GANESH POLYCHEM LIMITED,MUMBAI vs. DCIT, CC-3(2), MUMBAI

The ld. AR submitted that the assessee made the claim while filing the return in response to notice under section 153A which has been denied merely for the reason that no fresh claim can be made during the proceedings under section 153A. The ld. AR further submitted that the MEIS Subsidies is held to be capital receipt not chargeable to tax by the Chennai Bench of the Tribunal in the case of ACIT vs. Eastman Exports Global Clothing Pvt. Ltd. (ITA No. 3326/Chny/2019 dated 24.09.2024). The ld. AR also submitted that the identical issue has been considered by the Co-ordinate Bench in the case of Leshark Global LLP vs. DCIT (ITA No. 3184/Mum/20225 dated 31.07.2025) where the Co-ordinate Bench has remitted the impugned issue back to the AO with certain directions. The ld. AR accordingly prayed that a similar direction can be given in assessee's case also by remitting the issue back to the AO.

The ld. DR on the other hand submitted that the proceedings under section 153A are different from the regular assessment and is based on the materials found during the course of search. The ld. DR further submitted that there is no provision under the Law to allow any fresh claim during the proceedings under section 153A. The ld. DR also submitted that the CIT(A) has correctly denied the claim of the assessee on the ground that in the case of abated assessment the additions or disallowances could be based on only the incriminating material and therefore the assessee cannot be allowed to make any fresh claim. Accordingly, the ld. DR supported the order of the lower authorities.

We heard the parties and perused the material on record. We notice that the Co-ordinate Bench in the case of Leshark Global LLP (supra) has considered an identical issue of fresh claim towards MEIS as capital receipt in the return filed in response to notice under section 153A and held that “20. The question that arises is whether such a fresh claim can be entertained in proceedings initiated under section 153A, particularly where the relevant assessment years were unabated as on the date of search. In this regard, reference was made to the Special Bench decision in SEW Infrastructure Ltd. [(2024) TIOL-1211-ITAT-HYD], wherein it was held that in the case of unabated assessments under section 153A, the assessee cannot make fresh claims in response to notice u/s. 153A. However, in the case of abated assessments, the Assessing Officer is empowered to conduct a fresh assessment de novo and consider all claims; whether made earlier or not including those under Chapter VI-A and section 80-IA(4), as if it were a first assessment.

On merits, the assessee placed reliance on the Delhi Bench decision in Jindal Photo Ltd. [ITA No. 5251/Del/2015], wherein sales tax subsidies were held to be capital in nature. However, we find that case involved the Maharashtra 1993 Scheme, which had different objectives. In the present case, the assessee’s claim was grounded on export incentives granted under the Foreign Trade Policy (FTP) framed by the Ministry of Commerce, Government of India, specifically the FPS (2009–14) and MEIS (2015–2020) schemes.

First we need to understand the scheme. The Focus Product Scheme, as notified under the Foreign Trade Policy for 2009–14 (effective from 23.08.2010), was formulated under Chapter 1B-Special Focus Initiatives. As per Para 3.15.3 of the FTP, the scheme provided for incentives at 2% of the FOB value of eligible exports made in freely convertible foreign exchange to designated “linked markets”. The stated objective was “to continuously increase our percentage share of global trade.” The policy expressly recognised that products with high export intensity and employment potential, particularly from sectors such as agriculture, handlooms, handicrafts, electronics, sports goods, and units in the North-East, required targeted fiscal support. These incentives were thus policy instruments designed not to compensate exporters for revenue loss but to promote long-term capital investment and global market expansion. The Ministry of Commerce, through FTP circulars and notifications such as No. 1 (RE-2012)/2009–14 dated 05.06.2012, clearly set out that the object of these schemes was to support exporters in entering new markets, improving competitiveness, and fostering employment. The Status Holder Incentive Scheme (SHIS), under which additional benefits were extended to high-performing exporters, had similar objectives of promoting capital investment and technology upgradation. These objectives, as recorded in the AO’s remand report dated 11.04.2019, and it has been contended before us that the incentives were capital in nature and not designed to subsidise routine business operations.

Before us, it has been argued that the character of these receipts has been judicially tested in multiple forums. The Rajasthan High Court in PCIT v. Nitin Spinners Ltd. [2020] 116 taxmann.com 26 held that subsidies granted under MLFPS (a variant of FPS) were capital receipts. This decision was affirmed by the Hon’ble Supreme Court with dismissal of Revenue’s SLP [2021] 283 Taxman 2 (SC), thus settling the law in favour of the assessee. The Punjab and Haryana High Court in Shyam Lal Bansal and the Calcutta High Court in Gloster Jute Mills Ltd. have also echoed the same view if the objective of the scheme is to encourage industrial development, market access, or employment generation, the resulting receipt must be treated as capital.

The relevant observation of the Hon’ble High Court in the case of Pr.CIT vs. Nitin Spinners Ltd., [2020] 116 taxmann.com 26(Rajasthan) reads as under:- “5. In its order, the ITAT took note of several previous Bench ruling as well as judgment of the Punjab and Haryana High Court in CIT v. Sham Lal Bansal [2011] 11 taxmann.com 396/200 Taxman 14 (Mag.) (Punj & Har.). In Shyam Lal Bansal (supra) the Punjab and Haryana High Court observed as follows: "6. The purpose of scheme under which the subsidy is given, has been discussed by the Tribunal. To sustain and prove the competitiveness and overall, long- term viability of the textile industry, the concerned Ministry of Ganesh Polychem Limited. Textile adopted the TUFS scheme, envisaging technology upgradation of the industry. Under the scheme, there were two options, either to reimburse the interest charged on the lending agency on purchase of technology upgradation or to give capital subsidy on the investment in compatible machinery. In the present case, the assessee has taken term loans for technology upgradation and subsidy was released under agreement dated 12-7-2005 with Small Industry Development Bank of India. The relevant clause of the agreement under which the subsidy was given is as under:- "Para 8. to prevent mis-utilization of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a noninterest- bearing term loan by the Bank/Fis. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a pro-rate basis in terms of release of capital subsidy. There is no apparent or real financial loss to a borrower since the countervailing concession is extended to the loan amount."

Further, the Coordinate Bench of ITAT Mumbai in DCIT v. Patanjali Foods Ltd. [2024] 161 taxmann.com 815 dealt squarely with the same issue. It held that incentives received under FPS, FMS, and SHIS were capital receipts and not taxable. The Bench relied on policy objectives, purpose test, and the AO’s own remand report which affirmed that the incentives were granted to increase global trade share and competitiveness, not to supplement business income. It further held that the assessee’s fresh claim before CIT(A) was maintainable and could not be rejected merely on technical grounds, especially when it pertained to a non-taxable capital receipt. The Tribunal observed and held as under:- “8.4 It is also noted that the SLP preferred by the Revenue against the above judgment of the Hon'ble High Court has since been dismissed by the Hon'ble Supreme Court, which is reported in Pr. CIT v. Nitin Spinners Ltd. [2021] 130 taxmann.com 402. We also note that identical issue has also been consider by this Tribunal in the case of Aarti Drugs Ltd. (supra) wherein also the incentives received under the FPS/FMS/SHIS Schemes notified under the Foreign Trade Policy was held to be capital in nature and thus not liable to tax. The relevant findings of this Tribunal, as noted by us, are as under: "43. We have considered the rival submissions and perused the material available on record. The assessee is a manufacturer of bulk drugs and also exports some of the products to various countries for which the government is providing certain subsidies under the Foreign Trade Policy. As noted above, the assessee initially, in its return of income, treated the subsidies received as Revenue receipts and offered the same to tax. However, before the learned CIT(A), the assessee filed additional grounds claiming that the subsidy received under the FPS, FMS, SHIS schemes are capital in nature and therefore cannot be included in the total income of the assessee. As noted elsewhere, the appellate authority can entertain a fresh claim made by the assessee, even if such a claim was not made in return of income or by way of a revised return of income. Thus, we find no infirmity in the impugned order admitting the additional ground filed by the assessee. 44. Further, we find that the learned CIT(A) analyzed the objectives of subsidies received under the aforesaid schemes in para 14.10 of its order, as under: "14.10 The Government of India notified the Foreign Trade Policy, 2009-14 under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 vide notification No 1 (RE-2012)/2009-14 dated 05.06.2012. The Policy contains a Chapter on Special Focus Initiatives, wherein the objective of special focus incentives given for various sectors (FMS and FPS) is specified as under: "(a) with a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus Ganesh Polychem Limited. initiatives have been identified/continued for Market Diversification, Technological Upgradation, Support to status holders, Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North- East, Sports Goods and Toys sectors Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time" Further, the objective of subsidy under Status Holder Incentive Scrip (SHIS) is laid down in the policy as under: "With an objective to promote investment in upgradation of technology of some specified sectors as listed in Para 3.16.4 below, Status Holders shall be entitled to incentive scrip @ 1% the FOB Value of exports made during 2009- 10 and during 2010-11 of these specified sectors in the form of duty credit. This shall be over and above the duty credit scrip claimed/availed under this chapter. "

In this regard, it is also relevant to note that the AO in its remand report dated 11/04/2019, forming part of the paper book from pages No. 117-120 after examining the submissions of the assessee and schemes and various facts placed on record noted that the salient objectives of the FPS/FMS/SHIS subsidy received under the Foreign Trade Policy is to increase percentage share of global trade by increasing the competitiveness in selected markets, technological upgradation and expanding employment opportunity. In para 7.2 of its remand report, the AO further stated that the purpose of introduction of the schemes was to encourage industries, which require industrial growth, technological upgradation, and development.

Accordingly, the learned CIT(A) came to the conclusion that the subsidy is a capital receipt in the hands of the assessee and therefore not includable in the total income. The relevant findings of the learned CIT(A) in this regard are as under: "14.11 Thus, on a plain reading of the relevant policy document of the Government of India, it is clear that the objective of the subsidy granted under FPS, FMS and SHIS is to increase the global market share, technology up gradation and employment generation in certain sectors. The object of the subsidy under these schemes was not to enable the assessee to run the business more profitably. The object was primarily to provide encouragement and support, which would create benefits of enduring nature, for the industry as a whole in certain sectors of economy. It is pertinent to recall here that in the remand report, after examining the facts brought on record by the appellant, AO has also concluded that the salient objective of the FPS, FMS and SHIS subsidy under the Foreign Trade Policy is to increase percentage share of global trade by increasing competitiveness in select markets, technological upgradation and expanding employment opportunity. In that view, I am of the considered opinion that, having regard to the 'purpose test' Ganesh Polychem Limited. laid down by the Supreme Court in the aforementioned cases, the amounts received by the appellant during the year, under those Schemes as subsidy should be treated as capital receipt in its hands, not includible in the total income."

We find that the subsidy granted under the FMS scheme came up for consideration before the Hon'ble Rajasthan High Court in PCIT v. Nitin Spinners Ltd. [2020] 116 taxmann.com 26 (Rajasthan), wherein the Hon'ble High Court observed as under: . . . . . . .48. We further find that the Hon'ble Supreme Court dismissed the Revenue's Special Leave Petition in PCIT v. Nitin Spinners Ltd., [2021] 283 Taxman 2(SC), against the aforesaid decision of the Hon'ble Rajasthan High Court. Thus, when the objective of the aforesaid subsidies has been admitted to be to encourage industries by providing industrial growth, technological upgradation, and development, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue in treating the amount received by the assessee under the aforesaid schemes as capital receipt. As a result, grounds no. 9-13 raised in Revenue's appeal are dismissed." 8.5 Following the ratio laid down in the above decisions, we, in principle, find merit in the claim of the Ld. AR that the subsidies received by the assessee under the Foreign Trade Policy was in the nature of capital receipt not liable to tax”.

The learned counsel also placed reliance on a series of Tribunal decisions including: • Eastman Exports Global Clothing Pvt. Ltd. (ITA No. 47/Mds/2016), • Dy. CIT v. Aarti Drugs Ltd., • Bharat Rasayan Ltd. (ITA No. 1231/Del/2019), • Jindal Saw Ltd. v. DCIT (ITA Nos. 826/Del/2016 and 4693/Del/2019), • Geena Garments v. ACIT (Chennai Bench), • ACIT v. Gravita Metal Inc. (Amritsar Bench), and • Gates Wears v. ACIT (Chennai Bench).

All these decisions have consistently upheld the view that export-related subsidies aimed at capital development are not chargeable to tax.

The assessee’s contention, therefore, stands on a different footing altogether. This is not a case of seeking additional relief or deductions under Chapter VI-A or section 10; rather, it is a case where a fundamentally non-taxable capital receipt was inadvertently offered to tax, and the assessee now seeks to correct that error. It has been consistently held that only income legally chargeable to tax can be brought to tax, and equity and justice demand that such capital Ganesh Polychem Limited. receipts not be taxed merely due to procedural lapses. Appellate authorities are well within their jurisdiction to consider such claims when all relevant facts are on record.

Thereafter, ld. Counsel has quoted series of decisions of the Tribunal with the relevant paragraphs in support of this claim that it is capital receipt however, the same are not reiterated. A list of such decisions are as under:-  Eastman Exports Global Clothing Pvt. Ltd. in 2011-12&2012-13) Dated 17.05.2016  Dy. CIT v. Aarti Drugs Ltd. [IT Appeal No. 2503 (Mum.) of 2021, dated 20-1-2023  Bharat Rasayan Ltd AY 2014-15 Dated 02.02.2021  Jindal Saw Ltd vs DCIT in ITA no. 826/DEL/2016 dated 04/06/2025  Jindal Saw Ltd. vs DCIT in ITA No.4693/Del/2019  Geena Garments, Tiruppur vs ACITinI.T.A. No.1823/Chny/2024 Dated 16/10/2024  ACIT v. Gravita Metal Inc in ITA No. 594/Asr/2019 for AY 2016-17 dated 15.06.2023  Gates Wears in I.T.A. Nos.3326/Chny/2019 & 326/Chny/2024 Dated 20/09/2024 30. Strongly relying upon these judgments, ld. Counsel for the assessee submitted that on the basis of facts and legal decisions even in the aforesaid decisions, here it is not a case where assessee has claimed same additional relief / exempt u/s.10 or under Chapter VIA or additional claim of expenses. But here is a case, due to an inadvertent error on the part of the assessee, non-taxable income at its root got taxed and the issue here is that same is altogether on a different footage.

Ld. Counsel has confronted during the course of hearing as to whether such a claim though capital in nature can still be entertained at this belated stage especially when the assessments have been framed u/s.153A, ld. Counsel submitted that such a claim should be viewed through lens of equity, justice and constitutional principles, particularly Article 265 which mandates that no tax shall be calculated except by authority of law. He strongly relied upon the judgment of Constitutional Bench of nine Benches of the Hon’ble Supreme Court Mafatlal Industries versus UOI (1997) 5 SCC 536 (2002-TIOL-54-SC- CX) interpreted the Article 265 of the Constitution and laid down the legal principles to be followed thenceforth and which is still binding in the Country on all Courts including the Apex Court as has not been overruled. “The Hon’ble Supreme Court has held therein that Article 265 mandates that no tax can be levied or collected except by authority of law, which means that Ganesh Polychem Limited. tax collected contrary to law has to be refunded; but the question is -- when a tax is considered to have been levied and collected without authority of law.

The Supreme Court visualized several hypothetical situations and answered questions and categorically held as: “22. There is as yet a third and an equally important category. It is this: a manufacturer (let us call him "X") pays duty either without protest or after registering his protest. It may also be a case where he disputes the levy and fights it out up to first Appellate or second Appellate/Revisional level and gives up the fight, being unsuccessful therein. It may also be a case where he approaches the High Court too, remains unsuccessful and gives up the fight. He pays the duty demanded or it is recovered from him, as the case may be. In other words, so far as 'X' in concerned, the levy of duty becomes final and his claim that the duty is not leviable is finally rejected. But it so happens that sometime later - may be one year, five years, ten years, twenty years or even fifty years - the Supreme Courts in the case of some other manufacturer that the levy of that kind is not exigible in law. (We must reiterate - we are not speaking of a case where a provision of the Act whereunder the duty is struck down as unconstitutional. We are speaking of a case involving interpretation of the provisions of the Act, Rules and Notification.) The question is whether 'X' can claim refund of the duty paid by him on the ground that he has discovered the mistake of law when the Supreme Court has declared the law in the case of another manufacturer and whether he can say that he will be entitled to file a suit or a writ petition for refund of the duty paid by him within three years of such discovery of mistake? Instances of this nature can be multiplied. It may not be a decision of the Supreme Court that lead 'X' to discover his mistake; it may be a decision of the High Court. It may also be a case where 'X' fights up to first appellate or second appellate stage, gives up the fight, pays the tax and then pleads that he has discovered the mistake of law when the High Court has declared the law. The fact is that such claims have been entertained both in writ petitions and suits until now, purporting to follow the law declared in Kanhaiyalal, and are being allowed and decreed, sometimes even with interest…. ……… 149. For the sake of convenience, I shall summarise my conclusions as hereunder: (in case of doubt, the body of the judgment should be looked into)…… (E) It is not possible to conclude that any and every claim for refund of illegal/unauthorised levy of tax, can be made only in accordance with the provisions of the Act (Rule 11, Section 11B etc., as the case may be), and an action by way of suit or writ petition under Article 226 will not be maintainable under any circumstances. An action by way of suit or a petition under Article 226 of the Constitution is maintainable to assail the levy or order which is illegal, void or unauthorised or without jurisdiction and/or Ganesh Polychem Limited. claim refund, in cases covered by proposition Nos. (1), (3), (4) and (5) in Dulabhai's case, as one passed outside the Act, and ultra vires. Such action will be governed by the general law and the procedure and period of limitation provided by the specific statute will have no application.”

Mr. Bindal further submitted that it is a well accepted principle of law that the Courts and the Tribunal have inherent powers to further the cause of substantive justice and something which is not taxable under the Act, same cannot be taxed. He further referred and relied upon the judgment of the Hon’ble Supreme Court in Supreme Court in Shipping Corporation Of India Ltd vs Machado Brothers & Ors on 25 March, 2004 in CASE NO.: Appeal (Civil) 1855-1856 of 2004 held: “This Court in the case of Pasupuleti Venkateswarlu vs. The Motor & General Traders (1975 1 SCC 770 at para 4) has held thus: "We feel the submissions devoid of substance. First about the jurisdiction and propriety vis-a`-vis circumstances which come into being subsequent to the commencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief or the manner of moulding it, is brought diligently to the notice of the tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equality justifies bending the rules of procedure, where no specific provision or fairplay is not violated, with a view to promote substantial justice subject, of course, to the absence of other disentitling factors or just circumstances. Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial court. If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or justice. Rulings on this point are legion, even as situations for applications of this equitable rule are myriad….We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed." In the very same case, this Court quoted with approval a judgment of the Supreme Court of United States in Patterson vs. State of Alabama, (294 US 600) wherein it was laid down thus: "We have frequently held that in the exercise of our appellate jurisdiction we have power not only to correct error in the judgment under review but to make such deposition of the case as justice requires. And in determining what justice does require, the Court is Ganesh Polychem Limited. bound to consider any change, either in fact or in law, which has supervened since the judgment was entered.”

Likewise he has noted several other judgments of the Hon’ble Supreme Court laying down and reiterating same principle. It has been further relied upon the decision of Anant Raj Ltd.[2020] 116 taxmann.com 741 (Delhi - Trib.)where the coordinate Bench of the ITAT examined the entire gamut of law on just approach, avoiding hyper-technical approach, charging only due tax and after referring to the decisions. After referring to series of decisions it was observed and held as under:- “The principle enunciated by the Hon'ble Supreme Court clearly clinches the issue that, if the assessee in the earlier years has offered the income or loss under the different head of income either under an erroneous presumption of law or by mistake, then it does not act as an estoppel or bar the assessee to point out that same was assessable under the different head if it is found that income was actually assessable under the different head as claimed by the assessee. Acquiescence by the assessee cannot determine the head in which the income is to be assessed. The income is to be assessed under the correct provisions of the law and it has been held so by various judgments as referred and relied upon by the ld. counsel as incorporated above…One very important fact which weighs here in this case is that, assessee has incurred genuine loss of Rs. 77.98 Crores as discussed herein above and has paid taxes in the earlier years, albeit shown in different head. One fundamental principle while deciding such kind of matters is that, tax due should be collected as enshrined in the taxing statute and which is also the mandate of the Constitution of India. Here assessee is fastened with tax liability on a hypothetical income which did not materialize /received and in this situation a justice- oriented approach is warranted when assessee has, on one hand incurred huge loss and on other, tax on Rs. 77.98 Crores is charged merely on technicality that, since assessee had offered the tax under one particular head which it is claiming in this year to be set-off in the other head, is precluded from doing so. When assessee itself has pointed out its bonafide and legal claim before the Assessing Officer that correct head in which it is assessable is 'business income', then acquiescence by the assessee in earlier year cannot be the ground to tax the same or deny any legal claim. Hon'ble Supreme Court in a recent judgment, in the case of Dalmia Power Ltd. v. Asstt. CIT [2019] 112 taxmann.com 252/[2020] 420 ITR 339, reiterated this principle by holding that "Rules of procedure have been construed to be handmaiden of Justice. Kailash v. Nanhku [2005] 4SCC 480; State of Punjab v. Shamlal Murari [1976] 1 SCC 719. The purpose of assessment proceedings is to assess the tax liability correctly in accordance with law. National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC)" This justice-oriented approach has earlier been ordained in CIT v. Shelly Products [2003] 29 Taxman 271/261 ITR 367 (SC) also. The aforesaid Ganesh Polychem Limited. principle can also be applied here”. Similar view has been taken by the jurisdictional Bombay High Court in CIT vs Lok Housing & Constructions Ltd. (2015) 58 taxmann.com 179 (Bom) SLP dismissed in (2025) 175 taxmann.com 848 (SC).

Now coming to the issue whether such a claim can be entertained in the assessment proceedings u/s.153A, Mr. Bindal strongly relied upon the judgment of the Hon’ble Bombay High Court in the case of PCIT vs. JSW Steel Limited (2020) 115 taxmann.com 165(Bom) wherein, the Hon’ble High Court had observed and held as under:- “In other words, section 153-A(1) provides that where a person is subjected to a search under section 132or his books of accounts, etc. are requisitioned under section 132-A after 31-5-2003, the assessing officer is mandated to issue notice to such person to furnish return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Such returns of income shall be treated to be returns of income furnished under section 139. Once returns are furnished, income is to be assessed or re-assessed for the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, once section 153-A (1) is invoked, assessment for 6assessment years immediately preceding the assessment year in which search is conducted or requisition is made becomes open to assessment or re-assessment……That brings us to the crucial expression, which is 'abate'. The ordinary dictionary meaning of the word 'abate', as per Concise Oxford English Dictionary, Indian Edition, is to reduce or remove (a nuisance). Derivative of abate is abatement. In Black's Law Dictionary, Eighth Edition, 'abatement' has been defined to mean an act of eliminating or nullifying; the suspension or defeat of a pending action for a reason unrelated to the merits of the claim. In Supreme Court on Words and Phrases (1950-2008), "abating" has been defined to mean "an extinguishment of the very right of action itself"; to "abate", as applied to an action, is to cease, terminate, or come to an end prematurely….15. In view of the above, we are in agreement with the findings given by the Tribunal in respect of allowing of the assessee's appeal in paragraph -14 of the order under challenge dated 28-9-2016, which reads thus: "14. From the above discussion and precedence, the scheme of assessment u/s. 153A of the Act in case of search, the AO shall issue notice to searched person requiring him to furnish within such period as maybe specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A and clause (b) postulates assessment or reassessment of the total income of six years immediately preceding the assessment year relevant to Ganesh Polychem Limited. the previous year in which such search is conducted. The first proviso mandates that the AO shall assess or reassess the 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, 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. It means that the 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 section153A (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."

From the above we conclude that in view of the second proviso to section 153A (1) of the said Act, once assessment gets abated, it is open for the assessee to lodge a new claim in a proceeding under section 153A (1) which was not claimed in his regular return of income, because assessment was never made/finalised in the case of the assessee in such a situation.

The ld. Counsel also stated that similarly in CIT Vs B. G. Shirke Construction Technology (P.) Ltd [2017] 79 taxmann.com 306 (Bombay) has held as under:-

The reliance on the decision of the Apex Court in Sun Engineering Works (P.) Ltd.(supra) by the Revenue is misplaced. The above case dealt with re-opening of an assessment under Section 147 of the Act. It was in that context that the Apex Court observed that the Order passed under Section 147/148 and the Assessing Officer is primarily restricted to such income which has escaped assessment and does not permit reconsideration of issue which are concluded in the earlier assessment years in favour of the Revenue.

In the present facts for the subject assessment years, it is an undisputed position that the pending assessment before the Assessing Officer consequent to return filed under Section 139(1) of the Act for the subject Assessment years had abated. This was on account of the search and as provided in second proviso to Section 153A (1) of the Act. The consequence of notice under Section 153A (1) of the Act is that assessee to furnish fresh return of income for each of the six assessment years in regard to which a notice has been issued. It is this return which is filed consequent to the notice which would be subject of assessment by the Revenue for the first time in the case of abated assessment proceedings. Consequent to notice under Section 153A of the Act the earlier return filed for the purpose of assessment which is pending, would be treated as non-est in law. Further, Section 153A(1) of the Act itself provides on filing of the return consequent to notice, the provision of the Act will apply to the return of income so filed. Consequently, the return filed under Section 153A (1) of the Act is a return furnished under Section 139 of the Act. Consequently, the respondent-assessee is being assessed in Ganesh Polychem Limited. respect of abated assessment for the first time under the Act. Therefore, the provisions of the Act which would be otherwise applicable in case of return filed in the regular course under Section 139(1) of the Act would also continue to apply in case of return filed under Section153A of the Act and the case laws on the provision of the Act would equally apply.

This Court in Pruthvi Brokers & Shareholders (supra) while dealing with a return of income filed under Section 139(1) of the Act has held that an assessee is entitled to raise a fresh claim before the Appellate Authorities, even if the same was not raised before the Assessing Officer at the time of filing return of income or by filing a revised return of income. This Court also placed reliance upon decision of the Apex Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 wherein while dealing with the powers of the Assessing Officer, it had held that a claim not made in the return of income, the Court may lead to nonentertainment of claim by the Assessing Officer. However, this restriction in the power of the Assessing Officer will not affect the power of the appellate Tribunal to entertain a fresh claim.

In view of the fact that the issue stands concluded by the decision of this Court in Pruthvi Brokers &Shareholders (supra) the question as proposed does not give rise to any substantial question of law.

Thus, Mr. Bindal submitted that in view of the binding judgments of the Jurisdictional High Court (Bom) such a new claim in respect of abated assessment for the A.Y.2017-18 and also in the subsequent assessment orders passed u/s.143(3) should be accepted. However, with respect to unabated assessment for the A.Yrs. 2012-13 to 2016-17, he submitted that although it is now a trite law well settled by the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd.(Supra), the ld. AO while passing an independent assessment order u/s.153A, cannot disturb the assessment / re-assessment order which has attained finality, unless materials gathered in the course of proceedings u/s.153A establish that relief granted under the final assessment / re-assessment cannot be disturbed unless there is certain incriminating material unearthed during the course of search and if there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the ld. AO while passing the order u/s.153A r.w.s. 143(3) cannot disturb the assessment order. However, he submitted that none of the judgments can be read in saying that assessee is also fettered and cannot raise a new claim. His logic and reasoning on this proposition is stated in the succeeding paragraphs.

The ld. Counsel stated that the wordings even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, Ganesh Polychem Limited. otherwise the Revenue would be left without remedy, has not been given due attention in interpreting the same. The Hon’ble Supreme Court has accorded alternative only remedy to the revenue u/s 148, and thus, by implication, a remedy must also be accorded to the assessee and the only remedy is a new/ fresh claim. Such an interpretation is fair, equitable and balance both sides.

Thus, he submitted that the assessee is entitled to bring in new/ fresh claims not made in original proceedings and on showing that such new claims exceed escaped income, proceedings u/s 148 be dropped. Thus, it can be inferred that neither the Legislature nor the Hon’ble Supreme Court in Abhisar has shut the door for an assessee to put up new claim in the assessment proceedings u/s 153A of the Act. In fact, even the appellate proceedings are the extension of the assessment proceedings only in all cases.

In so far as the proposition that in cases where reopening are done u/s.147 and in such proceedings, assessee cannot make a new claim, he stated that reliance upon Sun Engineering. (supra) is otherwise based upon picking some sentences and without consideration of the factual matrix. The facts therein were that the loss return submitted by the assessee beyond time was held invalid by the AO and the proceedings were filed. On appeal, the AAC held that the ITO was wrong in filing the returns without proper scrutiny and without first computing the loss in accordance with the law. The AAC also opined that it could only be known after proper computation whether the assessment would result in a loss or not. However, the appellate authority finally held that since the ITO had filed the returns, no relief could be granted to the assessee in the appeals and dismissed the same. No appeal was filed by the assessee against this order. Later on, the assessment was reopened u/s 147 of the Act and a positive income was determined. Now, the case of the assessee was that the ITO should have redetermined the loss so declared in the original return and set it off against the escaped income from other sources and even carried forward the loss, if necessary, to the subsequent assessment years. The Apex Court held that “39. As a result of the aforesaid discussion, we find that in proceedings under section 147, the ITO may bring to charge items of income which had escaped assessment other than or in addition to that item or items which have led to the issuance of notice under section 148 and where reassessment is made under section 147 in respect of income which has escaped tax, the ITO's jurisdiction is confined to only such income which has escaped tax or has been under-assessed and does not extend to revising, reopening or reconsidering the whole assessment or permitting the assessee to reagitate questions which had been decided in the original assessment proceedings. It is only the under-assessment which is set aside and not the entire assessment when reassessment proceedings are initiated. The ITO cannot make an order of reassessment inconsistent with the original order of assessment in respect of matters which are not the subject matter of proceedings under section 147.

He also submitted that Sun Engineering (supra) is in essence against the re-agitation of issues concluded in the original assessment. However, in the present case, the assessee is not disputing any item agitated in the original assessment. The claim of assessee is based upon a subsequent development which converted the voluntarily offered taxable income into a non-income by the judicial orders of the higher judiciary. In essence, the case of the assessee is not of re-agitation but claim that even in the reassessment proceedings, income has to be computed as per the provisions of Act and non-taxable should not be just taxed on technicalities. He submitted that the hyper-technical approach of the revenue ought to be shunned as Sun Engineering was not in this background and a just and fair approach be must be adopted. There is no estopple against the Ganesh Polychem Limited. statutory provisions and there is no vested right in any authority in continuation of error, mistakes, injustice and in ignoring provisions of the statute.

However, the ld. Counsel also referred to the decision of the Special Bench, ITAT Hyderabad in M/s SEW INFRASTRUCTURE LTD 2024-TIOL-1211-ITAT- Hyderabad where it has been held that assessee cannot make fresh claim of deduction under Chapter VI-A of Income Tax Act, for first time in its return filed in response to notice issued u/s 153A, pursuant to the search conducted u/s 132 in an unabated assessment as on date of search. He submitted that this SB decision may not apply in Mumbai, as this decision has been rendered on certain legal premises which are contrary to the Decision of Bombay High Court. For example, it has been held in para 31 that ‘Therefore, the reliance placed by the revenue on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Sun Engineering Works (P) Ltd (supra) is justified’ which is contrary to the judgment in CIT vs B. G. Shirke Construction Technology (P.) Ltd [2017] 79 taxmann.com 306 (Bombay).

Now coming to the merits of the claim, ld. Counsel clarified that for the Completed/Unabated being the AYs 2012-13 to 2016-17,the assessee did not make the claim for exclusion of Export Incentive-FPS (Focus Product Scheme) from taxable income, in either original or in revised ROI. The assessee also did not claim Export Incentive-FPS (Focus Product Scheme) as non-taxable in the return filed u/s 153A. However, a claim for exclusion of Export Incentive-FPS (Focus Product Scheme) from taxable income is made by way of Addl. GOA before CIT (A) during the appellate proceedings of assessments completed u/s 153A of the Act following a search conducted on the assessee, a remand report from the AO was called for and a report dated 23/01/2023 was received. The facts of the said completed assessment years are as below. Figures in Rs Particulars AY2012-13 AY2013-14 AY2014-15 AY2015-16 AY2016-17 Original ROI filed 11,55,11,368 26,44,80,690 33,08,45,440 46,71,16,26 43,74,23,21 u/s 139 30.09.2012 29.11.2013 30.11.2014 0 0 30.11.2015 17.10.2016 Regular assessment 11,63,43,954 26,50,73,490 33,12,57,830 46,71,16,26 43,74,23,21 Completed u/s143(3) dt. u/s143(3) dt. u/s143(3) dt- 0 0 13.03.2015 18.03.2016 22.12.2016 u/s 143(1) u/s143(1) Search and seizure 18.12.2017 operation u/s 132 of the Act in case of assessee ROI filed u/s 153A 11,63,43,954 26,50,73,490 33,12,57,830 46,71,16,26 43,74,23,21 0 0 Ganesh Polychem Limited. Asst. u/s 153A 13,99,79,512 29,95,78,357 37,73,41,927 49,92,39,67 44,97,86,87 7 6 Addl. GOA filed 28.12.2020 before CIT(A) modified on 28.04.2023 AO’s Remand 23.01.2023 Report Amount of FPS 82,98,227 2,05,48,555 2,80,12,373 2,92,65,345 2,92,65,345 (Focus Product Scheme) export incentive hitherto included in taxable income now being claimed as exclusion/deduction 44. For the only abated assessment year u/s153A (A.Y.2017-18), the ld. counsel submitted that for the AY 2017-18 also, the assessee did not make the claim for exclusion of Export Incentive-MEIS (Merchandise exports from India Scheme) from its taxable income, in either original or in revised ROI. The assessee also did not claim the Export Incentive -MEIS (Merchandise exports from India Scheme) as non-taxable in the return of income filed u/s 153A. However, a claim for exclusion of Export Incentive- MEIS (Merchandise exports from India Scheme) from taxable income was made by way of an Addl. GOA before the CIT(A) during the appellate proceedings of assessment completed u/s 153A of the Act, following a search conducted on the assessee. A remand report from AO was called for and received. Particulars AY 2017-18 Rs Original ROI filed u/s 139 on 31/10/2017 46,10,64,900/- Regular assessment Completed 143(1) Search and seizure 18.12.2017 operation u/s 132 of the Act in case of assessee ROI filed u/s 153A on 04/01/2019 46,10,64,900/- Asst. u/s 153A 47,06,19,726 Addl. GOA filed before CIT(A) 28.12.2020 modified on Ganesh Polychem Limited. 28.04.2023 AO’s Remand Report 23.01.2023 Amount of MEIS (Merchandise exports 3,67,40,912 from India Scheme) export incentive hitherto included in taxable income now being claimed as exclusion/deduction 45. In respect of the searched AY 2018-19(date of search 18/12/2017) completed u/s143(3) of the Act the ld. counsel stated that for the AY 2018-19 being the relevant period to the search, the assessee again did not make the claim for exclusion of the Export Incentive-MEIS (Merchandise exports from India Scheme) from taxable income, in either original or in the revised ROI. However, a claim for exclusion of the Export Incentive- MEIS (Merchandise exports from India Scheme) from its taxable income was made by way of an Additional GOA before the CIT(A) during the appellate proceedings of assessment completed u/s 153A of the Act. A remand report from the AO was called for and received. The facts for the said AY are as below: Particulars AY 2018-19 Rs Original ROI filed u/s 139 46,10,64,900 31.10.2018 Asst. completed u/s 143(3) 47,06,19,726 Addl. GOA filed before CIT(A) 28.12.2020 modified on 28.04.2023 AO’s Remand Report 23.01.2023 Amount of MEIS (Merchandise 3,67,40,912 exports from india Scheme) export incentive hitherto included in taxable income now being claimed as exclusion/deduction 46. During the first appellate proceedings, the assessee filed an additional GOA and claimed that the FPS and MEIS receipts are exempt from levy of income tax being ‘Capital in Nature’. The Ld. CIT(A) called for Remand Report from the AO and eventually dismissed the additional GOA adjudicating that the claim of the assessee is not admissible, considering the fact that the said claim was not made in the original return of income or the revised return of income, by relying on the Judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd.

With regard to admissibility of claim, reliance placed by the CIT(A) on judgment of Goetze India Limited vs CIT (2006) 284 ITR 323 (SC) is highly misplaced, since the Hon’ble Supreme Court’s judgment was in the context of power of the AO to entertain a fresh claim made otherwise than by a revised return within time but the same in no manner impinged on the power of the CIT(A) / Tribunal u/s 254 of the Act to permit a new claim. (i)Further, the ld. Counsel also submitted that the Hon’ble Supreme Court also held that the judgment in the case of National Thermal Power Company Ltd. v CIT:229 ITR 383 dealing with the powers of the appellate authority to admit new claims did not relate to the power of the assessing authority to entertain a claim otherwise than by way of revised return. He stated that in fact, the Hon’ble Supreme Court clarified that power of the Tribunal u/s 254 of the Act to permit new claim was not impinged.The Hon'ble Apex Court in NTPC (supra) has held that the purpose of assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. The Hon'ble Court further observed that it did not see any reason to restrict the power of the Tribunal u/s 254 only to decide the ground which arises from the order of Commissioner of Income Tax (Appeals) and held that both the assessee as well as the Department have a right to file an appeal/cross objection before the Tribunal. (ii) The ld. Counsel advanced his submissions, further, by referring to the Hon'ble Supreme Court in the case of, Wipro Finance Ltd. v. CIT [2022] 137 Ganesh Polychem Limited. taxmann.com 230 (SC)dated 12.04.2022 holding that Tribunal's power u/s 254 of the Act remain broad and unrestricted in entertaining fresh claim for the first time, even if, inconsistent with the assessee's original return. It also did not accept the Department's reliance on Goetze (India) Ltd. (supra) and clarified that limitation on raising new claims applies only to the AO and not to the Tribunal. (iii) He emphasized, that apart the above legal position,the purpose of an assessment is to compute the correct taxable income of the assessee as per the provisions of the Act and even if the deduction was not claimed in the return of income by the assessee, which was clearly allowable in law to the assessee, the assessing officer was duty bound to consider and allow such claim suo-motu, while framing the assessment. For this proposition, he relied on the Circular No. 14 (XL-35) dated 11.04.1955 issued by the Board of Revenue under the Income- tax Act, 1922 besides referring to various legal citations where Courts have held that the AO is duty bound to grant benefits and reliefs during assessment, even if not claimed in the return of income by the assessee.

The ld. Counsel also stated that the DGFT vide its circular no. 13/2020 – customs dated 19.02.2020 withdrew the MEIS benefit with effect from 07.03.2019 by issuing a public notice no. 58/2015-2020 dated 29.01.2020 on the subject - withdrawal of MEIS for items in the apparel and made-ups sector. And a new scheme titled “RoDTEP (Remission of Duties and Taxes on Exported Ganesh Polychem Limited. Products) and RoSCTL (Rebate of State and Central Taxes and Levies)” was introduced which is a revenue income.

Thus, as per the ld. Counsel, the Export incentives received as FPS & MEIS is a capital receipt even as per the accepted action of the Government in the new Scheme and accordingly the assessee must have been allowed re-computation of its taxable incomes for the AYs 2012-13 to 2016-17 (FPS) and AYs 2017-18 to 2018-19 (MEIS) respectively and be granted eligible refund with interest.

On the other hand, ld. DR submitted that first of all assessee cannot raise any inclusion in the proceedings u/s.153A because the same is based on search proceedings and the scope of Section 153A is confined to assessing / re-assessing the income based on both on incriminating material found in the course of search and also during the course of assessment proceedings. Even if it is accepted that in the abated assessment everything is open however, the scope of unabated assessment, no new claim can be made at all because the assessment has to be completed based on incriminating material found in the course of search which is agreed by the ld. Counsel is well settled by the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra).

We have heard the rival submissions and carefully perused the material placed on record. The principal issue for adjudication before us is whether the assessee is entitled to raise an additional claim before the appellate authority in the course of proceedings under Section 153A of the Act, specifically in respect of export incentives received under the Focus Product Scheme (FPS) and the Merchandise Exports from India Scheme (MEIS), which were not claimed as exempt income in the original returns, nor in the returns filed in response to notices issued under Section 153A.

It is an admitted factual position that the assessments for the Assessment Years 2012–13 to 2016–17 had attained finality prior to the date of search and are thus treated as ‘unabated’ assessments. The assessee did not make any claim in the original or revised returns for excluding FPS receipts from taxable income. Nor did it claim the same in the returns filed pursuant to the notices issued under Section 153A. The claim was raised for the first time by way of additional grounds of appeal

On the substantive aspect, the taxability of incentives received under the Foreign Trade Policy namely, FPS and MEIS has been judicially settled in favour of the assessee by various Coordinate Benches of the Tribunal, and more notably by the Hon’ble Rajasthan High Court in the case of PCIT v. Nitin Spinners Ltd. [(2020) 116 taxmann.com 26], wherein it was held that such incentives, when realised by way of sale of scrips in the open market, do not partake the character of income but are capital receipts within the meaning of Section 2(24)(xviii) of the Act. The view of the High Court was affirmed by the Hon’ble Supreme Court by dismissing the Special Leave Petition filed by the Revenue. Thus, there remains little doubt that, on merits, such receipts are not taxable.

As regards the admissibility of a fresh claim in proceedings under Section 153A of the Act, particularly in the context of abated assessments, we find authoritative guidance in the binding pronouncement of the Hon’ble Bombay High Court in the case of PCIT v. JSW Steel Ltd. [(2020) 115 taxmann.com 165 (Bom.)]. The Hon’ble High Court, after a comprehensive analysis of the statutory framework, held that upon initiation of search under Section 132, the assessment for the six preceding assessment years becomes open for reassessment under Section 153A. Where the assessment for a particular year was pending on the date of search, it is deemed to abate. In such a case, the jurisdiction of the Assessing Officer is not confined merely to the incriminating material found during the search but extends to conducting a fresh assessment de novo.

Most significantly, the Hon’ble Court held that once the assessment abates, it is not only open to the Revenue to make additions on the basis of search material or otherwise, but equally open to the assessee to lodge fresh claims, deductions, exemptions or reliefs which may not have been claimed earlier, including those that were not claimed in the original return filed under Section 139(1). The Court interpreted the legislative scheme of Section 153A(1), including its second proviso, to affirm that an abated assessment merges into the fresh 153A proceedings and that both the Revenue and the assessee stand on an equal footing in terms of scope and rights.

This principle affirms the fundamental objective of tax administration: to assess the correct income in accordance with law, and not to withhold legitimate reliefs on procedural or technical grounds. Applying this ratio to the facts before Ganesh Polychem Limited. us, we have no hesitation in holding that in respect of A.Y. 2017–18, which is admittedly an abated assessment, the assessee is fully entitled to raise a new claim in respect of export incentives under MEIS, and the same cannot be rejected solely on the ground that it was not made in the original or revised return.

The legal position becomes even more compelling when viewed in conjunction with the principle laid down by the Hon’ble Bombay High Court in the case of CIT v. B.G. Shirke Construction Technology (P.) Ltd. [(2017) 79 taxmann.com 306 (Bom.)]. In that case, the Hon’ble High Court authoritatively clarified that the limitation on entertaining fresh claims, as pronounced by the Hon’ble Supreme Court in Goetze (India) Ltd., applies only to the Assessing Officer and does not circumscribe the powers of appellate authorities under the Act. The Court held that even if a fresh legal claim is not made in the return of income or by way of a revised return, it can still be entertained by appellate authorities such as the CIT(A) or the ITAT.

It further noted that once a notice under Section 153A is issued and a fresh return is filed, particularly in abated cases, the assessment is conducted afresh, and therefore, all legitimate claims that could have been made in a regular assessment may be validly entertained. Importantly, the Court reiterated that tax cannot be levied on income which is not chargeable under the Act, merely on account of an omission or error by the assessee in the original return.

In the present case, the nature of the receipts viz., export incentives under MEIS has been consistently held to be in the nature of capital receipts, not chargeable to tax, by several judicial fora including the Hon’ble Rajasthan High Court and Coordinate Benches of this Tribunal. Therefore, even if the assessee had not claimed such exclusion in its original return, there is no legal impediment to raising the claim during appellate proceedings. Accordingly, in A.Y. 2018–19, although the assessment was completed under Section 143(3), the claim raised by the assessee before the learned CIT(A) regarding the non- taxability of MEIS receipts deserves to be examined on merits, and cannot be denied on technical grounds. Since the lower authorities have not adjudicated the claim substantively, nor quantified the claim, we restore the matter to the file of the Assessing Officer for de novo adjudication in accordance with law.

However, the legal landscape changes materially when it comes to unabated assessments, i.e., those which had attained finality as on the date of search specifically, the assessments for A.Ys. 2012–13 to 2016–17 in the present case. It is now well-settled by the Hon’ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. [(2023) 149 taxmann.com 399 (SC)] that where the assessment for a given year has not abated on the date of search, the power of the Assessing Officer under Section 153A is restricted to making additions based on incriminating material found during the course of search. In the absence of such Ganesh Polychem Limited. incriminating material, the concluded assessment cannot be disturbed, and any new issue whether in the nature of an addition by the AO or a fresh claim by the assessee would ordinarily fall outside the permissible scope of Section 153A proceedings.

That said, a nuanced legal perspective emerges from the very language and construct of Section 153A. The provision mandates that the assessee must file a return of income in response to the notice, and the Assessing Officer is entrusted with the duty to assess or reassess the “total income” for six preceding years. The term “total income”, as defined under Section 2(45), refers to the amount of income computed in accordance with the provisions of the Act. It necessarily follows that the Assessing Officer, while discharging his statutory obligation under Section 153A, must compute the correct total income of the assessee in accordance with law.

This brings us to a subtle yet important legal distinction. If a particular receipt such as one under the Focus Product Scheme (FPS) or the Merchandise Exports from India Scheme (MEIS) is in its very nature a capital receipt not chargeable to tax, and thereby falls outside the sweep of “total income” as defined under the Act, the question arises whether the assessee can still point out this legal position in response to a Section 153A notice, even in the absence of any incriminating material. While Abhisar Buildwell imposes a fetter upon the Revenue to safeguard the sanctity of concluded assessments, it is debatable whether this constraint should extend to prohibit the assessee from asserting a jurisdictional truth namely, that a receipt erroneously offered to tax does not, in law, constitute income at all.

Indeed, the mandate to “assess the total income” postulates a correct and lawful determination of taxable income, not a mere reaffirmation of what was returned. If the assessee, upon legal advice or judicial clarification, realises that a previously offered receipt was never taxable ab initio, it would be anathema to both equity and the rule of law to prevent the assessee from bringing such a fundamental contention to the notice of the Assessing Officer. The finality attached to concluded assessments is intended to protect against arbitrary additions by the Revenue, not to perpetuate erroneous or excessive taxation merely because the assessee did not previously raise a legal plea.

This interpretive tension between the sanctity of finality on one hand and the right to correct a non-taxable error on the other remains a grey area in the jurisprudence under Section 153A. It calls for principled clarification as to whether the bar on reassessment in unabated cases should operate with equal rigidity against a bonafide claim by the assessee that a particular receipt is not income in the first place.

Nonetheless, since both the Assessing Officer and the learned CIT(A) in the present case have declined to admit the assessee’s claim solely on procedural Ganesh Polychem Limited. grounds, citing Goetze (India) Ltd., without examining whether the claim could be entertained within the permissible contours of Section 153A, we consider it just and equitable to restore this issue to the file of the Assessing Officer. The AO shall now examine, in law and on facts, whether such a claim for exclusion of export incentives under the FPS scheme can be entertained in respect of the unabated assessment years, and pass a reasoned order after affording an adequate opportunity of hearing to the assessee.

Accordingly, in light of the foregoing discussion and judicial pronouncements, we hold that the additional claim made by the assessee in respect of A.Y. 2017–18, being an abated assessment, and A.Y. 2018–19, being a regular assessment under Section 143(3), is legally admissible. In both these years, the claim pertains to the treatment of export incentives under the FPS and MEIS schemes as capital receipts, not exigible to tax under the provisions of the Act.

Since the nature and quantum of these receipts have not been examined on merits by the lower authorities and considering that these claims were raised for the first time at the appellate stage, we deem it just and expedient to restore the matter to the file of the Assessing Officer. The Assessing Officer is directed to verify the claim, quantify the amount involved, and adjudicate the same afresh, in accordance with law, after granting due opportunity of hearing to the assessee.

As regards the unabated assessment years, namely A.Ys. 2012–13 to 2016– 17, where the assessments had attained finality prior to the date of search, the additional claim made by the assessee for exclusion of FPS incentives requires reconsideration from the standpoint of statutory permissibility under Section 153A. As already observed, the power to make adjustments or admit new claims in such years is contingent upon the existence of incriminating material found during the course of search.

Since the Revenue authorities have hitherto declined the claim solely on procedural grounds by placing reliance on the decision in Goetze (India) Ltd., without examining whether such a claim can be entertained in the context of Section 153A for unabated assessments, we consider it appropriate to restore this issue as well to the file of the Assessing Officer. The Assessing Officer shall now examine, in law and on facts, whether the additional claim made by the assessee falls within the permissible ambit of assessment under Section 153A in respect of concluded assessments. The assessee shall be at liberty to raise all relevant contentions in support of its claim, and the Assessing Officer shall pass a reasoned and speaking order in accordance with law.”

On perusal of the above we notice that the facts in assessee's case are identical and therefore we are of the considered view that the impugned issue in Ganesh Polychem Limited. the present appeal is covered by the above decision of the Co-ordinate Bench. Accordingly we remit the issue back to the AO with similar directions. Needless to say that the assessee be given an opportunity of being heard.

In result, the appeal of the assessee is allowed for statistical purposes.