Parties through their counsel.
Regard being had to the similitude in the controversy involved in the present cases, the writ petitions were analogously heard and by a common order, they are being disposed of by this Court. Facts of the Writ Petition No.8001/16 are narrated hereunder.
Petitioner before this Court is a company under the Companies Act, 1956. It is having manufacturing unit at Pithampur. Petitioner company has filed e-Return in respect of income for the assessment year 2013-14 declaring the total income of Rs. 19,61,04,970/- and total tax on returned income was shown by the petitioner to the tune of Rs. 4,45,23,618/- along with interest under Section 234B and 234C of the Income Tax Act, 1961 (hereinafter referred as the 'Act') thus, total income tax payable is Rs. 4,92,27,267/-. The assessment proceedings in respect of the year 2013-14 are not pending as on date.
A raid was conducted in the office and in the business premises as well as at the residence of the directors of the Company on 27.02.2015 and certain documents and books of accounts were seized by the respondents and pursuant to the raid, a notice under Section 153(A) dated 18.09.2015 was served to the petitioner with a direction to prepare and submit true and correct return of income for the assessment year 2013-14.
Petitioner's contention is that in light of the Income Tax Act, when notice has been issued under Section 153A on 18.09.2015, the earlier self assessment tax return submitted by the petitioner stands abated, therefore, petitioner is not liable to pay any tax to the respondent.
It is pertinent to note that petitioner has not paid outstanding tax in respect of the order passed earlier and thereafter, notice was issued to the petitioner informing outstanding tax under Section 143(3) and 143(1) of the Income Tax Act and the petitioner was directed to show the cause as to why the prosecution under Section 276C(2) of the Income Tax Act may not be initiated.
Petitioner did submit a reply and thereafter, another notice was issued on 16.03.2016 under Section 279(1) of the Act and finally, a complaint has been filed by the respondent under Section 267C(2) r/w Section 276(B) of the Income Tax Act, 1961 before the Judicial Magistrate, Class-I, Indore on 29.09.2016 stating the default in payment of the dues of self assessment tax and interest of Rs. 4,72,70,650/- and a demand has been raised to the tune of Rs. 5,40,81,379/- plus interest till 31.08.2016.
Learned counsel for the petitioner by placing reliance upon Section 153A has prayed for quashment of the complaint on the ground that the proceedings stand abated in view of Section 153A of the Income Tax Act.
Reliance has also been placed upon the judgments delivered in the case of State of Haryana Vs. Bhajan Lal, reported in 1992 Supp.(1) SCC 335 and in the case of M/s. Pepsi Foods Ltd. & Anr. Vs. Special Judicial Magistrate & Ors, reported in 1998 (5) SCC 749. A prayer for quashment of criminal case No.09/16 has been made before this Court.
On the other hand, the department has filed a reply and the contention of the department is that even after issuance of the notice under Section 153(A) and after filing Return under Section 153 of the Income Tax Act, the income originally declared and demand raised thereon remains alive.
It has been stated that there is no clause under the Income Tax Act, 1961 providing that if search was conducted / assessment proceedings under Section 153(A) have been initiated, then the tax which remains unpaid cannot be recovered from the assessee.
Ms. Veena Mandlik, learned counsel has vehementally argued before this Court that Section 153(A) deals with the pending assessment only and there is no provision to abate the demand raised on either self assessment demand or demand on completed assessment and reassessment proceedings.
Learned counsel has argued that in the present case, assessment proceedings were not pending, therefore, the question of abatement does not arise, hence, the present writ petition be dismissed.
Heard learned counsel for that parties at length and perused the record.
The statutory provisions governing the field as contained under Section 153A of the Income Tax Act, 1961 reads as under:-
“Assessment in case of search or requisition.
153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall :
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:
[Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.]
[(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.”
The aforesaid statutory provision makes it very clear that assessment under Section 153A is different from the required assessment. The section can be attracted only when the search is initiated under Section 132 or books of accounts, other accounts or any assets are requisitioned under Section 132 (A).
The provision under Section 153 (A) has to be read in conjunction with the provisions contained under Section 132(1), the reason being that latter deals with the search and seizure and former deals with the assessment in caseof search etc., thus, inextricable linked with each other.
The provisions of Section 153A starts with non-obstante clause with reference to Sections 139, 147, 148, 151 and 153. Heavy reliance has been placed by the learned counsel, Shri Sumit Neema, upon the first proviso to provisions of Section 153A.
First proviso to the Clause B of Section 153A(1) provides that assessing officer shall assess or reassess the total income of each of six assessment years.
Second proviso contemplates that if any of the aforesaid six assessments is pending on the date of initiation of the search or making of requisition, the same shall abate.
In the present case, assessment in question is not pending. Complaint has been filed as a consequence upon non-deposition of tax. Not only this, a circular has been issued i.e. Circular No.7 of 2003 dated 06.09.2003 by the Commissioner, Income Tax clarifying the position.
Allhabad High Court in the case of CIT vs. Shaila Agrawal, reported in 2004 Taxman, 276, has taken care of the aforesaid grounds raised by the petitioner. The Division Bench of Allahabad High Court in paragraph Nos.10 to 20 has held as under:-
“10. Shri Bharat Ji Agarwal submits that the order of the Income Tax Appellate Tribunal is not acceptable as it is not in accordance with the provisions of the Act. A plain reading of the second proviso of Section 153A of the Act would show that only the assessment pending on the date of initiation of the search shall abate.
11. The second proviso of Section 153A reads as under:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the searchunder section 132 or making of requisition under section 132A, as the case may be, shall abate.
12. A plain reading of Section 153A would show that where notice under this Section is issued as result of any search under Section 132, assessment or reassessment if any relating to any assessment year falling within the period of six assessment years referred to under Section 153, pending on the date of initiation of search under Section 132 or requisition under Section 132A shall abate. The words, pending on the date of initiation of search under Section 132, or making of requisition under Section 132A, as the case may be, has to be assigned simple and plain meaning. Where the assessment or re- ssessment is finalised, there are no pending proceedings to be abated, and restored to the file of the assessing officer. To abate means to diminish or to take away. The word 'abatement' has been defined in the Concise Law Dictionary (P. Ramanatha Aiyer) as follows: Abatement. "Abatement" means, in respect of any chargeable accounting period, ending on or before the 31st day of March, 1947 a sum which bears to a sum equal to-
(a) in the case of a company, not being a company deemed for the purposes of Section 9 to be a firm, six per cent of the capital of the company on the first day of the said period computed in accordance with Schedule II, or one lakh of rupees, whichever is greater, or
(b) in the case of a firm having
(i) nor more than two working partners, one lakh of rupees, or
(ii) three working partners, one and a half of rupees, or
(iii) four or more working partners, two lakh of rupees,
or
(c) in the case of a Hindu undivided family, two lakhs of rupees, or
(d) in any other case, one lakh of rupees,-The same proportion as the said period bears to the period of one year and, in respect of any chargeable accounting period beginning after the 31st day of March, 1947, such sum as may be fixed by the annual Finance Act. [Business Profits Tax Act (21 of 1947), S. 2 (1)]
Removal or destruction, (as) of a nuisance; failure; premature end, suspension or diminution, (as) of an action or of a legacy. The action of abating; being abated. {O.XXII, R.1, CPC (5 of 1908)]; decrease [S. 12(3)(b)(i), Specific Relief Act (47 of 1963)].
Of An Action Or Suit: In civil law an abatement of a suit is a complete termination of it. Abatement of a matter or cause is caused by the same becoming defective on account of the death of the parties materially interested. (Ency. of the Laws of England)
A suspension or termination of proceedings for want of proper parties or due to some technical defect.
The abatement of the main action abates proceedings ancillary or collateral to it.
In Criminal Law: Abatement of proceedings connotes their termination without any decision on merits and without the assent of the prosecutor. (Ency. of the Laws of England)
In Revenue Law: Abatement is a deduction from or refunding of duties on goods damaged during importation or in store.
The word 'abatement' is referable to something, which is pending alive, or is subject to deduction. The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The word is commonly used in the legislations, which provide for abatement of action/ suit; abatement of legacies; abatement of nuisance; and all actions for such nature, which have the pendency or continuance. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof.
14. The word 'pending' occurring in the second proviso to Section 153A of the Act, is also significant. It is qualified by the words 'on the date of initiation of the search', and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate.
15. The pendency of an appeal in the Tribunal against the order of assessment against which an appeal has been decided by CIT (A) isnot a continuation of the proceedings of assessment. An appeal under the Income Tax Act lies to the Appellate Tribunal on a question of law. Even if it is pending on the date of search, no such intention has indicated by the Tribunal arises out of the provisions of second proviso to Section 153A, to abate the proceedings, which have been completed, or concluded, and to restore assessment to the file of the Assessing Officer.
16. We do not find force in the submission of Shri Ashish Bansal that where a notice under Section 153A has been given after the search operations under Section 132, for filing assessment for the block period of 6 years, and if such period includes any of the assessment year, the abatement of assessment and re-assessment proceedings, to give way to reassessment considering the additions in the assessment under Section 153A, will also include the assessment or ressessment, which has been completed. If as a result of search, some undisclosed income is found to have escaped assessment, the Assessing Officer, may initiate steps for reassessment after sanction of competent authority, within the prescribed period of limitation.
17. A Circular No. 7 of 2003 dated 5.9.2003 issued by the Commissioner of Income Tax has clarified the position in para 65.5 as follows:
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 section 132 or requisition under section 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 section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It i also clarified that assessment or reassessment made under section 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.
18. In State of Rajasthan & Ors. v. Khandaka Jain Jewellers, MANU/SC/4214/2007 : (2007) 14 SCC 339 the Supreme Court reiterating the principles of interpretation of taxing statutes held in para 24 as follows:
A taxing statute has to be construed as it is all these contingencies that the matter was under litigation and the value of the property by that time shot up cannot be taken into account for interpreting the provisions of a taxing statute. As already mentioned above a taxing statute has to be construed strictly and if it is construed strictly then the plea that the incumbent took a long time to get a decree for execution against the vendor that consideration cannot weigh with the Court for interpreting the provisions of the taxing statutes.
19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate.
20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the searchmay be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty.”
In light of the aforesaid, the question of interference by this Court does not arise.
The complaint, which has been filed before the learned Magistrate on 29.09.2016 is in fact in respect of Section 278B of the Income Tax Act, which relates to an offence by the company.
In the present case, it is true that a notice was issued under Section 153 of the Act. The petitioner was asked to furnish true and correct particulars of income including the income, which was included by the petitioner in the original return while finalizing the total income, meaning thereby, the return filed in response to the notice under Section 153A includes the income tax income (if any) in addition to income originally declared by the petitioner while filing the return under Section 139(1) of the Act. Meaning thereby, in short, it is as clear as noon of the day that even after filing of the return under Section 153 of the Income Tax Act, in fact, originally declared and demand raised thereon remains alive.
There is no statutory provision under the Income Tax Act, 1961, which provides that in case search was conducted/assessment proceeding under Section 153A has been initiated then the tax, which remains unpaid by the assessee for the same period cannot be recovered from the assessee.
In the considered opinion of this Court, the ground raised by the petitioner for quashment of complaint by taking into account Section 153A does not arise. The application for stay is rejected and the admission is declined.
In the other connected writ petitions, which relate to the same company and as similar issue is involved, the admission is declined and all the writ petitions are, accordingly, dismissed.