Section 153A of the Income Tax Act of 1961, establishes a mechanism for the assessment of income in the instance of a searched individual. According to this section, the Assessing Officer (AO) has the authority to frame an individual's income for the 6 assessment years which immediately precede the search year.


Under Section 153A, the income assessing system in case of a searched individual has been specified. Majority of the judicial precedents suggest that during the construction of an assessment under Section 153A, the AO can’t make a disallowance/addition if no ‘incriminating’ data is found.

Amendments u/s 153A

Section 153A permits notices up to the last 10 assessment years if tangible evidence is found during a search or investigation. Here are some instances which could lead to a search: 

  • Assets are used to hide income from taxation

  • Income Tax exemption, in whole or in part, pertains to that year

  • The AO has books of accounts, other papers, or proof in his possession that show that the income that has avoided assessment amounts to or is expected to amount to ₹50 Lakhs or more in a single year or in the aggregate in the relevant 4 assessment years (AYs) 

Assessment In Case of Requisition or Search

Despite anything under sections 153, 151, 149, 147, 148, and 139, if the commencement of a search u/s 132 or the books of accounts, other papers, or the assets which are requisitioned u/s 132A post-May 31, 2003, the AO must:

  • Issue a notice to an individual needing him to furnish the income returns in the form which has been prescribed and verified for every AY which falls within the 6 years of assessment. This is also applicable for the valid AY(s) as referred to in clause (b).

  • The notice should be in the prescribed form and shall set forward the particulars as prescribed. This Act’s provision must apply accordingly as if such return were a return required to be furnished under Section 139.

  • Reassess or assess the net income of the 6 AYs immediately prior to the valid AY(s) and for the relevant AYs.


The AO will not issue a reassessment or an assessment notice for the valid AY(s) unless:

  • The AO has books of accounts, evidence, and other documents which show that the income which has escaped the assessment amounts, or could amount to about ₹50 Lakhs or more in the valid AY or in the aggregate in the valid AY(s);

  • The income which has been mentioned in the above paragraph eludes the assessment for the relevant years

  • After April 1, 2017, a search u/s 132 has commenced or a demand u/s 132A has been submitted

Explanation of Section 153A

‘Relevant Assessment Year’ refers to the year of assessment which precedes the AY valid to the previous year in which the requisition or search is made or conducted. This is more than 6 AY(s), however, it is less than 10 AY(s) from the relevant AY’s end. 


‘Asset’ comprises the immovable properties such as shares, securities, buildings, loans, lands, deposit in bank accounts, and advances, which are for the purposes of the 4th proviso.


If any of the proceedings gets initiated or any assessment or reassessment order is made under subsection (1) is made null and void in a legal proceeding, the reassessment or assessment proceedings which are related to any AY which has abated under the 2nd proviso to subsection (1) should get revived. This would be brought into effect from the receipt date of such annulment’s order by the Principal Commission.


Nonetheless, such resurrection will stop having an effect if the annulment decree gets overturned. Hence, for the doubt’s avoidance, it is declared that:

  • The tax will be chargeable at a rate which is applicable to the AY in a reassessment or an assessment which is made under this particular section

  • Unless otherwise provided under this section, Section 153B and Section 153C, this Act’s every other provision will be applicable to the assessment which has been made under this particular section.

Assessment Procedure u/s 153A

The investigator should provide a report of appraisal to the respective Assessment Officer, given the seizure and the search processes have been concluded at the premises of the assessee.

1. Appraisal Report

The AO gets a report of assessment from the Conducting Directorate. It comprises the following information:

  • Conclusions of a premises’ search u/s 132 and 133A of the Income Tax Act

  • Inventory of seized/found books of documents/accounts, and more. Inventory of found/seized books of accounts/documents, etc.

  • Seized inventory and assets discovered.

  • Seized damning evidence’s analysis.

  • Unreported assets and income’s information.

  • Recorded key points’ summary.


The report of appraisal should indicate to the assessment officer an inquiry-related path, recommendations to the assessment officer, potential of the assessee’s prosecution. This is in order to consider the tax evasion findings which are described in the report when drafting the orders of assessment under Section 153A.

2. Peak Credit Theory

If an assessee doesn’t have an explanation for every debit or credit entry, the entries must be arranged in a proper order, that a debit entry followed by the credit entry must be referred to the latter to a possible extent. Also, only the credits’ ‘peak’ must be treated as something which isn’t explained.

3. Peak Credit Theory’s Summary

  • Used when debit and credit entries are not explained.

  • Could get extended to the circumstances when the credit entry is shown in several accounts and not just in one.

  • The primary premise of the peak credit theory is to prevent the double addition by taxing only the actual income of the assessee when there are a high number of credit and debit entries which are not explained.

Connection Between Impeachment Material and Assessment

Assessment under section 153A may be done exclusively based on the incriminating material. This comprises the books of account and several other papers which have been discovered during the search. However, they have not been submitted at the initial assessment, and the undeclared income or property is disclosed during the search.

The AO can initiate a searched person’s assessment for the 6 assessment years frequently preceding the search year under the abovementioned clause. One of the questions which arise is whether, when the framing of the assessments under the mentioned section takes place, the disallowance/addition, with respect to the AY for which the proceedings don’t abate, must only be limited to the materials which are  'incriminating' and are discovered during the span of the search-related proceedings. The majority of legal precedents, as mentioned, indicate that the Assessing Officer, when framing an assessment provided u/s 153A of the Income Tax Act, 1961, cannot make disallowances or additions in the absence of any "incriminating" data.

Frequently Asked Questions

What is the income-tax administrative framework?

The Ministry of Finance is in charge of the Indian Government's revenue functions. The Central Board of Direct Taxes has been tasked by the Finance Ministry with the job of administering direct taxes such as income tax, wealth tax, and so on. The CBDT is part of the Ministry of Finance's Department of Revenue.


The CBDT provides critical inputs for direct tax policy formulation and planning, as well as administering direct tax laws through the Income-tax Department. As a result, the Income-tax Department administers the income-tax law under the administration and supervision of the CBDT.

What is the time period during which a person's earnings are considered for income tax purposes?

A person's annual income is subject to income tax. Under the Income Tax Law, a financial year begins on April 1st and ends on March 31st of the following calendar year. The year is divided into two categories by the Income Tax Law: (1) previous year and (2) assessment year. The prior year is the year in which money is earned, and the assessment year is the year in which the income is taxed.

What does regular assessment tax entail, and how is it paid?

When the Income Tax Department discovers that income has been understated and that tax is owed as a result, it takes steps to calculate the exact tax amount that should have been paid. Tax on regular assessment is the name given to the demand placed on the person. The regular assessment tax must be paid within 30 days of receiving the demand notification.

What is the role of an Assessing Officer?

An Assessing Officer is an income tax officer assigned to every taxpayer. They are responsible for communicating the instructions of the income tax department to the taxpayers in a particular jurisdiction.


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