27 Dec 2021
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What is 153A of the Income Tax Act?

Section 153 A of the Income Tax Act, 1961, establishes a mechanism for assessing income in the instance of a searched individual. According to the aforementioned section, the Assessing Officer has the authority to frame an individual's assessment for the six assessment years immediately preceding the year of search.

One such aspect is whether, in framing the assessment under the said section, the addition/disallowance, if any, with respect to the assessment year for which the proceedings do not abate (that is, there has been prior assessment or the time period for making such an assessment has expired), should be limited to the 'incriminating' materials discovered during the course of the search proceedings. Until date, the bulk of legal precedents listed infra indicate that the Assessing Officer cannot make an addition/disallowance based on any 'incriminating' material while framing an assessment under section 153A of the Act.

Amendments under Section 153A of Income Tax Act

To protect the revenue's interest in cases where tangible evidence is discovered during a search or seizure operation, Section 153A of Income Tax Act relating to search assessments is amended to provide that a notice under the said section can be issued up to the 10th AY if:

 

  • 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 Rs.50 lakh or more in a single year or in the aggregate in the relevant 4 AYs.

Is the AO authorized to assess whole income [disclosed or undisclosed] or are there any limitations?

The legality of assessment under section 153A is to strike a balance between the rights and obligations of both the assessee and the IT department in accordance with the cardinal principles of any assessment mechanism, which is to meet the ends of natural justice, and no Authority can intervene in any matter that is sub-judice. Additionally, one should not be permitted to analyze one's own conduct. Each of the six assessment years is assessed separately and uniquely. A determination must be made under section 153A of the Act in relation to the search or requisition, specifically in relation to the material disclosed during the search or requisition. If no incriminating material is discovered in respect to any assessment year, no addition or disallowance can be imposed in that assessment year in the exercise of powers under section 153A of the Act, and the previous assessment must be repeated.

Is assessment connected to impeachable material?

Whether the assessment's breadth is constrained by incriminating evidence discovered during the search. Yes, assessment under section 153A may be done exclusively on the basis of incriminating material, which includes books of account and other papers discovered during the search but not submitted at the initial assessment, as well as undeclared income or property disclosed during the search.

Wrapping Up

The Assessing Officer can initiate an assessment of a searched person for 6 assessment annums frequently preceding the year of search under the abovementioned clause. One such question is whether, when framing assessments under the said section, the addition/disallowance, if any, with respect to the assessment year for which the proceedings do not abate (that is, there has either been an assessment done previously or the time period for making such an assessment has elapsed), should be limited only to the 'incriminating' materials discovered during the course of the search proceedings. The majority of legal precedents, as mentioned infra, indicate that the Assessing Officer, when framing an assessment under Section 153A of the Income Tax Act, cannot make additions or disallowances in the absence of any "incriminating" data.

Frequently Asked Questions (FAQs)

  • ✔️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 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?

    Every individual is responsible for appropriately computing and paying his or her taxes under the Income Tax Act. When the 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-400 tax must be paid within 30 days of receiving the demand notification.

  • ✔️Is my liability under the Income Tax Act discharged once my taxes have been paid?

    No, you are responsible for ensuring that the tax credits are available in your tax credit statement and TDS/TCS certificates, and that full details of your income and tax payment are given to the Income-tax Department in the form of a Return of Income, which must be filed by the due date.

  • ✔️What is the role of an Assessing Officer?

    He or she is an officer of the Income Tax Department with jurisdiction over a specific geographical region in a city/town or a group of people. You can learn about the officer in charge of enforcing the legislation from the PRO or the Departmental website, which may be dependent on your geographical jurisdiction or the type of income you receive.