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2025 (4) TMI 411 - HC - Income TaxRevisitation of the issue already considered in re-assessment - Revision u/s 263 after assumption of jurisdiction u/s 153A - Assessing Authority adopts the view that the benefit provided under Section 54F is unavailable as according to him the thrust of Section 54F is on dwelling house and hence the investment made must substantially relate to the residential house and not the component of land in the property - distinction between the provisions of Section 54F and Section 54 of the Act noticing that the phrase lands appurtenant thereto contained in Section 54 are absent in Section 54F HELD THAT - Section 153A is sought to be invoked in a situation where the reassessment has already been completed on the same issue under Section 147 on 30.05.2012. There cannot thus be as per the judgement in Abhisar Buildwell (P) Ltd 2023 (4) TMI 1056 - SUPREME COURT yet another assessment in terms of Section 153A of the Act again on the same issue as identified already in the course of the re-assessment proceedings. As the issue dealt in re-assessment and that dealt with in the order u/s 153A are one and the same there is an embargo in the Department raking up the same issue yet again in the absence of any incriminating material. Hence and on a plain reading of the second proviso to Section 153A the Department is estopped from framing a regular assessment in this case as the re-assessment stands concluded as on 30.05.2012. On the question of assumption of jurisdiction u/s 153A the search has admittedly not yielded any incriminating materials in regard to the claim u/s 54F. A perusal of assessment order does not indicate any incriminating material based on which the assessment has been made save the Inspector s report dated 10.08.2011. Incidentally this is a case where the Department has raked up the same issue in multiple proceedings an order of re-assessment under Section 147 proceedings under Section 263 and an assessment under Section 153A. The claim has been accepted under Section 147 considered and dropped in revision u/s 263 and disallowed in search assessment u/s 153A in the absence of incriminating search materials. We thus cannot but recall the observations of the Supreme Court in the case of Parasuram Pottery 1976 (11) TMI 1 - SUPREME COURT where this to say in regard to allowing stale matters to attain finality. Though in the context of re-assessments the observations will be equally applicable to the present case as well It has been said that the taxes are the price that we pay for civilization. If so it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. Policy of law is that there must be a point of finality in all legal proceedings that state issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as income-tax assessment orders are concerned they cannot be reopened on the scope of income escaping assessment under section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned this cannot be said in the present case - Decided in favour of the assessee
ISSUES PRESENTED and CONSIDERED
The core legal issues examined in this judgment are: i. Whether the Income Tax Appellate Tribunal (ITAT) was correct in law to hold that issues addressed in proceedings under Section 263 cannot be reassessed in proceedings under Section 153A, especially when the Commissioner of Income Tax (CIT) had dropped the Section 263 proceedings without adjudicating the issue of deduction under Section 54F. ii. The legal soundness of the ITAT's reliance on Circular No.7 of 2003 to conclude that Section 263 proceedings do not abate following a search action under Section 132. iii. Whether the ITAT was justified in ignoring the Supreme Court's decision in Commissioner of Central Excise Vs. Ratan Melting & Wire Industries, which addresses the supremacy of statutory provisions over executive circulars. iv. The correctness of the ITAT's decision in not applying the Karnataka High Court's decision in Canara Housing Development Co. Vs. DCIT, which discusses the jurisdiction of the CIT under Section 263 post Section 153A proceedings. v. The appropriateness of the ITAT's conclusion that the Assessing Officer should not have re-adjudicated the Section 54F deduction issue in Section 153A proceedings, given the earlier scrutiny assessment under Section 143(3) read with Section 147. vi. The relevance of the Supreme Court's decision in CIT Vs. Kelvinator of India Ltd. to the present case. vii. The ITAT's decision not to follow the Karnataka High Court's ruling in Canara Housing Development Co. Vs. DCIT, regarding the scope of assessment under Section 153A. ISSUE-WISE DETAILED ANALYSIS i. Reassessment under Section 153A vs. Section 263 Proceedings The Tribunal concluded that the issues addressed in Section 263 proceedings cannot be reassessed under Section 153A. The Tribunal relied on the clarification provided by the Central Board of Direct Taxes (CBDT) that revision or rectification proceedings pending on the date of initiation of a search do not abate. The Tribunal emphasized that the Assessing Officer (AO) should not have revisited the deduction under Section 54F, as it had already been adjudicated in earlier scrutiny assessment proceedings. The Tribunal's decision was guided by the principle that once an issue has been adjudicated and proceedings under Section 263 have been dropped, it should not be revisited unless new incriminating material is found. ii. Circular No.7 of 2003 and Legal Precedence The Tribunal placed reliance on Circular No.7 of 2003, which clarifies that appeal, revision, or rectification proceedings pending on the date of search do not abate. The Tribunal found that the CIT's decision to drop the Section 263 proceedings meant that the revisionary proceedings had concluded, and thus, the issues could not be revisited under Section 153A. The Tribunal's reliance on the circular was challenged by the appellant, citing the Supreme Court's decision in Ratan Melting & Wire Industries, which emphasizes that statutory provisions take precedence over executive circulars. However, the Tribunal maintained its stance, interpreting the circular as consistent with the statutory framework. iii. Jurisdiction under Section 153A The Tribunal found that the assumption of jurisdiction under Section 153A was erroneous, as the search did not yield any incriminating material related to the Section 54F claim. The Tribunal noted that the Inspector's report, which was part of the Department's records since 2011, was not new evidence unearthed during the search. Consequently, the Tribunal held that the assessment under Section 153A could not be sustained, as it was not based on any undisclosed income or new incriminating material. iv. Relevance of Previous Judicial Decisions The Tribunal did not apply the Karnataka High Court's decision in Canara Housing Development Co. Vs. DCIT, which allows for a comprehensive assessment under Section 153A, including undisclosed income and regular income. The Tribunal distinguished the present case on the grounds that the issue of Section 54F deduction had already been adjudicated and no new incriminating material was found. Similarly, the Tribunal's reliance on the Supreme Court's decision in Kelvinator of India Ltd. was challenged, but the Tribunal found it applicable, as it relates to the principles of reassessment and the necessity of new material for reopening assessments. SIGNIFICANT HOLDINGS The Tribunal held that the assumption of jurisdiction under Section 153A was erroneous, as the search did not yield any new incriminating material related to the Section 54F claim. The Tribunal directed the AO to delete the addition made by disallowing the deduction under Section 54F, emphasizing that the issue had already been adjudicated in earlier proceedings, and no new material justified its reassessment. The Tribunal's decision underscores the principle that once an issue has been adjudicated and proceedings under Section 263 have been dropped, it should not be revisited unless new incriminating material is found. The Tribunal's reliance on Circular No.7 of 2003 was upheld, as it aligns with the statutory framework and clarifies that revision or rectification proceedings do not abate upon the initiation of a search. The Tribunal's decision was guided by the principle that there must be finality in legal proceedings, and issues should not be reactivated beyond a particular stage without new evidence. The Tribunal's reliance on previous judicial decisions, including the Supreme Court's decision in Kelvinator of India Ltd., reinforced the necessity of new material for reassessment and the limitations on reopening concluded matters.
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