2015 (6) TMI 524 - AT - Income Tax

Partnership firm's assessments remanded for thorough verification of claims; fair opportunity emphasized.

The Tribunal remanded the case involving a partnership firm's assessments for A.Y. 2008-2009 and 2009-2010 back to the A.O. for proper verification of ... Assessment under Section 153A/153C treated as a fresh assessment - entitlement to claim deductions in returns filed in response to notices under Section 153C/Section 142(1) - onus on assessing officer to verify and disprove claimed deductions - right to opportunity of being heard and verification of claims on meritsAssessment under Section 153A/153C treated as a fresh assessment - entitlement to claim deductions in returns filed in response to notices under Section 153C/Section 142(1) - Whether additional or enhanced claims for depreciation and interest made in returns filed in response to notice under section 153C (for A.Y. 2008-09) and in the revised return filed in response to notice under section 142(1) (for A.Y. 2009-10) could be entertained by the assessing officer. - HELD THAT: - The Tribunal accepted the view recorded by the CIT(A) that assessments under section 153A/153C are to be treated as fresh assessments and that a return filed under those provisions is to be treated as if filed under section 139(1). Consequently, there is no statutory bar to the assessee making additional or enhanced claims (such as depreciation and interest) in the returns filed in response to the post-search notices. The assessing officer, however, is required to verify such claims and bring cogent material to disprove them before rejecting them. The Revenue did not dispute the legal proposition that deductions not claimed in the original return can be claimed in returns filed under section 153A/153C or in revised returns filed in response to notices under section 142(1). [Paras 5, 6]Claims for depreciation and interest made in the returns filed under section 153C/section 142(1) are prima facie admissible and cannot be summarily rejected merely because they were not claimed in the original return; the assessing officer must verify the claims on merits.Onus on assessing officer to verify and disprove claimed deductions - right to opportunity of being heard and verification of claims on merits - Whether the matter should be remanded for verification of the assessee's claims for depreciation and interest and for affording opportunity to be heard. - HELD THAT: - The Tribunal noted that the CIT(A) allowed the claims but did not examine their merits or direct specific verification by the assessing officer. The Revenue accepted that the legal proposition allowing such claims was not disputed but contended that the AO should be given a chance to verify the claims. In consequence, the Tribunal modified the CIT(A)'s order by restoring the matter to the file of the assessing officer for limited purpose of deciding the allowability of depreciation on the office building and interest on loan after verifying all relevant aspects and after affording the assessee a proper opportunity of being heard. [Paras 8]Matter remanded to the assessing officer to verify the depreciation and interest claims on merits and to decide them in accordance with law after giving the assessee adequate opportunity of hearing.Final Conclusion: Tribunal upholds the legal principle that returns filed under section 153A/153C or revised returns filed in response to notices under section 142(1) may contain additional claims for deductions; however, the assessments are remanded to the assessing officer for verification of the depreciation and interest claims on merits and after affording the assessee opportunity of being heard. Appeals of the Revenue are partly allowed for statistical purposes. Issues:1. Assessment under section 153C for A.Y. 2008-2009.2. Assessment under section 143(3) for A.Y. 2009-2010.3. Appeals before Ld. CIT(A) challenging the A.O.'s decisions.4. Entertaining additional claims for depreciation and interest.5. Orders of Ld. CIT(A) directing the A.O. to adopt the income as declared by the assessee.6. Grounds of appeal by the Revenue.7. Decision of the Tribunal modifying the Ld. CIT(A) order.Assessment under section 153C for A.Y. 2008-2009:The case involved a partnership firm engaged in trading marbles and granites. A notice under section 153C was issued post a search action, but the A.O. rejected additional claims for depreciation and interest made by the assessee. The Ld. CIT(A) found merit in the assessee's contention that such claims should have been entertained under section 153C/153A. The Tribunal agreed that the A.O. should have verified these claims on merit and remanded the matter for further assessment.Assessment under section 143(3) for A.Y. 2009-2010:Similar to the previous year, the A.O. rejected additional claims made by the assessee post a search action. The Ld. CIT(A) directed the A.O. to adopt the income as declared in the revised return, emphasizing that the A.O. should verify the claims before rejecting them summarily. The Tribunal upheld the Ld. CIT(A)'s decision and remanded the matter for proper verification.Appeals before Ld. CIT(A) challenging the A.O.'s decisions:The assessee contended that assessments under section 153C/153A allow for new/additional claims, citing relevant judicial decisions. The Ld. CIT(A) agreed, emphasizing the fresh nature of assessments under these sections and directed the A.O. to consider the revised returns.Entertaining additional claims for depreciation and interest:The Ld. CIT(A) found merit in the assessee's claims for additional depreciation and interest, stating that the A.O. should have verified these claims on merit before rejecting them. The Tribunal upheld this view and remanded the matter for proper assessment.Orders of Ld. CIT(A) directing the A.O. to adopt the income as declared by the assessee:The Ld. CIT(A) directed the A.O. to adopt the income as declared in the revised returns, emphasizing that the A.O. should verify the claims before rejecting them summarily. The Tribunal upheld this direction and remanded the matter for proper assessment.Grounds of appeal by the Revenue:The Revenue challenged the Ld. CIT(A)'s decision to allow enhanced claims of interest and depreciation, arguing that assessments under section 153C are not denovo assessments. The Tribunal acknowledged the Revenue's concerns and remanded the matter for further assessment.Decision of the Tribunal modifying the Ld. CIT(A) order:The Tribunal modified the Ld. CIT(A) order and remanded the matter to the A.O. for proper verification of the assessee's claims for depreciation and interest. The A.O. was directed to afford the assessee a proper opportunity to be heard during this process.This detailed summary covers the issues involved in the legal judgment, the arguments presented by both parties, the decisions of the Ld. CIT(A), and the Tribunal's final ruling.