The Jharkhand High Court recently rendered a judgment affirming the legitimacy of the Assessing Officer's (A.O.) decision to reopen the assessment for the assessment year 2013-14, a decade after the search was conducted. The court, consisting of Justice Rongon Mukhopadhyay and Justice Deepak Roshan, ruled that the A.O. had appropriately obtained prior authorization from the competent authority before initiating the reassessment proceedings.
Notably, the court highlighted a legislative amendment effective April 1, 2022, which broadened the scope of revenue exploration in search proceedings. Section 149(1)(b) was amended to include entries in books of account, in addition to assets and expenditure. The department's allegations pertained to entries in the books of account, specifically focusing on a substantial amount of bogus loans amounting to Rs. 93 lakhs given by the assessee's Chartered Accountant, which were not disclosed in the income tax return.
The court emphasized that the amendment empowered the revenue authorities to scrutinize entries in the books of account during search proceedings. In this case, the department's decision to issue a notice under Section 148 for the assessment year 2013-14 was deemed appropriate in light of the unreported loans and the legislative changes.
Additionally, the court invoked Section 153C, stating that the department was entitled to initiate an assessment against a third party if their documents were discovered during the search, as outlined in Section 153A. This provision allows for the assessment of a person other than the one subjected to the search, based on the documents found during the search operation.
The appellant, engaged in the construction and development of residential flats, commercial establishments, and schools, contested the issuance of notices under Section 148. The genesis of the dispute traced back to the search and seizure operations conducted on the business premises of Naresh Kumar Kejriwal on June 9, 2022. Notably, Devika Constructions, the appellant, underwent a survey under Section 133A but was not subject to a full-fledged search.
Addressing the appellant's argument concerning the Finance Act, 2021, the court examined the legislative intent behind reducing the time limit to three years in ordinary cases and increasing the threshold for income escaping assessment to Rs. 50 lakhs. The appellant contended that the extended time limit under Section 149(1)(b) was not applicable, as the alleged information did not result in any income escaping assessment in the form of an "ASSET." The notice issued after ten years was deemed time-barred by the appellant.
However, the court disagreed, asserting that the search conducted on June 9 fell within the financial year 2022-23, corresponding to the assessment year 2023-24. Therefore, the Assessing Officer's issuance of a notice under Section 148 for the assessment year 2013-14 was deemed justified under the amended section, aligning with the legislative changes and the circumstances of the case.
In conclusion, the Jharkhand High Court's ruling underscores the importance of legislative amendments, validating the revenue's authority to reassess even after a significant period post-search, provided proper authorization is obtained and the amended provisions are adhered to.
TAGS: Jharkhand High Court reassessment assessment year search proceedings legislative amendment Section 149(1)(b) books of account bogus loans Section 148 notice Section 153C Finance Act 2021 time limit
