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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI RAJESH KUMAR, AM Shri Subramainian Shri Shishir Dhameja
आदेश / O R D E R PER RAJESH KUMAR, A. M:
This is an appeal filed by the assessee challenging the order dated 23.12.2013 passed by the ld.CIT(A)-1, Mumbai for the assessment year 2008-09. 2. The issue raised in the ground No.1 by the assessee is in respect of jurisdiction of AO to make addition while framing assessment under section 143(3) read with section 153A of the Income Tax Act, 1961 which was not raised before the First Appellate Authority and is being raised before this Tribunal for the first time.
The ld. AR at the outset, submitted before us that the issue being raised for the first time before the tribunal as the same could not be raised before the FAA due to inadvertence. The ld AR submitted before the bench that the issue being legal in nature and goes to the root of the matter and therefore, the Tribunal is well within its jurisdiction to entertain this additional ground as being of legal in nature and adjudicate the same as per provisions of Act.
We have heard the rival contentions and perused the material placed before us including the ground No.1 raised by the assessee which is reproduced below: “1. On the facts and in the circumstances of the case and in law, the assessment order passed under section 143(3) read with section 153A of the IT Act is invalid and bad in law”
After hearing both the sides and going through the record placed before us, we find that the issue raised by the assessee is purely of legal nature which is concerning the jurisdiction of the AO to make addition while framing assessment under section 143(3) read with section 153A of the Act. We are of the opinion that it would be just, fair and in the interest of justice if the same is admitted and taken for adjudication as per the provisions of law and no prejudice would be caused to the revenue. Moreover, in our opinion, the assessee is free to raise the issue of legal nature at any stage of litigation in view of the ratio laid down in National Thermal Power Co Ltd Vs. CIT 229 ITR 383(SC). In view of these facts and legal position we are inclined to admit the legal issue raised by the assessee.
Brief facts of the case are that the return of income was filed by the assessee on 12.2.2009 u/s 139(1) declaring a total income of Rs.1,54,090/-. A search was conducted on 18.2.2010 on the assessee under section 132 of the Act. Thereafter, a notice under section 153A was issued on 29.10.2010 calling upon the assessee to file return of income which was served upon the assessee on 4.11.2010. The assessee complied with the notice by filing return of income along with computation of income on 3.12.2010 declaring total income of Rs.1,54,090/-.
The ld. AR submitted before us that since the return of income was filed on 12.2.2009 and no notice under section 143(2) of the Act was issued which could have been issued under the provisions 143(2) of the Act up to six months from the end of financial year in which the return of income filed by the assessee i.e. upto 30.09.2009 . However, no such notice was issued and therefore, the return filed by the assessee had attained finality. In other
words, the ld. AR submitted that the assessment had attained finality on the date of search and therefore any addition could be made in case of assessment which had attained finality only with regard and reference to the seized incriminating documentary material during search. The ld. AR submitted that in the case of assessee no incriminating material was seized and the only addition made by the AO in the order passed under section 143(3) r.w.s. 153A dated 27.12.2011 was in respect of expenditure attributable to the earning of exempt income in terms of provisions of section 14A of the Act. It was obviously and apparently not based on any incriminating material found during the course of search by the search party. Therefore, the AO has no jurisdiction to make disallowance under section 14A without reference to the incriminating material as stated above. The ld. AR finally submitted that since the assessment in the instant year had attained finality the addition made by the AO was without jurisdiction in terms of provisions of section 153A of the Act and required to be deleted. The ld. AR in defence of his arguments relied on the decision of the Hon’ble Jurisdictinal High Court in the case of CIT V/s Gurinder Singh Bawa (2016) 386 ITR 483(Bom).
The ld. DR on the other hand, relied on the orders of authorities below.
We have heard the rival contentions and perused the material on record including the orders of authorities below and case law relied upon by the assessee. We find that the return of income filed by the assessee on 12.2.2009 declaring a total income of Rs.1,54,090/- and no notice was issued under section 143(2) to the assessee. The period for issuing such notice expired on 30.9.2009 under the provisions of section 143(2) of the Act. A search was conducted on 18.2.2010. Now, the issue before us whether the assessment for the year under consideration has attained finality on the date of search or abated in terms of provision of section 153A of the Act. According to the said provisions the AO shall make the assessment in respect of six preceding years prior to the financial year during which the search is conducted. It is further provided in the said section that the assessment which are pending on the date of search shall abate, the AO has same powers to make assessment as he has powers under section 143(3) of the Act and each and every issue is open to be examined by the AO during the course of assessment proceedings. Whereas in respect of those years which have attained finality out of six years, the AO has very limited powers and jurisdiction to make addition only with reference to the incriminating material found during the course of search and not otherwise. In other words, the AO cannot dispute and disturb already completed and finalized assessment by making additions which have no connections or relevance with the seized
material. In the present case before us we find that there was no materials found during search by search party with respect to addition made by the AO. The case of the assessee also find support from the decision in the case of the Gurinder Singh Bawa(supra) wherein it has been held : “:Held: dismissing the appeal, that once an assessment was not pending but had attained finality for a particular year, it could not be subject to proceedings under section 153A of the Act, if no incriminating materials were gathered in the course of the search or during the proceedings under section 153A, which were contrary to and were not disclosed during the regular assessment proceedings”
Thus, it is clear from the above facts that the assessment in the present year was complete and finalized on the date of search and therefore addition as made by the AO u/s 14A in respect of expenses relating to the exempt income is without jurisdiction u/s 143(3) read with section 153A and accordingly, the AO is directed to delete the addition.
The issue raised in ground no.2 is rendered academic in nature in view of our finding on legal issue. The same is dismissed.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 4th Jan, 2017. Sd sd (C.N. Prasad) (Rajesh Kumar) न्याययक सदस्य / Judicial Member ऱेखा सदस्य / Accountant Member भुंफई Mumbai; ददनधंक Dated :4.1.2017 SRL,Sr.PS