Wednesday, December 7, 2011

S. 153A: Assessee can agitate claim which was given up at s. 143(3) stage

DCIT vs. Eversmile Construction Co Pvt Ltd (ITAT Mumbai)

S. 153A: Assessee can agitate claim which was given up at s. 143(3) stage

The assessee filed a ROI declaring a loss of Rs. 3.93 crores. The AO passed a s. 143(3) order by which he disallowed interest of Rs. 58 lakhs. The assessee accepted the disallowance and it became final. Subsequently, pursuant to a search u/s 132, the assessee filed a ROI u/s 153A in which it reserved its right to claim deduction for the said interest of Rs. 58 lakhs. The AO rejected the claim though the CIT (A) gave part relief. The department filed an appeal before the Tribunal claiming that in s. 153A proceedings the assessee was not entitled to seek relief on additions which were made in the original assessment as s. 153A did not permit assessment at an income lower than the one assessed in original assessment. HELD dismissing the appeal:

S. 153A requires the AO to make the assessment afresh and compute the "total income" in respect of each of the relevant six assessment years. There is no inhibition on the jurisdiction of the AO on the including of new income and likewise there is no restriction on the assessee to claim any deduction which was not allowed in the original assessment. The determination of total income u/s 153A has to be done afresh without any reference to what was done in the original assessment. The fact that there was an addition in the original assessment does not preclude the assessee from contesting it in the s. 153A proceedings. As it is a fresh exercise of framing assessment of "total income", the assessee is not estopped from arguing about the merits of his case qua the additions made in the original assessment. Debarring the assessee from making a claim about the deductibility of any item, which was earlier disallowed, counters the very concept of fresh assessment of total income (Sun Engineering Works 198 ITR 297 (SC) & Goetze (India) Ltd 284 ITR 323 (SC) distinguished)

Note: Contrast with Anil Kumar Bhatia 1 ITR 484 (Delhi)(Trib) & the cases referred to therein where it was held that s. 153A does not authorize a "de novo" assessment & completed matters could not be revived

Related Judgements
Anil Kumar Bhatia vs. ACIT (ITAT Delhi) S. 153A does not authorize the making of a de novo assessment. While under the 1st Proviso, the AO is empowered to frame assessment for six years, under the 2nd Proviso, only the assessments which are pending on the date of initiation of search abate. The effect is that…
Manori Properties Pvt Ltd vs. ITO (ITAT Mumbai) The claim regarding "business loss" cannot be entertained because, though the CIT (A) has dealt with the issue, there is no specific ground. The claim is also not maintainable under Rule 27 since that applies only to a Respondent in the appeal
DCIT vs. Reclamation Realty India Pvt. Ltd (ITAT Mumbai) In Circular 204 dated 24.7.1976, the CBDT has accepted that u/s 23(1)(a) the "sum for which the property might reasonably be expected to let from year to year" is the municipal valuation of the property. The same view that the Municipal valuation is the annual value u/s 23(1)(a) has…

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