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TMI Blog2024 (10) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the findings of the Hon'ble Apex Court, in our considered view, the appellant also cannot make any fresh claim of deduction or expenditure for the first time in the return of income filed in response to the notice issued u/s 153A of the Act. Insofar as the abated assessment is concerned, the assessee can make all claims, provided the return of income is filed in adherence to the timeline to furnish as per notice u/s 153A of the Act, failing which the assessee shall not be able to claim any deduction in view of Section 80A As going by the wording of the provisions of Section 80A(5) and Section 80AC of the Act, in order to claim any deductions u/s 80IA(4) of the Act, the assessee should file its return of income on or before the due date prescribed u/s 139(1) and further, the said claim should be made in the return furnished. in order to claim deduction u/s 80IA(4) as per Section 80IA(7), furnishing of the audit report on or before the specified date referred to in Section 44AB of the Act is mandatory and not directory as argued by assessee. We are taking support from the decision of Dilip Kumar and Company [ 2018 (7) TMI 1826 - SUPREME COURT] wherein clearly held that benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on merits. The Registry is directed to list the appeals in due course and inform both parties - Justice (Retd.) C.V. Bhadang, President, Shri Mahavir Singh, Vice President And Shri G. Manjunatha, Accountant Member For the Assessee : Shri K.K. Chaitanya, Senior Advocate And Shri S. Ramarao, Advocate For the Revenue : Smt. Mamata Choudhary, Senior Standing Counsel and Ms. TH Vijaya Lakshmi, CITDR ORDER PER MANJUNATHA G., ACCOUNTANT MEMBER: This Special Bench is constituted by the President by posing the following questions for our consideration and decision: (i) Whether an assessee can make a claim for deduction under Chapter VIA of Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the Act ? (ii) If yes, under which circumstances ? 2. The brief facts of the case are that the appellant being engaged in the business of development of infrastructure projects, filed its original return of income for the assessment year 2009-10 on 21-09-2009, admitting a total income of Rs. 113,58,17,240/-. The assessment has been completed under Section 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 of the Act and thus, as held by the Hon ble Supreme Court in the case of CIT Vs. Sun Engineering Works (P) Ltd. (supra), reassessment proceedings under Section 147 of the Act are for the benefit of the Revenue, and hence, no new claim can be raised towards any deduction or expenditure in the return of income filed in response to Section 153A of the Act. The AO further held that the appellant is not entitled to a deduction under Section 80IA(4) of the Act for all the projects, and if at all such deduction is allowable, it is only to the extent of Rs. 8,03,26,819/- in respect of the projects referred to in Serial Numbers 1 to 4 on Page No. 8 of the assessment order. Therefore, the AO rejected the fresh claim of deduction under Section 80IA(4) of the Act, amounting to Rs. 44,91,03,357 and assessed the taxable income at Rs. 113,58,58,470/-. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee filed detailed written submissions on the issue along with certain judicial precedents and argued that the provisions of Section 153A of the Act, are very clear in as much as, the AO shall assess or reassess the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration before the Special Bench, submitted that the present reference to the Special Bench is only on the issue of whether a claim of deduction under Section 80IA(4) of the Act could be maintained for the first time in the return filed pursuant to a notice under Section 153A of the Act and not on merits as to whether the assessee is eligible for such a claim and the submissions before the Special Bench are limited only to the questions referred for its consideration. 8. The learned counsel for the Revenue further submitted that the respondent assessee did not claim any deduction under Section 80IA in its return filed under Section 139(1) of the Act but sought to raise such claim for the first time in the return filed in response to the notice under Section 153A of the Act. The AO disallowed the claim of deduction, inter-alia, on the ground that a claim not made in the original return filed under Section 139(1) and sought to be made for the first time in a return filed pursuant to a notice under Section 153A of the Act would not be maintainable. Further, the assessee was also found to be ineligible for such a deduction on merits, as well. The learned counsel for the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial found as a result of search. This legal proposition has been further examined by various High Courts, including the Hon ble Rajasthan High Court in the case of Jai Steel (India) Vs. ACIT (supra), wherein the Hon ble High Court has dealt with the issue of a fresh claim made by the appellant in unabated/concluded assessments and, after examining relevant facts and law, held that in unabated/concluded assessments, the appellant is not entitled to make any fresh claim for the first time in the return of income filed in response to notice u/s 153A / 153C of the Act. 9. The learned counsel for the Revenue further submitted that the Ld.CIT(A) relied on the decision of Coordinate Bench of the Tribunal, Hyderabad in the case of M/s.KNR Constructions Ltd. (supra) to allow the claim of the assessee, but the fact remains that the order in the case of M/s. KNR Constructions Ltd (supra) is per incuriam as it has not noticed the explicit provisions of the statue prescribed under Section 80A(5) and 80AC for making a claim under Section 80IA(4) of the Act. She further referring to the provisions of Section 80A(5) and Section 80AC, submitted that any claim under Section 80IA would be maintainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued under Section 153A(1)(a) of the Act, then the assessee is required to file a return of income in respect of each assessment year falling within six assessment years. The language of this provision is similar to that of Section 139(1) of the Act, and hence, when a claim under Chapter VI-A is permitted to be made in a return filed under Section 139(1), there is no reason why such claim cannot be permitted in the return filed under Section 153A of the Act. The learned counsel for the assessee referring to provisions of Section 153A submitted that Section 153A of the Act only overrides Section 139, Section 147, Section 148, Section 149, Section 151, and Section 153, but not Chapter VI-A. Further, Section 153A(1)(a) states that the provisions of the Act shall apply as if it were a return required to be furnished under Section 139, and therefore, fresh claims can be made in such return in a manner similar to making claims in the return under Section 139(1) of the Act. The learned counsel for the assessee further referring to Form ITR 6 submitted that there is a separate Schedule (Schedule 80IA) for claiming deduction under Section 80IA, in which the assessee has rightly claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 153A is like Section 158BH. In the context of section 158BH, the Hon'ble Supreme Court in the case ACIT Vs. Hotel Blue Moon reported in (2010), 321 ITR 362 (SC) noted that due to the operation of this Section, all the provisions of the Act would apply except where saving is expressly made. Section 158BH also makes provisions relating to the computation of income applicable to the undisclosed income for the block period as held in the following decisions : CIT v. S. Ajit Kumar [2018] 404 ITR 526 Fenoplast Ltd. Vs. ACIT [2014] 367 ITR 761 (Andhra Pradesh and Telangana) S. Badrinarayan Kala Vs. ACIT [2005] 96 TTJ 642 (Chennai) 12. The learned counsel for the assessee further referred to the decision of the Hon ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P) Ltd. (supra). He, drew our attention to para. 11 of the judgment where it was observed that even in the case of a completed / unabated assessment, the AO would have the jurisdiction to assess or reassess the total income taking into consideration the incriminating material collected during the course of search and other material which would include income declared in the returns, if any, furnished by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, whereas, Section 153A deals with the assessment or reassessment of total income as against assessment or reassessment of such income i.e., income escaping assessment u/s 147 of the Act. The fact that Section 147 only deals with assessment or reassessment of income escaping assessment is clear from the use of the words 'and also any other incomes chargeable to tax . ' in section 147 and Explanation 3 thereto as it stood prior to substitution vide Finance Act, 2021. Similar provision to Explanation 3 is contained in Explanation to section 147 as it stood substituted vide Finance Act, 2021, with effect from 01.04.2021. If the scope under Section 147 was assessment or reassessment as in Section 153A, there was no need for such words in Section 147 and Explanation 3 thereto. Therefore, he submitted that Section 153A differs from Section 147, which clearly indicates that the scheme of provision of Section 153A is different from that of Section 147. In this regard, he relied upon the following judicial precedents : DCIT Vs. Eversmile Construction Co. (P.) Ltd. [2012] 143 TTJ 322 (Mumbai) KNR Constructions Vs. DIT IT Appeal Nos.946 to 948 and 983 to 986/Hyd/2015, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the practice of claiming multiple deductions from the same profits. In the instant case, the appellant has not made any multiple claims, and thus, where the return of income has been filed within the due date prescribed in notice u/s 153A of the Act then it is concluded that the assessee has complied with the provisions of Section 80A(5) of the Act and fresh claim can be made towards deduction under Section 80IA(4) of the Act. He further referring to the provisions of Section 80AC submitted that as per the said provision, no deduction under Section 80IA shall be allowed to assessee unless he furnishes a return of income for such assessment year on or before the due date specified under Section 139(1) of the Act. If we go by the said provision, it requires only the filing of a return of income on or before the due date under section 139(1) of the Act. It does not require a claim of deduction in the said return. In this regard, he relied upon the decision of ITAT Hyderabad in the case of ASR Engg. Projects Ltd. Vs. DCIT reported in (2019) 111 taxmann.com 49 (Hyderabad - Trib.). Therefore, he submitted that the assessee has complied with the provisions of Section 80AC, and a fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anguage of Section 10B(8) requires the option to be exercised before the due date, under Section 139(1) by filing a declaration. However, there is no such due date provided under Section 80IA(7) of the Act. Further, Section 10B deals with the exercise of an option by way of a declaration in writing for the withdrawal of a claim for deduction. Hence, the Court held that the same is by way of an essential condition for the withdrawal of a claim. Therefore, the same cannot be equated with for furnishing of audit report under Section 80IA(7) because the said provision is a compliance condition and not condition precedent for claiming a deduction. In this regard, reliance is placed on the decision in the case of Ajanta Pharma Ltd Vs. CIT reported in (2010) 327 ITR 305 (SC). He further referring to the decision in the case of Wipro Ltd (supra) submitted that the Court has made a clear distinction between exemption provisions and deduction provisions contained in Chapter VI-A. In Para 11, the Court has also not doubted or upset the ratio of GM Knitting's case (supra), but has only distinguished it on the count that it cannot be used in exemption provisions. Therefore, the ratio in GM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Act, 1961. The special procedure for the assessment of search cases under Chapter XIVB required the assessment of undisclosed income as a result of search, which has been defined in Section 158B(b) of the Act. The new provisions of assessment in the case of a search under Section 153A came into force w.e.f 01-06-2003 and the said provisions require the AO to determine the total income and not the undisclosed income. Therefore, before going deeper into the issue, it is necessary to consider the provisions of Section 153A of the Act, which are reproduced below: 153A. Assessment in case of search or requisition. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or after the 1st day of April, 2017. Explanation 1. For the purposes of this sub-section, the expression relevant assessment year shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2. For the purposes of the fourth proviso, asset shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) 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 by the Principal Commissioner or Commissioner: Provided that such revival shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or six assessment years and assess or reassess the total income for those six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted. The first proviso is nothing but a reiteration of the provisions contained in Clause (b) of Section 153A(1) wherein it is provided that the AO shall assess or reassess the total income for each of the six assessment years as mentioned above. The second proviso contemplates that if any assessment relating to any assessment year falling within the period of six assessment years is pending on the date of initiation of the search, the same shall abate. However, there is no provision stating that even the completed assessments for the six assessment years shall abate. Therefore, a distinction has been made between completed assessments and pending assessments. Further, under the proviso contained in Sub- section (2), the assessment or reassessment relating to any assessment year which has been abated under the second proviso, and if such an assessment is annulled in appeal or any other legal proceedings, it shall stand revived with effect from the date of receipt of the order of such annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, and in case, there is no incriminating material, then the Assessing Officer cannot tinker with the completed assessment. Insofar as pending assessments are concerned, the AO shall assume jurisdiction to assess the total income of those assessment years on the basis of regular books of accounts and any incriminating material found as a result of the search. The Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (supra) approved the ratio laid down by various High Courts, including the decision of Hon'ble Delhi High Court in the case of Kabul Chawla (supra) and held that, in the case of a search under Section 132 or requisition u/s 132A of the Act, the Assessing Officer assumes jurisdiction u/s 153A and further, in case, any incriminating material is found as a result of search, even in case of unabated/completed assessment, the Assessing Officer would assume jurisdiction to assess or reassess the total income, taking into consideration the incriminating material found during the course of search and other material available with the Assessing Officer, including the income declared in the return. In case no incriminating material is found during the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious judicial precedents, including the decision of the Hon'ble Bombay High Court in the case of K. Sudhakar S. Shanbhag Vs. ITO, reported in (2000) 241 I.T.R. 865 (Bom), which was rendered by taking note of the principle laid down by the Hon'ble Apex Court in the case of CIT Vs. Sun Engineering Works (P) Ltd (supra) to the effect that in the reassessment proceedings, an assessee can neither claim nor be allowed a deduction that was not claimed in the original return. According to the department a search under Section 132 of the Act, also cannot be utilized by the assessee to seek relief not claimed earlier. The Department, while disallowing such claims had also taken support from the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (supra), wherein it has been laid down that the AO cannot entertain a claim for deduction otherwise than by filing a revised return. Since the assessee neither made any such claim in the original return filed under Section 139(1) of the Act, nor in any regular assessment proceedings by way of filing any revised return and, therefore, return in response to notice under Section 153A of the Act is not a substitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment proceedings initiated under Section 147 of the Act, and if we go by the words used in the said provision, it refers to such income i.e., income escaping assessment under Section 147 of the Act. The appellant further claims that the department's reliance on the case of Goetze (India) Ltd. Vs. CIT (supra) can be distinguished as being not applicable in case of raising the fresh claim in the return of income filed under Section 153A, since the return filed under Section 153A should be treated as a return filed under Section 139 of the Act. 23. We have given thoughtful consideration to the various arguments advanced by the learned counsel for the assessee and also, the counter-arguments advanced by the Senior Standing Counsel for the Revenue in light of the provisions of Section 153A of the Act, coupled with relevant case laws referred to by both parties. We find that it is well settled from the decision of various High Courts and the decision of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (supra) that in case of search assessments, where search is conducted under Section 132 of the Act, all pending assessments within the block of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment. Further, if we go by the argument of the counsel for the assessee, in light of the provisions of Section 153A(1)(a) of the Act, once return is filed in response to a notice under Section 153A of the Act, the said return shall be treated as return which was furnished under Section 139 of the Act, in our considered view, it defeats the whole purpose of initiation of search and consequent assessments. In our considered view, although provisions of Section 153A make it very clear that return filed in response to a notice under Section 153A of the Act, partakes the nature of return filed u/s 139 of the Act, said interpretation cannot be enlarged so as to say that even in case where the assessee has filed a regular return under Section 139 and not made any claim towards deduction and further for the first time, the assessee has made a claim of deduction under Section 80IA(4) in the return of income filed in response to notice under Section 153A of the Act, also to be considered as if the assessee has made a claim on or before filing the return under Section 139(1), and further, it is contrary to the scheme of regular assessment and search assessment and is devoid of merits. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assess income which was not disclosed or would not have been disclosed. The purpose of the second proviso is also very clear, in as much, as once assessment or reassessment is pending on the date of initiation of the search or requisition, and in terms of Section 153A, a return is filed, and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and therefore, the proviso provides for the abatement of such pending assessments and reassessment proceedings, and it is only the assessment made under Section 153A of the Act that would be the assessment for the said year. The necessary corollary of the above provision is that the assessments or reassessments which have already been completed and the assessment orders have been passed, determining the assessee's total income and such orders are subsisting at the time when the search or requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, when the assessment has already been completed, the AO can reopen the assessment or reassess the assessment already made without following the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled in response to the notice issued under Section 153A of the Act. Insofar as the abated assessment is concerned, the assessee can make all claims, provided the return of income is filed in adherence to the timeline to furnish as per notice under Section 153A of the Act, failing which the assessee shall not be able to claim any deduction in view of Section 80A of the Act. 27. At this stage, it is necessary to consider the decisions relied upon by the learned counsel for the assessee and the learned senior standing counsel appearing for the Revenue. The learned counsel for the assessee placed reliance on the decision of the Hon ble High Court of Bombay in the case of PCIT Vs. JSW Steel Ltd (2020) 422 ITR 71, CIT Vs. D.G. Shirke Construction Technology Pvt. Ltd. (2017) 79 Taxmann.com 306 and the Hon ble Karnataka High Court in the case of G.M.R. Infrastructure Limited Vs. DCIT in ITA No.1036 of 2017 dt.06.07.2021. We have gone through the decisions rendered by the Hon ble Bombay High Court in the case of PCIT Vs. JSW Steel Ltd (supra), and we find that, the Hon ble High Court held that once the search is conducted u/s 132 of the Act and the original assessment was pending and was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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). 28. In the case of CIT Vs. D.G. Shirke Construction Technology Pvt. Ltd., (supra), the Hon ble High Court of Bombay once again examined the question of law raised before the Court which is similar to the question before the Special Bench and after considering relevant provisions of Section 153A(1) of the Act, held that consequent to notice under section 153A of the Act, the earlier return filed for the purpose of assessment which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (supra), the Hon ble High Court of Karnataka had occasion to consider a similar question of law before the Court, which is similar to the question for this Special Bench and after considering relevant facts and also by following the decision of Hon ble Rajasthan High Court in the case of Jai Steel (India), Jodhpur Vs. ACIT (supra) has held that the assessment or reassessment made in pursuance to section 153A of the Act, is not a denovo assessment and, therefore, it was not open to the assessee to claim and be allowed such deduction or allowance of expenditure which it had not claimed in the original assessment proceedings which in the case of assessee stood completed vide order dated 15.01.2009 passed under section 143(1) of the Act. If we go by the observations of the Hon'ble High Court of Bombay and Hon'ble High Court of Karnataka in the above-mentioned case, it is only in the context of abated assessments which are pending as on the date of search under section 132 of the Act, the return filed in response to notice under section 153A of the Act partakes the nature of return filed under section 139 of the 30. Act and the assessee can make/lodge any claim which otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, there should be income which has escaped assessment, and such escapement should be based on fresh tangible material which comes to the possession of the AO subsequent to the completion of the original assessment and further, the formation of belief of escapement of income should have a live nexus with reasons to believe and fresh tangible material. Similarly, the provisions of Section 153A deal with assessment in case of search or requisition, and as per the said provisions, notwithstanding anything contained in certain provisions of the Act, in case of a person where search is initiated after 31st day of May 2003, the AO shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year in which such search is conducted or requisition is made. According to the provisions of Sections 147 and 153A of the Act, although both operate in different fields, the purpose is the same. Section 147 deals with income escaping assessment, and Section 153A deals with assessment consequent to search and seizure unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished for relevant assessment years. Therefore, in our considered view, the argument of the counsel for the assessee that in view of the specific provisions of Section 153A of the Act, even in case of a return filed in response to notice under Section 153A of the Act, the assessee satisfies all the conditions prescribed under Section 80A(5) and 80AC is devoid of merit and cannot be accepted. If we accept the argument of the learned counsel for the assessee that even after search, an assessee can make a claim for the first time towards deduction under Section 80IA(4) of the Act in the return of income filed under Section 153A, then in our considered view, the provisions set out under Section 80A(5) and Section 80AC become redundant, and in our considered view, this is not the intention of the Legislature. Further, if we accept the arguments of the learned counsel for the assessee, it discriminates the persons, who file the return of income and make a claim in the said return of income on or before the due date u/s 139 and the persons who do not file any return of income and also do not make any claim in the said return of income. Therefore, in our considered view, going by the word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to search conducted under Section 132 of the Act, in unabated/completed assessment as on the date of search. In case of abated assessments, like the AO who can make assessment based on incriminating materials and any other information made available to him, including information furnished in return of income, the assessee may claim all deductions towards any income or expenditure, as if it is a first return of income and fresh assessment. In view of the above, the questions referred are answered as under. i) Whether an assessee can make a claim for deduction under Chapter VIA of Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the Act ? Yes (ii) If yes, under which circumstances ? I. In case of unabated/ completed assessment/s, no fresh claim can be made under chapter VI-A of the Income Tax Act, 1961, for the first time, in the return of income filed in response to the notice issued u/s 153A of the Act, pursuant to a search conducted under section 132 of the Act. II. in case of abated assessment/s, fresh claim can be made under chapter VI-A of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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