Tarun Agarwala, J.For the assessment year 2000-01, the assessee filed the regular return of income on August 29, 2000, showing a total income of Rs. 14,03,630. In the regular return of income, the assessee has showed income from salary from M/s. Som Fragrance Pvt. Ltd. in which the assessee himself claimed to be a director and also showed rental income, interest income on FDRs, saving bank accounts, UTI Bonds and minor children income. The return of income was processed under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") on a total income of Rs. 16,15,250. A search and seizure operation was carried out on September 1, 2005. During the course of search and seizure operation, incriminating documents along with cash, jewellery and other valuables were found and seized. Consequent to the search, jurisdiction of the assessee was centralized to the Assistant Commissioner of Income-tax, Kanpur, under section 127 of the Act. Notice under section 153A of the Act was issued and, thereafter, notice under sections 143(2) and 142(1) was issued and served upon the assessee. In compliance with the above notices, the assessee intimated the Assessing Officer stating therein that regular return of income filed under section 139 of the Act may be treated to be filed in compliance with the notice under section 153A of the Act.

2. During the course of assessment proceedings under section 153A of the Act, the Assessing Officer found that the gift received by the minor children from various persons was a sham transaction and the assessee failed to prove the genuineness of these gifts. The Assessing Officer, accordingly, made an addition in this regard while completing the assessment under section 153A of the Act.

3. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals)-I, Kanpur, who allowed the appeal of the assessee on the ground that the transaction of gift had taken place through banking channel where date, mode of payment and other details was duly recorded. The gift deed was also available which was filed before the Assessing Officer also confirming the amount, details of transactions of gift. From a perusal of all the gift deeds executed by all the three donors it transpires that it contained the details of transaction and also the context of transaction of gift to the recipient.

4. The Revenue being aggrieved by the order of the appellate authority, filed an appeal before the Tribunal, who by its order dated August 3, 2010 dismissed the appeal by relying upon the decision of the co-ordinate Bench of the Tribunal of Delhi in the case of Anil Kumar Bhatia v. Asst. CIT [2010] 1 ITR (Trib) 484 (Delhi) The Tribunal held that the process of return under section 143(1) of the Act stood completed prior to the search in which the gift deeds were considered and since no incriminating materials in relation to the gift deeds were found in the search, no addition on such gift could be made in assessment proceedings under section 153A of the Act. The Tribunal, accordingly, held that no addition could be made on the gift.

5. The Revenue, being aggrieved by the order of the Tribunal has filed the present appeal under section 260A of the Act praying that the following substantial questions of law arise:

"1. Whether Income-tax Appellate Tribunal has erred in law in dismissing the appeal of the Department and holding that no addition can be made for gift in the assessment completed under section 153A unless some incriminating material was found during the course of search, thus ignoring the provisions of law as contained in section 153A which required the Assessing Officer to assess or reassess the total income as defined in section 2(45) of the Income-tax Act, 1961

2. Whether the order of the Income-tax Appellate Tribunal is perverse inasmuch as it has ignored the provisions of law as contained in proviso (b) of sub-section (1) of section 153A which required the Assessing Officer to assess or reassess the total income"

6. We have heard Sri Dhananjay Awasthi, learned counsel for the Revenue and Sri Ashish Bansal for the assessee.

7. Section 153A of the Act was introduced in the Income-tax Act by the Finance Act, 2003, with effect form June 1, 2003, along with section 153B and section 153C. Section 153A of the Act provides for assessment in the case of search or requisition. For facility, section 153A of the Act is extracted hereunder:

"153A Assessment in case of search or requisition.--(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall--

(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:

Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.

Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.

(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:

Provided that such revival shall cease to have effect, if such order of annulment is set aside.

Explanation.--For the removal of doubts, it is hereby declared that--

(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;

(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year"

8. Section 153A of the Act along with section 153B and section 153C replaced the "post-search block assessment scheme" in respect of any search under section 132A or requisition under section 132A made after May 31, 2003. The Central Board of Direct Taxes explained these provisions through circular dated September 5, 2003, which is reported in [2003] 263 ITR (St.) 62, 106. The said circular is as under:

"65. The special procedure for assessment of search cases under Chapter XIV-B be abolished:

65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed.

65.2 The Finance Act, 2003, has provided that the provisions of this Chapter shall not apply where a search is initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after May 31, 2003, by inserting a new section 158BI in the Income-tax Act.

65.3 Further, three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition.

65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after May 31, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A.

65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.

65.6 The new section 153B provides for the time limit for completion of search assessments. It provides that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year, falling within six assessment years under section 153A within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed.

65.7 This section also provides that assessment in respect of the assessment year relevant to the previous year in which the search is conducted under section 132 or requisition is made under section 132A shall be completed within a period of two years from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed.

65.8 It also provides that in computing the period of limitation for completion of such assessment or reassessment, the period during which the assessment proceeding is stayed by an order or injunction of any court; or the period commencing from the day on which the Assessing Officer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending on the day on which the assessee is required to furnish a report of such audit under that sub-section, or the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee of being re-heard under the proviso to section 129, or in a case where an application made before the Settlement Commission under section 245C is rejected by it or is not allowed to be proceeded with by it, the period commencing on the date on which such application is made and ending with the date on which the order under sub-section (1) of section 245D is received by the Commissioner under sub-section (2) of that section, shall be excluded. If, after the exclusion of the aforesaid period, the period of limitation available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the period of limitation shall be deemed to be extended accordingly.

65.9 The new section 153C provides that where an Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A, then the books of account, or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.

65.10 An appeal against the order of assessment or reassessment under section 153A shall lie with the Commissioner of Income-tax (Appeals).

65.11 Consequential amendments have also been made in sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to give reference to section 153A in these sections.

65.12 These amendments will take effect from June 1, 2003."

9. Earlier, Chapter XIV-B provided for assessment to be made in cases of search and seizure, which was known as post-search block assessment scheme because this Chapter provided for single assessment to be made in respect of a block period of 10 assessment years prior to the assessment in which the search was made. With the introduction of section 153A to section 153C of the Act, the single block assessment concept was given a goby. Under section 153A of the Act, in case where a search was initiated under section 132 of the Act or requisition of books of account, documents or assets was made under section 132A after May 31, 2003, the Assessing Officer was required to exercise the normal assessment powers in respect of the previous year in which the search took place. A perusal of section 153A of the Act clearly indicates that it starts with a non obstante clause relating to normal assessment procedure which is covered by sections 139, 147, 148, 149, 151 and 153 in respect of searches made after May 31, 2003.

10. Under section 153A of the Act, the Assessing Officer is bound to issue notice to the assessee to furnish return for each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. The Assessing Officer is required to assess or reassess the total income of the aforesaid years.

11. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of section 153A of the Act provides a departure from this proceeding. Under section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which the total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under section 143(1)(a) or under section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under sections 147 and 148 of the Act have been removed by the non obstante clause under section 153A of the Act.

12. Consequently, we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under section 143(1)(a) of the Act.

13. In the light of the aforesaid, the reasons given by the Tribunal that no material was found during the search cannot be sustained, since we have held that the Assessing Officer has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment. We find that the Tribunal dismissed the appeal while relying upon the decision of a co-ordinate Bench of the Tribunal in the case of Anil Kumar Bhatia v. Asst. CIT [2010] 1 ITR (Trib) 484 (Delhi). We find that the said decision of the co-ordinate Bench of the Tribunal was set aside by the Delhi High Court in CIT Vs. Anil Kumar Bhatia, ; [2012] 24 taxmann.com 98 (Delhi). We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on the merits.

14. For the reasons stated aforesaid, the Tribunal has committed an error in dismissing the appeal of the Revenue. We, accordingly, set aside the order of the Tribunal and remit the matter back to the Tribunal to reconsider the appeal of the Department afresh on the merits. The question of law is answered accordingly. The appeal is allowed.