The
Supreme Court on Monday held that the income tax authorities cannot add to a
taxpayer's income under Section 153A of the Income Tax Act if no incriminating
evidence is found during a search. The court, however, left the scope for the
authorities to re-open the cases of tax violation if any incriminating evidence
emerges later.
Section
153A of the I-T Act specifies a process to determine the income of the searched
individual. It aims to bring undisclosed income under the tax. The cases can be
re-opened under Section 147/148.
According
to the report, a division bench of justices MR Shah and Sudhanshu Dhulia said
that if no incriminating evidence is found during the search, the Assessing
Officer (AO) cannot assess other material which relates to already completed
assessments.
The
report also quoted Vishwas Panijar, partner with Nangia Andersen LLP, as saying
that the reassessment is detrimental to the taxpayer by its very nature. So, it
would require a higher degree of care by the department. According to the law,
'reassessment' inherently satisfies two of the most critical elements. One, it
is deemed that income has escaped assessment in a case where a search/seizure
has been conducted. Second, a show cause notice before initiating reassessment
is not required to be given in such cases.
Panijar
added that there is no restriction on the initiation of reassessment,
safeguards like a time limit for issuing of notice and seeking the reason for
reassessment would continue to be available to the taxpayer even in such cases.