Assessment procedure in case of search or requisition [Section 153A/153B/153C] – Income Tax

Assessment procedure in case of search or requisition [Section 153A/153B/153C] :

The block assessment procedure introduced in 1995 and in operation since then for 8 years with various amendments from time to time has been abolished in respect of search carried out after 31st May, 2003. In the place of the block assessment, a new scheme of reassessment has been introduced by inserting three sections 153A, 153B and 153C with effect from 1st June, 2003 for assessment in case of search or making requisition.

Procedure for assessment where search is initiated under section 132 or books of account etc. are requisitioned under section 132A [Section 153A]

(a) The provisions of section 153A prescribing a procedure for assessment in the case of search or requisition will apply notwithstanding anything contained in sections 139/147/148/149/151 and 153.

(b) This section provides for the procedure for completion of assessment where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003.

(c) In such cases, the Assessing Officer shall issue notice to such person. Such a person has to furnish a return of income within such period as may be specified in the notice setting forth such other particulars as may be prescribed.

(d) Such a return should be filed in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A.

(e) The Assessing Officer shall assess or reassess the total income of each of these six assessment years.

(f) The assessment or reassessment, if any, relating to any assessment year falling within the above period of six assessment years, pending on the date of the initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. In other words, they will cease to be applicable.

(g) The Central Government is empowered to notify class or classes of cases [except the cases where any assessment or reassessment has abated] in which the Assessing Officer shall not be required to issue notice for initiation of assessment or reassessment of total income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made .

The assessment proceedings in the class or classes of cases so notified shall be carried out only for the assessment year relevant to the previous year in which search was conducted or requisition was made, except in cases where any assessment or reassessment in respect of any of the earlier six years has abated.

Accordingly, in exercise of this power, the Central Government has, through Notification No.42/2012 dated 4.10.2012, inserted Rule 112F which shall come into force from 1st July, 2012.

The said Rule provides that the Assessing Officer is not required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, in the following cases:

(i) where as a result of a search under section 132(1) or a requisition made under section 132A, a person is found to be in possession of any money, bullion, jewellery or other valuable articles or things, whether or not he is the actual owner of the same, and

(ii) where such search is conducted or such requisition is made in the territorial area of an assembly or parliamentary constituency in respect of which a notification has been issued under section 30 read with section 56 of the Representation of the People Act, 1951, or where the assets so seized or requisitioned are connected in any manner to the ongoing election in an assembly or parliamentary constituency.

However, this Rule is not applicable to cases where such search under section 132 or such requisition under section 132A has taken place after the hours of poll so notified.

Circular No.10/2012 dated 31.12.2012 clarifies that the aforesaid amendment was introduced with a view to reduce infructuous and unnecessary proceedings under the Income-tax Act, 1961 in cases where a search is conducted under section 132 or requisition is made under section 132A and cash or other assets are seized during the election period, generally on a single warrant, and no evidence is available, or investigation required, for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made.

In such cases, the officer investigating the case, with the approval of the Director General of Income-tax, is required to certify that –

(i) the search is conducted under section 132 or the requisition is made under section 132A in the territorial area of an assembly or parliamentary constituency in respect of which a notification has been issued under section 30, read with section 56 of the Representation of the People Act, 1951; or

(ii) the assets seized or requisitioned are connected in any manner to the ongoing election process in an assembly or parliamentary constituency; and

(iii) no evidence is available or investigation is required for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made.

The certificate of the investigating officer shall be communicated to the Commissioner of Income-tax and the Assessing Officer having jurisdiction over the case of such person.

(h) If any proceeding initiated under section 153A or any order of assessment or reassessment made under section 153A(1) has been annulled in any appeal or other legal proceeding, the abated assessment or reassessment relating to any assessment year shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner. If the order of annulment is set aside, such revival shall cease to have effect.

(i) Unless section 153A, section 153B and section 153C provide otherwise, all other provisions of the Income-tax Act, 1961, shall apply to the assessment or reassessment made in respect of assessment year under this section.

(j) The tax shall be chargeable at the rate or rates as applicable to such assessment year.

Time-limit for completion of search assessments [Section 153B]

(a) Section 153B provides for the time-limit for completion of search assessments.

(b) An assessment or reassessment order in respect of each assessment year falling within six assessment years under section 153A, should be made within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or requisition under section 132A was executed.

(c) The section also provides the time limit for completion of assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A within a period of 2 years from the end of the financial year in which the last of the authorisations for search under se ction 132 or for requisition under section 132A, as the case may be, was executed.

(d) In case of any other person referred to in section 153C, the time limit for making assessment or reassessment of total income of the assessment years referred to in clause (b) and clause (c) above, shall be the either 2 years from the end of the financial year in which the last of authorisations for search under section 132 or for requisition under section 132A was executed or 1 year from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later.

The time limit for assessment or reassessment under section 153B with effect from 1st July, 2012 is as follows –

Proceeding under section

Time limit for completion of assessment or reassessment

Applicability of new time limit

153A – for the assessment year relevant to the previous year in which search is conducted and for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted

2 years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed

In case where the last of authorizations for search under section 132 or for requisition under section 132A was executed during the financial year 2010-11 or any subsequent financial year

In case of a person assessed under section 153C – for the assessment year relevant to the previous year in which search is conducted and for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted

2 years from the end of the financial year in which last of the authorizations for search under section 132 or for requisition under section 132A was executed

1 year from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over to the jurisdictional Assessing Officer under section 153C

whichever is later

In a case where last of the authorizations for search under section 132 or for requisition under section 132A was executed during the financial year 2010-11 or any subsequent financial year

Time limit for completion of assessment/reassessment where a reference is made to the Transfer Pricing Officer

The time limit for completion of assessment/re-assessment where a reference is made to the Transfer Pricing Officer under section 92CA(1) is as under –

Section	Particulars	Time-limit
Third Proviso to section 153(1)	Completion of assessment under section 143 or section 144 for the A.Y. 2009-10 onwards.	3 years from the end of the assessment year in which the income was first assessable.
Fourth proviso to section 153(2)	Completion of assessment/ reassessment/re-computation under section 147 if notice is served under section 148 on or after April 1, 2010.	2 years from the end of the financial year in which notice under section 148 is served.
Fourth proviso to section 153(2A)	Fresh assessment in pursuance of an order under section 254 (received by the Principal Chief Commissioner or Chief Commissioner/Principal Commissioner or Commissioner on or after April 1, 2010) or an order passed by the Principal Commissioner or Commissioner under sections 263 and 264 on or after April 1, 2010	2 years from the end of the financial year in which such order is received by the Principal Chief Commissioner or Chief Commissioner/ Principal Commissioner or Commissioner or passed by the Principal Commissioner or Commissioner, as the case may be.
Fourth Proviso to section 153B(1)	Completion of assessment in cases where the last of the authorizations for search under section 132 or for requisition under section 132A was executed during F.Y.2009-10 or thereafter.	3 years from the end of the financial year in which the last of the authorizations for search under section 132 or requisition under section 132A was executed.
Fifth Proviso to section 153B(1)	Completion of assessment/ reassessment in case of other person referred to in section 153C in cases where the last of the authorizations for search under section 132 or for requisition under section 132A was executed during F.Y.2009-10 or thereafter.	3 years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed or 2 years from the end of the financial year in which the books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later.

Exclusions while computing period of limitation [Explanation to Section 153B]

In computing the period of limitation for completion of assessment or reassessment, the following periods should be excluded –

1. Stay or injunction – The period during which the assessment proceeding is stayed by an order or injunction of any court; or

2. Audit under section 142(2A) – The following time period should be excluded –

the period commencing from	the period ending with
the period commencing from	In a case where such direction is not challenged before a court	In a case where such direction is challenged before a court
the date on which the Assessing Officer directs the assessee to get his accounts audited u/s 142(2A).	the last date on which the assessee is required to furnish a report of such audit under section 142(2A).	the date on which the order setting aside such direction is received by the *Principal Commissioner or* *Commissioner*.

3. Report of Valuation Officer – The period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under section 142A(1) and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer.

4. Re-hearing under section 129 – The time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being re-heard under the proviso to section 129; or

5. Settlement – In a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under section 245D(1) is received by the Principal Commissioner or Commissioner under section 245D(2); or

6. Advance Ruling – The period commencing from the date on which an application is made before the Authority for Advance Ruling under section 245Q(1) and ending with the date on which the order rejecting the application is received by the Principal Commissioner or Commissioner under section 245R(3); or

7. Advance Ruling – The period commencing from the date on which an application is made before the Authority for Advance Ruling under section 245Q(1) and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under section 245R(7) or

8. Setting aside of order of annulment – The period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in sub – section (2) of section 153A till the date of the receipt of the order setting aside the order of such annulments by the Principal Commissioner or Commissioner.

9. Obtaining information from tax authorities outside India – The period beginning with the date on which a reference or first of the references for exchange of information is made by a competent authority and ending with the date on which the information so requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less, is excluded for computing the above time limits. This is for the purpose of excluding the time taken in obtaining information from the tax authorities in jurisdictions situated outside India (under an agreement referred to in section 90 or section 90A) from the prescribed time limit for completion of assessments/reassessments under section 153B.

If, after the exclusion of the aforesaid period, the period of limitation available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly.

Assessment or reassessment of income of any other person [Section 153C]

(a) Section 153C provides for assessment or reassessment of income of any other person.

(b) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that –

(1) any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to ; or

(2) any books of account or documents seized or requisitioned pertain to; or

(3) any information contained therein, relates to,

any person, other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person.

(c) The Assessing Officer having jurisdiction over the other person shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A only if he is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in section 153A(1) [Section 153C(1)].

(d) The assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in the said section pending on the date of initiation of the search under section 132 or on the date of making of requisition under section 132A, as the case may be, shall abate.

(e) In case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having the jurisdiction over such other person [Section 153C(1)] .

(f) The Central Government is empowered to notify class or classes of cases [except the cases where any assessment or reassessment has abated] in which the Assessing Officer shall not be required to issue notice for initiation of assessment or reassessment of total income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made.

Accordingly, in exercise of this power, the Central Government has, through Notification No.42/2012 dated 4.10.2012, inserted Rule 112F which shall come into force from 1st July, 2012.

(ii) where, such search is conducted or such requisition is made in the territorial area of an assembly or parliamentary constituency in respect of which a notification has been issued under section 30 read with section 56 of the Representation of the People Act, 1951, or where the assets so seized or requisitioned are connected in any manner to the ongoing election in an assembly or parliamentary constituency.

However, this Rule is not applicable to cases where such search under section 132 or such requisition under section 132A has taken place after the hours of poll so notified.

Circular No.10/2012 dated 31.12.2012 clarifies that the aforesaid amendment was introduced with a view to reduce infructuous and unnecessary proceedings under the Income-tax Act, 1961 in cases where a search is conducted under section 132 or requisition is made under section 132A and cash or other assets are seized during the election period, generally on a single warrant, and no evidence is available , or investigation required, for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made.

In such cases, the officer investigating the case, with the approval of the Director General of Income-tax, is required to certify that –

(ii) the assets seized or requisitioned are connected in any manner to the ongoing election process in an assembly or parliamentary constituency; and

(iii) no evidence is available or investigation is required for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made.

The certificate of the investigating officer shall be communicated to the Principal Commissioner or Commissioner of Income-tax and the Assessing Officer having jurisdiction over the case of such person.

(g) In respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, in case of such other person, where –

(i) no return of income has been furnished by such person and no notice under section 142(1) has been issued to him, or

(ii) a return of income has been furnished by such person but no notice under sub -section (2) of section 143 has been served and limitation of serving the notice under sub -section (2) of section 143 has expired, or

(iii) assessment or reassessment, if any, has been made, before the date of receiving of books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person for such assessment year in the manner provided in section 153A. [Section 153C(2)].

(h) The provisions of sub-section (2) would apply where books of account or documents or assets seized or requisitioned referred to in sub-section (1) has been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A.

Prior approval of Joint Commissioner required for assessment or reassessment in respect of search cases [Section 153D]

Section 153D has been inserted to provide that assessment or reassessment of search cases in respect of each assessment year referred to in section 153A(b) or the assessment year referred to in 153B(1)(b) shall not be made by an Assessing Officer below the rank of Joint Commissioner without the previous approval of the Joint Commissioner.

Assessment to be made individually in search cases even where the authorization or requisition mentions the name of more than one person [Section 292CC]

(i) Under section 132 and section 132A, an authorization can be issued or a requisition can be made, as the case may be, where the Director General or the Director, in consequence of information in his possession, has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing. In such a case, he may authorize the income-tax authorities mentioned therein to enter and search any building, place, vehicle, etc. and seize any such books of accounts, other documents, undisclosed property, etc.

(ii) In a case where search is initiated under section 132 or requisition is made under section 132A, assessment is to be completed under the provisions of section 153A or section 153C or section 143(3).

(iii) Section 292CC provides that:

(1) it shall not be necessary to issue an authorization under section 132 or make a requisition under section 132A separately in the name of each person;

(2) where an authorization under section 132 has been issued or a requisition under section 132A has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorization or requisition shall not be deemed to construe that it was issued in the name of an association of per sons or body of individuals consisting of such persons;

These provisions would apply irrespective of anything contrary contained in any other provision of the Act.

(v) Further, even if an authorization under section 132 has been issued or requisition under section 132A has been made mentioning therein the name of more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorization or requisition.

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