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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SRI MAHAVIR SINGH & SRI MANOJ KUMAR AGARWAL
IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JUDICIAL MEMBER AND SRI MANOJ KUMAR AGARWAL, ACCOUNTANT MEMBER 34 & 35/Mum/2015 (A.Y:2008-09, 2009-10 & 2010-11) M/s. JSW Steel Ltd., (Successor on Vs. The Dy. Commissioner of amalgamation of JSW Ispat Steel Ltd.), Income Tax, Central Circle JSW Center, Bandra Kurla Complex, 18 & 19, Mumbai Bandra (E), Mumbai PAN :AAACI 6293F Appellant .. Respondent .. Appellant by Shri Rishabh Shah, AR Respondent by .. Shri Alok Johari, CIT DR .. Date of hearing 10-08-2016 Date of pronouncement .. 28- 09-2016 O R D E R PER MAHAVIR SINGH, JM:
These three appeals by the assessee are arising out of the orders of the CIT (Appeals)-39, Mumbai in appeal Nos.CIT (A) -39/IT-14, 15 & 16/2013-14, all of even date 02-10-2014. Assessments were framed by the DCIT, Central Circle 18 & 19, Mumbai for assessment years 2008-09, 2009-10 and 2010-11 u/s 153A read with section 143(3) of the Income Tax Act, 1961 (hereinafter „the Act‟) vide his order dated 25-03-2013.
The brief background of the case is that the assessee is a widely held public company engaged in various activities including production of sponge iron, galvanized sheets, cold-rolled coils through its steel plants located at Dolve and Kalmeshwar in Maharashtra. Original return of income was filed by the assessee on 30-09-2008 for assessment year 2008-09 declaring loss at Rs.104,17,70,752/- u/s 139(1) of the Act. The case was selected for scrutiny u/s 143(2) of the Act on 03-09-2009. A search was conducted u/s 132 of the Act on ISPAT Group of cases on 30-11-2010; at that point of time assessment for the relevant assessment year was pending. In response to notice u/s 153A of the Act the assessee filed return of income declaring total loss at Rs.419,48,90,102/- on 2 34 & 35/Mum/2015 29-03-2012. The assessee made a new claim for treating “gain on pre-payment of deferred VAT/sales tax” on Net Present Value (NPV) basis for an amount of Rs.318,10,93,993/- as capital receipts.. The AO while completing assessment u/s 143(3) r. w. s. 153A of the Act disallowed this claim by considering the same as revenue receipt. According to the AO the assessee has availed of sales tax deferral scheme but, state government permitted premature re-payment of deferred sales tax liability at the NPV basis. According to the AO, the assessee treated this as capital receipt though credited to the P & L account being difference between the deferred sales tax and its NPV. The AO first decided the issue as to whether a claim which was not made in the return of income filed u/s 139 (1) of the Act, can be considered in the subsequent return filed in pursuance to notice u/s 153A of the Act, consequent to search action u/s 132 of the Act. Secondly, whether such claim per-se can be allowed as capital, as against the claim of the assessee treating the same as revenue receipt in the original return of income? Admittedly, in the original return filed u/s 139 (1) of the Act on 30-09-2008 no claim regarding gain on pre-payment of deferred VAT/sales tax on NPV basis was made rather it was claimed as revenue receipt. Further, the assessee claimed this as capital receipt in the subsequent return filed in pursuance to notice issued u/s 153A of the Act on 29-03-2012 in consequence to search action u/s 132 of the Act on 30-11-2010.
The first issue in these appeals of assessee is against the order of the CIT (A) holding that assessment u/s 153A of the Act to be for the benefit of the Revenue. For this, the assessee has raised the following grounds No.3, 4 and 5 in all the assessment years as under:- “3. The Learned CIT (A) erred in the facts and circumstances of the case and in law while holding the assessment u/s 153A of the Income Tax Act, 1961 was only for the benefit of revenue without appreciating the fact that original assessment proceedings in the case had not concluded but merely abated due to initiation of search under section 132 of the Act.
4. The Learned CIT (A) erred in facts and circumstances of the case and in law in holding that the assessee is not entitled to make fresh legal claims in a return filed u/s 153A even in abated assessment proceedings.
5. The Learned cit (a) erred in facts and circumstances of the case and in law in not allowing a legal claim arising due to a binding decision of special 3 34 & 35/Mum/2015 bench of Jurisdiction Appellate Tribunal which was not available at the time of filing of original return of income u/s 139(1)”.
4. Brief facts leading to the above issue are that the assessee itself had treated this receipt as revenue and credited the same to the P & L A/c., which return stood accepted under s. 143(1) of the Act. It is only that in the return held in pursuance to notice under s. 153A of the Act the assessee due to a change of opinion, claims the same as capital receipts in the statement of computation of business income. The assessee has made the fresh claim in the return of income filed on 29-03-2012 u/s 153A of the Act in consequence to search action, whereas in the original return of income filed u/s 139(1) of the Act on 30-09-2008, the assessee treated these receipts as capital receipts. The original return filed u/s 139(1) of the Act was processed u/s 143(1) of the Act but, notice u/s 143(2) of the Act for scrutinizing the return of income was pending as on the date of search conducted on the assessee. The AO did not allow carry forward of total loss so assessed, together with claim on account of unabsorbed depreciation/business loss and unabsorbed long term capital loss of earlier years. Aggrieved, assessee preferred appeal before the CIT (A).
The CIT (A) confirmed the action of the AO with a detailed order vide Para 6 to 6.3 as under:- “6. I have very carefully considered the facts of the case, findings of the A.O., and the submissions made by the appellant. I have also considered the orders/ decisions cited and relied on by the appellant. The initial submission of the appellant is that there is no embargo or restriction on the assessee to claim any deduction which was not allowed in the original assessment. It has to be stated that this contention is totally misplaced in the context of the facts in the case of the appellant. It is not as though a claim had been claimed in the original return filed under s. 139(1) which had been denied by the A.Q. and which claim had again been made in the return filed in pursuance to notice under s. 153A. The fact is that there was no such claim in the original return and therefore the A.O. denying the claim in the original assessment does not arise. It is an undisputed fact that the assessee itself had treated the receipt as gain on prepayment of deferred VAT/Sales Tax on NPV basis revenue and credited the same to the P & L A/c., which return stood accepted under s. 143(1). It is only that in the return held in pursuance to notice under s. 153A, the appellant due to a change of opinion, claims deduction of the said gain in the statement of computation of business income. Hence, such a submission made by the appellant is not only misplaced but is mischievous since the same is downright contrary to the facts of the case. Absolutely no such claim had been made by the appellant in the original return of income filed under s. 139(1). 6.1 As per the provisions of law, certainly the A.O. retains the original jurisdiction under s. 139(1) as well as jurisdiction conferred on him under s. ' 153A in abated proceedings. The retention of original jurisdiction is to enable the A.O. to examine the claims made in the return filed under s. 139(1). With the abatement of proceedings, the A.O. has to issue fresh notice under 0. 153A which is to enable the A.O. to make addition, other than already assessed, on the basis of the incriminating material unearthed as a result of search and/or undisclosed income discovered in the course of search. In other words, there will only be one assessment order for all the relevant years, unlike the earlier block assessment procedure under s. 158BC when separate assessment had to be made in . . respect of income/addition made in the context of search/discovered in the course of search. Thus, the proceedings/procedure prescribed under s. 153A are for the benefit of Revenue and it is not permissible for an assessee .• .• to make any fresh claim/ new claim in a return filed in pursuance to sec. • .; • 153A, which had not been made in the original return filed under s. 139(1). The search assessment procedure as prescribed under s. 153A is a code in • itself enabling the A.O. to make additions in the context of search and Seizure carried out; section 153A clothes the A.O. with jurisdiction to make addition, other than what has already been assessed, on the basis of incriminating materials unearthed during search, facts discovered in the course of search assessment proceedings. Once the A.O. assumes jurisdiction under s. 153A, the assessment would be made under s. 143(3) but that does not tantamount to mean that the search assessment is akin to normal assessment proceedings. The enabling provision to make assessment is sec. 143(3) but the same is subject to express provisions of sec. 153A in cases of search and seizure. It has been held by the Hon‟ble Jodhpur ITAT in the case of Suncit3r Alloys P. Ltd. vs. ACIT, that the expression 'assessment or reassessment' used in sec. 153A of the Act connotes determination of total income pursuant to return required to be filed in the case of a person where a search is initiated under s. 132 or requisition is made under s. 132A of the Act To such assessment or reassessment made all other provisions of this Act shall also apply as is spelled out in Explanation (i) below section 153A. Explanation (ii) further clarifies the amount of tax chargeable in an assessment or reassessment in respect of an assessment under this reassessment used in this section have to be understood in the context of section 153A of the Act alone. According to the 1TAT, in section 153A the expression signifies merely computation of undisclosed income that shall form part of "total income" within the meaning of section 2(45) of the Act in respect of each of the assessment falling within such six assessment years that is required to be aggregated with the income already assessed in cases of completed assessments, more so when section 132 of the Act comprehends action to search of a person in possession of undisclosed income or property. In those cases where assessments are pending at the time of initiation of action under s. 132, the 5 34 & 35/Mum/2015 computation of total income has to be done in a normal manner. The ITAT has further held that the issuance of notice under s. 153A for all the six4 assessment years also does not entail altogether a fresh exercise of making fresh assessment. In fact, the apparent and logical purpose of calling for returns for all the six assessment years immediately preceding the year which search is initiated is to dispense with the requirement of recording reasons for reopening the assessment and also to avoid any controversy a to the correct year of assessibility of such income falling within such six assessment years. Necessarily the undisclosed income that shall form part of total income would be so taken after defraying for all expenses that are incurred for earning such income by the assessee. Considering the scheme of the Act, it is apparent that section 234B of the Act also mandates only the „increase‟ in the amount of interest pursuant to assessment under section 153A of the Act. Section 240 of the Act does not entitle an assessee to claim refund of the tax paid in excess of the tax chargeable on the total income returned by the assessee in cases where assessments have already been completed but stand annulled. Section 139(5) of the Act stipulates tune for revising return within one year from the end of the relevant assessment year or- before the completion of the assessment whichever is earlier. Furthermore, the original returns filed under section 139 of the Act are relevant for imposing penalty in such cases. This all goes to show that the assessment or reassessment made pursuant to notice under section 153A of the Act are not de novo assessments It has been held by the 1TAT that there is no merit in the ground raised
in appeal to make a new claim of deduction or allowance as such where admittedly the regular assessments are shown as completed assessment on the date of initiation of action under section 132 of the Act. 6.2 The appellant has placed emphasis on the order of the Hon'ble ITAT in the case of DCIT Vs Eversmile Construction Co. P. Ltd. reported in 65. DTR 39 to assert that the assessee is entitled to lodge a fresh claim. The appellant has placed reliance on the said decision on the ground that the facts are identical. The said decision has been perused. It is observed that in the said case, in the assessment completed under s. 143(3), the A.O. had made disallowance of interest .The assessment attained finality with no appeal filed. Subsequently, the said assessee was searched and in the return filed in pursuance to notice under s. 153A, the assessee suo moto added back the interest disallowed but appended a note stating that the disallowance of interest voluntarily made was subject to its reservation of right to contest the allowability of entire interest in the assessment proceedings. The A.O. did not consider the said claim made as per the note thus not granting any relief as regards the addition on account of interest. When the matter was taken up before the CIT (A), the appellant made submissions establishing the nexus between the utilization of funds borrowed at interest with the carrying on of business. The CIT (A) remanded the matter to the A.O., who after examining of submissions, quantified the disallowable interest and thereby greatly reducing the quantum of interest disallowable which gave major part-relief to the assessee When the matter was taken up by the Department before the ITAT, on the basis of the said facts, the Hon'ble ITAT held that on the mere fact that there was same addition in the original assessment, the same would not preclude the assessee from 6 34 & 35/Mum/2015 contesting the said addition in the subsequent proceedings. The facts in the assessee's case are totally different. it is not as though it is contesting an addition made in the earlier assessment; what the assessee seeks to do is to make an entirely fresh claim when it is called upon to file a return vide notice under s 153A issued A provision, which is to empower the Revenue to make additions in the context of search and seizure cannot be made use of by an assessee to its benefit to make wholly fresh/new claims, never made in the return originally filed under s 139(1) There is no provision in the Act to enable the assessee to make a claim, earlier not made, other than sec. 139(5). Thus, the facts in both the cases are eminently distinguishable. - The ratio of the decision in the case of Eversmile Construction Co. is not applicable to the facts in the case of the appellant. The ratio of a decision cannot be applied de-hors the facts or divorced from facts. 6.3 In view of the facts as set forth above and the stated legal position, it is held that assessment under s. 153A is only for the benefit of Revenue. The action of the A.O. in declining to allow the claim of deduction in a sum of Rs.1,87,52,34,319/- is hereby confirmed. Grounds 1 & 2 are dismissed”. Aggrieved, the assessee is in second appeal before the Tribunal on this issue.
We have heard rival contentions and gone through the facts and circumstances of the case. The facts of the case are undisputed that the assessee has shown these gains as capital receipts in the original return of income filed u/s 139(1) on 30-09-2008. This return was processed u/s 143(1) of the Act but, scrutiny assessment was pending as notice u/s 143(2) of the Act was issued on 03-09-2009. A search was conducted u/s 132 of the Act on assessee on 30-11-2010 and at that point of time assessment was pending. The assessee treated these as capital receipts filing return of income u/s 153A of the Act in consequence to search u/s 132 of the Act. The objection of the Revenue, i. e. of the AO as well as of the CIT (A) is that this claim was not made in the original return of income nor revised return was filed u/s 139 (5) of the Act and hence, it is not open to the assessee to use the proceedings initiated u/s 153A of the Act to lodge a fresh claim. It is a concurrent view of the authorities below that the proceedings u/s 153A of the Act cannot be used by the assessee to seek benefit by making a fresh claim of deduction not made in the original/revised return. Now before us, learned Counsel for the assessee argued that, in the given facts and circumstances, in view of the second proviso of Section153A (1) of the Act the 7 34 & 35/Mum/2015 proceedings got abated and the AO issued notice u/s 153A of the Act and assessee filed return of income appending a note stating that the gain on pre- payment of deferred VAT/sales tax on NPV basis was to be considered as capital receipt on the basis of the decision of this Tribunal in the case of M/s. Sulzer India Pvt. Ltd. Vs JCIT in ITA No.2871/Mum/2007 for assessment year 2003-04 (Mumbai Special Bench) Order dated 07-09-2012 and the assessee accordingly reduced the profits of business in the computation of income.
Before us, the learned Counsel for the assessee contended that there is no specific inhibition of the AO to include any new income to such fresh total income computed pursuant to search which was not added in the original assessment and in like manner there is no restriction on the assessee to make any new claim, deduction which was not claimed during the original assessment. According to the assessee as per the provisions of Section 153A of the Act, a return filed under this Section is deemed to be a return filed u/s 139(1) of the Act and all the provisions of the Act will apply to the same accordingly. He argued that once assessment gets abated, as in the present case, both the AO as well as the assessee, are at liberty to make claim / addition as per normal assessment proceedings because assessments get abated and the AO retains the original jurisdiction as well as the jurisdiction conferred on him u/s 153A of the Act in consequence to search u/s 132 of the Act. The learned Counsel for the assessee relied on the decision of the Hon‟ble Bombay High Court in the case of CIT Vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) and DCIT Vs Eversmile Construction Co. Pvt. Ltd. 65 DTR 39 to support its view that the assessee is fully entitled to make fresh claim in the return filed in pursuance to Section 153A of the Act.
We have gone through the second and third proviso to Section 153A (1) of the Act which reads as under:- “Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:
8 34 & 35/Mum/2015 [Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.]”
From the reading of section 153 A of the Act, it is observed that this section provides for the procedure for assessment in search cases. Section 153A (1) starts with non-obstante clause stating that it is, “notwithstanding anything contained in section 147, 148 and 149”. Sub-section (a) of Section 153A (1) provides for issuance of notice to the persons searched u/s 132 of the Act to furnish a return of income but it nowhere prescribes issuance of notice u/s 143(2) of the Act. The second proviso to section 153A of the Act makes it clear that the assessment relating to any assessment year filed within the period of sixth assessment year pending on the date of search u/s 132 of the Act shall abate. As per our understanding of this section, if on the date of search any assessment proceedings are initiated relating to any assessment year falling within the period of six assessment years it shall stand abated and the assessing authority cannot proceed with such pending assessment after initiation of search u/s 132 of the Act. It is that the plain and simple meaning is to be assigned to the words, “pending on the date of initiation of search u/s 132 of the Act” as used u/s 153A of the Act. In the present case before us, admittedly the search was conducted on assessee on 30-11-2010 and at that point of time assessment in the case of the assessee for assessment year 2008-09 was pending scrutiny as notice u/s 143(2) of the Act was issued and assessment was not completed. In view of the second proviso to Section 153A (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 the assessee also can claim any deduction or exemption or relief not claimed in regular return of income, because assessment was never made in the case of the assessee in such situation. Once, assessment gets abated, the original return filed loses its originality and the return filed in response to notice u/s 153A of the Act issued in consequence to search u/s 132 of 9 34 & 35/Mum/2015 the Act gets the place of original return. In that case, as per the provisions of Section 153A (1) of the Act, return filed under this section is deemed to be a return filed u/s 139(1) of the Act and the provisions of the Act apply to the same accordingly.
The case law relied on by the learned Counsel for the assessee in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) has explained this provision as under:-
“17. On the other hand, while canvassing the lead arguments, Mr. Dastur, learned senior counsel appearing for the assessee - All Cargo Global Logistics Ltd. would submit that the power under section of the IT Act and its ambit and scope has rightly been interpreted in the impugned judgment. Mr. Dastur submits that the title of the section itself is indicative of the object and namely assessment in case of search or requisition. This section contains a non-obstante clause so as to not to restrict the powers which are conferred by virtue of section 153A in the Assessing Officer. However, the exercise of power under that provision is where search is initiated under section 132 or books of account or other documents or assets are requisitioned under section 132A of the Act after 31st May, 2003. Then the Assessing Officer shall issue notice to such person requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years 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 the previous year in which such search is conducted or requisition is made. The first proviso mandates that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso, according to Mr. Dastur, is important because 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) pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. Equally, sub-section (2) of section 153A deals with a situation where any proceeding initiated or any order of assessment or reassessment is made under sub-section (1) but that has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Further, proviso to this sub-section says that such revival shall cease to have effect if the order of annulment is set aside.
10 34 & 35/Mum/2015 18. Mr. Dastur would submit that the Revenue is protected completely in this case. The power is of drastic nature and has to be exercised within constitutional parameters. 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, 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 but the foundation for all this and the action under section 153A is a search under section 132 or requisition of books of account and other assets under section 132A. In the present case, the notice under section 153A is founded on search. If there is no incriminating material found during the search, then, the Special Bench was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search reveals any incriminating material. If that is not found, then, in relation to the second phase of three years, there is no warrant for making an order within the meaning of this provision. In any event, the issue stands concluded by a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax (Central) Nagpur vs. M/s. Murli Agro Products Limited in Income Tax Appeal No.36 of 2009 decided on 29th October, 2010. It is, therefore, apparent that the law laid down by this Court is binding on the Revenue. If that is binding then the questions of law and with regard to applicability of section 153A need to be answered against the Revenue and in favour of the assessee”. This judgment of the Hon‟ble High Court also explains that the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate and this means that the assessment pending on the date of initiation of search shall cease to exist and no further action qua that assessment shall be taken by the AO. 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.
As regards to arguments made by the learned CIT DR, in view of the decision of the Hon‟ble Supreme Court in the case of Sun Engineering Vs. CIT 198 ITR 297 (SC) that the reassessment proceedings u/s 147 r. w. s. 148 of the Act are for the benefit of the Revenue and the assessee is not entitled to lodge a new claim of deduction/exemption/relief during the course of proceedings. We are not in agreement with the arguments of the learned CIT DR that the assessee is not entitled to lodge new claim in regard to abated assessment in the return filed in pursuance to notice u/s 153A of the Act for the reason that the proceedings u/s. 153A of the Act are totally distinct from the proceedings of reassessment u/s 147 of the Act and further, there is no assessment at all framed by the Revenue and assessment u/s 153A of the Act is the first assessment where assessee is entitled to make any claim because that is a regular assessment also apart from search assessment.
The learned CIT DR also relied on the decision of the Hon‟ble Delhi High Court in the case of Ashok Chaddha Vs ITO [2011] 337 ITR 399 (Del.) wherein the Hon‟ble High Court has interpreted the words “so far as may be” in Para 13 as under:- “13. The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A. The use of the words, "so far as may be" cannot be stretched to the extent of mandatory issue of notice under Section 143(2). As is noted, a specific notice was required to be issued under Clause (a) of sub-section (1) of Section 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A.” We find from the above judgment of the Hon‟ble Delhi High Court that the issue before the Hon‟ble Court was whether issue of notice u/s 143(2) is mandatory or not, which is not the case before us. Hence, this judgment relied on by the learned CIT DR is altogether different from the facts of the present case before us. However, we bow down to the proposition of law laid down by the Hon‟ble Delhi High Court.
12 34 & 35/Mum/2015 12. The learned CIT DR also relied on the decision of the Co-ordinate Bench of the Tribunal in the case of Jay Bharat Co-operative Housing Society Ltd. Vs ITO [2010] 125 ITD 90 (Mum.) wherein the Tribunal vide Para 13 and 14 has rejected the claim of the assessee for admissibility of new claim by observing as under:- 13. We have also examined the other order of the Tribunal, but they all were “rendered on different facts. Turing to the facts of the case, we find that AO has passed an order following the judgment of the apex Court in the case of Goetze (India) Ltd. vs. CIT (supra). Now, the question arises; can the Tribunal pass any order and direct the AO to adjudicate the claim of the assessee which was not entertained by the AO in the light of the judgment of the apex Court? The answer is certainly 'No'. If the Tribunal passes such order, it would certainly be against the spirit of the judgment of the apex Court. More so, it is a settled position of law that when a particular act or a power cannot be exercised directly by an authority, that act cannot be done indirectly under the garb of directions of the appellate authority. We, therefore, are of the view that since the AO has passed an order pursuant to the judgment of the apex Court, the order of the AO or the CIT (A) who has confirmed the order, cannot be disturbed or set aside in order to provide an opportunity to the assessee to prove his claim.
14. So far as admission of this ground is concerned, we are of the view that since this issue requires a proper verification of facts and the relevant facts are not available on record or in the assessment proceedings, it cannot be admitted. If we admit the ground, it has to go back to the AO for verification and the order for directing the AO to verify the facts and adjudicate the claim of the assessee would again be against the spirit of the Supreme Court judgment. We, therefore, are of the considered view that the claim of the assessee with regard to doctrine of mutuality cannot be entertained at this stage. In the light of these facts, we do not see any infirmity in the order of the CIT (A) and we confirm the same”.
On the other hand learned Counsel for the assessee relied on direct judgment of the Hon‟ble Bombay High Court in the case of CIT Vs M/s. Pruthvi Brokers & Shareholders Pvt. Ltd. in ITA No.3908 of 2010 dated 21st June, 2010, wherein the Hon‟ble Bombay High Court has held in Para 20 to 24 as under:- “20. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs.40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs.40,00,000/- under section 43B of the Act.
13 34 & 35/Mum/2015 21. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala- fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible.
It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax, (2006) 157 Taxman 1. We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of Income-tax (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held:- “4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income tax Act, 1961. There shall be no order as to costs.”
It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.
14 34 & 35/Mum/2015 24. A Division Bench of the Delhi High Court dealt with a similar submission in Commissioner of Income-tax v. Jai Parabolic Springs Limited, (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgment held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case. We find that the Supreme Court had not taken a different view in Goetze (India) Limited (Supra), wherein Supreme Court dismissed the appeal making it clear that the decision was for limiting the power of the assessing authority to entertain a new claim for deduction otherwise than by a revised return and did not limit the powers of the Tribunal u/s 254 of the Act.
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 may be 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 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.
15 34 & 35/Mum/2015 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 Section 153A (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.
The second issue in these appeals of the assessee is as regards to the order of the CIT (A) confirming the disallowance of Rs.3,18,10,93,993/- made by the AO claimed by the assessee as capital receipt on account of gain on prepayment of VAT / Sales tax. For this, the assessee has raised the following grounds No.1 and 2:- “1. The Learned CIT (A) erred in the facts and circumstances of the case and in law, in confirming the disallowance of Rs.3,18,10,93,993/- by the A. O. claimed as Capital Receipt on account of gain on prepayment of VAT / sales tax.
2. The Learned CIT (A) erred in law in not following the ratio laid by Hon‟ble Special Bench of the Jurisdictional Appellate Tribunal which has since been confirmed by the Hon‟ble Jurisdictional High Court”.
16. The facts relating to this issue are that the assessee treated “gain on pre- payment of deferred VAT/sales tax” on Net Present Value (NPV) basis amounting to Rs.318,10,93,993/- as capital receipt. The AO while completing 16 34 & 35/Mum/2015 assessment u/s 143(3) r. w. s. 153A of the Act treated this as revenue receipt. According to the AO, the assessee has availed of sales tax deferral scheme but, state government permitted premature re-payment of deferred sales tax liability at the NPV basis. According to the AO, the assessee treated this as capital receipt though credited to the P & L account, which in the view of the AO, were revenue receipts.
The AO as well as the CIT (A) has not examined this claim by observing that the fresh claim cannot be made after initiation of proceedings u/s 153A of the Act as the assessee has not made the claim in the original return of income filed u/s 139(1) of the Act. The AO noticed that the assessee in its computation of income filed along with the return of income in response to notice u/s 153A of the Act claimed a sum of Rs.318,10,93,993/- as capital receipt for the first time under the head “Items claimed in Return under section 153A – Gain on repayment of deferred value added/ sales-tax”. The rationale for the said claim is stated to be that gain on the prepayment of sales-tax deferral loan on net present value basis cannot be classified as remission or cessation of trading liability u/s. 41(1) of the Act.
At the outset, learned Counsel for the assessee stated that this issue is squarely covered by the decision of the Hon‟ble Bombay High Court in the case of CIT Vs Suzler India Ltd. (2014) 369 ITR 717 (Bom.) wherein the same issue was decided in favour of the assessee by observing in Para 51 and 52 as under:- “51. In the final analysis, we find that Mr. Gupta can derive no assistance from the Judgment of Polyflex India (P.) Ltd. (supra). There the Assessee paid excise duty on certain goods. Pursuant to the decision of the Customs, Excise and Gold Control Appellate Tribunal, a sum of Rs.9,64,206/- was refunded in September, 1988. The Excise Department filed an Appeal to the High Court but it was dismissed. A Petition for special leave to Appeal before the Hon‟ble Supreme Court was filed, but fate of that Petition was not known. For the assessment year 1989-90, the Assessing Officer brought to tax the amount by invoking section 41 (1) of the I. T. Act, but the Appellate Authority and the Appellate Tribunal held that there was no remission or cessation of trading liability so long as the Petition for special leave to appeal was pending in the Supreme Court. A reference was made to the High Court, but it held that the amount was assessable to tax. However, on the basis of the Counsel‟s argument that the Tribunal ought to consider the question whether the excise duty was actually refunded to the Assessee or not, the case was sent back to t he 17 34 & 35/Mum/2015 Tribunal. This was a clear case, in our view, as held by the Supreme Court; the statutory levy being discharged by the Assessee, the amount thereunder was refunded to him. That will definitely be a case where he obtains an amount in respect of the expenditure within the meaning of section 41(1) of the I. T. Act. It will not be a case of “benefit by way of remission/cessation of trading liability”. It is in these circumstances that the judgment of the Hon‟ble Supreme Court was rendered. We do not find that the observations and conclusions at pages 346 and 347 of the report, which are relied upon heavily by Mr. Gupta, would have any application in the facts and circumstances of the present case. The Judgment of the Hon‟ble Supreme Court is therefore distinguishable on facts.
We are of the opinion that the Revenue‟s argument really misses the point. The Incentive to establish a unit or factory in a industrially backward or hilly area is the core of the Sales Tax Deferral Scheme. Some time has to be given to the unit to establish itself before it starts giving corresponding benefit to the state. That opportunity is granted by deferring the remittance of the Sales Tax collected by the unit like the Assessee. In that regard, we have perused the compilation of admitted documents placed on record by Shri Dastur. From a perusal thereof, it is apparent that the Government Resolution dated 4th May, 1983 evolves a package of incentives to disperse the industries from Bombay – Thane – Pune belt and to attract them to underdeveloped and developing areas of the Stat4e of Maharashtra. This package evolves several measures to achieve this object. Then, there is a New Package Scheme of incentives, 1988. Both Schemes have clauses and paras containing Sales Tax deferral incentives. To carry this object further and also to achieve the purpose of early remittance of deferred Sales Tax collected by the units availing of the Schemes, the statutory option was incorporated in Section 38 by substituting the 4th proviso to sub-section 4 of section 38 of the Bombay Sales Tax Act, 1959. That is informed by the Trade Circular dated 12th December, 2002 issued by the Commissioner of Sales Tax, Maharashtra. A combined reading of the Schemes and this Circular reveals the legislative intent as noted above. In such circumstances, a proper understanding of all this by the Tribunal cannot be termed as perverse. The view taken by it is imminently possible. Once this conclusion is reached, the other Judgments cited by the Revenue are obviously distinguishable and on facts.”
We find that the Hon‟ble Bombay High Court has decided the issue in favour of the assessee by observing that where the assessee has made pre-mature payment of deferred sales tax on NPV basis of certain amount against the total liability and credited balance amount to its capital reserve account, the credited amount was capital receipt and it cannot be held to be a cessation or remission of a trading liability u/s 41(1) of the Act. Since, none of the authorities below have adjudicated this issue and facts are not available on records, we restore this issue back to the file of the AO to decide the same in view of the above decision of the 18 34 & 35/Mum/2015 Hon‟ble Bombay High Court in the case of CIT Vs Suzler India Ltd. supra. Accordingly, this common issue of all the three appeals of the assessee is set aside to the file of the A O and allowed for statistical purposes. 20. In the result, all the appeals of the assessee are partly allowed for statistical purposes. Order pronounced in the open court on 28-09-2016.