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TMI Blog2016 (9) TMI 1561X X X X Extracts X X X X X X X X Extracts X X X X ..... and assessment u/s 153A of the Act merge into one and in that case only one assessment for the remaining set of years, where assessment is pending, is to be made separately on the basis of search materials and the regular material existing or brought on record before the AO/Revenue. Assessee can make any new claim in the return of income filed u/s 153A of the Act or even during the course of assessment proceedings undertaken u/s 153A of the Act. In our view, and in view of the second proviso to Section 153A (1) of the Act, once assessment get abated it is opened both way i.e. for the Revenue to make any additions apart from seized material even regular items declared in the return can be subject matter if there is doubt about the genuineness of those items and similarly the assessee also can lodge new claim, deduction or exemption or relief which remained to be claimed in regular return of income, because assessment was never made in the case of the assessee in such situation. Hence, we allow this issue of assessee‟s appeal. Disallowance of capital receipt on account of gain on prepayment of VAT / Sales tax - remission or cessation of trading liability u/s. 41(1) - HE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. The AO while completing assessment u/s 143(3) r. w. s. 153A of the Act disallowed this claim by considering the same as revenue receipt. According to the AO the assessee has availed of sales tax deferral scheme but, state government permitted premature re-payment of deferred sales tax liability at the NPV basis. According to the AO, the assessee treated this as capital receipt though credited to the P L account being difference between the deferred sales tax and its NPV. The AO first decided the issue as to whether a claim which was not made in the return of income filed u/s 139 (1) of the Act, can be considered in the subsequent return filed in pursuance to notice u/s 153A of the Act, consequent to search action u/s 132 of the Act. Secondly, whether such claim per-se can be allowed as capital, as against the claim of the assessee treating the same as revenue receipt in the original return of income? Admittedly, in the original return filed u/s 139 (1) of the Act on 30-09-2008 no claim regarding gain on pre-payment of deferred VAT/sales tax on NPV basis was made rather it was claimed as revenue receipt. Further, the assessee claimed this as capital receipt in the subsequent re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved, assessee preferred appeal before the CIT (A). 5. The CIT (A) confirmed the action of the AO with a detailed order vide Para 6 to 6.3 as under:- 6. I have very carefully considered the facts of the case, findings of the A.O., and the submissions made by the appellant. I have also considered the orders/ decisions cited and relied on by the appellant. The initial submission of the appellant is that there is no embargo or restriction on the assessee to claim any deduction which was not allowed in the original assessment. It has to be stated that this contention is totally misplaced in the context of the facts in the case of the appellant. It is not as though a claim had been claimed in the original return filed under s. 139(1) which had been denied by the A.Q. and which claim had again been made in the return filed in pursuance to notice under s. 153A. The fact is that there was no such claim in the original return and therefore the A.O. denying the claim in the original assessment does not arise. It is an undisputed fact that the assessee itself had treated the receipt as gain on prepayment of deferred VAT/Sales Tax on NPV basis revenue and credited the same to the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A in cases of search and seizure. It has been held by the Hon‟ble Jodhpur ITAT in the case of Suncit3r Alloys P. Ltd. vs. ACIT, that the expression 'assessment or reassessment' used in sec. 153A of the Act connotes determination of total income pursuant to return required to be filed in the case of a person where a search is initiated under s. 132 or requisition is made under s. 132A of the Act To such assessment or reassessment made all other provisions of this Act shall also apply as is spelled out in Explanation (i) below section 153A. Explanation (ii) further clarifies the amount of tax chargeable in an assessment or reassessment in respect of an assessment under this reassessment used in this section have to be understood in the context of section 153A of the Act alone. According to the 1TAT, in section 153A the expression signifies merely computation of undisclosed income that shall form part of total income within the meaning of section 2(45) of the Act in respect of each of the assessment falling within such six assessment years that is required to be aggregated with the income already assessed in cases of completed assessments, more so when section 132 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the said decision on the ground that the facts are identical. The said decision has been perused. It is observed that in the said case, in the assessment completed under s. 143(3), the A.O. had made disallowance of interest .The assessment attained finality with no appeal filed. Subsequently, the said assessee was searched and in the return filed in pursuance to notice under s. 153A, the assessee suo moto added back the interest disallowed but appended a note stating that the disallowance of interest voluntarily made was subject to its reservation of right to contest the allowability of entire interest in the assessment proceedings. The A.O. did not consider the said claim made as per the note thus not granting any relief as regards the addition on account of interest. When the matter was taken up before the CIT (A), the appellant made submissions establishing the nexus between the utilization of funds borrowed at interest with the carrying on of business. The CIT (A) remanded the matter to the A.O., who after examining of submissions, quantified the disallowable interest and thereby greatly reducing the quantum of interest disallowable which gave major part-relief to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal return of income nor revised return was filed u/s 139 (5) of the Act and hence, it is not open to the assessee to use the proceedings initiated u/s 153A of the Act to lodge a fresh claim. It is a concurrent view of the authorities below that the proceedings u/s 153A of the Act cannot be used by the assessee to seek benefit by making a fresh claim of deduction not made in the original/revised return. Now before us, learned Counsel for the assessee argued that, in the given facts and circumstances, in view of the second proviso of Section153A (1) of the Act the proceedings got abated and the AO issued notice u/s 153A of the Act and assessee filed return of income appending a note stating that the gain on pre-payment of deferred VAT/sales tax on NPV basis was to be considered as capital receipt on the basis of the decision of this Tribunal in the case of M/s. Sulzer India Pvt. Ltd. Vs JCIT in ITA No.2871/Mum/2007 for assessment year 2003-04 (Mumbai Special Bench) Order dated 07-09-2012 and the assessee accordingly reduced the profits of business in the computation of income. 7. Before us, the learned Counsel for the assessee contended that there is no specific inhibition of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use stating that it is, notwithstanding anything contained in section 147, 148 and 149 . Sub-section (a) of Section 153A (1) provides for issuance of notice to the persons searched u/s 132 of the Act to furnish a return of income but it nowhere prescribes issuance of notice u/s 143(2) of the Act. The second proviso to section 153A of the Act makes it clear that the assessment relating to any assessment year filed within the period of sixth assessment year pending on the date of search u/s 132 of the Act shall abate. As per our understanding of this section, if on the date of search any assessment proceedings are initiated relating to any assessment year falling within the period of six assessment years it shall stand abated and the assessing authority cannot proceed with such pending assessment after initiation of search u/s 132 of the Act. It is that the plain and simple meaning is to be assigned to the words, pending on the date of initiation of search u/s 132 of the Act as used u/s 153A of the Act. In the present case before us, admittedly the search was conducted on assessee on 30-11-2010 and at that point of time assessment in the case of the assessee for assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. The first proviso mandates that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso, according to Mr. Dastur, is important because the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Equally, sub-section (2) of section 153A deals with a situation where any proceeding initiated or any order of assessment or reassessment is made under sub-section (1) but that has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the other being search assessment u/s 153A of the Act. In other words, these two assessments merge into one assessment. It means that completed assessments stand on different footing from the pending assessments. Hence, in so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A of the Act merge into one and in that case only one assessment for the remaining set of years, where assessment is pending, is to be made separately on the basis of search materials and the regular material existing or brought on record before the AO/Revenue. 10. As regards to arguments made by the learned CIT DR, in view of the decision of the Hon‟ble Supreme Court in the case of Sun Engineering Vs. CIT 198 ITR 297 (SC) that the reassessment proceedings u/s 147 r. w. s. 148 of the Act are for the benefit of the Revenue and the assessee is not entitled to lodge a new claim of deduction/exemption/relief during the course of proceedings. We are not in agreement with the arguments of the learned CIT DR that the assessee is not entitled to lodge new claim in regard to abated assessment in the return filed in pursuance to notice u/s 153A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee which was not entertained by the AO in the light of the judgment of the apex Court? The answer is certainly 'No'. If the Tribunal passes such order, it would certainly be against the spirit of the judgment of the apex Court. More so, it is a settled position of law that when a particular act or a power cannot be exercised directly by an authority, that act cannot be done indirectly under the garb of directions of the appellate authority. We, therefore, are of the view that since the AO has passed an order pursuant to the judgment of the apex Court, the order of the AO or the CIT (A) who has confirmed the order, cannot be disturbed or set aside in order to provide an opportunity to the assessee to prove his claim. 14. So far as admission of this ground is concerned, we are of the view that since this issue requires a proper verification of facts and the relevant facts are not available on record or in the assessment proceedings, it cannot be admitted. If we admit the ground, it has to go back to the AO for verification and the order for directing the AO to verify the facts and adjudicate the claim of the assessee would again be against the spirit of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held:- 4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income in respect of each assessment year falling within such six assessment years. The second proviso postulates that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub-section (1) is pending on the date of initiation of the search u/s 132 of the Act shall abate. In the present case before us, however, though the second proviso to sub-section (1) of section 153A would not apply in the first three years of this case, yet, as far as the second three year period is concerned (which are pending before us), the assessments were pending. The proceedings in relation thereto abate. Now the entire assessment in relation to the second phase of three years can be made. The pending assessment in that case may be undertaken u/s 153A of the Act. The abatement of pending assessment is for the purpose of avoiding two assessments for the same year i.e. one being regular assessment and the other being search assessment u/s 153A of the Act. In other words, these two assessments merge into one assessment. It means that completed assessments stand on different footing from the pending assessments. Hence, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deferred sales tax liability at the NPV basis. According to the AO, the assessee treated this as capital receipt though credited to the P L account, which in the view of the AO, were revenue receipts. 17. The AO as well as the CIT (A) has not examined this claim by observing that the fresh claim cannot be made after initiation of proceedings u/s 153A of the Act as the assessee has not made the claim in the original return of income filed u/s 139(1) of the Act. The AO noticed that the assessee in its computation of income filed along with the return of income in response to notice u/s 153A of the Act claimed a sum of ₹ 318,10,93,993/- as capital receipt for the first time under the head Items claimed in Return under section 153A Gain on repayment of deferred value added/ sales-tax . The rationale for the said claim is stated to be that gain on the prepayment of sales-tax deferral loan on net present value basis cannot be classified as remission or cessation of trading liability u/s. 41(1) of the Act. 18. At the outset, learned Counsel for the assessee stated that this issue is squarely covered by the decision of the Hon‟ble Bombay High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore it starts giving corresponding benefit to the state. That opportunity is granted by deferring the remittance of the Sales Tax collected by the unit like the Assessee. In that regard, we have perused the compilation of admitted documents placed on record by Shri Dastur. From a perusal thereof, it is apparent that the Government Resolution dated 4th May, 1983 evolves a package of incentives to disperse the industries from Bombay Thane Pune belt and to attract them to underdeveloped and developing areas of the Stat4e of Maharashtra. This package evolves several measures to achieve this object. Then, there is a New Package Scheme of incentives, 1988. Both Schemes have clauses and paras containing Sales Tax deferral incentives. To carry this object further and also to achieve the purpose of early remittance of deferred Sales Tax collected by the units availing of the Schemes, the statutory option was incorporated in Section 38 by substituting the 4th proviso to sub-section 4 of section 38 of the Bombay Sales Tax Act, 1959. That is informed by the Trade Circular dated 12th December, 2002 issued by the Commissioner of Sales Tax, Maharashtra. A combined reading of the Schemes and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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