CBDT issued Instruction on Implementation of Judgment of Hon’ble Supreme Court

The Central Board of Direct Taxes(CBDT) has issued Instruction on Implementation of Judgment of Hon’ble Supreme Court in case of Central-3 vs. Abhisar Buildwell pvt. ltd..

On 24.04.2023, the Hon’ble Supreme Court delivered a judgment in a batch of Income- tax matters, the lead matter being Principal Commissioner of Income Tax, Central-III v. Abhisar Buildwell Pvt. Ltd. (CA No. 6580 of 2021) (hereinafter referred to as the Case). The matter of the civil appeal pertained to the scope and ambit of section 153A/153C of the Income-tax Act, 1961 (hereinafter referred to as the Act).

The Hon’ble Supreme Court in Civil Appeal No. 6634 of 2021 in the case of DCIT Central Circle 20 v/s U.K. Paints (Overseas) Ltd. delivered a judgement on 25.04.2023 and dealt with the same issue as was in the case of Abhisar Buildwell case in regard to section 153C of the Act. The Hon’ble Supreme Court in the last paragraph of the judgement held that, “However, so far as the prayer made on behalf of the Revenue to permit them to initiate the reassessment proceedings is concerned, it is observed that it will be open for the revenue to initiate the reassessment proceedings in accordance with law and if permissible under the law.”

Background

Notices under section 153A were issued for block period (six assessment years prior to year of search) and orders were passed considering incriminating material and other material available with the Assessing Officer (hereinafter referred to as the AO). Further, for a search initiated or requisition made after 1.4.2017, notices for four more years (7″ to 10″) could also be Issued, if the income represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year. In some cases, orders were passed considering only other material available in the record in the absence of incriminating material. Hon’ble Delhi High Court delivered a decision on 28.08.2015 in the case of Kabul Chawla [ITA No. 707 of 2014 (Commissioner of Income-tax (Central)-III v/s Kabul Chawla)]. It was held that the AO does not have jurisdiction for passing order under Section 153A in the absence of incriminating material found during the search under Section 132 or requisition made under Section 132A of the Act.

Hon’ble Supreme Court in the cases of Abhisar Buildwell (cited supra) and U.K. Paints (Overseas) Ltd. (cited supra), accordingly provided power to the AO to reopen the completed/unabated assessments u/s 147/148 of the Act, subject to fulfillment of the conditions as envisaged/mentioned under sections 147/148 of the Act, in cases where no incriminating material is found during the search.

The implementation of the judgment of Hon’ble Supreme Court is required to be done in uniform manner. Accordingly, in exercise of its power under section 119 of the Act, the Central Board of Direct Taxes (hereinafter referred to as “the Board”) directs that the following may be taken into consideration while implementing this judgment.

Scenarios and action suggested to be taken:

Considering that (i) significant time has elapsed from the decisions received in completed cases wherein the assessment was made based on the other material’ and to provide tax certainty to the taxpayers, the Board has decided that no action is required to be taken under section 147/148 of the Act in cases (except cases covered by paragraph 7.2.1 below) where decisions of the appellate authorities have become final because these decisions have not been contested further in appeal. Further, it is decided that the said judgement is required to be applied in the following cases only:

(a) The lead and tagged cases in the said judgement.

(b) All cases which are pending at appellate levels or before AO or any tax authority.

(c) All cases in which contrary decisions has been given by appellate authorities after Apex Court judgement in the Abhisar Buildwell case dated 24.04.2023.

7. In this regard, the AOS would have to divide the cases impacted by the judgment into two broad categories i.e.,

(I) pending/abated assessments, and

(II) completed/unabated assessments.

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