AO Cannot Reopen Assessments under Income Tax Act in Block Period of Six Years in Absence of Incriminating Materials: Kerala HC

The Kerala High Court has ruled that an Assessing Officer (AO) cannot reopen assessments for a block period of six years in the absence of incriminating materials obtained during a search under Section 132 of the Income Tax Act, 1961. The case involved M/s. Sunny Jacob Group, which includes partnership firms and a proprietorship engaged in making gold ornaments. Following a search on August 21, 2007, notices were issued to the assessees under Section 153A. The AO rejected the books of account and estimated escaped income for the assessment years from 2002-03 to 2008-09 based on findings for the assessment year 2008-09.\r

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The assessees' appeals were partially successful, with the Commissioner of Income Tax (Appeals) allowing them for the years 2002-03 to 2007-08 but confirming the tax demand for 2008-09. The Income Tax Appellate Tribunal then remanded the matter back to the AO. The AO maintained his original stance in fresh assessments, which were again appealed. The CIT (Appeals) sided with the assessees for 2002-03 to 2007-08, echoing earlier decisions. The High Court noted that under Section 153A, an AO can reassess six previous years if incriminating material is found during a search. However, since no such material existed for 2002-03 to 2007-08, the Tribunal's reversal of the first appellate orders was unsustainable.