M/S. GIGAPLEX ESTATE PVT. LTD,MUMBAI vs. DCIT CENT. CIR 4(2) , MUMBAI

As the issues involved in both these appeals are identical, we hereby pass a consolidated order on the above captioned appeals, taking as a lead case.

The brief facts are that the assessee company is incorporated under the Companies Act, 1956 with the main objective of carrying of business of real estate development, including development and maintenance of industrial parts and SEZs. It is observed that the assessee company has its projects in Airoli, Navi Mumbai.

During the impugned year, the assessee filed its return of income dated 29.11.2014, declaring a loss of (-) Rs.26,46,45,710/- and filed its revised return of income dated 27.11.2015, declaring total income at (-) Rs.27,47,49,972/- under the heads: 1. House property Rs.15,22,69,385/- 2. Business profession Rs.10,11,35,023/- 3. Unobserved depreciation Rs.2,13,45,564/-

The assessee’s case was selected for scrutiny, wherein the returned loss was accepted but an amount of Rs.89,67,600/- was reduced from the capital work-in-progress.

The assessee was in appeal against the said order before the ld. CIT(A). It is observed that a search and seizure action u/s.132(1) of the Act dated 30.11.2017 was carried out at the business premises of the assessee company. The assessee then filed its return in response to section 153A proceedings, declaring total loss of (-)

The Assessing Officer (A.O. for short) passed the assessment order u/s. 143(3) r.w.s. 153A of the Act dated 24.12.2019, wherein the A.O. has rejected the change of stand adopted by the assessee and concluded the assessment as per the returns filed in the original assessment proceedings. It is observed that the A.O. disagreed to consider the rental income from the property situated in SEZ as ‘income from profit and gain from business and profession’ and treated the same as ‘income from house property’.

The assessee preferred an appeal before the ld. CIT(A) as against the order of the A.O.

The ld. CIT(A) dismissed the appeal filed by the assessee and confirmed the order of the A.O. by placing reliance on the following decisions:

The assessee is in appeal before us as against the order of the ld. CIT(A) in rejecting the claim of the assessee.

The ld. Authorized Representative (AR for short) for the assessee contended that the provisions of section 153A enables both the A.O./assessee to assess or reassess the ‘total income’ of the assessee. The ld. AR further stated that the lower authorities have failed to distinguish the facts of the case in case of Hon'ble Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) and that the lower authority has failed to rely on the decision of the Mumbai Tribunal in case of Dorf Ketal Chemicals (P) Ltd. vs. DCIT (ITA No. 3736/Mum/2012). The ld. AR contended that the provision of section 153A does not curtail the assessee from making a fresh claim which was not taken up in the original assessment. The ld. AR relied on the CBDT Circulars, specifying the head of income under which the impugned income should be charged to tax. The ld. AR relied on the decision of Mumbai Tribunal in the case of Dorf Ketal Chemicals (P) Ltd. (supra).

The ld. Departmental Representative (ld. DR for short), on the other hand, controverted the contention of the ld. AR by laying emphasis on the fact that the impugned years fall under the unabated assessment and relied on the decision of the Hon'ble Jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) and the Special Bench decision of the Mumbai Tribunal in the case of All Cargo Logistics Ltd. (supra) which held that the scope of the assessment in case of unabated years are restricted only to the incriminating material found during the course of search.

The ld. DR alleged that the same principle will apply for both, the A.O. as well as the assessee as per the decision of the Hon'ble Bombay High Court and relied on the various decisions, favouring the Revenue in this proposition.

Having heard the rival submissions and perused the material on record, it is evident that the impugned year pertains to unabated assessment, which was not disputed by both the sides. It is pertinent to point out that the provisions of section 153A of the Act was enacted as a replacement to section 158BA, which dealt with assessment of ‘undisclosed income’ pursuant to the search operation. Section 153A, on the other hand, intends to assess or reassess the ‘total income’ of the assessee and does not restrict only to undisclosed income.

The assessee in present case has interpreted the ‘total income’ to be eligible to make a fresh claim which was not declared in the original return of income furnished u/s.139(1) of the Act. The assessee claims to change his stand of the impugned deduction from the head ‘income from house property’ to ‘income from profit and gain of business’. The moot question which arises here is whether the assessee is eligible to change his stand of the heads of income at the stage of section 153A proceeding, pertaining to unabated assessment year. We would like to place our reliance on the decision cited by the assessee in case of Dorf Ketal Chemicals (P) Ltd. (supra). It is pertinent to point out that the above said decision is distinguishable on the facts of the present case, wherein the fresh claim made by the assessee during section 153A proceeding, has no specification that it relates to unabated assessment year. Hence, the assessee has failed to corroborate its claim that fresh or additional claim can be raised during the assessment made u/s. 153A of the Act. We would like to place our reliance on the decision cited by Special Bench of the Mumbai Tribunal in the case of All Cargo Logistics Ltd. (supra), wherein it was held that in case of unabated assessment, the assessment u/s.153A can be made only on the basis of incriminating material, thereby restricting the scope of assessment or reassessment of total income u/s.153A to only the incriminating material seized during the search. This interpretation categorically restricts the A.O. in altering the original assessment passed u/s.143(3) only when there are new materials found during search and which was not disclosed during the original assessment. This interpretation according to us holds good even in assessee’s case. The assessee as per the decisions cited by the Revenue in case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), CIT Vs. Gurinder Singh Bawa [2015] 79 Taxmann.com 398 (Bom) and the Special Bench decision in case of All Cargo Logistics Ltd. (supra) restricts the fact that the assessment u/s. 153A is restricted only to incriminating material in case of unabated assessment. We would also like to place our reliance on the decision of the Hon’ble Rajasthan High Court in case of Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523 (Raj), which held that both the assessee as well as the A.O. cannot make any claim which is not a consequence of the search action in case of unabated assessment.

From the above observation, we are of the considered view that the provisions of section 153A cannot be interpreted as enabling the A.O./assessee to make a fresh or additional claim, which was not raised during the original assessment in absence of incriminating material found during the search. By respectfully following the above decisions, we hold that there is no infirmity in the order of the ld. CIT(A).

In the result, the appeal filed by the assessee does not hold merit and is hereby dismissed.