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FCA BPMUNDRA 93145 01680, 70141 24100

Senior partner

B. P. Mundra & Co.‎ Mobile
Chartered Accountants
‎822 A, Mundra House, Shivaji Nagar, Near Hanuman Temple, Civil Lines, Jaipur‎-302006
Ph.No. (O) 2225110, 2225116, 2224085

[email protected]

url www.bpmundraca.com

Search conducted,  survey or requisition cases  on or after 1st April, 2021- Assessment shall be framed under section 147 read with section 148, 148A, 149,151 of the Income Tax Act’ 1961. Explanation 2 of Section 148.

 

1. Now notice u/s 148 can be issued in following circumstances
   1. There is “information with the assessing officer that the income chargeable to tax has escaped assessment” : and
   2. The assessing officer has obtained prior approval of the specified authority to issue such notice.
2. In the following circumstances AO shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment
   1. As per Explanation 1 of Section 148: (Other than search survey cases)
      1. Computer based system: Information tagged in this case of the assesses for the relevant assessment year in accordance with the risk management strategy formulated by the board from time to time. Explanation 1.
      2. Final objection raised by the comptroller and Auditor general of India that the assessment has not been made in accordance with the provision of this Act.
   2. As per Explanation 2 of Section 148 (Search, survey & Seizure cases)
      1. When search is initiated u/s 132 on or after the 1st day of April,2021
      2. When Books of Accounts or other documents or any assets are requisitioned u/s 132A, on or after the 1stday of April, 2021

• When asurvey u/s 133A is conducted on or after the 1st day of April 2021 to verify expenditure incurred in connection with any function, ceremony or event. These survey are not covered u/s 133A (2A) [TDS, TCS related survey] or a survey u/s 133A (5) [survey ],

1. When asset seized or requisitioned during search belongs to another assesses; and the AO is satisfied with the prior approval of the Pr. CIT or CIT, that any money bullion, jewelry  or other valuable article or thing, seized or requisitioned u/s 132 or Section 132A in the case of any other person on or after the 1stday of April 2021, belongs to the assesses
2. When documents seized or requisitioned during search related to or pertains to another assesses; AO is satisfied , with the prior approval of Pr, CIT or CIT, that any books of accounts or documents, Seized or requisitioned u/s 132 or Section 132A in case of any other person on or after the 1stday of April 2021, pertains to or pertain to, or any information contained therein, relate to the assesses

3. It shall be deemed thatthe Assessing officer has information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or requisition is made or any material is seized or requisitioned or survey is conducted.
4. Hence for search, seizure and survery cases Explanation 2of section 148 is relevant. For the purposes of this section, where,—
5. a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or
6. a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or

• the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

1. the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.”

5. In search based assessments the period for which reopening shall be mandatory is now 3 assessment years, in case the AO intends to re-open for beyond 3 years, he can do so by complying with explanation 1 to Section 148. Kindly note that Section 148A procedure of enquiry, providing opportunity and passing order, before issuing notice under section 148 of the Act, isnot required in search or requisition cases for three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated. Hence it is not clear that when an Assessing Officer desires to go beyond the above three assessment years then whether the AO is duty bound to follow the procedure laid down in Section 148A of conducting enquiries,  providing opportunity and passing order before issuing notice(s) under section 148 of the Act for such assessment years.

 

6. Section 149 of the Income Tax Act’1961: “Time limit for notice”
7. Three yearsimmediately preceding the assessment year relevant to the previous year in which the search is initiated or requisition is made or any material is seized or requisitioned or survey is conducted. No notice shall be issued if the above period
8. However the above period is ten years where the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakhs rupees or more for that year.
9. Kindly note that no notice under section 148 canbe issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021. First proviso to sub-section (1) of Section 149. For example a Search conducted on an assessee on 15th May; 2021 and  incriminating documents pertaining to A.Y. 2013-14 evidencing escapement of income chargeable to tax amounting to more than fifty lakh rupees were found. Now as per provisions of section 149(1)clause (b), the A.Y. 2013-14 is already barred by limitation for issuance of notice u/s 148. Since  such notice could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021 (due to limitation period of six years from end of the relevant assessment year). Hence, no notice under Section 148 of the act can be issued under the new scheme of Search Assessments despite of the fact that the Ld. AO can go beyond up to 10 years.  Several decisions are there that subsequent amendment cannot seek to enhance or extend limitation for reopening assessment for those assessment years in respect of which limitation had already expired/ lapsed before the date the amendment becoming effective. Reliance can be also placed on the following judgements:
   1. K.M. Sharmav. ITO [2002] 122 Taxman 426/254 ITR 772 (SC)
   2. Brahm Datt v. ACIT 100 com324
   3. S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 (SC)
   4. Govinddas v. ITO [1976] 103 ITR 123 (SC)
   5. CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC)
   6. [2014] 49 com249/227 Taxman 121/367 ITR 466 (SC)
   7. C.B. Richards Ellis Moritius Ltd. v. A.DIT [2012] 21 taxmann.com535(Delhi)
10. The second proviso clarifies that Section 149(1) shall not apply in cases where search has been initiated on or before 31stMarch’2021.
11. There is no express provision now under the new scheme to abate the pending assessments on the date of search, if any.
12. Kindlynote that Explanation to newly substituted Section 147 w.e.f. 01-04-2021 provides that for the purpose of assessment or reassessment or recomputation under  Section 147, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.
13. In case of any other person on or after the 1st day of April, 2021:-
    1. The relevant part of explanation 2 is as under :-

 “Explanation 2.—For the purposes of this section, where,—

(i)  ……………………………..; or

(ii)  ……………………………..; or

(iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee,

the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the ………………………………………………………

…………………………………………………………………………………………………………………………………………………………………………………………… money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person.”

1. Hence there is no requirement of recording of the prior satisfaction of the Assessing Officer of the searched person only the satisfaction of the Assessing Officer of the person other than that of the searched person is deemed fit by the legislature.

9. Now Section 153A of the act has been made inoperative for searches initiated on or after 1stApril’2021 and the return required to be filed u/s 148 of the act. Hence applicability of penalty provisions of “Section 271AAB is not clear.
10. The assessee shall be provided an opportunity of 7 to 30 days to dispute the proposal or reassessment.