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2020 (2) TMI 307 - HC - Income TaxAssessment u/s 153A - assessee made a new claim for treating gain on pre-payment of deferred VAT/sales tax on Net Present Value (NPV) basis as capital receipt . - pending assessment or reassessment on the date of initiation of search if abated - HELD THAT - In the present case, search was conducted on the assessee on 30.11.2010. At that point of time assessment in the case of assessee for the assessment year 2008-09 was pending scrutiny since notice under Section 143(2) of the Act was issued and assessment was not completed. Therefore, in view of the second proviso to Section 153A of the said Act, once assessment got abated, it meant that it was open for both the parties, i.e. the assessee as well as revenue to make claims for allowance or to make disallowance, as the case may be, etc. That apart, assessee could lodge a new claim for deduction etc. which remained to be claimed in his earlier/ regular return of income. This is so because assessment was never made in the case of the assessee in such a situation. It is fortified that once the assessment gets abated, the original return which had been filed looses its originality and the subsequent return filed under Section 153A of the said Act (which is in consequence to the search action under Section 132) takes the place of the original return. In such a case, the return of income filed under Section 153A(1) of the said Act, would be construed to be one filed under Section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly. If that be the position, all legitimate claims would be open to the assessee to raise in the return of income filed under Section 153A(1). We would further like to emphasis on the judgment passed by this Court in the case of Continental Warehousing 2015 (5) TMI 656 - BOMBAY HIGH COURT which also explains the second proviso to Section 153A(1). The explanation is that pending assessment or reassessment on the date of initiation of search if abated, then the assessment pending on the date of initiation of search shall cease to exist and no further action with respect to that assessment shall be taken by the AO. In such a situation the assessment is required to be undertaken by the AO under Section 153A(1) of the said Act. In view of the second proviso to Section 153A(1) of the said Act, once assessment gets abated, it is open for the assessee to lodge a new claim in a proceeding under Section 153A(1) which was not claimed in his regular return of income, because assessment was never made/finalised in the case of the assessee in such a situation. - Decided against revenue
Issues Involved:
1. Whether the assessee can lodge new claims, deductions, exemptions, or reliefs in the return filed under Section 153A of the Income Tax Act, 1961, which were not claimed in the original return filed under Section 139(1). 2. Interpretation and applicability of Section 153A of the Income Tax Act, 1961, in the context of assessments abating due to search actions under Section 132. Detailed Analysis: Issue 1: Lodging New Claims under Section 153A The primary question was whether the assessee could raise a new claim in the return filed under Section 153A, which was not made in the original return filed under Section 139(1). The Assessing Officer (AO) disallowed the new claim, treating it as a "revenue receipt" instead of a "capital receipt." The AO's reasoning was based on the fact that the assessee had availed of a sales tax deferral scheme and had treated the gain on pre-payment of deferred VAT/sales tax on NPV basis as a "capital receipt" in the subsequent return filed under Section 153A. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, but the Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeal, setting aside both the AO and CIT(A)'s orders. The ITAT concluded that the assessee could lodge new claims in the return filed under Section 153A, as the assessment proceedings had abated. Issue 2: Interpretation and Applicability of Section 153A Section 153A deals with assessments in the case of search or requisition. It mandates that the AO issue notice to the person searched to furnish returns for six assessment years preceding the search year. These returns are treated as returns filed under Section 139, and the AO is required to assess or reassess the total income for these years. The court emphasized the significance of the non-obstante clause in Section 153A, which overrides the provisions of Sections 139, 147, 148, 149, 151, and 153. The second proviso to Section 153A(1) states that any pending assessment or reassessment proceedings on the date of the search shall abate. Judicial Precedents and Analysis The court referred to the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. and the principles laid down therein. The judgment clarified that once the assessment proceedings abate due to a search, the AO must conduct a fresh assessment for the relevant years. The court also noted that the returns filed under Section 153A should be treated as returns filed under Section 139, allowing the assessee to make new claims. The court highlighted that the abatement of pending assessments means that the original return loses its originality, and the subsequent return filed under Section 153A takes its place. This interpretation allows the assessee to raise new claims, deductions, exemptions, or reliefs that were not claimed in the original return. Conclusion The court concluded that in view of the second proviso to Section 153A(1), once the assessment gets abated, it is open for the assessee to lodge new claims in the return filed under Section 153A, which were not claimed in the original return. The court found no substantial question of law in the revenue's appeal and dismissed it, upholding the ITAT's decision. Final Judgment The appeal filed by the revenue was dismissed, with the court agreeing with the ITAT's interpretation that the assessee could make new claims in the return filed under Section 153A following the abatement of the original assessment proceedings. The court emphasized that the provisions of the Income Tax Act should be applied to the return filed under Section 153A as if it were filed under Section 139(1).
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