Hindi film Raid was loosely primarily based on the revenue tax (I-T) search operations on the home of a Kanpur-based businessman. In the film, the protagonist and his workforce have been capable of finding undisclosed money and jewelry hidden within the civil construction of the premises. In actuality, such a discovery is incriminating sufficient to justify the additions within the tax evaluation pursuant to the search motion. But what occurs if no incriminating materials is discovered in the course of the search? Is any addition within the evaluation then justified? The reply is clearly within the detrimental.
A ‘search’ motion is taken into account an excessive measure of tax administration and its legislative mandate is given in part 132 of the Act. If the competent I-T authority, in consequence of any data in its possession, believes that any individual is having any undisclosed revenue within the type of cash, bullion, jewelry, or different related valuables, then it may well concern a search warrant in opposition to such individual, and enter and search such individual’s enterprise and residential premises. During such searches, I-T officers are empowered to interrupt open the lock of any door, locker, protected, vault, almirah, or different civil construction within the premises and impound or seize the property discovered therein.
Until fiscal 2021-22, the assessments pursuant to such searches have been ruled by separate provisions of sections 153A and 153C of the Act and may very well be reopened for previous six years. From fiscal 2022-23 onwards, search associated assessments have been subsumed within the new reassessment regime beneath sections 147-151 of the Act. The appellate authorities have recognised and held that, after subjecting the taxpayer to the acute invasion of privateness and trauma and hardship of a search motion, I-T authorities are anticipated to find some incriminating materials to justify the reopening of accomplished assessments of previous years and making of consequential additions in respect of alleged undisclosed revenue. This established authorized place has been given the ultimate stamp of approval by the Supreme Court in a current judgement, within the case of PCIT vs Abhisar Buildwell Pvt. Ltd. However, the apex courtroom additionally noticed that such in any other case quashed assessments could also be reopened by income authorities, beneath reassessment sections 147/148, topic to the fulfilment of the required situations therein.
One such prescribed situation is that the income authorities wouldn’t have the facility to reopen outdated search instances carried out earlier than 1 April 2021 at current. However, on 23 August, CBDT got here out with an instruction that conceived an out-of- the-box fictional idea of ‘time-travel’ within the Income Tax Act. It visualizes a state of affairs whereby assessing authorities can reopen accomplished assessments made pursuant to searches carried out earlier than 1 April 2021, which in any other case had been quashed by the apex courtroom.
The CBDT instruction depends upon part 150 of the Act, which supplies leeway to the IT authorities to ignore the time barring limitation interval, for reopening of already accomplished assessments, as a way to give impact to the discovering of any courtroom in any attraction proceedings. The CBDT instruction directs the assessing authorities that, as a way to give impact to the discovering of the apex courtroom in Abhisar Buildwell judgement that such in any other case quashed assessments could also be reopened, beneath sections 147-148, and the above said limitation situations may be bypassed and undermined.
The legislative intent of the highest dispensation is to offer a extra steady, sure and conclusive taxation regime to the taxpayers to make sure that the tax assessments attain finality and should not left open inconclusive, infinitely. However, opposite to this legislative intent, a tsunami of litigations is foreseeable and anticipated after this adventurous CBDT instruction. It may very well be challenged in acceptable appellate boards because the instructions given in it should not in accordance with the legislative sanctity of the Finance Act 2021.
Mayank Mohanka is the founding father of TaxAaram India and a accomplice at S M Mohanka & Associates.
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Updated: 03 Sep 2023, 10:55 PM IST
