2014 (8) TMI 387 - HC - Income Tax

Admission of appeal Issue not raised before any Assessment authority - Re-computation of book profits Held that - Assessee contended that the addition is not justified in the assessment order u/s 153A, as no incriminating material was found concerning the addition u/s 115 JB the contention of the assessee cannot be accepted as per section 153A, the additions need not be restricted or limited to the incriminating material, which was found during the course of search - There cannot be multiple assessments, once Section 153A of the Act is applicable - determination in the orders passed u/s 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income the issue was not raised before the AO, CIT(A) or Tribunal thus, the contentions of the assessee cannot be accepted Decided against Assessee. Denial of set off of book loss unabsorbed depreciation as per clause (iii) of Explanation 1 to section 115JB Held that - As per the clause (iii), the brought forward losses or unabsorbed depreciation, whichever is less, is to be set off - in the last AY 2003-04, book profit of ₹ 413 lakhs was set off from balance forward losses of ₹ 910 lakhs, giving a balance figure of ₹ 497 lakhs, which has been carried forward as unabsorbed loss - The applicable figure for this year would be ₹ 497 lakhs i.e. the available book loss and unexpired depreciation of ₹ 1079 lakhs no substantial question of law arises for consideration Decided against Assessee.

Summary

Issues involved:
1. Interpretation of Section 153A of the Income Tax Act, 1961 regarding the scope of additions in assessment under Section 153A without strict reliance on incriminating material found during search.
2. Denial of set off of book loss unabsorbed depreciation relatable to earlier assessment years under clause (iii) of Explanation 1 to section 115JB of the Act.

Analysis:

Issue 1:
The appellant-assessee challenged the re-computation of book profit under Section 153A without specific incriminating material related to the addition under Section 115JB. The High Court noted that Section 153A allows for one assessment covering six preceding assessment years, not limited to incriminating material found during search. The Court referenced past judgments to clarify that assessments under Section 153A must have a nexus with the search material, but not solely based on it. The Court emphasized that the Assessing Officer's powers under Section 153A override normal assessment procedures, ensuring a comprehensive assessment of undisclosed income.

Issue 2:
Regarding the denial of set off of book loss unabsorbed depreciation, the appellant argued for reworking brought forward losses and depreciation for the current assessment year. The Court upheld the Tribunal's decision, stating that clause (iii) of Explanation 1 to Section 115JB mandates setting off the lower figure between brought forward losses and unabsorbed depreciation. The Court found the appellant's argument illogical and contrary to the clause's language. Consequently, the Court dismissed the appeal, affirming the Tribunal's decision on the set off issue.

In conclusion, the High Court dismissed the appeal at the admission stage, emphasizing the clear legal positions on both issues raised by the appellant. The Court's detailed analysis clarified the interpretation of relevant provisions under the Income Tax Act and upheld the Tribunal's decisions on the matters in question.