2013 (10) TMI 1366 - AT - Income Tax

Assessment envisaged u/s 153A - Held that - An assessment u/s 153A(1)(b) for the assessment years 2003-04 and 2006-07 would be based on incriminating material books of accounts other documents found in the course of search but not produced in the course of original assessment or any undisclosed income or property discovered in the course of search. At the time of hearing the Ld. Counsel for assessee fairly conceded the position that impugned claim relating to exclusion of income on account of retention money does not fall in the aforesaid category and thus it is beyond the scope and ambit of an assessment envisaged u/s 153A(1)(b) of the Act for assessment years 2003-04 and 2006-07. Therefore on this point itself we uphold the stand of the Revenue for assessment years 2003-04 and 2006-07 in denying assessee s claim for excluding income on account of retention money. We find no justification for the Revenue to reject assessee s impugned claim for assessment years 2007-08 and 2008-09 on the ground that the claim was made by way of a letter during the course of assessments and not in the return of income. At the time of hearing the appellant has preferred Additional Grounds of Appeal re-quantifying the claim for assessment years 2007-08 and 2008-09 in the event of similar claims not being found exigible for assessment years 2003-04 and 2006-07. In order to enable the Assessing Officer to verify the workings of the claim for assessment years 2007-08 and 2008-09 we restore the matter back to the file of the Assessing Officer. The Assess1in3g Officer shall examine the working of the claim made by the assessee including the revised workings consequent to non-admission of similar claim for assessment years 2003-04 and 2006-07 and thereafter allow the appropriate claim as per law. Needless to say the Assessing Officer shall allow the assessee a reasonable opportunity of furnishing appropriate details in support of the claim and only thereafter the Assessing Officer shall adjudicate it as per law and re-compute the total income accordingly for the assessment years 2007-08 and 2008-09.

Issues Involved:
1. Taxability of retention money withheld by customers.
2. Scope of assessment under section 153A of the Income-tax Act, 1961.
3. Consideration of fresh claims during post-search assessments.
4. Applicability of the Goetze (India) Ltd. vs. CIT decision.
5. Determination of total income below the originally assessed income.

Detailed Analysis:

1. Taxability of Retention Money Withheld by Customers:
The core issue in the appeals was whether the income on account of retention money withheld by customers should be taxed in the year it is retained or in the year it is actually received by the assessee. The assessee argued that such income should be taxed in the year of actual receipt, not in the year it is retained.

2. Scope of Assessment under Section 153A of the Income-tax Act, 1961:
The appeals arose from assessments made under section 153A r.w.s. 143(3) of the Act following a search and seizure action. The Revenue contended that claims not made in the original return filed under section 139(1) could not be entertained in assessments under section 153A, which are meant to assess or reassess income based on material found during the search.

3. Consideration of Fresh Claims During Post-Search Assessments:
The Tribunal referenced the Special Bench decision in All Cargo Global Logistics Ltd., which clarified that in cases where original assessments are pending and abate due to a search, the Assessing Officer retains both original and additional jurisdiction to consider fresh claims. For assessment years 2007-08 and 2008-09, which were pending and abated, the Tribunal held that the Assessing Officer could entertain fresh claims, including the exclusion of retention money.

4. Applicability of the Goetze (India) Ltd. vs. CIT Decision:
The Revenue argued that the claim for excluding retention money should not be entertained as it was not made in the return filed in response to the notice under section 153A(1)(a) but was submitted by a letter during the assessment proceedings. The Tribunal noted that the Supreme Court's decision in Goetze (India) Ltd. does not restrict the powers of appellate authorities to entertain fresh claims. The Tribunal found that the assessee had made the claim in the return, albeit without quantification, and later quantified it during assessment proceedings.

5. Determination of Total Income Below the Originally Assessed Income:
The CIT(A) had rejected the claim on the grounds that allowing it would result in total income below the originally assessed income, which was deemed impermissible. The Tribunal disagreed, citing the Supreme Court judgment in CIT vs. Shelly Products and the Gujarat High Court decision in Gujarat Gas Co. Ltd., which allow for such adjustments.

Conclusion:
The Tribunal dismissed the appeals for assessment years 2003-04 and 2006-07, as the claim for excluding retention money did not fall within the scope of section 153A for these years. However, for assessment years 2007-08 and 2008-09, the Tribunal allowed the appeals, holding that the Assessing Officer should consider the claim for excluding retention money. The matter was remanded to the Assessing Officer to verify the claim's workings and re-compute the total income accordingly. The Tribunal emphasized that the lower authorities erred in not entertaining the claim based on procedural grounds and directed a substantive examination of the claim.

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