Section 153A IPC - Meaning, Provisions and Penalty

1. The tax will be imposed at the rate pertaining to the AY in a reassessment or assessment made under this section.
2. Unless specifically stated in this section, sections 153B and 153C, all other provisions of this Act will apply to the assessment made under this section.

Provisions of Section 153A

The Income Tax Act of 1961's Section 153A specifies the income assessing system that will be used in the case of a searched individual. According to the previously stated clause, the assessor may frame the assessment of the searched individual for a period of six years prior to the search year.

One of the issues is also whether the disallowance or addition (if any) in the assessment under Section 153A must be restricted to the materials that are ‘incriminating.’ These should be found during the search process for the assessment year for which the process is still ongoing.

Amendments under Section 153A 

Section 153A of the Income Tax Act, which deals with search assessments, has been amended to ensure that the revenue's interests are safeguarded in situations where tangible evidence is found during a search or seizure operation. This amendment states that a notice provided under the aforementioned section may be given up to the tenth AY if:

1. Assets are used to prevent taxation of income.
2. The whole or part of the income tax exemption relates to that year.
3. The AO possesses books of accounts, other records, or proof demonstrating that the income that has escaped assessment is equal to or is expected to amount to Rs.50 lakh or higher in a single year or the aggregate over the relevant four assessment years.

Process of Assessment under Section 153A

Given that the seizure and search processes at the assessee's premises have been completed, the investigator must submit a report of appraisal to the appropriate AO.

Appraisal Report:

The Conducting Directorate submits an assessment report to the AO. The following details are included in it:

1. Results of a search of property under Sections 132 and 133A of the IT Act
2. Seized inventory and assets

1. Summary of the noted key points
2. Information about unreported assets and income
3. Inventory of found or seized financial records, papers, etc.

The appraisal report must provide the assessment officer with recommendations, a possible investigational path, and the likelihood of the assessee being prosecuted. This is done so that when drafting the orders of assessment under Section 153A of the Income Tax Act, the tax evasion findings that are outlined in the report will be taken into account.

Peak Credit Theory:

If an assessee fails to provide an explanation for each debit or credit entry, the entries should be arranged in the right sequence, with a debit entry followed by a credit entry referring to the latter to the maximum extent possible. Additionally, only the ‘peak’ of the credits should be regarded as something that is unexplained.

Summary of Peak Credit Theory:

1. Used in the case of debit and credit entries without an explanation
2. This might be expanded to include situations where a credit entry appears in more than one account
3. The main idea behind the peak credit theory is to avoid double addition when there are a lot of debit and credit entries that are unjustified by only levying taxes on the assessee's actual income

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Assessment during Search or Reacquisition

Regardless of the provisions of Sections 153, 151, 149, 147, and 139, if a search under Section 132 is initiated or assets are requisitioned under Section 132A after 31 May 2003, the AO is required to:

1. Send a notice to a person requesting that they submit income returns in the format that has been stated and verified for each  AY that comes in the assessment period of six years. This also applies to the valid AY(s) referred to in clause (b), in the prescribed form, and will set forth the prescribed particulars within a period that may be stated in the provided notice, and the provisions of this Act will be applied accordingly as if;
2. Assess or reassess the total income of the six assessment years for the valid assessment years and the appropriate assessment years.

The Indian government may specify the class(es) of the cases in which the AO does not have to issue the notice for reassessing or assessing the total revenue for the six AYs right before the year of assessment that is relevant to the previous year when the requisition is made by rules it has issued. The search will be carried out and published in the Official Gazette. Assessment or reassessment notice for the valid assessment years will not be made by the AO unless:

1. A search under Section 132 has started or a demand under Section 132A has been made after around 1 April 2017.
2. The AO's books of accounts, proof, and other documents demonstrate that the evaded income amounts to, or may amount to, at least Rs.50 lakh in the valid assessment year or total in the valid assessment years.
3. The income mentioned in the preceding section evades assessment for the applicable years.

Will the AO Assess the Total Income

The assessment under Section 153A requires striking a balance between the rights and obligations of the income tax department as well as the assessee with regard to each of the fundamental principles of the assessment mechanism. Any authority cannot intervene in any matter that is sub-judice. Each of the six assessment years undergoes assessment separately.

In accordance with Section 153A of the IT Act of 1961, a determination must be made regarding the reacquisition or search. This must be done with respect to the material that is disclosed during the search or reacquisition. If the incriminating material has not been found with regard to any AY, no disallowance or addition can be imposed in that AY in the exercise of powers under Section 153A of the IT Act, 1961, and the previous assessment must be repeated.