TaxTMI 
TaxTMI 
2021 (10) TMI 1319
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....t assessment which are completed do not abate and that proceedings u/s 153A/153C do not empower the AO to re-adjudicate the same issues again unless fresh incriminating material is found during the course of search 2. Whether on the circumstances and facts of the case, the learned CIT(A) was right in holding that the AO cannot disturb the assessment order which has attained finality, unless the material Gathered during the search established that the income computed in the finalized assessment was not in accordance with the facts unearthed during the search ? 3. Whether on the circumstances and facts of the case, the learned CIT(A) was right in relying on the decision of Bombay High Court in the case of Continental Warehousing Corporation(374 ITR 645), even though the Department has not accepted the decision and has filed SLP before Hon'ble Supreme Court on the issue which is still pending ? 4. Whether on the circumstances and facts of the case, the learned CIT(A) was right in deleting disallowance made by the AO with regard to the business expenditure of Rs. 3,20,86,059/- debited to Profit & Loss account and to carry forward the same to the construction Work-in-Progress ....
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....essee filed the return of income on 07.01.2015 declaring the same loss as it had returned in the original return of income. Finally, the assessment was completed vided order dated 28.03.2016 passed under section 153A read with section 143(3) of the Act wherein the total income was assessed at Rs. 55,04,550/- against the retuned loss of Rs. 2,61,45,374/-. 5. The assessee challenged the jurisdiction of the AO to make addition in the assessment framed under section 153A read with section 143(3) of the Act on the ground that the assessment had attained finality on the date of search and has not abated on that date. The Ld. CIT(A) after admitting the ground of the assessee adjudicated the same in favour of the assessee by observing and holding and under: "6.11 In the case of completed assessments, the provisions of Section 153A of the Act clearly restrict the scope of the assessment under these section to the extent of the material unearthed during the course of the search operation. It is evident from the assessment order that during the course of the search action, no incriminating material was found at the premises of the appellant based on which the addition has been made by the ....
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....t the completed proceedings attains finality. The use of the phrase 'so far as may be' in section 153A(1)(a) implies that all the provisions of the Act as contained under Chapter XTV prescribing the procedure for assessment or under any other Chapter of the Act with respect lo1 the return of income filed U/s. 139 shall be applicable to the returns filed pursuant to notice issued U/s. 153A/153C of the Act. The applicability of those provisions which are inconsistent with the provisions of section -153A are restricted by the use of the phrase 'so far as may be'. 6.15 As such, for the assessments proceedings which are abated, the AO gets all the powers prescribed under the law, as if the assessment is being made for the first time. Thus, if the assessment is made for the first time, all the provisions of assessment, relevant for making of an assessment u/s. 143(3) shall be applicable. In the case of re-assessment, the principles pertaining to assessment u/s .147/148 of the Act shall become applicable. As far as the assessments/reassessments, which do not abate or which have attained finality, the principle of time barring rule comes into play. The assessee acquires a....
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....ted. Similarly on annulment of assessment made under Section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1)." 6.18 A similar view has been taken by the Hon'ble Bombay High Court (Nagpur Bench) in case of Murli Agro Products Ltd Vs. CIT 49 Taxman.com 172in ITA No 36 of 2009, wherein it has been held that on initiation of proceedings U/s. 153A, it is only the assessment proceedings that are pending on the date of conducting search U/s. 132 or making requisition U/s. 132A of the Act that stand abated and not the assessments already finalised. The relevant excerpts of the judgment are reproduced hereunder:- "9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding (he assessment year relevant to the previous ....
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.... the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act." 6.19 In view of the aforesaid detailed discussion and judicial precedents, I am of the view that assessments which are completed do not abate. Further, proceedings U/s. 153A of the Act do not empower the AO to re-a....
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....es incurred during the year towards cost of const0ruction were shown in the work in progress account. Out of the total expenses incurred during the year, the expenses to the extent of Rs. 130,50,41,601/- were shown as project work in progress after reducing the interest income on fixed deposits of Rs. 55,04,550/-. The remaining expenses of Rs. 3,20,86,059/- were debited to P&L account and after making some adjustments, the net loss was computed at Rs. 2,61,45,374/- which was shown in the return of income. According to the AO the project was in progress and the expenses debited to the P&L account should have been added to the project work in progress and accordingly a show cause notice was issued to the assessee as to why the business loss claimed by the assessee should be disallowed. The assessee replied the show cause notice by submitting that assessee is following project completion method of accounting and accounting has been done pursuant to accounting standard-9 for revenue recognition issued by ICAI. The assessee filed bifurcation of total expenses which were capitalized as project work in progress as well as the expenses which were written off during the year. The assessee s....
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.... that during the year under consideration the assessee earned income by way of interest on fixed deposits of Rs. 55,04,550/- which was reduced from project work in progress . According to the AO the said interest income should be taxed as income from other sources and accordingly a show cause notice was issued. The assessee replied the show cause notice by submitting that the assessee has raised huge funds and there is a gap between raising of funds and deployment of funds. During the intervening period these funds are to be kept in the fixed deposits in order to reduce the interest cost of borrowings. The assessee submitted that the income from these fixed deposits are directly due to capital receipt of the assessee company to meet the requirement of project undertaken at Bengaluru and this is an income which is accrued to the assessee in the course of business and the said interest income is inextricably linked to the business of the assessee and has to be reduced from project cost of inventory. The AO did not accept the contention of the assessee and treated the interest income as income from other sources and brought to tax accordingly. 14. After hearing both the parties and p....
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....red. 17. In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by following the decision of the coordinate Bench of the Tribunal in ITA No.2067/M/2014 for A.Y. 2009-10 in assessee's own case wherein Rs. 14,87,379/- was claimed and allowed by the AO. However, the Ld. PCIT revised the assessment under section 263 of the Act on this issue which was reversed by Ld. CIT(A). The operative part of Ld. CIT(A) is reproduced as under: "17.2 I have noted that this issue is duly covered by the Hon'ble ITAT's judgment dated 23.09.2015 pronounced in ITA No. 2067/Mum/ 2014 for the A.Y. 2009-10 in the Appellant's own case, wherein the preliminary expenditure of Rs. 14,87,379/- claimed by the appellant in A.Y. 2009-10 was considered to be an allowable expenditure u/s. 3513 of the Act. The relevant excerpts of the said judgment wherein the order passed by the CIT u/s 263 of the Act was set-aside by the Hon'ble ITAT on this issue is reproduced hereunder:- "5. We have heard the rival submissions and carefully perused the order of the CIT. Undisputedly, the assessment was made u/s 143(3) of the Act. We have also gone through the contents of the impugned no....