The Hindu : Business : New block assessments

Online edition of India's National Newspaper
Monday, Jun 07, 2004

Business

Business

New block assessments — what is the scope?

QUESTION: What are the main differences between post-search assessments in respect of searches initiated up to May 31, 2003 and after?

ANSWER: There are three new sections by way of 153A, 153B and 153C. Board Circular No. 7 of 2003 (2003) 263 ITR (St.) 62 explains the new scheme as under:

65.3 Further three new Sec. 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition.

65.4 The new Sec. 153A provides the procedure for completion of assessment where a search is initiated under Sec. 132 or books of account, or other documents or any assets are requisitioned under Sec. 132A after May 31, 2003. In such cases, the assessing officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Sec. 132 or requisition was made under Sec. 132A.

65.5 The assessing officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Sec. 132 or requisition under Sec. 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under Sec. 132 or requisition shall not abate. Save as otherwise provided in the proposed Sec. 153A, Sec. 153B and Sec. 153C, all other provisions of this Act shall apply to the assessment or reassessment made under Sec. 153A.

It is also clarified that assessment or reassessment made under Sec. 153A shall be subject to interest, penalty and prosecution, if applicable.

In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.

65.6 The new Sec. 153B provides for the time limit for completion of search assessments.

It provides that the assessing officer shall make an order of assessment or reassessment in respect of each assessment year, falling within six assessment years under Sec. 153A within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under Sec. 132A was executed.

65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under Sec. 132 or requisition is made under Sec. 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorisations for search under Sec. 132 or for requisition under Sec. 132A, as the case may be, was executed.

65.8 It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any court; or the period commencing from the day on which the assessing officer directs the assessee to get his accounts audited under sub-section (2A) of Sec. 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being re-heard under the proviso to Sec. 129, or in a case where an application made before the Settlement Commission under Sec. 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of Sec. 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded. If, after the exclusion of the aforesaid period, the period of limitation available to the assessing officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly.

65.9 The new Sec. 153C provides that where an assessing officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in Sec. 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the assessing officer having jurisdiction over such other person and that assessing officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of Sec. 153A.

65.10 An appeal against the order of assessment or reassessment under Sec. 153A shall lie with the Commissioner of Income-tax (Appeals).

65.11 Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to Sec. 153A in these sections.

65.12 These amendments will take effect from June 1, 2003".

The main changes are that income will be computed for each of the year falling in the block under the scheme. Block will consist not only of six years prior to the year of search, but the whole financial year, during which the search took place. Under the earlier scheme, jurisdiction for block assessment was available only for the period till date of search.

Re-opening is now made easy, because a search by itself will confer jurisdiction. The concept of undisclosed income is given a go-by making jurisdiction of the assessing officer much wider. The need for two assessments one by way of regular assessment and the other as block assessment to tax undisclosed income as under the former scheme has no application after the amended law. There will be one assessment/ re-assessment under the new scheme.

S. Rajaratnam

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section

Productivity versus Outsourcing

Terror and the oil industry

Chidambaram's daunting budget exercise

New block assessments — what is the scope?

Exemption for terminal leave encashment

Bochs: An open source virtual PC software

FII comeback restores investor confidence

Watch out Qualis, Safari, Scorpio and Sumo