abatement of nuisance; and all actions for such nature, which have the pendency or continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. The word 'pending' occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words 'on the date of initiation of the search', and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. The pendency of an appeal in the Tribunal against the order of assessment against which an appeal has been decided by Commissioner (Appeals) is not a continuation of the proceedings of assessment. An appeal under the IT Act lies to the Appellate Tribunal on a question of law. Even if it is pending on the date of search, no such intention has indicated by the Tribunal arises out of the provisions of second proviso to Section 153A, to abate the proceedings, which have been completed, or concluded, and to restore assessment to the file of the AO [Paras 12, 13, 14 & 15] Court did not find force in the submission of Shri Ashish Bansal that where a notice under section 153A has been given after the search operations under section 132, for filing assessment for the block period of 6 years, and if such period includes any of the assessment year, the abatement of assessment and re-assessment proceedings, to give way to reassessment considering the additions in the assessment under section 153A, will also include the assessment or re-assessment, which has been completed. If as a result of search, some undisclosed income is found to have escaped assessment, the assessing officer, may initiate steps for reassessment after sanction of competent authority, within the prescribed period of limitation. [Para 16] The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. [Para 19] There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty. For the aforesaid reasons, the Income Tax Appellate Tribunal erred in law in abating the regular assessment proceedings, which had become final, and restoring them as a consequence of search under section 132, and notice under section 153A of the Act to the file of the AO. [Paras 20 & 21]