Abated section 153A assessments permit fresh claims, and pre-2018 unsold stock-in-trade cannot attract notional annual letting value.

In an abated section 153A assessment, the return filed in response to the notice substitutes the original return, so the assessee may raise a fresh claim. Lease rental from an Industrial Park/SEZ IT park is to be assessed as business income, not house property income. Disallowance under section 14A read with Rule 8D is confined to the exempt income earned, and the section 14A mechanism cannot be imported into book-profit computation under section 115JB beyond direct exempt-income related expenditure. For years before the 2018 amendment, notional annual letting value cannot be added for unsold flats held as stock-in-trade without a specific charging provision.

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Issues: (i) whether, in an abated assessment under section 153A, the assessee could raise a fresh claim and whether lease rental from an Industrial Park/SEZ IT park was taxable under the head business income; (ii) whether the disallowance under section 14A read with Rule 8D could be restricted to exempt income and whether any adjustment could be made under section 115JB; and (iii) whether notional annual letting value could be added in respect of unsold flats or units held as stock-in-trade.

Issue (i): whether, in an abated assessment under section 153A, the assessee could raise a fresh claim and whether lease rental from an Industrial Park/SEZ IT park was taxable under the head business income.

Analysis: Once the search caused the pending assessments to abate, the return filed in response to section 153A replaced the earlier return and the assessment became a fresh assessment on the open record. In such a situation, the assessee was entitled to make a claim different from the original return. On merits, the income from letting out premises in an Industrial Park/SEZ, as clarified by the CBDT circular and supported by the settled line of decisions, was to be assessed as business income and not as income from house property.

Conclusion: The assessee could raise the fresh claim, and the lease rental income was assessable under the head business income, in favour of the assessee.

Issue (ii): whether the disallowance under section 14A read with Rule 8D could be restricted to exempt income and whether any adjustment could be made under section 115JB.

Analysis: The disallowance under the normal provisions could not exceed the exempt income earned during the year. For computation under section 115JB, the mechanism of section 14A could not be imported to enlarge book-profit adjustments, though direct expenditure relatable to exempt income could still be considered in accordance with the relevant explanation.

Conclusion: The disallowance was confined as directed by the first appellate authority, and the Revenue's challenge failed, in favour of the assessee.

Issue (iii): whether notional annual letting value could be added in respect of unsold flats or units held as stock-in-trade.

Analysis: For the years involved, the statutory amendment inserting section 23(5) with effect from assessment year 2018-19 did not govern the assessment years in dispute. In the absence of an applicable charging basis for a notional ALV on unsold stock-in-trade for the relevant years, the addition on estimate basis could not be sustained.

Conclusion: The addition on account of deemed annual letting value was deleted, in favour of the assessee.

Final Conclusion: The Revenue's appeals failed on the substantive issues, the assessee obtained relief on the notional ALV issue, and the connected cross objections were allowed.

Ratio Decidendi: In an abated section 153A assessment, the return filed in response to the notice substitutes the original return and permits fresh claims, while lease rentals from notified Industrial Park/SEZ premises are taxable as business income; further, pre-2018 notional annual letting value cannot be added to unsold stock-in-trade without a specific charging provision.

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