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Income Tax Appellate Tribunal, DEHRADUN CIRCUIT BENCH: DEHRADUN
consolidated order dated 21.08.2019 passed by learned Commissioner of Income Tax (Appeals)-IV [hereinafter referred to as ‘CIT(A)’], Kanpur, pertaining to assessment years 2011-12 to 2016- 17.
2. At the outset, we find there is a delay of 2 days in filing the appeals by the assessee. Considering the small duration of delay, we are inclined to condone the delay and admit the appeals of the assessee for adjudication.
As identical issues are involved in all these appeals, they are taken up together and disposed of by this common order for the sake of convenience.
ITA No.201/DDN/2019 AY: 2011-12
The assessee has raised the following grounds of appeal:
That the Order passed by the Hon'ble Commissioner of 1. Income Tax(Appeals)-4, Kanpur is bad in law, against the facts of the case and principles of natural justice.
That the assessment of income by the Ld AO is illegal 2. since the Assessment Order is based on a time barred revised Return. . That the assessment, of income by the Ld AO is erroneous 3. since additions made to the returned income under Section 68 in respect of unsecured loans have not been obtained during the Financial Year relevant to the Assessment Year 2011-12. The appellant therefore, pray that the appeal may be 4. admitted and orders may be passed rendering justice to the appellant. That the Appellant craves for the right to add, alter, amend 5. or delete any ground of appeal during the course of appeal proceedings.
We have heard the rival submissions and perused the materials available on record. The assessee is a proprietor of M/s.
Garhwal Sabzi Bhandar, Vikas Nagar and is in business of commission agent. The assessee has shown business income from commission agent and income from other sources. The return of income for the assessment year 2011-12 was originally filed under section 139(1) of the Income-tax Act, 1961 (in short ‘the Act’) on 14.12.2011 declaring total income of Rs.2,45,850/-. A search and seizure operation under section 132 of the Act was conducted on 01.12.2016 at the business and residential premises of M/s. Kaveri Jewellery group of cases. The premises of the assessee was also covered under search operation under the authorization of warrant dated 23.11.2016 issued by Principal Director of Income Tax (Investigation), Kanpur, authorizing to search premises situated at 28, Feet Road, Dehradun & Pahadi Gali, Vikas Nagar, Dehradun.
During the course of search, cash amounting to Rs.27,54,530/- was found. The assessee was able to explain the found cash out of withdrawals made from his bank account to the tune of Rs.4,12,000/-. The remaining sum of Rs.23,42,530/- become unexplained for the period 01.04.2016 to 01.12.2016 (date of search). The assessee based on this worked out the unaccounted income at Rs.74,96,096/- and agreed to offer the same as unaccounted income for assessment year 2017-18 and pay taxes thereon. The assessee also gave a statement under section 132(4) of the Act to this effect. Notice under section 153A of the Act was issued on 20.12.2017. The due date granted to the assessee for filing return in response to notice issued under section 153A was 22.01.2018. The assessee, however, filed return of income in response to notice under section 153A of the Act only on 13.06.2018. 4 Appeals for AYs 2012-13 to 2016-17
Pursuant to the search conducted in the premises of the assessee, notice under section 153A of the Act was issued to the assessee for the assessment years 2012-13 to 2016-17 on 20.12.2017. The time granted by learned AO in the notice issued under section 153A of the Act for filing returns of income was 22.01.2018 for all the years, i.e., assessment years 2012-13 to 2016-17. The assessee filed his returns of income for assessment years 2012-13 to 2016-17 on 13.06.2018, in response to the notice issued under section 153A of the Act on 20.12.2017.
The assessee independently offered Rs.74,96,096/- as his additional income for assessment year 2017-18 in the regular return of income filed by him on 13.06.2018 and paid taxes thereon with applicable interest. Further, in order to avoid the rigours of provisions of section 115BBE of the Act of getting taxed at a higher rate, the assessee chose to file revised return on 13.12.2018, wherein, the assessee distributed the additional income of Rs.74,96,096/- to all the assessment years commencing from assessment years 2011-12 to 2017-18. Accordingly, the additional income offered by him in the revised return filed on 13.12.2018 for various assessment years are as under:
Assessment year Amount (in Rs.) 2011-12 4,17,602 2012-13 6,40,112 2013-14 6,37,080 2014-15 27,95,725 2015-16 7,96,806 2016-17 12,16,310 2017-18 9,97,365
The assessee in the revised return filed on 13.12.2018 submitted that the taxes and interest payable on the additional income so offered for the AYs 2011-12 to 2016-17 had to be appropriated from the refunds available in assessment year 2017- 18 in view of the fact that the income disclosed in the revised return filed for assessment year 2017-18 is less by roughly Rs. 65 lakhs and it would ultimately result in refund. In other words, the refund arising in assessment year 2017-18 was sought to be adjusted by the assessee with the demands payable for assessment years 2011- 12 to 2016-17 pursuant to the revised returns filed on 13.12.2018. 6
Learned AO did not agree to the contentions of the assessee in distributing the unaccounted income of Rs.74,96,096/- to various years. Having not agreed, the learned AO still completed the assessment by taking into account the revised return filed on 13.12.2018 [which includes the distributed portion of unaccounted income as tabulated(supra)] for assessment years 2011-12 to 2016- 17 and made further additions in respect of certain unsecured loans borrowed by the assessee from various parties together with disallowance of interest paid on such loans.
The learned CIT(A) summarily dismissed the appeals of assessee for assessment years 2011-12 to 2016-17 as not maintainable on the ground that the assessee had not paid the taxes and interest due as per the revised return filed by him on 13.12.2018. Aggrieved, the assessee is in appeals before us for assessment years 2011-12 to 2016-17.
We find that the learned CIT(A) had grossly erred in dismissing the appeals of the assessee as not maintainable. It is a fact on record that the assessee had, indeed, sought to adjust the refunds that would arise in assessment year 2017-18 with the demands payable for assessment years 2011-12 to 2016-17. It is a fact on record that the revised returns were indeed filed by the assessee on 13.12.2018 for assessment years 2011-12 to 2017-18, wherein, the additional income as agreed in the search statement under section 132(4) of the Act amounting to Rs.74,96,096/- was distributed to various assessment years and residual portion being offered in assessment year 2017-18. It is a fact on record that the assessee had paid the entire taxes with applicable interest on the additional income of Rs.74,96,096/- while filing the original return for assessment year 2017-18 on 13.06.2018 in response to the notice issued under section 153A of the Act. When the return for assessment year 2017-18 is revised with a lesser income by Rs.65 lakhs approximately, obviously, it would result in huge refunds for the assessee in that year. This refund was sought to be appropriated or adjusted by the assessee with the demands 8 payable for assessment years 2011-12 to 2016-17 pursuant to revised returns filed on 13.12.2018 offering more income thereon.
In the above narration of facts, a crucial point that requires to be considered is as to whether the returns filed by the assessee for the assessment years 2011-12 to 2016-17 on 13.06.2018 in response to notice issued under section 153A of the Act could be construed as a return filed within the due date as per section 139(1) of the Act. Admittedly, the maximum time granted by learned AO in the notice issued under section 153A of the Act to the assessee for filing of returns for assessment years 2011-12 to 2016-17 was 22.01.2018. Hence, the date of 22.01.2018 becomes the due date as
per section 139(1) of the Act. When the return is not filed within due date, the returns filed by the assessee on 13.06.2018 would become belated returns.
Next consequential issue that emerges for consideration is as to whether such belated returns could be revised or not. This issue is no longer res integra in view of the decisions of Hon’ble Supreme 9 Court in the case of Kumar Jagdish Chandra Sinha Vs. CIT, reported in 220 ITR 67 (SC).
The issue of maximum time limit granted by learned AO in the notices issued under section 153A of the Act to file the return is to be construed as due date under section 139(1) of the Act, has been duly addressed by the Coordinate Bench decision of Chennai Tribunal in the case of ACIT Vs. V.N. Devadoss, in & 1221/Mad/2012, dated 04.02.2013 and ACIT Vs. V.N. Devadoss (HUF) in ITA No.1220,1222 & 1223/Mds/2012, dated 04.02.2013.
The relevant operative portion of the said judgment is as under:
“31. The issue is to be examined in the above background. Valid returns sustainable in law are the returns filed by the assessees in response to notices issued by the Assessing Officer under section 153A of the Act, consequent to the search action carried out under section 132 of the Income-tax Act, 1961.
How the requirement of section 139(1) is satisfied by filing a return under section 153A? This is assumed in the light of section 153A(1)(a), where it is stated that where a search is initiated under section 132, the Assessing Officer 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 in the prescribed form and verified in the prescribed manner and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. It is because of 10
the above provision of law stated in section 153A(1)(a) that a statutory presumption is made that a return filed under section 153A is a return required to be filed under section 139(1).
Where the law has declared that all the provisions of the Income-tax Act will apply to the returns filed by an assessee in response to a notice issued by the Assessing Officer under section 153A as if such return filed by the assessee was a return filed under section 139(1), there cannot be a dash of interpretation between the character of section 139(1) and section 139 adopted in section 153A(1)(a). It is to be seen that the law stated in section 153A starts with a non obstante clause. It overrides all other provisions stated in the Act in matters of filing of return of income consequent to a search. By declaring through a non obstante clause when section 153A adopts section 139 for the purpose of completing the assessment under section153A, there is no scope for drawing a dividing line between section 139 provided in section 153A and section 139(1) simpliciter.
The liability to file a return of income in response to a notice issued under section 153A is as much good as the liability fo file a return under section 139(1). The liability to file return arises under section139 (1). All other sub-sections of section 139 are only derivatives thereof and explanations thereto. Therefore, the reference made to section 139 in section 153A(1)(a) is virtually the reference made to section 139(1).
It is suffice to mention section ‘139’ while stating the character of the return filed under section 153A. That is why, sub-section(l) of section 139 has not been more particularly provided in section 153A(1)(a).
Search under section 132 enables an Assessing Officer to issue notice to file returns under section 153A. Section 153A is a substantive provision to do the assessment for six assessment years. Section 153A, by way of adaptation, conveys the responsibility for filing of the return under section 139 Therefore, a return filed in pursuance of a notice issued under section 153A is as good as a return filed under section 139 and more particularly under section 139(1).
In the present case, the assessees being the builders, had the option to recognize their income either on percentage completion 11
method or on project completion method. Therefore, it was not certain to hold that the assessees were liable at all to file returns under section 139(1). Whether the assessees had recognized their income for the impugned assessment years is also not clear. The returns were filed after search made under section 132 but before the issue of notice under section 153A. Those returns were belated returns. Therefore, those returns are non est in law. The emerging picture is that the assessees had filed returns for the first time only in response to notices issued under section 153A. They were filed within the time. Law has not prescribed any time limit for issue of notice under section 153A or for filing of the return in I response to notice issued under section 153A. Law provides that an assessee shall file his return in pursuance of the notice issued under section 153A within the time stipulated in the notice. But it is also available in the hands of the Assessing Officer to extend the period of time to file the return. In these cases the assessees have filed returns within the extended time. Therefore, it is to be held that these returns were filed by the assessees under section 153A within the time. By way of a corollary stated earlier, these returns filed under section 153A within the time are necessarily to be treated as returns filed under section 139(1).
Where an assessee has filed his return of income as prescribed by law, even if as a consequence of search carried out under section 132 and in consequence of notice issued under section 153A, the assessee is obviously entitled for claiming corresponding deductions provided in law. The deduction claimed in a return filed under section 153A cannot be denied on the ground that the claim was not made earlier in a return filed under section 139(1).
In the present case, the returns were filed because of section 132, section 153A and consequently because of section 139. Income of the assessees had to be declared because of the event of search. At that time the assessees were equally entitled to claim lawful deductions available to them. A claim made by an assessee cannot be denied only on the ground that the return was filed in consequence of search.
The litmus test in the present case is whether the assessees have filed the returns in time, in response to the notices issued under section 153A. If the returns were filed within the time allowed under section 153A, it is as good as having the returns filed under section 139(1) within the due date. 12
It is in the light of the above discussion that we have to consider the two relevant decisions of the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, F-Bench, Mumbai in the case of Mr. Faisal Abbas vs DCIT, in & 3487/Mum/2010 dated 25-10-2011 has held that the return of income filed under section 153A was to be deemed to be a return filed under section 139 and therefore all other provisions of the Act would apply in view of the provisions of law stated in section 153A(1)(a). The Tribunal, therefore, held that even if a return of income was filed under section 153A, the assessee was entitled for the benefit of brought forward losses to be set off against the assessable income. Section 139(3) provides that if any person who has sustained a loss in any previous year under the head ‘Profits and gains of business or profession’, the same could be carried forward and set off against future income only if the assessee has filed his return within the due date prescribed under section 139(1). It is exactly like the provisions of law stated in section 80AC. In spite of that, the Tribunal in the above stated case of Mr. Faisal Abbas has held that the assessee is still entitled for carry forward and set off of business loss as the return filed by the assessee under section153A has to be treated as a return filed under section 139(1). The same principle has been followed by the Income-tax Appellate Tribunal, Mumbai G-Bench in the case of DCIT vs. Ms. Eversmile Construction Co. Pvt. Ltd.in ITA No.4238/Mum/2010 dated 30-8-2011.
In view of the above discussion and relying on the above mentioned decisions of the Income-tax Appellate Tribunal, Mumbai Benches, we hold that the returns filed by the assessees under section 153A are to be treated as returns filed under section 139(1) by virtue of the law stated in section 153A(1)(a). As such, the assessees are entitled for the deduction available under section 80IB(1). The rider provided in section 80AC does not apply to the present cases, as the returns filed by the assesees under section 153A have been considered as returns filed under section 139(1) within time.
Therefore, we uphold the decision of the Commissioner of Income-tax(Appeals) on the alternate ground raised by the assessee as to whether the returns filed in response to notices under section 153A can be taken as returns filed within the time stipulated under section 139(1). We hold that the returns filed under section 153A need to be treated as returns filed within the time limit stipulated 13 under section 139(1). Therefore, the rider provided in section 80AC does not apply to these cases. Therefore, the assessees are entitled for claiming the benefit of deduction available under section 80IB(10) of the Act.
Thus the first common issue raised in all these appeals relating to deduction under section 80IB(10) is decided in favour of the assessees and the orders of the Commissioner of Income- tax(Appeals) on this issue is upheld on the ground that the returns filed under section 153A are returns filed under section 139(1).”
On perusal of provisions of section 153A of the Act, we find that there is no statutory time limit provided therein for filing the returns of income. When regular return has been filed by the assessee within the due date prescribed under section 139(1) of the Act, the same could be revised under section 139(5) of the Act. But where the return is filed under section 153A of the Act and there is no statutory time limit for filing of return of income, the powers have been statutorily delegated to the Assessing Officer to prescribe the time limit for filing the return of income while issuing the notice under section 153A of the Act itself. Accordingly, where the return of income has been filed within the prescribed time limit for filing such return as per notice issued under section 153A of the Act, the assessee shall be eligible for filing revised return as the due date mentioned in the notice has to be considered as due date under section 139(1) of the Act. But where the return has been filed in response to notice under section 153A beyond the time limit permitted in the said notice under section 153A of the Act, the said return shall become belated return, which cannot be revised in view of the aforesaid decision of Hon’ble Apex Court in Kumar Jagdish Chandra Sinha reported in 220 ITR 67 (SC).
When a search is initiated, the assessee is not required to file his return till such time he receives notice under section 153A of the Act. Once such notice is received, the liability fastens on the assessee to file the return within the reasonable time specified in the relevant notice. This principle has been duly addressed by the Coordinate Bench of Chennai Tribunal referred to supra.
Considering the issue in dispute before us in the light of the aforesaid observations and the decision of Chennai Tribunal, it could be safely concluded that the revised return filed by the assessee for the assessment years 2011-12 to 2016-17 are invalid 15 returns and have to be declared non-est, for the reason that these are nothing but revising of belated returns filed on 13.06.2018.
Hence, the entire additional incomes offered by the assessee in the revised returns filed on 13.12.2018 for assessment years 2011-12 to 2016-17 cannot be taxed at all in the relevant assessment years as it had been offered in the invalid and non-est revised return. We would also like to make a passive observation, at this stage, in the interest of justice and fair play, that the additional income of Rs 74,96,096/- offered by the assessee in assessment year 2017-18 in the returns filed on 13.06.2018 shall have to be sustained and added. This would meet the ends of justice and avoid double taxation. This would also be in consonance with the search statement given under section 132(4) of the Act.
We find that the assessee has raised following additional grounds before us:
That having regard to the facts and circumstances of the case, impugned assessment orders passed u/s 153A(1) r.w.s. 143(3) are bad in law more so when unabated returns have been assessed by making additions to returned income when no incriminating material/evidence was found during the course of search operations. 2. That having regard to the facts and circumstances of the case, impugned assessment orders passed u/s 153A(1) r.w.s. 143(3) are bad in law since the same income has been taxed twice, once in Assessment year 2017-18 and again in the assessment year 2011-12 to 2016-17.
Since, the aforesaid additional grounds go to the root of the matter challenging the validity of assessments for the assessment years 2011-12 to 2016-17, we are inclined to admit the same and take up for adjudication. All the facts relevant for adjudication of these additional grounds are already on record.
We find that various additions were made by learned AO for assessment years 2011-12 to 2015-16 on account of:
a. Treating the unsecured loans as unexplained cash credit under section 68 of the act. b. Disallowing the interest paid on such unsecured loans.
The aforesaid two additions were made by learned AO for assessment years 2011-12 to 2015-16 in absence of any incriminating materials found during the course of search. 17 Admittedly, the assessments for assessment years 2011-12 to 2015-16 are unabated/concluded assessments as on the date of search. For all these years, either the assessments were already completed or the due date of issuing notice under section 143(2) of the Act had already expired, as the case may be. The following table would prove this fact:
Particulars Assessment Years Date Date of filing of original 2011-12 14.12.2011 return under section 139(1) 2012-13 20.06.2012 2013-14 30.07.2013 2014-15 02.09.2014 2015-16 30.08.2015
Date of search 01.12.2016
Hence, from the above, it could be concluded that assessment years 2011-12 to 2015-16 are concluded assessments and the assessments thereon could be disturbed by learned AO only when he has in possession of any incriminating material found during the course of search relatable to those assessment years qua the additions made by learned AO. Admittedly, there is absolutely no incriminating material found during the course of search for assessment years 2011-12 to 2015-16 in respect of making addition made towards unsecured loans under section 68 of the Act and consequential disallowance of interest on such loans. Hence, the earlier assessment years for assessment years 2011-12 to 2015-16 cannot be disturbed at all by learned AO while framing the search assessments under section 153A of the Act. This issue is no longer res integra in view of the recent decision of the Hon’ble Supreme Court in case of PCIT Vs. Abhisar Buildwell Pvt. Ltd reported in 149 taxmann.com 399 (SC) dated 24.04.2023, wherein the decision of Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla reported in 380 ITR 573 (Del) has been upheld by the Hon’ble Apex Court. Hence, in view of the same, all the additions made by learned AO in the search assessments for assessment years 2011- 12 to 2015-16 are hereby directed to be deleted.
In view of our earlier observations made that the revised returns filed by the assessee for the assessment years 2011-12 to 2015-16 on 13.12.2018 are invalid and non-est, the income to be determined for assessment years 2011-12 to 2015-16 would be as under:
Assessment Year Income (in Rs.) 2011-12 2,45,850 2012-13 2,52,895 2013-14 2,58,770 2014-15 2,96,370 2015-16 3,48,770
In view of above observations, the grounds raised by the assessee for assessment years 2011-12 to 2015-16 together with the additional grounds thereon are disposed of in the above mentioned manner.
ITA No.202/DDN/2019 AY: 2016-17
As stated for assessment years 2011-12 to 2015-16, the additional income offered by the assessee for the assessment year 2016-17 in the revised return filed on 13.12.2018 should be ignored as it was offered in an invalid and non-est return. Accordingly, a sum of Rs.12,16,310/- offered by the assessee by way of addition in assessment year 2016-17 in the revised return filed on 13.12.2018 should be reduced from taxable income. 20
We find that the assessment year 2016-17 would become an abated assessment as on the date of search as time limit for issuance of notice u/s 143(2) of the Act for the assessment year 2016-17 was very much available with the revenue as on the date of search. Hence there is no need for existence of any incriminating material found during the course of search for this assessment year. We find that only disallowance made in the search assessment completed under section 153A of the Act for assessment year 2016- 17 vide order dated 28.12.2018, is disallowance of interest paid on unsecured loans taken in earlier years. The interest disallowed was Rs.10,95,482/-. As we have already deleted the additions made on account of unsecured loans in earlier years, i.e., assessment years 2011-12 to 2015-16, the interest paid during the year on such loans would automatically become an allowable expenditure. Hence, the disallowance of interest made by learned AO is hereby directed to be deleted for assessment year 2016-17. Accordingly, the grounds raised by the assessee for assessment year 2016-17 are disposed of in the above mentioned terms. 21
In the result, all the appeals of the assessee are allowed.
Order pronounced in Open Court on 23rd June, 2023