(Last Updated On: February 18, 2017)

Initiation of assessment in case of search and seizure beyond 6 year

( Amendment as per Finance Bill 2017 in Sections 153A and 153C – Applicable from Assessment Year 2017-18 ]

Memorandum Explaining Provisions of Finance Bill 2017

Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendment to section 153A and 153C

The existing provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer, and provisions of the said Act shall apply accordingly.

In view of the various representations received from stakeholders citing genuine hardships if the said provision is made applicable, it is proposed to omit clause (c) of section 197 of the Finance Act, 2016.

This amendment will take effect retrospectively from 1st June, 2016.

However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset, it is proposed that section 153A relating to search assessments be amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided upto the tenth assessment year if—

(i)		the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year);
(ii)		such income escaping assessment is represented in the form of asset;
(iii)		the income escaping assessment or part thereof relates to such year or years.

It is however proposed that the amended provisions of section 153A shall apply where search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.

It is also proposed to consequentially amend section 153C to provide a reference to the relevant assessment year or years as referred to in section 153A.

These amendments will take effect from 1st April, 2017.

[Clauses 59, 61, & 150]

Relevant Note on Clause 59 of Finance Bill 2017

Clause 59 of the Bill seeks to amend section 153A of the Income-tax Act, 1961 relating to assessment in case of search or requisition.

Sub-section (1) of the aforesaid section provides that where a search is conducted under section 132 or requisition is made under section 132A, a notice shall be issued to such person to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. It also provides for assessment or reassessment of total income of the said years.

It is proposed that issuance of notice and assessment or reassessment under the said section can also be made for an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not beyond ten assessment years from the assessment year relevant to the previous year in which search is conducted or requisition is made, provided that –

(i)		the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant assessment years;
(ii)		such income escaping assessment is represented in the form of asset which shall include immovable property being land or building or both, shares and securities, deposits in bank account, loans and advances;
(iii)		the income escaping assessment or part thereof relates to such year or years; and
(iv)		search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.

It is further proposed to make consequential amendment to the provisos of the said sub-section.

It is also proposed to define the expression “relevant assessment year” and “asset” in the form of Explanation.

These amendments will take effect from 1st April, 2017.

Relevant Clause 59 of Finance Bill 2017

Amendment of section 153A.

59. In section 153A of the Income-tax Act, in sub-section (1),—

(i) in clause (a), first proviso and the second proviso, after the words “six assessment years” wherever they occur, the words “and for the relevant assessment year or years” shall be inserted;

(ii) in clause (b), after the words “requisition is made”, the words “and of the relevant assessment year or years” shall be inserted;

(iii) in the third proviso, after the words “requisition is made”, the words “and for the relevant assessment year or years” shall be inserted;

(iv) after the third proviso, the following shall be inserted, namely:—

‘Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless––

(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that 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 or in aggregate in the relevant assessment years;

(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and

(c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017.

Explanation 1.––For the purposes of this sub-section, the expression “relevant assessment year” shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.

Explanation 2.––For the purposes of the fourth proviso, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.’.