Scope of Reassessment Proceedings in Search Cases in The Light of CBDT Instruction No. 1 of 2023
Gunjan Kakkad, Advocate
The Central Board of Direct Taxation (“CBDT”) has recently issued instruction no. 1 of 2023 dated 23rd August, 2023, (hereinafter referred to as “instruction”) in exercise of its powers under section 119 of the Income-tax Act, 1961 (“the Act”) with the object of implementing the decision of the Hon’ble Supreme Court in cases of PCIT vs. Abhisar Buildwell (P) Ltd  454 ITR 212 (SC) (hereinafter referred to as “Abhisar Buildwell”) and DCIT vs. U. K. Paints (Overseas) Ltd  454 ITR 441 (SC) (hereinafter referred to as “U K Paints”) in a uniform manner. The CBDT has taken a view that in cases where the proceedings did not abate at the time of the search, reassessment proceedings under section 147 / 148 of the Act will have to be undertaken in view of section 150 of the Act by following the procedure laid down under section 148A of the Act as inserted by Finance Act, 2021 in accordance with the law laid down by Supreme Court in case of Union of India vs. Ashish Agarwal  444 ITR 1 (SC). This article analyses the scope of the provisions of section 150 of the Act, and it is submitted that the said section is not applicable. Accordingly, the Revenue would be justified to initiate reassessment proceedings only if the time limit prescribed under section 149 of the Act is adhered to and it is submitted that any other view would mean that the CBDT instruction is not in accordance with the law and thus, invalid.
Part 1: Decision of the Supreme Court in the cases of Abhisar Buildwell (supra) and U. K. Paints (supra)
1. In the case of Abhisar Buildwell (supra), the Hon’ble Supreme Court settled the dispute on the scope of the assessments under section 153A of the Act. The question before the Hon’ble Supreme Court in the batch of several appeals was whether the Assessing Officer (hereinafter referred to as “the AO”) was justified to make additions to total income in respect of assessment / reassessment proceedings which do not abate under the second proviso to section 153A(1) of the Act.
2. The Hon’ble Supreme Court vide order dated 24th April, 2023, held that in the absence of incriminating material, the AO cannot make any addition to the total income on the basis of other material. However, the AO may initiate reassessment proceedings under section 147 / 148 of the Act subject to fulfilling the conditions prescribed in law. In cases where incriminating material is found, the Hon’ble Court held that the AO will be entitled to make additions based on incriminating material as well as other material which is available with him including the income declared in the returns.
3. Subsequently, the Revenue moved miscellaneous application no. 680 of 2023 w