DCIT Vs United Stock Exchange of India Ltd. (ITAT Mumbai)
Conclusion: Additions could not be made in respect of assessments already completed if no incriminating material was found during search or during 153A proceedings.
Held: In CIT Vs. Continental Warehousing Corporation [2015 374 ITR 645] Bombay High Court held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceedings. Respectfully following the same, additions made by AO was deleted.
FULL TEXT OF THE ITAT JUDGEMENT
1. Aforesaid appeal by revenue for Assessment Year [AY] 2009-10 contest the order of the Ld. Commissioner of Income Tax (Appeals)-48 [CIT(A)], Mumbai, Appeal No.CIT(A)-48/I.T-187/DCCC-2(2)/2015-16 dated 22/11/2016. The assessment for impugned AY was framed by Deputy Commissioner of Income Tax, Central Circle -2(1), Mumbai [AO] u/s 143(3) read with Section 153A of the Income Tax Act, 1961 on 27/03/2015 wherein the expenses of Rs.135.08 Lacs as claimed by the assessee has been disallowed in terms of Section 3 of the Income Tax Act, 1961. During impugned AY, the assessee being resident corporate assessee was engaged in providing exchange platform for trading in currency derivatives. The effective sole ground raised by revenue reads as under:-
On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.1,35,08,000/- made in order u/s 153A r.w.s. 143(3) stating that in the absence of any incriminating material on issue, addition so made was beyond the scope and ambit of an assessment envisaged u/s 153A of the I.T.Act, 1961.
The assessee, in cross objections, has supported the stand taken by Ld. CIT(A) in the following manner:-
On the facts and circumstances of the case and in law, the Hon’ble CIT (A) has correctly deleted the addition of Rs.1,35,08,000/- on account of absence of any incriminating material on issue.
2. The assessee was assessed u/s 153A pursuant to search action u/s 132(1) upon assessee on 30/03/2012 by the investigation wing of the department. In response to notice u/s 153A, the assessee offered original return of income filed by the assessee on 07/05/2010 declaring loss of Rs.3.50 Lacs. It was noted that the assessee started business operations from 20/09/2010 and therefore, there was no business carried out by the exchange in the impugned AY. In view of the same, the assessee, in the opinion of Ld. AO, was not at all entitled to claim any expenditure before setting up of the business in terms of Section 3 of the Income Tax Act, 1961. Consequently, the expenditure of Rs.135.08 Lacs as claimed by the assessee was treated as capital expenditure and disallowed in the hands of the assessee.
3. Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 22/11/2016 wherein after due consideration, the matter was concluded in the following manner:-
7.I have given a careful consideration to the appellant’s contention. Section 153A of the Act postulates the assessment in cases of search or requisition under section 132 or 132A of the Act respectively. The said section envisages that the AO shall assess or reassess the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. The second proviso to section 153A(1) of the Act also prescribes that assessment or reassessment, if any, relating to any assessment year falling within the period of six years referred to in this sub-section pending on the date of initiation of search u/s. 132 or making of requisition u/s. 132A of the Act as the case may be shall abate.
7.1 The chronologies of events relating to status of assessment of the impugned assessment year are that a search action u/s.132(1) of the Act was conducted on the appellant on 30/03/2012. Prior to that, the appellant had filed the return of income u/s. 139 of the Act, on 07/05/2010. It is the case of the assessee that assessment/reassessment was not pending prior to the date of initiation of search. Subsequent to search action, the AO issued notice u/s. 153A(1)(A) for A.Y.2009-10 on 26/09/2013, in response thereof the assessee vide letter dtd. 0810/2013 requested the AO to consider its original return of income filed on 07/05/2010 and total loss of Rs. (-)3,50,107/-, being the same as declared earlier in the original return of income. The assessment u/s. 143(3) r.w.s, 153A was completed on the total income of Rs.1,35,08,000/- on 27/03/2015. whereby he made the following addition:
