2016 (10) TMI 174 - AT - Income Tax

Assesment of proceedings u/s153A - claim of deduction in response to notice issued under section 153A of the Act even if such claim was not made in the original return - Held that - Once return of income is filed under section 153A of the Act, it has to be considered as a return of income filed under section 139 of the Act and all other provisions would apply as though it is a return of income filed under section 139 which includes reconsideration of any deduction permissible under the law. It is also not in dispute that the assessee has placed all the facts on record even in the original return but did not claim set off of the expenditure and while declaring additional income, in response to the notice issued under section 153A of the Act, though he stuck to the income declared, set off was claimed as per law which should not be denied, overlooking the fact that the return of income filed under section 153A of the Act should be deemed to be the return filed under section 139 of the Act; irrespective of the question as to whether it is for the benefit of the assessee or department, the assessee is entitled to claim deduction of interest expenditure, particularly when the facts are already on record. Section 147 of the Act, should not be imported into the proceedings under section 153A of the Act, more particularly when the claim of the assessee is not a fresh claim un-connected to the income declared but the claim was linked with the income declared. Having regard to the circumstances of the case, we are of the view that the Assessing Officer as well as the Ld. CIT(A) were not justified in disallowing the claim of deduction of ₹ 24,57,965. We direct the Assessing Officer to allow the claim of deduction and re-compute the income accordingly. - Decided in favour of assessee

Issues Involved:
1. Denial of the benefit of deduction of ?24,57,965.
2. Whether the deduction not claimed in the original return can be allowed in the return furnished in response to the notice under section 153A of the I.T. Act.
3. Scope and applicability of Section 153A in relation to reassessment and fresh claims by the assessee.
4. Interpretation of the Supreme Court's decision in CIT vs. Sun Engineering Works P. Ltd. concerning reassessment proceedings under section 147 of the Act.

Detailed Analysis:

1. Denial of the Benefit of Deduction of ?24,57,965:
The primary issue revolves around the denial of the benefit of a deduction amounting to ?24,57,965. The assessee, a director and partner in multiple firms, declared an income of ?75,46,300 and agricultural income of ?9,04,539 for the A.Y. 2010-2011. A search and seizure operation under section 132 led to the admission of unaccounted income for A.Ys. 2009-2010 to 2011-2012. Subsequently, a notice under section 153A was issued, and the assessee admitted additional income. However, the Assessing Officer observed a shortfall of ?24,57,963 in the declared income, which was added to the assessment.

2. Whether the Deduction not Claimed in the Original Return can be Allowed in the Return Furnished in Response to the Notice under Section 153A of the I.T. Act:
The assessee contended before the CIT(A) that the deduction of ?24,57,965 was claimed against interest income in the return filed in response to the notice under section 153A, which was permissible under law. The CIT(A) acknowledged the facts but held that the deduction could not be allowed since it was not claimed in the original return. The CIT(A) relied on the Supreme Court's decision in CIT vs. Sun Engineering Works P. Ltd., which pertains to reassessment proceedings under section 147, to conclude that the provisions of section 153A are for the benefit of the revenue, not the assessee.

3. Scope and Applicability of Section 153A in Relation to Reassessment and Fresh Claims by the Assessee:
The Tribunal examined whether the provisions of section 153A allow for fresh claims by the assessee. The Tribunal referred to several ITAT decisions, including ACIT vs. VN Devadoss and M/s. Malpani Estates vs. ACIT, which held that returns filed under section 153A should be treated as returns filed under section 139, allowing for all provisions of the Act to apply, including the consideration of deductions. The Tribunal noted that the claim of deduction was linked to the additional income declared and not a fresh claim unconnected to the income declared.

4. Interpretation of the Supreme Court's Decision in CIT vs. Sun Engineering Works P. Ltd. Concerning Reassessment Proceedings under Section 147 of the Act:
The Tribunal distinguished the Supreme Court's decision in CIT vs. Sun Engineering Works P. Ltd., which is related to reassessment under section 147, from the current case under section 153A. The Tribunal observed that the Supreme Court's decision precludes new claims unconnected with the assessment of escaped income. However, in the present case, the claim for deduction was connected to the additional income declared and thus permissible.

Conclusion:
The Tribunal concluded that the Assessing Officer and the CIT(A) were not justified in disallowing the claim of deduction of ?24,57,965. The Tribunal directed the Assessing Officer to allow the claim of deduction and re-compute the income accordingly. The appeal of the assessee was allowed, and the order was pronounced in the open court on 19.08.2016.

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