Block assessment will get a new name

QUESTION: What are the changes in respect of post-search block assessment?

ANSWER: Block assessment scheme for making post-search assessments, which had come under heavy fire from Kelkar Committee, is proposed to be dropped in respect of searches initiated on or after June 1, 2003. The powers for making normal assessments are adequate to deal with undisclosed income discovered during the search. But the present block assessment scheme is proposed to be substituted by another block assessment scheme under new Sec. 153A, 153B and 153C, which provide for automatic issue of a notice for six past years for initiating action against searched persons as well as third parties, whose undisclosed income might have been discovered in the course of search by way of assets, books of account or documents relating to such third parties. A separate time limit for completion of such assessments has also been prescribed.

The difference between normal procedure for back assessment available under Sec. 147 and the proposed new scheme is that such reopening would not require any new information or concealment on the part of the assessee so that the substituted scheme suffer from the same uncertainty as to the jurisdiction as the present block assessment.

The mandate to assess or reassess the total income of each assessment year falling within such six assessment years without discovery of undisclosed income during search would be as vulnerable as the pre-existing procedure for block assessment under Chapter XIV-B of the Act. Merely because a search has been conducted, there is no justification for automatic reopening the assessments for six years. The intention obviously is to dispense with the pre-condition of any `reason to believe', that there is liability for taking action for back years. Without the safeguards now available under Sec. 147, the search powers themselves are likely to be abused, as it would be an indirect route for exercise of such powers, which are not available under Sec. 147. Some rethinking is necessary as to the need for such power as well as the need for any special procedure for post-search assessments.

S. Rajaratnam

(To be continued)

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