AI Drafter 
TaxTMI 
TaxTMI 
2023 (1) TMI 1301
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.... 2. "The Ld. CIT(A) erred in not considering the decision held by the Hon'ble apex Court in CIT v. Sun Engineering Works (P) Ltd. and by the Hon'ble Bombay High Court in K. Sudhakar S. Shanbhag v. ITO with regard to the fact that assessee can't seek relief not claimed earlier during post search assessment and reassessment as per section 153A of the Act". 3. "The Ld. CIT(A) erred in deleting the disallowance of interest expenses which was attributable to monies borrowed for making payment of Rs.100.80 Crores to M/s Om Metals Ltd. and M/s Wellwisher Construction & Finance Pvt. Ltd even when the payment of Rs.100.80 Crores did not qualify the provision of section 37(1) of the IT Act." 4, "The Ld. CIT(A) erred in holding the payment of Rs.100.80 Cr. to M/s OM Metal Pvt. Ltd. and M/s Well Wisher Construction and Finance Pvt. Ltd. as genuine business expenditure without paying heed to the decision of Hon'ble Apex Court in the case of MC Dowell and Co. Ltd. Vs CTO 154 ITR 148 even though the excess amount refunded and received is nothing but colorable transactions which results to manipulation". 5. "The Ld. CIT(A) erred in partly allowing the appeal of ....
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....9(1) of the Act, the lease rentals were offered under the head "Income from House Property" whereas in the return of income furnished u/s 153A of the Act, these lease rentals were offered under the head "Profits and Gains from Business or Profession". The assessee submitted that the said change of course was adopted pursuant to the CBDT Circular 16/2017 which clarified that the lease rentals derived by entities in SEZ/Industrial Park should be taxed under the head "Profits and Gains from Business or Profession". The AO did not agree with the assessee since the lease rentals for AY. 2014-15 & AY. 2015-16 in the case of assessee has been considered under the head "income from house property" and therefore, following the principles of consistency, he did not accept the claim of the assessee. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to allow the same by holding as under: - "7.2 From the chart provided by the assessee, it is noted that the investment assets or the value of assets generating lease rental have come into existence in FY. 2013-14, the value of total assets being Rs 114 crore, predominantly in form of buildings but some plant....
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.... is found acceptable for two reasons. It is noted that the statutory deduction under income from house property is with reference to the rent received and not the cost of asset which has been leased. The cost of asset in the balance sheet does not change with each year of rental receipt. Even when the asset is sold after certain years, the cost of asset for computing capital gains is the original cost of the asset and not the depreciated value of the asset. Hence, in such a circumstances, it is required to be held that the cost of asset does not depreciate when the income from such asset is being offered under the head 'House Property'. It is only when the asset becomes a business asset and the income is being shown as income from business and profession, the depreciation is allowed to the assessee and the value of asset gets altered every year based on the depreciation claimed. When the asset is sold, the assesse is allowed relief only to the extent of remaining depreciated value. 7.6 Under the circumstances, it is to be held that if this is the first year in which the income from lease rentals is being offered to tax under the head 'PGBP', then the original cost of the a....
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.... appeals and the Tribunal while upholding the action of Ld. CIT(A) held as under: - "12. Aggrieved by the above order of Ld.CIT(A), Revenue preferred appeal before us raising following common grounds in its appeals. Grounds raised for the A.Y. 201516 are reproduced below: - "1. The Ld. CIT(A) erred in considering lease rentals income earned by the appellant as income under the Profit or Gains from Business and Profession (Profit and Gain from Business and Profession) as against Income from House Property as claimed in its Return of Income filed u/s 139(1) of the Act. 2. The Ld. CIT(A) erred in not considering the decision held by Hon'ble Apex Court in CIT v. Sun Engineering Works (P) Ltd. and by the Hon'ble Bombay High Court in K. Sudhakar S. Shanbhag v, ITO with regard to the fact that assessee can't seek relief not claimed earlier during post search assessment as per section 153A of the Act. 3. The Ld. CIT(A) erred in partly allowing the appeal of the assessee on the ground of depreciation on assets without considering the fact that in post search assessment proceedings, an assessee can neither claim nor be allowed a deduction that ....
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....der section 153A of the Act, the return filed under section 139 of the Act is replaced by it and the entire assessment proceedings will be conducted by the revenue considering the return filed under section 153A of the Act only. Accordingly, all the provisions which are applicable to the return filed under regular course will be applicable to the return filed under section 153A of the Act. 17. Further, Ld AR brought to our notice the decision of Hon'ble Bombay High Court in case of Pr.CIT v. JSW Steel Limited [(2020) 422 ITR 71 (Bom)], wherein, Hon'ble Bombay High Court revisited the issue as to whether in case of an abated year, the assesse is allowed to raise fresh claim, which was not raised in the original return of income. While adjudicating the matter, Hon'ble Bombay High Court held that in accordance with second proviso to section 153A of the Act, once the assessment got abated, it is open for both assessee and revenue to make claims for allowance or disallowances as the case maybe. It has been held that once the assessment gets abated, the original return loses its originality and the subsequent return filed under section 153A of the Act takes place of ....
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....e Assessing Officer that the assessee cannot claim new benefit in the revised proceedings u/s 153A of the Act. However, Ld CIT(A) decided the issue in favour of the assessee considering the fact on record that the assessment years under consideration are abated, therefore, the assessee can claim fresh or modified claim. After considering the submissions of both counsels, we observe that this issue is well settled and the Hon'ble Bombay High Court held in the case of B.G. Shirke Construction Technology P Ltd (supra) that in the case of abated assessments the return filed u/s 153A replaces the return filed u/s 139 of the Act, for the sake of clarity, it is reproduced below: "10. The reliance on the decision of the Apex Court in Sun Engineering Works (P.) Ltd. (supra) by the Revenue is misplaced. The above case dealt with re-opening of an assessment under Section 147 of the Act. It was in that context that the Apex Court observed that the Order passed under Section 147/148 and the Assessing Officer is primarily restricted to such income which has escaped assessment and does not permit reconsideration of issue which are concluded in the earlier assessment years in favour of th....
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....tc. which remained to be claimed in his earlier/regular return of income. This is so because assessment was never made in the case of the assessee in such a situation. It is fortified that once the assessment gets abated, the original return which had been filed looses its originality and the subsequent return filed under section 153A of the said Act (which is in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly. If that be the position, all legitimate claims would be open to the assessee to raise in the return of income filed under section 153A(1). 16. From the above we conclude that in view of the second proviso to section 153A(1) of the said Act, once assessment gets abated, it is open for the assessee to lodge a new claim in a proceeding under section 153A(1) which was not claimed in his regular return of income, because assessment was never made/finalised in the case of the assessee in such a situation." 23. Wi....
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.... arises." 10. Since the Ld. CIT-DR could not point out any change in facts or law, respectfully following the order of this Tribunal in assessee's own case DCIT Vs. Mindspace Business Park Pvt. Ltd. (supra) and the Hon'ble Bombay High Court in the case of CIT-II Pune Vs. Magarpatta Township Development and Construction Co. Ltd. (supra), we uphold the action of the Ld. CIT(A) and dismiss the ground nos. 1 & 2 of the revenue; coming to ground no. 5, (depreciation on assets) . First of all, we note that assessee has not contested the direction/decision of Ld. CIT(A) on this issue by filing a crossappeal/Co, so we have to examine the action of Ld. CT(A) in the light of the ground no. 5 raised by the revenue. Having gone through the ground against the action of Ld. CIT(A), we are of the opinion that since we upheld the action of Ld. CIT(A) allowing the assessee to change the head of income in an abated assessment year pursuant to a notice of AO u/s 153A of the Act, (ie. change of rental income from "income from house property" to 'income from business profession'), the AO is directed to re-compute the depreciation claimed by the assessee treating AY. 2016-17 as the first year in whic....