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2021 (7) TMI 527 - HC - Income TaxEntitlement to raise a fresh claim during the assessment proceedings u/s 153A pursuant to search action u/s 132 - whether the Tribunal was justified in confirming the decision of commissioner of Income-tax (Appeals) order and thereby upholding the disallowance under section 14A of the Act? - HELD THAT - The Tribunal, by placing reliance on the decision of JAI STEELS, 2013 (6) TMI 161 - RAJASTHAN HIGH COURT has held that the assessment or re-assessment made in pursuance to Section 153A of the Act, is not a de novo assessment and therefore, it was not open to the assessee to claim and be allowed such deduction or allowance of expenditure which it had not claimed in the original assessment proceedings which in the case of the assessee stood completed vide order dated 15.01.2009 passed under Section 143(1) of the Act. The Tribunal, in our opinion, has followed the decision of Rajasthan High Court and we confer the view taken by Rajasthan High Court in JAI STEELS, supra. For the aforementioned reasons, the substantial questions of law are answered against the assessee and in favour of the revenue.
Issues:
1. Entitlement to raise a fresh claim during assessment proceedings under section 153A of the Income Tax Act. 2. Justification of disallowance under section 14A of the Act. Entitlement to Raise a Fresh Claim: The appellant, a company engaged in infrastructure development, filed an appeal challenging the order of the Income Tax Appellate Tribunal for the Assessment Year 2007-08. The main issue revolved around the appellant's entitlement to raise a fresh claim during assessment proceedings under section 153A of the Act following a search action under section 132 of the Act. The appellant argued that the Assessing Officer should determine the taxable income based on prevailing laws and applicable judgments. The appellant made a suo motu disallowance as a precautionary measure, citing lack of precedents. However, the Tribunal, relying on the decision of the Rajasthan High Court in 'JAI STEELS (INDIA) JODHPUR Vs. ACIT,' held that the assessment or re-assessment under section 153A is not a de novo assessment. Therefore, the Tribunal concluded that the appellant could not claim deductions or allowances not previously claimed in the original assessment proceedings. The court concurred with the Tribunal's decision based on the Rajasthan High Court's ruling. Disallowance under Section 14A of the Act: The appellant contested the disallowance of ?4,94,32,158 under section 14A of the Act. The Assessing Officer had disallowed this amount along with additional disallowances under section 14A and a claim under section 37(1) for club membership fees. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, leading the appellant to appeal to the Tribunal. The Tribunal, in its order dated 28.07.2017, dismissed the appeal. The appellant argued that the disallowance under section 14A should be limited to 1%-2% of dividend income related to indirect taxes. However, the Tribunal upheld the disallowance of ?4,94,32,158. The appellant further contended that the completed assessment could not be disturbed unless undisclosed income or incriminating documents were found during the search. The Tribunal's decision was challenged, but the court upheld the Tribunal's ruling, citing the decision of the Rajasthan High Court. Consequently, the court dismissed the appeal, ruling in favor of the revenue. In conclusion, the court rejected the appellant's arguments, answering the substantial questions of law against the assessee and in favor of the revenue. The appeal was dismissed based on the court's agreement with the Tribunal's decision and the precedent set by the Rajasthan High Court.
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