2008 (2) TMI 457 - AT - Income Tax

Block Assessments for undisclosed income - Search And Seizure - Validity of AO's Jurisdiction to make assessments/reassessments in assessment u/s 153A - Addition due to retrospective amendment in the provision of section 80HHC - receipts of sale of DEPB. Block Assessments for undisclosed income - Search And Seizure - Validity of AO's jurisdiction to make assessments/reassessments in assessment u/s 153A - HELD THAT - From reading section 153A and second proviso to section 153A, it is further clear that on the date of initiation of search or requisition u/s 132 or section 132A the pending assessment or reassessments relating to any assessment year falling within a period of six assessment years shall stand abated but, assessment or reassessments can be done u/s 153A of the Act in cases of completed assessments or in cases where assessments have not been framed due to non-filing of returns etc. for the above-mentioned assessment years even if such assessment made u/s 153A is not based on material found during course of search. The word abate or abatement has not been defined in the Act or in the Departmental Circular. According to Chambers Dictionary the word abate means demolition or to put an end to . Therefore, the contention of the learned counsel for the assessee have, no force because there is no requirement for an assessment made u/s 153A of the Act being based on any material seized in the course of search. Further, under the second proviso to section 153A pending assessment or reassessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall come to an end (abate), which means that the Assessing Officer gets jurisdiction for six assessment years referred to in section 153A(b) of the Act for making an assessment or reassessment. Further, it is not the contention of the assessee before us that any income, which was already subjected to assessment under section 143(3) or under section 143(3)/147 of the Act completed prior to search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed under section 153A of the Act. Thus, the contention of the assessee in support of Ground Nos. 1 and 2 of its appeal are liable to be rejected and the same are rejected accordingly. Consequent upon our findings given hereinabove, we hold that in the existing facts and circumstances of the case the Assessing Officer was perfectly justified in framing assessment u/s 153A of the Act for the assessment years under consideration and accordingly the Ground Nos. 1 and 2 of the appeal of the assessee are rejected. Deduction allowable under the amended provisions of section 80HHC - receipts of sale of DEPB - HELD THAT - We hold that since in the instant case, it is clear that the assessee during the financial years relevant to assessment years under consideration has no option for choosing duty drawback or DEPB, the assessee has not fulfilled the two mandatory conditions laid down in the provisos to section 80HHC(3), though its turnover in each of the assessment years exceeded Rs. 10 crores, the tax authorities below were fully justified in coming to a conclusion that the assessee-company did not qualify for further increase by an amount which bears to 90 per cent of any sum referred to clause (iiid) of section 28 in the proportion as the export turnover bears to the total turnover of the business carried on by the assessee, hence, disentitling the assessee for deduction of the profits on the receipts of DEPB licenses under the amended provisions of section 80HHC of the Act as claimed by the assessee. Accordingly, the impugned order of tax authorities below, in this regard are upheld and Ground No. 3 of respective appeals taken by the assessee in the instant appeals is rejected. In the result, the instant three appeals filed by the assessee are dismissed.

Summary

Issues Involved:

1. Jurisdiction of assessment under section 153A.
2. Applicability of section 153A for reassessment of already considered income.
3. Deduction eligibility under section 80HHC post-retrospective amendment.

Detailed Analysis:

1. Jurisdiction of assessment under section 153A:

The Tribunal examined whether the assessment under section 153A was valid when not based on any seized material or undisclosed income. The assessee argued that the assessment should be null and void due to lack of seized material. However, the Tribunal referred to section 153A, which allows the Assessing Officer to issue a notice for furnishing returns for six assessment years preceding the search year. The Tribunal clarified that section 153A does not require the assessment to be based on seized material. It further stated that pending assessments abate upon initiation of a search, granting jurisdiction to the Assessing Officer for those six years. The Tribunal rejected the assessee's contention, confirming the validity of the assessment under section 153A.

2. Applicability of section 153A for reassessment of already considered income:

The Tribunal addressed whether section 153A could reassess income already considered in original assessments. The assessee claimed that completed assessments should not be reopened under section 153A. The Tribunal highlighted that section 153A mandates reassessment of total income for six assessment years preceding the search, regardless of whether the assessments were completed. The Tribunal emphasized that pending assessments abate, but completed assessments can still be reassessed under section 153A. Consequently, the Tribunal upheld the Assessing Officer's jurisdiction to reassess the income for the relevant years, dismissing the assessee's argument.

3. Deduction eligibility under section 80HHC post-retrospective amendment:

The Tribunal evaluated the assessee's eligibility for deduction under section 80HHC, particularly concerning DEPB licenses, after the retrospective amendment. The assessee's turnover exceeded Rs. 10 crores, and it claimed deductions on DEPB receipts. The Tribunal noted that the amended section 80HHC required the assessee to fulfill two conditions: choosing between duty drawback or DEPB scheme and ensuring the duty drawback rate was higher than the DEPB rate. The assessee argued that it did not receive any duty drawback, making it impossible to fulfill the conditions. However, the Tribunal concluded that the statutory conditions must be met irrespective of the assessee's circumstances. Since the assessee did not fulfill these conditions, the Tribunal upheld the denial of the deduction under section 80HHC, affirming the lower authorities' decisions.

Conclusion:

The Tribunal dismissed all three appeals filed by the assessee, confirming the validity of assessments under section 153A and the denial of deductions under section 80HHC due to non-fulfillment of statutory conditions.