DCIT CENTRAL CIRCLE -4(3) , MUMBAI vs. M/S. MINDSPACE BUSINESS PARKS PVT LTD, MUMBAI

These appeals are filed by the Revenue against different orders of Learned Commissioner of Income Tax (Appeals)-52, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 16.12.2021 for the A.Ys. 2015-16 and 2016-17.

A search action under section 132 of the Act was conducted on the assessee on 30.11.2017 and assessment proceedings under section 143(3) of the Act got abated due to the search action. Pursuant to search action, notice under section 153A of the Act was issued to the 3 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., assessee on 01.08.2018 calling for the return of income. In response to the notice, the assessee filed its return of income on 30.08.2018 declaring a total loss of Rs (-) 41,98,52,777/- comprising of loss from business and profession only.

In the return filed under section 153A of the Act, the assessee offered income from let out of premises situated in the above referred SEZs under the head "Profit and Gain from Business and Profession" as against "House Property" in which income was originally offered to tax in the return of income filed u/s 139(1) of the Act.

Similarly in A.Y. 2016-17, the assessee filed its return of income under Section 139(1) of the Act on 30.11.2016 declaring total loss of (-) ₹35,83,82,086. The total loss reported in the return of income comprised of Income from House Property, loss from Business Profession and Capital loss. Subsequently, a revised return of income was filed by the assessee under section 139(5) of the Act on 28.03.2018 in which the income remained unchanged. Thereafter, the case was selected for scrutiny and notice under section 143(2) of the Act was issued on 29.07.2017. As stated above, a search action under section 4 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., 132 of the Act was conducted on the assessee on 30.11.2017 and assessment proceedings under section 143(3) of the Act got abated due to the search action.

Pursuant to search action, notice under section 153A of the Act was issued to the assessee on 01.08.2018 calling for the return of income. In response to the notice, the assessee filed its return of income on 30.08.2018 declaring a total loss of Rs (-) 30,68,35,981. The total loss reported in the return of income comprise of loss from Business Profession and Capital Loss.

In the return filed under section 153A of the Act, the assessee offered income from let out of premises situated in the above referred SEZs under head "Profit and Gain from Business and Profession" as against "House Property" in which income was originally offered to tax.

During the assessment proceedings, Assessment orders under section 143(3) r.w.s 153A of the Act were passed for both A.Y. 2015-16 and A.Y. 2016-17 on 30.12.2019, wherein, Assessing Officer considered the submission made by the assessee in respect of change of stand for offering income from let out of premises under head Profit and Gain

Ld.CIT(A), with respect to change of stand in offering income from lease rentals under head Profit and Gains from Business and Profession instead of House Property, the Ld. CIT(A) made the following observations: - A. For A.Y. 2015-16 and for A.Y. 2016-17, the Ld. CIT(A) has acknowledged the fact that the years under consideration represent abated years. B. The Ld.CIT(A) relied on the decision of Hon'ble Mumbai bench of ITAT in case of All Cargo Logistics Ltd. [(2012) 23 Taxmann.com 103 (Mum) (SB)] and Hon'ble Delhi High Court in case of CIT v. Kabul Chawla [281 CTR 45] and held that for an abated year, the assessing officer is competent and empowered to decide any issue based on material on record. C. Further, the Ld. CIT(A), took cognizance of the CBDT circular no. 16/2017 dated 25.04.2017, wherein it was clarified that income from letting out of premises/ developed space along with other amenities in an industrial park/SEZ is to be charged under head Income from "Business or Profession". Accordingly, for A.Y. 2015-16 at para 5.12 and for A.Y. 2016-17at 5.13, the Ld. CIT(A) held that board's circular are binding on the subordinate authorities and the case of the assessee is covered by the circular no. 16/2017.

Aggrieved by the above order of Ld.CIT(A), Revenue preferred appeal before us raising following common grounds in its appeals. Grounds raised

At the time of hearing Ld DR brought to our notice the findings of assessing officer and submitted that the assessee cannot the change the head of income for the lease rentals earned under the head income from Business and Profession while filing the return of income u/s 153A instead of income under the head House Properties as declared in the original return of income filed u/s 139 of the Act. He submitted that the Ld CIT(A) while adjudicating failed to consider the decision of Hon’ble Supreme Court in the case of Sun Engineering Works (P) Ltd (supra) and Hon’ble Bombay High Court decision in the case of K Sudhakar S Shanbhag (supra). Similarly, he submitted that the assessee cannot claim or allowed to claim the depreciation of assets that was not claimed originally in the return of income in the subsequent proceedings u/s.153A of the Act. Therefore, he vehemently supported the findings of assessing officer.

Ld. Counsel for the assessee reiterated the submissions made before the Ld.CIT(A). Ld. AR submitted that the years under 9 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., consideration i.e A.Y. 2015-16 and A.Y. 2016-17 represent abated years. He submitted the below chart with the relevant dates: Particulars A.Y. 2015-16 A.Y. 2016-17 Original Return under section 139(1) 28.11.2015 30.11.2016 Revised return under section 139(5) 22.03.2016 28.03.2018 Notice under section 143(2) of the 15.04.2016 29.07.2017 Act Date of search 30.11.2017 Notice under section 153A 01.08.2018 01.08.2018

Ld AR submitted that from the above table, it can be concluded that during the years under consideration, proceedings under section 143(3) of the Act were initiated but the same were never completed on account of search action under section 132 of the Act. Accordingly, the years under consideration represents abated years. Ld. AR of the assessee submitted that the said fact was also acknowledged by the Assessing Officer in the assessment orders for A.Y.2015-16 and A.Y.2016-17.

Further, Ld AR brought to our notice the decision of Hon'ble Bombay High Court in case of Pr.CIT v. JSW Steel Limited [(2020) 422 ITR 71 (Bom)], wherein, Hon'ble Bombay High Court revisited the issue as to whether in case of an abated year, the assesse is allowed to raise fresh claim, which was not raised in the original return of income. While adjudicating the matter, Hon'ble Bombay High Court held that in accordance with second proviso to section 153A of the Act, once the assessment got abated, it is open for both assessee and revenue to make claims for allowance or disallowances as the case maybe. It has been held that once the assessment gets abated, the original return loses its originality and the subsequent return filed under section 153A of the Act takes place of the original return. Accordingly, all the 11 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., legitimate claims would be open to the assessee to raise in the return filed under section 153A (1) of the Act.

Further, in respect of the judgment of Hon'ble Apex Court in the case of CIT v. Sun Engineering Works Pvt Ltd relied by the department as mentioned in Ground No. 2 of grounds of appeal, Ld AR submitted that the said decision was relied by the department before the Hon'ble Bombay High Court in the case of CIT v. B.G. Shirke Construction Technology P. Ltd [(2017) 395 ITR 371 (Bom)]. While adjudicating the matter, the Hon'ble Bombay High Court has held that the department has misplaced its reliance, as the judgement of Hon'ble Apex Court in Sun Engineering was restricted to the order passed under section 147/148 of the Act only.

Ld. AR further submitted that although, the department has not challenged the merits of the case but for the sake of completeness it is submitted that the merits are covered by the CBDT Circular No.16/2017 dated 25.04.2017. In the instant circular, it has been clarified that the income arising from letting out of premises/ developed space along with

Further, with respect to Ground No. 3, wherein the department has contested the Ld. CIT(A)'s jurisdiction in respect to the claim of depreciation, Ld AR submitted that once the years under consideration are held as "abated years", it becomes open for an assessee to make a fresh claim which needs to be considered on merits. Thus, the Ld.CIT(A) was well within his jurisdiction while allowing the assessee the claim of depreciation. However, he submitted that the said ground is consequential to the adjudication of the other grounds raised by the revenue.

Considered the rival submissions and material placed on record. We observe that the assessee is earning income from the let of out of the premises situated in the SEZs and offered to tax in the original return of income filed by the assessee under the head income from House property. However, subsequent to the Search, while filing the return u/s 153A, it changed the head of income to declare the income from let out of premises under the head Income from Business and 13 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., Profession. This action of the assessee was rejected by the Assessing Officer that the assessee cannot claim new benefit in the revised proceedings u/s 153A of the Act. However, Ld CIT(A) decided the issue in favour of the assessee considering the fact on record that the assessment years under consideration are abated, therefore, the assessee can claim fresh or modified claim. After considering the submissions of both counsels, we observe that this issue is well settled and the Hon’ble Bombay High Court held in the case of B.G. Shirke Construction Technology P Ltd (supra) that in the case of abated assessments the return filed u/s 153A replaces the return filed u/s 139 of the Act, for the sake of clarity, it is reproduced below: - "10. 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 is required to furnish fresh return of income for each of the six assessment years in 14 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., regard to which a notice has beenissued. 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 assessee-assessee is being assessed in 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 Section 153A of the Act and the case laws on the provision of the Act would equally apply."

We observe that similar view was expressed by Hon’ble Bombay High Court while adjudicating similar issues in the case of JSW Steel Ltd (supra) and held as under: - "13. In the present case, search was conducted on the assessee on 30-11-2010. At that point of time assessment in the case of assessee for the assessment year 2008-09 was pending scrutiny since notice under section 143(2) of the Act was issued and assessment was not completed. Therefore, in view of the second proviso to section 153A of the said Act, once assessment got abated, it meant that it was open for both the parties, i.e. the assessee as well as revenue to make claims for allowance or to make disallowance, as the case may be, etc. That apart, assessee could lodge a new claim for deduction etc. which remained to be claimed in his earlier/regular return of income. This is so because assessment was never made in the case of the assessee in such a situation. It is fortified that once the assessment gets abated, the original return which had been filed looses its originality and the subsequent return filed under section 153A of the said Act (which is 15 & 434/MUM/2022 (A.Ys. 2015-16 & 2016-17) Mindspace Business Park Pvt. Ltd., in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly. If that be the position, all legitimate claims would be open to the assessee to raise in the return of income filed under section 153A(1).

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."

With regard to submissions made by the Ld DR that the Ld CIT(A) has ignored the decision of Sun Engineering Works (P) Ltd decision, we observe that the Hon’ble Bombay High Court already considered the above decision in the case of B.G Shirke Construction (supra) in the Para No.10 of the decision (refer para no 22 above). It held that the stand of the revenue is misplaced as the issue is relating to the assessment u/s.147/148 of the Act, the same cannot be applied for the issue under consideration. Therefore, the submissions made by the Ld.DR are substantially answered.

Considering the above discussion, we are inclined to dismiss the grounds raised by the revenue in the appeal filed for the AY 2015-16. The issues raised in the appeal for the AY 2016-17 are mutandis

In the result, appeals filed by the Revenue are dismissed.