2024 (10) TMI 1144 - AT - Income Tax

Assessment u/s 153A - Assessment in case of search or requisition - deduction claimed u/s 80IA(4) - Whether an assessee can make a claim for deduction under Chapter VIA of Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A pursuant to a search conducted u/s 132 ? - HELD THAT - Once the matter has been finally concluded by the Hon ble Apex Court Abhisar Buildwell (P.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT and held that in unabated or concluded assessment, the AO cannot make any additions in the absence of any incriminating material found as a result of the search, in our considered view, particularly in the case of unabated or concluded assessments, and since the AO cannot tinker with unabated or concluded assessments in the absence of any incriminating material, with equal force, the same ratio should be applicable to the assessee as well. Thus, based on the findings of the Hon'ble Apex Court, in our considered view, the appellant also cannot make any fresh claim of deduction or expenditure for the first time in the return of income filed in response to the notice issued u/s 153A of the Act. Insofar as the abated assessment is concerned, the assessee can make all claims, provided the return of income is filed in adherence to the timeline to furnish as per notice u/s 153A of the Act, failing which the assessee shall not be able to claim any deduction in view of Section 80A As going by the wording of the provisions of Section 80A(5) and Section 80AC of the Act, in order to claim any deductions u/s 80IA(4) of the Act, the assessee should file its return of income on or before the due date prescribed u/s 139(1) and further, the said claim should be made in the return furnished. in order to claim deduction u/s 80IA(4) as per Section 80IA(7), furnishing of the audit report on or before the specified date referred to in Section 44AB of the Act is mandatory and not directory as argued by assessee. We are taking support from the decision of Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT wherein clearly held that beneficial provisions like, deductions/ exemptions provisions are required to be strictly interpreted and any perceived ambiguity would necessarily ensure to the benefit of the revenue. We further note that in the case of PCIT Vs. Wipro Ltd 2022 (7) TMI 560 - SUPREME COURT has also considered the interpretation of provisions of Section 10B of the Act and held that such an option should be exercised before the due date u/s 139(1) by way of filing a declaration. Although the said decision was in the context of withdrawal of exemption u/s 10B in our considered view, when it comes to the interpretation of exemption and deduction provisions, the said provisions should be strictly interpreted so as to achieve the larger intent of the Legislature. Therefore, we are of the considered view that the arguments of the learned counsel for the assessee that when the appellant filed its return of income in response to a notice u/s 153A of the Act, it partakes the nature of the return filed u/s 139 of the Act and thus, all the conditions prescribed u/s 80A(5) and Section 80AC are satisfied is contrary to law and devoid of merit and cannot be accepted. We are of the considered view that the assessee cannot make a fresh claim of deduction under Chapter VI-A of the Income Tax Act, 1961, for the first time, in the return of income filed in response to notice issued u/s 153A of the Act, pursuant to search conducted u/s 132 of the Act, in unabated/completed assessment as on the date of search. In case of abated assessments, like the AO who can make assessment based on incriminating materials and any other information made available to him, including information furnished in return of income, the assessee may claim all deductions towards any income or expenditure, as if it is a first return of income and fresh assessment. The present discussion hereinabove is with reference to the questions referred to on the issue, i.e. whether a fresh claim of deduction under Chapter VI-A of the Income Tax Act, 1961 could be maintained for the first time in the return filed pursuant to a notice u/s 153A of the Act or not. Assessee and the Senior Standing Counsel appearing for the Revenue did not argue on the merits as to whether the assessee is eligible for such a claim or not. Therefore, the present appeals filed by the Revenue are posted for hearing on the issue of deduction claimed u/s 80IA(4) of the Act on merits. The Registry is directed to list the appeals in due course and inform both parties

Summary

Issues Involved:

1. Whether an assessee can make a claim for deduction under Chapter VIA of the Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued under Section 153A of the Act, pursuant to a search conducted under Section 132 of the Act.
2. If yes, under which circumstances such a claim is permissible.

Detailed Analysis:

1. Claim for Deduction under Chapter VIA in Response to Section 153A Notice:

The core issue addressed in this judgment is whether an assessee can make a new claim for deduction under Chapter VIA of the Income Tax Act, 1961, for the first time in a return filed in response to a notice issued under Section 153A, following a search under Section 132. The tribunal examined the provisions of Section 153A, which mandates the assessment or reassessment of total income for six assessment years preceding the year of search. The tribunal noted that Section 153A does not provide for reassessment of completed assessments unless incriminating material is found during the search. The tribunal referred to various judicial precedents, including the Supreme Court's decision in PCIT Vs. Abhisar Buildwell (P.) Ltd., which emphasized that in the absence of incriminating material, the completed assessment cannot be disturbed.

The tribunal concluded that in the case of unabated or completed assessments, the assessee cannot make a fresh claim of deduction for the first time in the return filed in response to a Section 153A notice. This conclusion aligns with the principle that reassessment proceedings under Section 153A are primarily for the benefit of the Revenue, not the assessee, and are intended to bring undisclosed income to tax.

2. Circumstances Permitting Fresh Claims:

The tribunal clarified that fresh claims for deductions under Chapter VIA can only be made in the case of abated assessments. Abated assessments refer to those assessments that were pending as on the date of search. In such cases, the return filed in response to the Section 153A notice is treated as a return filed under Section 139, allowing the assessee to make new claims as if it were the first return of income. This interpretation is consistent with the principle that abated assessments are open for reassessment, allowing both the Revenue and the assessee to make new claims or adjustments.

The tribunal distinguished between abated and unabated assessments, emphasizing that in unabated assessments, no fresh claims can be made unless supported by incriminating material found during the search. This distinction ensures that the integrity of completed assessments is maintained unless there is a valid reason to reopen them based on new evidence.

Conclusion:

The tribunal held that an assessee can make a claim for deduction under Chapter VIA for the first time in the return filed in response to a Section 153A notice only in the case of abated assessments. In unabated or completed assessments, no fresh claims are permissible unless supported by incriminating material found during the search. The tribunal's decision underscores the importance of maintaining the finality of completed assessments and the limited scope for reassessment under Section 153A, which is primarily intended to address undisclosed income. The tribunal directed that the appeals be listed for further hearing on the merits of the deduction claimed under Section 80IA(4) of the Act.