2013 (6) TMI 161 - HC - Income Tax

Assessment in pursuance of research u/s 153A - claim of deduction which were not claimed earlier - Sales tax incentive - Capital receipt or revenue receipt - Held that - It has been observed by the Hon ble Supreme Court in K.P. Varghese v. Income Tax Officer 1981 (9) TMI 1 - SUPREME Court that it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon ble Supreme Court in the case of K.P. Varghese 1981 (9) TMI 1 - SUPREME Court . It is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made. - Decided against the assessee.

Summary

Issues Involved:
1. Whether the Tribunal was justified in not examining the question as to whether the sales tax incentive availed by the assesses for running their business is a capital expenditure or revenue expenditure?
2. Whether not examining the issue mentioned in question No.1 by the Tribunal entails remand of the case to the Tribunal for giving findings on the said issue?
3. Whether the sales tax incentive availed of by the assesses is in the nature of capital receipts or revenue receipts and if so whether it is subjected to payment of tax?
4. Whether the Tribunal was justified in holding that the case of the assessee relating to the sales tax incentive cannot be examined under Section 153A of the Act because it is a case of search?

Issue-wise Detailed Analysis:

1. Examination of Sales Tax Incentive as Capital or Revenue Expenditure:
The Tribunal did not examine whether the sales tax incentive availed by the assessee for running their business is a capital expenditure or revenue expenditure. The assessee argued that the findings and observations made by the authorities below on the interpretation and purport of Section 153A of the Act are baseless and against the plain reading of the provision. The Tribunal's decision not to delve into this issue was based on its interpretation of Section 153A, which it believed did not allow for the examination of new claims not made in the original return.

2. Necessity of Remand for Findings on Sales Tax Incentive:
Given that the Tribunal did not examine the nature of the sales tax incentive, the question arose whether the case should be remanded to the Tribunal for findings on this issue. However, the necessity of remand depends on the interpretation of Section 153A and whether it permits the assessee to raise new claims during reassessment proceedings initiated due to a search.

3. Nature of Sales Tax Incentive (Capital or Revenue Receipts):
The Tribunal did not address whether the sales tax incentive is a capital receipt or a revenue receipt and whether it is subject to tax. The assessee contended that the assessment under Section 153A should allow for new claims, including the nature of the sales tax incentive. However, the Tribunal's stance was that the reassessment under Section 153A does not permit new claims not raised in the original return, especially when the original assessment is completed.

4. Justification of Tribunal's Decision on Section 153A:
The Tribunal held that the case of the assessee relating to the sales tax incentive cannot be examined under Section 153A because it is a case of search. The Tribunal interpreted Section 153A as not allowing for the reassessment of completed assessments unless based on incriminating material found during the search. The Tribunal emphasized that Section 153A proceedings are not de novo assessments and are triggered by search or requisition under Sections 132 or 132A of the Act. The Tribunal concluded that the purpose of Section 153A is to assess income that was not disclosed or would not have been disclosed, and not to allow for new claims of deductions or expenditures that were not claimed in the original assessment.

Conclusion:
The court upheld the Tribunal's interpretation of Section 153A, concluding that it does not permit the assessee to seek deductions or claim expenditures not claimed in the original assessment. Consequently, the court found no merit in the appeal and dismissed it, holding that the reassessment under Section 153A should be based on incriminating material found during the search and cannot be used to make new claims. The other three questions did not arise due to the resolution of the fourth issue, and the appeal was dismissed with no costs.