2021 (8) TMI 1217 - AT - Income Tax

Assessment u/s 153A - filing of belated return in response to notice u/s 153A - denying carry-forward of loss claimed in the return filed under section 153A on the ground that return was not filed within the stipulated period of 16 days - Whether provision of the Act which would be otherwise applicable in the case of return filed under section 139(1)? - HELD THAT - AO has not correctly interpreted the provision - If assessment proceedings in particular assessment year are pending as on the date of the search, same get abated and in consequence to notice under section 153A, assessment of such year would be subject to assessment by the revenue for the first time and the earlier return filed for the purpose of assessment would be treated as non est in law - return filed under section 153A(1)(a) is return furnished under section 139 - provision of the Act which would be otherwise applicable in the case of return filed under section 139(1) of the Act would also apply in case of return filed under section 153A of the Act. Where the assessments are not abated or no assessments are pending as on the date of the search, the return of income filed under section 139 cannot be treated as non est. In such completed assessments, addition if any can be made on the basis of the income relating incriminating material otherwise the position accepted in completed assessment has to reiterate. In the year under consideration, it is undisputed that no assessment was pending as on the date of the search and, therefore, the AO is not permitted to make changes in the whatever determined in regular assessment proceeding on the basis of the return of income filed, in absence of any incriminating material. Since in the regular proceeding, the assessee is entitled to carry forward the losses in terms of the provision of the Act, the action of the Assessing Officer in denying the carry forward of the loss on account of the late filing of the return under section 153A of the Act, is not justified. - Decided in favour of assessee.

Summary

Issues:
1. Whether the return filed in response to notice u/s 153A is a revised return u/s 139(5) of the Act?
2. Whether a return filed after a delay in response to notice u/s 153A can be considered a belated return if filed within the time period allowed u/s 139(5)?
3. Whether an assessee not filing a return within the specified time under notice u/s 153A is entitled to carry forward losses?
4. Whether the Assessing Officer can specify a time limit to file a return of income under section 153A and if section 139(5) is applicable?
5. Whether the denial of carry-forward of losses claimed under section 153A is justified?

Analysis:
1. The case involves an appeal by the Revenue against the order of the Ld. CIT(A) concerning rectification of the order under section 153A for the assessment year 2006-07. The main issues revolve around the nature of the return filed in response to notice u/s 153A and the entitlement to carry forward losses.
2. The assessee initially filed the original return within the due date, but filed a return under section 153A after a delay, leading to a dispute regarding the carry-forward of losses. The dispute arises from the interpretation of section 153A(1)(a) and its application to returns filed under section 153A.
3. The Assessing Officer contended that the return under section 153A should be treated as per section 139 and denied carry-forward of losses due to late filing. However, the Tribunal held that the provisions of section 139 apply differently based on whether assessment proceedings are abetted or not under section 153A.
4. The Tribunal clarified that if assessments are not abated or pending during the search, the return filed under section 139 cannot be disregarded. In such cases, additions can only be made based on incriminating material, and regular assessment provisions apply for carry-forward of losses.
5. The Tribunal dismissed the Revenue's appeal, stating that since no assessment was pending during the search, the Assessing Officer could not deny carry-forward of losses based on the late filing of the return under section 153A. The decision was based on the interpretation of relevant provisions and the specific circumstances of the case.