Section 153A of ITA, 1961 : Section 153A: Assessment In Case Of Search Or Requisition

Explanation using Example

Imagine a scenario where the Income Tax Department suspects that Mr. Sharma, a businessman, has undisclosed income. On June 15, 2023, they conduct a search and seizure operation at his premises under Section 132 of the Income-tax Act, 1961. During the search, they find evidence suggesting that Mr. Sharma has not reported all of his income for the past several years.

Under Section 153A of the Income-tax Act, 1961, the Assessing Officer (AO) issues a notice to Mr. Sharma. This notice requires him to file income tax returns for the six assessment years immediately preceding the assessment year in which the search took place. Additionally, the AO is authorized to assess or reassess Mr. Sharma's total income for these six years plus the current year to ensure that all income has been accounted for and taxed accordingly.

The AO discovers that Mr. Sharma has unaccounted income that amounts to over fifty lakh rupees in the relevant assessment years, which had escaped assessment. Based on this, the AO proceeds to issue notices for assessment or reassessment for those years.

If later, an appeal against this reassessment results in an annulment, Section 153A(2) allows for the revival of the abated assessment or reassessment from the date the AO receives the order of annulment, unless that annulment order is itself set aside later on.

This section ensures that the AO has the power to bring to tax any undisclosed income unearthed during a search operation for a substantial period preceding the search year, thereby ensuring compliance with tax laws and proper collection of taxes.