2018 (2) TMI 1691 - AT - Income Tax

Additions made in pursuance of Sec. 153A - Held that - Since there is no incriminating material unearthed during search in respect of the concluded assessments, no addition/disallowance could be made by the AO for AYs 2009-10, 2010-11, 2011-12 and 2013-14. Therefore, the addition/disallowance made in impugned assessments for the AYs 2009-10, 2010-11, 2011-12 and 2013-14 are ordered to be deleted. Also as assessee has already made claims arising from BIFR order in the regular appeals before Ld.CITA) from the completed original assessment already made before search, because BIFR order dated 04.09.2012 was received later on i.e. after the original assessment was completed u/s 143(3) of the Act in certain years. The appellate proceedings before the Ld. CIT(A) from original assessments is a continuation of the assessment proceeding itself and the assessee can make a fresh claim before the Tribunal/Ld.CIT(A). Thus direct deletion of additions made in pursuance of Sec. 153A proceedings in these assessment years. Consequently, pending assessment proceedings before AO on the date of search, got abated and sec. 153A proceedings against the assessee is valid in respect of AYs. 2012-13 and 2014-15 and scrutiny assessment for AY 2015-16 u/s. 143(3) of the Act is valid Aggregation of WDV of block of assets - Held that - Since the assets of M/s.MSL after amalgamation have become assets of assessee company by operation of Law it falls in to the Block of assets of the assessee company from 01.04.2009 and though such assets, non-functional, yet they cannot be segregated and depreciation has to be allowed taking the first year as AY 2010-11 onwards and WDV to be calculated for AY 2012-13 as discussed above and we order the AO to calculate the WDV accordingly and allow the same in accordance to law. Grounds 6, 7 and 8 for AY 2012-13 are therefore stands allowed. Disallowing the claim of assessee in respect to brought forward loss and claim of allowance of unabsorbed depreciation in the light of BIFR sanctioned scheme - Held that - So far as former objection is concerned, the same is factual and AO is directed to allow the claim after considering the availability of losses for the instant year subject to the claims made in the preceding year in the light of the observations and decision given in the preceding paras. However as regards the latter is concerned, the fact that losses claimed and allowed in the instant year may or may not result in taxable income in succeeding years does not change the legal effect of a claim in the instant year. Since we have already held that the claim in the instant year is maintainable, the issue of taxability of said claim in any subsequent year doesn t arise. We therefore reject the contention of the Revenue in not allowing the losses fully and also the taxability of the sum in subsequent year. We therefore, also reject the aforesaid objection of the AO.

Issues Involved:
1. Validity of order u/s. 153A
2. Unabsorbed Depreciation
3. Tax Liability Calculation
4. Interest u/s. 234A, 234B, 234D
5. Not granting credit of TDS
6. Bogus Purchase
7. Interest on Investment, Fees, Prior Period Expenses, PF, Income Cessation
8. Not allowing depreciation on assets of Malanpur Steel Ltd.
9. Disallowance of set off of b/f loss and unabsorbed depreciation
10. Addition for difference of assets and liabilities of Malanpur Steel Ltd.

Detailed Analysis:

1. Validity of order u/s. 153A:
The tribunal considered the validity of assessments under section 153A for AYs 2009-10, 2010-11, 2011-12, and 2013-14. It was argued that since the original assessments for these years were completed before the search on 23.12.2014, no addition/disallowance could be made without incriminating material unearthed during the search. The tribunal upheld this view, citing precedents from the Hon’ble Delhi High Court in CIT vs. Kabul Chawla and the Hon’ble Jurisdictional High Court in CIT vs. Veerprabhu Marketing Ltd. Consequently, the tribunal ordered the deletion of additions made for these years.

2. Unabsorbed Depreciation:
The tribunal addressed the denial of depreciation on assets of Malanpur Steel Ltd. (MSL) post-amalgamation. It was noted that after the amendment of section 32 and the introduction of the concept of "block of assets," individual assets lose their identity. The tribunal held that depreciation must be allowed on the entire block of assets, including those of MSL, even if they were non-functional. This decision was supported by judgments from the Hon’ble Delhi High Court in Oswal Agro Mills Ltd. and the Hon’ble Bombay High Court in CIT v. M/s Sonic Biochem Extractions (P) Ltd.

3. Tax Liability Calculation:
The tribunal did not specifically address tax liability calculation as a separate issue, but it was implied in the overall assessment and adjustments made.

4. Interest u/s. 234A, 234B, 234D:
Interest under sections 234A, 234B, and 234D was considered consequential to the main issues. The tribunal noted that the levy of interest would be adjusted based on the final tax liability determined after considering the allowed claims and deletions.

5. Not granting credit of TDS:
The tribunal did not provide a separate detailed analysis on the issue of not granting credit of TDS. However, it would be consequential to the final determination of tax liability and the adjustments ordered.

6. Bogus Purchase:
For AYs 2010-11 and 2011-12, the tribunal examined the addition based on an investigation report of the Excise Department alleging bogus purchases. It was found that these additions were already made in the original assessments and could not be treated as incriminating material unearthed during the search. Therefore, the tribunal ordered the deletion of these additions.

7. Interest on Investment, Fees, Prior Period Expenses, PF, Income Cessation:
These issues were addressed in the context of specific assessment years. The tribunal upheld the claims of the assessee where appropriate, based on the evidence and legal precedents.

8. Not allowing depreciation on assets of Malanpur Steel Ltd.:
The tribunal allowed the claim for depreciation on the assets of MSL, reiterating that once assets form part of the block of assets, they cannot be segregated, and depreciation must be allowed as per the block concept.

9. Disallowance of set off of b/f loss and unabsorbed depreciation:
The tribunal addressed the claim of set-off of brought forward loss and unabsorbed depreciation in light of the BIFR order. It was held that the BIFR scheme overrides the Income Tax Act, and the AO was directed to give effect to the BIFR order, allowing the set-off of accumulated losses and unabsorbed depreciation.

10. Addition for difference of assets and liabilities of Malanpur Steel Ltd.:
The tribunal did not provide a separate detailed analysis on this issue, but any additions or adjustments would be in line with the overall findings and directions given in the judgment.

Conclusion:
The tribunal's judgment emphasized the binding nature of BIFR orders and the concept of block of assets for depreciation claims. It upheld the principle that completed assessments cannot be disturbed without incriminating material unearthed during a search and directed the AO to give effect to the BIFR order, allowing the set-off of accumulated losses and unabsorbed depreciation. The appeals were partly allowed, with specific directions for adjustments and deletions based on the findings.

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