2022 (9) TMI 1022 - AT - Income Tax

Assessment u/s 153A - CIT(A) allowed the claim that lease rentals income earned by the appellant as income under the Profit or Gains from Business and Profession (Profit and Gain from Business and Profession) as against Income from House Property as claimed in its Return of Income filed u/s 139(1) - HELD THAT - We observe that the assessee is earning income from the let of out of the premises situated in the SEZs and offered to tax in the original return of income filed by the assessee under the head income from House property. Subsequent to the Search, while filing the return u/s 153A, it changed the head of income to declare the income from let out of premises under the head Income from Business and Profession. This action of the assessee was rejected by the AO that the assessee cannot claim new benefit in the revised proceedings u/s 153A of the Act. CIT(A) decided the issue in favour of the assessee considering the fact on record that the assessment years under consideration are abated, therefore, the assessee can claim fresh or modified claim. After considering the submissions of both counsels, we observe that this issue is well settled and held in the case of B.G. Shirke Construction Technology P Ltd 2017 (3) TMI 879 - BOMBAY HIGH COURT that in the case of abated assessments the return filed u/s 153A replaces the return filed u/s 139. It held that the stand of the revenue is misplaced as the issue is relating to the assessment u/s.147/148 the same cannot be applied for the issue under consideration. Therefore, the submissions made by the DR are substantially answered. Appeals filed by the Revenue are dismissed.

Summary

Issues Involved:
1. Change of head of income from "House Property" to "Profit and Gain from Business and Profession."
2. Applicability of the decision in CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO.
3. Claim of depreciation on assets not claimed in the original return.

Detailed Analysis:

1. Change of Head of Income:
The assessee, a company engaged in real estate development and operating SEZ projects, initially declared rental income under "House Property" in its original returns for A.Y. 2015-16 and 2016-17. After a search action under section 132 of the Income Tax Act, the assessee filed returns under section 153A, changing the head of income to "Profit and Gain from Business and Profession." The Assessing Officer (AO) rejected this change, citing consistency with previous returns and assessed the income under "House Property."

The Ld. Commissioner of Income Tax (Appeals) [CIT(A)] acknowledged that the years under consideration were abated years, allowing the AO to decide any issue based on the material on record. The CIT(A) relied on the CBDT Circular No. 16/2017, which states that income from letting out premises in SEZs should be charged under "Business or Profession." Consequently, the CIT(A) directed the AO to compute the income from lease rentals under "Profit and Gain from Business and Profession."

2. Applicability of CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO:
The Revenue argued that the assessee could not change the head of income or claim new benefits in the returns filed under section 153A, citing the decisions in CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO. The CIT(A) and the Tribunal observed that these cases pertained to reassessment under section 147/148 and were not applicable to the present case involving abated assessments under section 153A. The Tribunal noted that in abated assessments, the return filed under section 153A replaces the original return, allowing for new claims.

3. Claim of Depreciation on Assets:
The Revenue contended that the assessee could not claim depreciation on assets not claimed in the original return in the subsequent proceedings under section 153A. The Tribunal held that in abated years, the assessee could make fresh claims, including depreciation, as the return filed under section 153A replaces the original return.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, allowing the assessee to change the head of income from "House Property" to "Profit and Gain from Business and Profession" and to claim depreciation on assets. The appeals filed by the Revenue were dismissed, affirming that in abated assessments, the return filed under section 153A replaces the original return, permitting new claims. The Tribunal also clarified that the decisions in CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO were not applicable to the present case.