Case Law Details
A plain reading of Section 153A of the Income-tax Act, it becomes clear that on initiation of proceedings under Section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalized for those assessment years covered under Section 153A of the Act. By a circular No. 8 of 2003 dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalized assessment/ reassessment shall not abate. It is only because, the finalized assessments/reassessments do not abate, the appeal, revision or rectification pending against finalized assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalized for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A (1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1).
In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalized on 29.12.2000 relating to Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.
Moreover, since the A.O. had made addition on account of undisclosed income at Rs.89,19,477/- in the assessment order passed under Section 153A, there was no question of computing book profits under Section 115 JA of the I.T. Act. When the addition of undisclosed income was deleted by CIT (A) without any direction to compute the book profits, the A.O. was bound to modify the assessment order passed under Section 153A read with S. 143(3) of the Act as directed by CIT (A). Therefore, in the facts of the present case, no fault could be found with the A.O. in giving effect to the order of CIT (A). Consequently, the CIT could not invoke jurisdiction under Section 263 of the Income-tax Act on the ground that the assessment under Section 153A read with Section 143 (3) was erroneous or prejudicial to the interests of revenue.
HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
INCOME TAX APPEAL NO. 36 OF 2009
The Commissioner of Income Tax
– Versus –
M/s. Murli Agro Products Ltd.
Date of reserving the judgment : 21/10/2010
Date of pronouncing the judgment : 29/10/2010
CORAM : J.P.DEVADHAR AND
A.B. CHAUDHARI, JJ.
DATED : OCTOBER 29, 2010
JUDGMENT (PER J.P. DEVADHAR, J.) :
Heard learned Counsel for the parties.
2) Although several questions are framed by the revenue, the basic question raised in this appeal is, whether the Income Tax Appellate Tribunal is justified in cancelling the order of Commissioner of Income Tax passed under Section 263 of the Income Tax Act, 1961 ?
3) The assessment year involved herein is AY 1998-99. Assessment order for AY 1998-99 was passed under Section 143(3) of the Income Tax Act, 1961 (for short, `IT Act’) on 29/12/2000 determining loss of Rs.43,02,246/-. Thereafter on 3/12/2003, there was a search action at the business/office premises of the assessee wherein several incriminating documents/ articles were seized. On issuance of notice under Section 153A of the IT Act, dated 13/9/2004, the respondent-assessee filed return of income pursuant to the said notice on 29/8/2005 declaring loss of Rs.46,45,338/-. Thereafter the Assessing Officer passed an order on 30/3/2006 under Section 153A read with Section 143(3) of the IT Act, determining the concealed income at Rs.89,19,477/-.
4) On appeal filed by the assessee, the Commissioner of Income Tax (A) by his order dated 30/11/2006 deleted the concealed income computed by the Assessing Officer on 30/3/2006. Thereafter, the Assessing Officer gave effect to the order of the Commissioner of Income Tax (A) thereby restoring the total income (loss) at Rs.43,02,246/- as originally assessed on 29/12/2000. There is no dispute that the order of Commissioner of Income Tax (A) deleting the concealed income has attained finality.
5) The Commissioner of Income Tax was of the opinion that the total income computed in the assessment order passed under Section 153(A) of the Income-Tax Act after giving effect to the order of Commissioner of Income Tax (A) being less than 30% of the book profit, the Assessing Officer ought to have computed the total income by invoking Section 115JA of the IT Act. The Commissioner of Income Tax was also of the opinion that the deduction allowed under Section 80HHC in the original assessment order dated 29/12/2000 was not in accordance with law and, therefore, while passing the assessment order under Section 153A read with Section 143(3), the Assessing Officer ought to have correctly computed deduction under Section 80HHC. As the same was not done, the Commissioner of Income Tax invoked the jurisdiction under Section 263 of the IT Act and passed an order on 4/10/2007 to the effect that the assessment order dated 30/3/2006 as modified after giving effect to the order of the Commissioner of Income Tax (A) is erroneous and prejudicial to the interest of the revenue and accordingly directed the Assessing Officer to adopt the book profit at Rs.7,88,557/-.
6) Challenging the order of the Commissioner of Income Tax passed under Section 263 of the IT Act, the assessee filed an appeal and the ITAT by its order dated 5/1/2009 set aside the order of the Commissioner of Income Tax dated 4/10/2007 on the ground that neither the computation of book profit under Section 115JA nor deduction under Section 80HHC of the IT Act were the subject matter of the proceedings under Section 153A and, therefore, the Commissioner of Income Tax could not have invoked the jurisdiction under Section 263 of the IT Act. Challenging the aforesaid order, the present appeal is filed by the revenue.
7) According to Shri Jaiswal, learned Counsel for the revenue, once the proceedings under Section 153A of the IT Act are initiated, then the original assessment/reassessment orders already passed in the assessment years covered under Section 153A stand abated and the Assessing Officer is obliged to pass fresh assessment/reassessment orders and determine the total income afresh for those assessment years. In the present case, according to Mr. Jaiswal, the assessment order passed under Section 153 A read with Section 143(3) of the Income- Tax Act is erroneous and prejudicial to the interests of the revenue because, firstly, the A.O. had only determined undisclosed income and had not determined the total income which is the mandate of Section 153A of the Income-tax Act. Secondly, the total income computed after giving effect to the order of Commissioner of Income-tax (A) being loss which less than 30% of the book profit, the A.O. ought to have computed book profit as per Section 115JA of the Income-tax Act. Thirdly, the deduction allowed under Section 80 HHC of the Act in the original assessment was erroneous and since the original assessment order stood abated on initiation of proceedings under Section 153A of the Act, the A.O. ought to have correctly computed deduction under Section 80 HHC in the assessment order passed under Section 153A read with Section 143(3) of the Income-tax Act. Accordingly, Mr. Jaiswal submitted that in the facts of the present case, the Commissioner of Income Tax was justified in invoking jurisdiction under Section 263 and the ITAT committed an error in setting aside the order passed by the C.I.T.
8) We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as `undisclosed income’ or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficulty, the legislature by Finance Act 2003, decided to discard Chapter XIV B provisions and introduce Sections 153A, 153B and 153C in the IT Act.
9) What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made and thereafter assess or reassess the total income for those assessment years. The second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on the date of search/requisition. Section 153A (2) provides that when the assessment made under Section 153(A)(1) is annulled, the assessment or reassessment that stood abated shall stand revived.
10) Thus on a plain reading of Section 153A of the Income-tax Act, it becomes clear that on initiation of proceedings under Section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalised for those assessment years covered under Section 153A of the Act. By a circular No. 8 of 2003 dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/ reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal, revision or rectification pending against finalised assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalised for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A (1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1).
11) In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalised on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in the facts of the present case , initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000.
12) Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153 A proceedings.
13) In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.
14) Moreover, since the A.O. had made addition on account of undisclosed income at Rs.89,19,477/- in the assessment order passed under Section 153A, there was no question of computing book profits under Section 115 JA of the I.T. Act. When the addition of undisclosed income was deleted by CIT (A) without any direction to compute the book profits, the A.O. was bound to modify the assessment order passed under Section 153A read with S. 143(3) of the Act as directed by CIT (A). Therefore, in the facts of the present case, no fault could be found with the A.O. in giving effect to the order of CIT (A). Consequently, the CIT could not invoke jurisdiction under Section 263 of the Income-tax Act on the ground that the assessment under Section 153A read with Section 143 (3) was erroneous or prejudicial to the interests of revenue.
15) In the result, the decision of the Tribunal in quashing the order of C.I.T. passed under Section 263 of the I.T. Act cannot be faulted. Accordingly, we see no merit in the present appeal and the same is hereby dismissed with no order as to costs.
THANNX.