Assessment under search-related proceedings: return in response substitutes original and taxpayer may lodge fresh claims; appeals remanded.

Assessments concluded under proceedings initiated by search/seizure notices result in the return filed in response to that notice being treated as substituting the original return, and the taxpayer may lodge fresh claims in abated assessments; the legal reasoning relies on analogy with prior decisions recognizing that provisions applicable to returns filed under normal assessment procedure continue to apply to returns filed in response to search-related notices, consequently enabling additional claims in abated years. Administrative dismissal of appeals as infructuous was held improper, directing reconsideration of admissibility and sustainability of the claims on merits.

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Issues: (i) Whether the First Appellate Authority was justified in dismissing the appeals as infructuous where assessments were completed under section 153C of the Income-tax Act, 1961; (ii) Whether the assessee is entitled to raise fresh/additional claims in returns filed in response to notices under section 153C where prior assessments had abated.

Issue (i): Whether dismissing the appeals as infructuous was justified.

Analysis: The appeal challenges the CIT(A)'s conclusion that the appeals were infructuous because the assessing officer had merely adopted figures from an earlier intimation under section 143(1). The Tribunal examined authorities addressing assessments arising from search/requisition provisions and the legal effect of abatement under the second proviso to section 153A(1). It distinguished cases dealing with regular assessments under section 143(3) / re-opening under section 147 from assessments under section 153C where the return filed in response to notice substitutes the earlier return for abated proceedings.

Conclusion: The Tribunal held that dismissal as infructuous was incorrect and the appeals should not have been treated as infructuous.

Issue (ii): Whether fresh or additional claims can be raised in returns filed in response to notices under section 153C for abated assessments.

Analysis: The Tribunal relied on the statutory scheme embodied in section 153A/153C and authoritative decisions recognizing that where assessments pending at the time of search abate, the return filed under section 153A/153C is to be treated as a return under section 139(1). Consequently, assessment under section 153A/153C is a fresh assessment for the abated years and both revenue and assessee can raise matters (including fresh claims) in that proceeding. The Tribunal contrasted this with decisions applicable to unabated/completed assessments and noted that those decisions do not prohibit fresh claims in abated assessments.

Conclusion: The Tribunal concluded that the assessee is entitled to raise additional/fresh claims in the proceedings under section 153C where the earlier assessment had abated, and therefore the issues should be decided on merits by the First Appellate Authority.

Final Conclusion: The appeals were allowed for statistical purposes and the matters remitted to the First Appellate Authority for fresh adjudication on merits in accordance with law.

Ratio Decidendi: Where assessments pending on initiation of search stand abated under the second proviso to section 153A(1), the return filed in response to notices under section 153A/153C is to be treated as a return under section 139(1), permitting the assessee to lodge fresh claims in the resulting assessment proceedings.

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