TaxTMI 
TaxTMI 
2025 (9) TMI 163
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....A) erred in law and on facts in upholding the action of the AO making the addition of Rs. 2,20,00,000/- in the completed assessment, on account of the alleged cash loan advanced by the appellant to Mr. Nilesh Bharani / Evergreen Enterprises as an unexplained investment u/s 69 of the Act where admittedly during the search on the assessee no incriminating material /evidence showing the alleged undisclosed income was found and following the judgment dated 24/04/2023 of the Hon'ble Apex Court in PCIT v Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC), the addition must be deleted. 2. The CIT (A) erred in law and on facts in confirming the estimated addition of Rs. 16,35,558/- made u/s 56 of the Act in the completed assessment presuming interest earned on the alleged cash loans given by assessee and assesseed as unexplained investments though no incriminating material at all was found during the search in the premises of the assessee. Thus, following the judgment dated 24/04/2023 of the Hon'ble Apex Court in PCIT v Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC), the addition must be deleted. 3. The CIT (A) erred in law and on facts and circumstances....
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..../s 153A dated 29.12.2019 and the impugned appellate order are bad in law as the additions have been framed /confirmed by applying the provisions of the section 69 and 56 of the Act without appreciating the facts and exclusively relying upon the statement of Mr. Nilesh Bharani and other persons and personal ledgers (unsubstantiated & uncorroborated) which suffered from following infirmities: a) that during the cross examination of Mr Nilesh Bharani (Creator of alleged incriminating material seized and exclusive base of addition) by other person searched (since cross- examination to assessee could not materialize) categorically denied to have taken any cash loan from so called alleged lenders and also denied to have paid any interest to them; b) Mr. Nilesh Bharani & other persons had also retracted the statements given by them during the search / investigation proceedings; c) Mr. Nilesh Bharani had filed an affidavit to the extent before the assessing officer denying all the allegations of the revenue and owned up all these transactions in personal capacity, recording all ingenuine compiled contacts and maintained ledgers written by pencil. d) By n....
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....h loan advanced in Rs Addition u/s 56 for notional interest earned on cash loan advanced in Rs 2012-13 2,20,00,000 16,35,558 2013-14 3,01,75,000 43,29,867 2014-15 3,78,00,000 82,84,097 2015-16 1,97,00,000 1,24,23,417 2016-17 - 1,23,63,666 (Abated Assessments) 2017-18 1,50,000 94,04,826 2018-19 46,70,000 99,59,373 5. First of all it is seen that ld. AO has incorporated the statement recorded u/s. 132(4) of Mr. Anil Shah, relevant extract of which are reproduced hereunder:- Statement of Mr Anil Shah the CEO and a partner of the assessee: Q.22 Have you ever entered into any transactions with Mr Nilesh Bharani? Ans: No sir, I have not entered into any transactions with Mr Nilesh Bharani. Q.23 What are the relations you have with Mr Nilesh Bharani? Ans: I have no relation with Mr Nilesh Bharani. Q. 24 Mr Nilesh Bharani in his statement dated 11.10.2017 attached as Annexure -2 has stated in reply to Question No 21 that he is engaged in cash lending and borrowing. Kindly confirm the same? Ans: Yes sir, I can confirm the same. Q....
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.... Ans: Yes, the telephone number as mentioned in reply to Question No 31 belongs to me. Q.33 Do you have anything to say about the details on Annexure 4? Ans: I do not know what the statement is nor do I understand the various names and figures mentioned in it. I fail to understand why I have been asked to read it. Q.34 Please confirm that the entry against Name on No 13 in Pg 1 of Annexure 4 matches with the entry on top of page 1 of Annexure 3 to this statement? Ans: I do not know what these documents are. I fail to understand why this question has been asked to me. All I can say is the name mentioned against Name on No 13 in Pg 1 of Annexure 4 is Le Shark. On Pg 1 of Annexure-3 the inscription on top is 291 L105 A (Anil Bhal) (LeShark). Q.35 Please confirm that the entry against Outstanding amount (in '000) on No 13 in Pg 1 of Annexure 4 matches with the entry on top of page 2 of Annexure 3 to this statement? Ans: I do not know what these documents are. I fail to understand why this question has been asked to me. As I can read it, in the column Outstanding amount (in '000) mentions 76520 and the On Pg 2 of Annexure-3....
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..../s. 132(4) and therefore, the information becomes part of the incriminating evidence. On a specific question raised at the time of hearing to the ld. CIT DR, whether any kind of corroborative evidence or material was found from the search of the assessee's premises, he submitted that the main material which was found in the case of Nilesh Bharani and Sons and since assessee was questioned, the Act of confrontation alone suffices to trigger the addition u/s. 153A. 7. In rejoinder Mr. Vinod Kumar Bindal submitted that there are consistent judicial pronouncement that mandate the foundational requirement of incriminating material being found in the course of search conducted in the premises of assessee not elsewhere. If any such material has been found in search of other person, then there is a proper procedure laid down under the Act i.e. u/s. 153C. He once again relied upon the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell (supra) had referred to the following passage:- "14(iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassesss taking into consideration the other material in respect of completed ass....
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....itiated u/s 148 of the Act in respect of the said incriminating information found during the course of a search up to 31/03/2021 on some other assessee is illegal and is ab initio as the same can be considered only by taking recourse to the provisions of the section 153C r.w.s. 153A of the Act. Thus, the assessment of the said amount of LTCG, which was claimed to be exempt u/s 10(38) of the Act by the assessee, made u/s 147 of the Act is beyond the scope of section 147, albeit it can be roped in only u/s 153C. 93. If on overall appreciation of the scheme of assessment / reassessment of income after the income-tax searches on the assessee searched and also for the persons not searched based on detection of some incriminating information during the said searches conducted upto 31/03/2021, the following legal course of action is open for the AOs, which can be summed up, in the following manner: (i) It is mandatory for the AO of the person searched to make an assessment / reassessment of income of the said assessee u/s 153A of the Act for the 6 assessment years prior to the date of search and also for the extended 4 relevant assessment years, subject to fulfillment of....
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....from undisclosed sources. In that case, this fact was not admitted by the assessee and also Mr. Nilesh Bharani has retracted his statement before the Investigation Wing on 14.10.2017. The relevant observations and the finding of the Tribunal is as under:- 5.31. In the light of the above discussion, the cash loans given by the assessee to Shri Nilesh Bharani are assesseed as undisclosed investment in loans amounting to Rs. 56,00,000/- for AY 2014-15 to 2018-19, u/s 69 of the IT Act as detailed below. Assessment Year (Unabated Assessments) Addition u/s 69 for alleged cash loan advanced in Rs Addition u/s 56 for notional interest earned on cash loan advanced in Rs 2014-15 42,00,000 2,34,167 2015-16 14,00,000 7,98,583 2016-17 0 7,35,416 (Abated Assessments) 2017-18 0 3,80,208 2018-19 0 3,80,208 16. Thus, the additions were made by the AO in the above five AYs and also estimated the interest income having been earned thereon in cash outside the declared sources of income in its return of income by the assessee on the said amounts allegedly lent by the assessee to Mr Nilesh Bharani, though ther....
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....hereafter on 23/10/2017 proves that the said statement was not at all voluntary and where words were allegedly put in the mouth of the husband of the assessee. 19. The ld. Counsel also stated that no question at all, which must have been asked, as a corollary to the answer given by the husband of the assessee, as to where those records which were not available with him at that time, were kept to surface the truth. He stated that the Revenue Officers were duty bound to take consequent action u/s 132 r.w.s. 133A to find the said record and if the assessee was not forthcoming with such information, he could have been confronted about it then and there only and not later. However, the same was also not done later including on 03/11/2017 when another panchnama was drawn to vacate the prohibited order in continuation to the search proceedings undertaken on 06/10/2017 in the premises of the assessee had already retracted his earlier statement dated 10/10/2017 vide letter dated 23/10/2017, a fact not denied by the Revenue. The learned counsel of the assessee also drew the attention of the bench to the said statement of the husband of the assessee, which interestingly was not signe....
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....d on perusal of the facts on record and the decisions of the coordinate bench as mentioned above, we agree with the contention of the Ld. Counsel that the additions made on an uncorroborated statement of the husband of the assessee cannot be sustained at least within the scope of assessment under section 153A as the statement is not corroborated with any other material found from the search and statement per se cannot be reckoned as incriminating material. 23. It is a well settled proposition by various High Courts that addition cannot be made only on the basis of admission made by the assessee in the absence of any incriminating material. The Hon'ble Delhi High Court in the case of PCIT vs. Pavitra Realcon Pvt. Ltd. and others in ITA No.579/2018, 587/2018 and 590/2018 vide judgment dated 29/05/2024 had referred to various decisions which are as under:- "20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements. ....
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....ded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation, 23. In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment. ....
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.... vide judgment and order dated 12/02/2021 had held that statement u/s. 132(4) does not construe incriminating material for carrying out the assessment u/s. 153A of the Act and statement cannot justify the additions made by the ld. AO. Similarly other judgments which have been referred and relied upon by the ld. Counsel which are not repeated but underlying principle is that for making the addition within the scope and ambit of Section 153A for unabated assessment years, statement alone cannot be treated as incriminating material and here in this case this statement is not of the assessee but of her husband and here it is not a case of assessment u/s. 153C that any material or document found from search of other person has been made the basis for addition. Albeit in case of assessment u/s. 153A (searched person) wherein the addition for unabated assessment has to be confined on the basis of incriminating material found during the course of search. 25. It is undisputed fact that no material much less incriminating material was found during the course of search from the premises of the assessee in support of the additions, made for the quantum amounts of the alleged cash loan....
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....ke additions in the hands of another assessee under Section 153A, unless the procedural mandate of Section 153C is duly followed. 12. This Tribunal in Nilesh Bharani (supra), while elaborating the statutory architecture, observed that the jurisdiction under Section 153A is strictly confined to the material unearthed during the course of search conducted on the assessee himself. Where the Revenue seeks to act on the basis of documents found during the search of another person, the only lawful recourse is via Section 153C requiring satisfaction to be recorded that the material belongs to or pertains to the assessee and in the absence of such compliance, the jurisdiction exercised under Section 153A would be rendered invalid and the consequential assessment orders, non-est in law. 13. The same reasoning was echoed in Rupal Kashyap Mehta (supra), where this Tribunal found that the alleged transactions were neither corroborated by any material found during the search on the assessee nor independently supported by any verifiable documentation, and that even the statement relied upon by the Revenue had been retracted, unauthenticated, or was otherwise uncorroborated. On those ground....
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....9(1), were, in law, capital receipts not liable to tax. These claims had earlier been agitated in respect of A.Y. 2020-21 and were now sought to be extended to the earlier years under appeal. 17. The claim relates to incentives received under two specific schemes, namely, the Focus Product Scheme (FPS) for A.Ys. 2012-13 to 2016-17 (assessed u/s. 153A), and the Merchandise Exports from India Scheme (MEIS) for A.Ys. 2017-18 to 2018-19 (assessed under section 153A/143(3)). It is not in dispute that the assessee had initially offered these receipts as taxable income in its regular and search-based returns, filed both under section 139(1) and in response to section 153A. However, the assessee subsequently contended that such receipts were capital in nature and not liable to tax, and accordingly raised a fresh ground before the appellate authorities. 18. The assessee, a Limited Liability Partnership engaged in the manufacture and export of knitted hosiery garments, contended that the erroneous inclusion of these receipts as revenue income was based on mistaken professional advice. It was submitted that the incentives under FPS and MEIS were in fact capital receipts, intended to pro....
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....incentives at 2% of the FOB value of eligible exports made in freely convertible foreign exchange to designated "linked markets". The stated objective was "to continuously increase our percentage share of global trade." The policy expressly recognised that products with high export intensity and employment potential, particularly from sectors such as agriculture, handlooms, handicrafts, electronics, sports goods, and units in the North-East, required targeted fiscal support. These incentives were thus policy instruments designed not to compensate exporters for revenue loss but to promote long-term capital investment and global market expansion. The Ministry of Commerce, through FTP circulars and notifications such as No. 1 (RE-2012)/2009-14 dated 05.06.2012, clearly set out that the object of these schemes was to support exporters in entering new markets, improving competitiveness, and fostering employment. The Status Holder Incentive Scheme (SHIS), under which additional benefits were extended to high-performing exporters, had similar objectives of promoting capital investment and technology upgradation. These objectives, as recorded in the AO‟s remand report dated 11.04.201....
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....ill be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a pro-rate basis in terms of release of capital subsidy. There is no apparent or real financial loss to a borrower since the countervailing concession is extended to the loan amount." 7. In view of the above, the view taken in Sahney Steel & Press Works Ltd., could not be applied in the present case, as in said case the subsidy was given for running the business. For determining whether subsidy payment was 'revenue receipt' or 'capital receipt', character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test, as held in Sahney Steel & Press Works Ltd. itself and reiterated in later judgment in CIT v. Ponni Sugars & Chemicals Ltd. & Ors. (2008) 306 ITR 392, referred to in the impugned order of the Tribunal." 6. This Court notices that the Punjab and Haryana High Court took into account the previous binding ruling of the Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd. [2008] 174 Taxman 87/306....
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....ugs and also exports some of the products to various countries for which the government is providing certain subsidies under the Foreign Trade Policy. As noted above, the assessee initially, in its return of income, treated the subsidies received as Revenue receipts and offered the same to tax. However, before the learned CIT(A), the assessee filed additional grounds claiming that the subsidy received under the FPS, FMS, SHIS schemes are capital in nature and therefore cannot be included in the total income of the assessee. As noted elsewhere, the appellate authority can entertain a fresh claim made by the assessee, even if such a claim was not made in return of income or by way of a revised return of income. Thus, we find no infirmity in the impugned order admitting the additional ground filed by the assessee. 44. Further, we find that the learned CIT(A) analyzed the objectives of subsidies received under the aforesaid schemes in para 14.10 of its order, as under: "14.10 The Government of India notified the Foreign Trade Policy, 2009-14 under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 vide notification No 1 (RE-2012)/2009-14 dated 05.06....
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.... policy document of the Government of India, it is clear that the objective of the subsidy granted under FPS, FMS and SHIS is to increase the global market share, technology up gradation and employment generation in certain sectors. The object of the subsidy under these schemes was not to enable the assessee to run the business more profitably. The object was primarily to provide encouragement and support, which would create benefits of enduring nature, for the industry as a whole in certain sectors of economy. It is pertinent to recall here that in the remand report, after examining the facts brought on record by the appellant, AO has also concluded that the salient objective of the FPS, FMS and SHIS subsidy under the Foreign Trade Policy is to increase percentage share of global trade by increasing competitiveness in select markets, technological upgradation and expanding employment opportunity. In that view, I am of the considered opinion that, having regard to the 'purpose test' laid down by the Supreme Court in the aforementioned cases, the amounts received by the appellant during the year, under those Schemes as subsidy should be treated as capital receipt in its hand....
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....ts not be taxed merely due to procedural lapses. Appellate authorities are well within their jurisdiction to consider such claims when all relevant facts are on record. 29. Thereafter, ld. Counsel has quoted series of decisions of the Tribunal with the relevant paragraphs in support of this claim that it is capital receipt however, the same are not reiterated. A list of such decisions are as under:- • Eastman Exports Global Clothing Pvt. Ltd. in ITA No. 47/MDS/2016(AYs 2011-12&2012-13) Dated 17.05.2016 • Dy. CIT v. Aarti Drugs Ltd. [IT Appeal No. 2503 (Mum.) of 2021, dated 20-1-2023 • Bharat Rasayan Ltd ITA No. 1231/Del/2019 AY 2014-15 Dated 02.02.2021 • Jindal Saw Ltd vs DCIT in ITA no. 826/DEL/2016 dated 04/06/2025 • Jindal Saw Ltd. vs DCIT in ITA No.4693/Del/2019 • Geena Garments, Tiruppur vs ACITinI.T.A. No.1823/Chny/2024 Dated 16/10/2024 • ACIT v. Gravita Metal Inc in ITA No. 594/Asr/2019 for AY 2016-17 dated 15.06.2023 • Gates Wears in I.T.A. Nos.3326/Chny/2019 & 326/Chny/2024 Dated 20/09/2024 30. Strongly relying upon these judgments, ld. Counsel for the assessee sub....
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....appens that sometime later - may be one year, five years, ten years, twenty years or even fifty years - the Supreme Courts in the case of some other manufacturer that the levy of that kind is not exigible in law. (We must reiterate - we are not speaking of a case where a provision of the Act whereunder the duty is struck down as unconstitutional. We are speaking of a case involving interpretation of the provisions of the Act, Rules and Notification.) The question is whether 'X' can claim refund of the duty paid by him on the ground that he has discovered the mistake of law when the Supreme Court has declared the law in the case of another manufacturer and whether he can say that he will be entitled to file a suit or a writ petition for refund of the duty paid by him within three years of such discovery of mistake? Instances of this nature can be multiplied. It may not be a decision of the Supreme Court that lead 'X' to discover his mistake; it may be a decision of the High Court. It may also be a case where 'X' fights up to first appellate or second appellate stage, gives up the fight, pays the tax and then pleads that he has discovered the mistake of law wh....
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....the right to relief or the manner of moulding it, is brought diligently to the notice of the tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equality justifies bending the rules of procedure, where no specific provision or fairplay is not violated, with a view to promote substantial justice subject, of course, to the absence of other disentitling factors or just circumstances. Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial court. If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or justice. Rulings on this point are legion, even as situations for applications of this equitable rule are myriad....We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed." In the very same cas....
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.... one hand incurred huge loss and on other, tax on Rs. 77.98 Crores is charged merely on technicality that, since assessee had offered the tax under one particular head which it is claiming in this year to be set-off in the other head, is precluded from doing so. When assessee itself has pointed out its bonafide and legal claim before the Assessing Officer that correct head in which it is assessable is 'business income', then acquiescence by the assessee in earlier year cannot be the ground to tax the same or deny any legal claim. Hon'ble Supreme Court in a recent judgment, in the case of Dalmia Power Ltd. v. Asstt. CIT [2019] 112 taxmann.com 252/[2020] 420 ITR 339, reiterated this principle by holding that "Rules of procedure have been construed to be handmaiden of Justice. Kailash v. Nanhku [2005] 4SCC 480; State of Punjab v. Shamlal Murari [1976] 1 SCC 719. The purpose of assessment proceedings is to assess the tax liability correctly in accordance with law. National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC)" This justice-oriented approach has earlier been ordained in CIT v. Shelly Products [2003] 29 Taxman 271/261 ITR 367 (SC) also. The aforesaid principl....
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....wing of the assessee's appeal in paragraph -14 of the order under challenge dated 28-9-2016, which reads thus: "14. From the above discussion and precedence, the scheme of assessment u/s. 153A of the Act in case of search, the AO shall issue notice to searched person requiring him to furnish within such period as maybe specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A and clause (b) postulates assessment or reassessment of the total income of six years immediately preceding the assessment year relevant to the previous year in which such search is conducted. The first proviso mandates that the AO shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso postulates that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in sub- section (1) is pending on the date of initiation of the search u/s. 132 of the Act shall abate. In the present case before us, however, though the second provis....
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....nology (P.) Ltd [2017] 79 taxmann.com 306 (Bombay) has held as under:- "For the purpose of the present appeal, the issue whether or not the claim of quantification made by the respondent before the Assessing Officer for the subject assessment years would be a fresh claim or not is academic. This in view of the fact that the impugned order has held that even if one accepts that the quantification of the amount of deduction made during the course of assessment proceedings is a fresh claim it is a settled position so far as this Court is concerned that it can be made before and could be considered by the Appellate Authorities. The right of an assessee to raise a fresh claim before the Appellate Authorities is no longer res-integra in view of the decision of this Court in CIT v. Pruthvi Brokers & Shareholders [2012] 349ITR 336/208 Taxman 498/23 taxmann.com 23 (Bom.) wherein the reference has also been made amongst other decisions, to the decision of the Delhi High Court in Jai Parabolic Springs Ltd. (Supra) wherein it has been held that there is no prohibition in the Tribunal to entertaining additional ground/claims which was not placed before the lower Authorities. In view of....
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.... Court in Pruthvi Brokers & Shareholders (supra) while dealing with a return of income filed under Section 139(1) of the Act has held that an assessee is entitled to raise a fresh claim before the Appellate Authorities, even if the same was not raised before the Assessing Officer at the time of filing return of income or by filing a revised return of income. This Court also placed reliance upon decision of the Apex Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 wherein while dealing with the powers of the Assessing Officer, it had held that a claim not made in the return of income, the Court may lead to nonentertainment of claim by the Assessing Officer. However, this restriction in the power of the Assessing Officer will not affect the power of the appellate Tribunal to entertain a fresh claim. 13. In view of the fact that the issue stands concluded by the decision of this Court in Pruthvi Brokers &Shareholders (supra) the question as proposed does not give rise to any substantial question of law. 37. Thus, Mr. Bindal submitted that in view of the binding judgments of the Jurisdictional High Court (Bom) such a new claim in respect of abated assessme....
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....ition that in cases where reopening are done u/s. 147 and in such proceedings, assessee cannot make a new claim, he stated that reliance upon Sun Engineering. (supra) is otherwise based upon picking some sentences and without consideration of the factual matrix. The facts therein were that the loss return submitted by the assessee beyond time was held invalid by the AO and the proceedings were filed. On appeal, the AAC held that the ITO was wrong in filing the returns without proper scrutiny and without first computing the loss in accordance with the law. The AAC also opined that it could only be known after proper computation whether the assessment would result in a loss or not. However, the appellate authority finally held that since the ITO had filed the returns, no relief could be granted to the assessee in the appeals and dismissed the same. No appeal was filed by the assessee against this order. Later on, the assessment was reopened u/s 147 of the Act and a positive income was determined. Now, the case of the assessee was that the ITO should have redetermined the loss so declared in the original return and set it off against the escaped income from other sources and even carr....
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....aims for deduction of any expenditure in respect of that income or the non-taxability of the items at all. Keeping in view the object and purpose of the proceedings under section 147 which are for the benefit of the revenue and not an assessee, an assessee cannot be permitted to convert the reassessment proceedings as his appeal or revision, in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to 'escaped income', and reagitate the concluded matters. Even in cases where the claims of the assessee during the course of reassessment proceedings related to the escaped assessment are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assesseed. The income for purposes of 'reassessment' cannot be reduced beyond the income originally assesseed." 41. He also submitted that Sun Engineering (supra) is in essence against the re-agitation of issues concluded in the original assessment. However, in the present case, the assessee is not disputing any item agitated in the original asses....
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....d on the assessee, a remand report from the AO was called for and a report dated 23/01/2023 was received. The facts of the said completed assessment years are as below. Figures in Rs Particulars AY2012-13 AY2013-14 AY2014-15 AY2015-16 AY2016-17 Original ROI filed u/s 139 11,55,11,368 30.09.2012 26,44,80,690 29.11.2013 33,08,45,440 30.11.2014 46,71,16,260 30.11.2015 43,74,23,210 17.10.2016 Regular assessment Completed 11,63,43,954 u/s143(3) dt. 13.03.2015 26,50,73,490 u/s143(3) dt. 18.03.2016 33,12,57,830 u/s143(3) dt- 22.12.2016 46,71,16,260 u/s 143(1) 43,74,23,210 u/s143(1) Search and seizure operation u/s 132 of the Act in case of assessee 18.12.2017 ROI filed u/s 153A 11,63,43,954 26,50,73,490 33,12,57,830 46,71,16,260 43,74,23,210 Asst. u/s 153A 13,99,79,512 29,95,78,357 37,73,41,927 49,92,39,677 44,97,86,876 Addl. GOA filed before CIT(A) 28.12.2020 modified on 28.04.2023 AO‟s Remand Report 23.01.2023 Amount of FPS (Focus Product Scheme) expo....
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....ted u/s 143(3) 47,06,19,726 Addl. GOA filed before CIT(A) 28.12.2020 modified on 28.04.2023 AO‟s Remand Report 23.01.2023 Amount of MEIS (Merchandise exports from india Scheme) export incentive hitherto included in taxable income now being claimed as exclusion/deduction 3,67,40,912 46. During the first appellate proceedings, the assessee filed an additional GOA and claimed that the FPS and MEIS receipts are exempt from levy of income tax being 'Capital in Nature‟. The Ld. CIT(A) called for Remand Report from the AO and eventually dismissed the additional GOA adjudicating that the claim of the assessee is not admissible, considering the fact that the said claim was not made in the original return of income or the revised return of income, by relying on the Judgment of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. 47. Ergo, the question in this lis is whether the incentives granted in the form of the Scrip (FPS&MEIS) to the assessee as per the FTP Policy of 2010 to 2014 and 2015 to 2020 respectively being an eligible exporter under the FTP Policy is chargeable to the tax or not. The assessee had relied on several judicial prec....
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.... u/s 254 only to decide the ground which arises from the order of Commissioner of Income Tax (Appeals) and held that both the assessee as well as the Department have a right to file an appeal/cross objection before the Tribunal. (ii) The ld. Counsel advanced his submissions, further, by referring to the Hon'ble Supreme Court in the case of, Wipro Finance Ltd. v. CIT [2022] 137 taxmann.com 230 (SC)dated 12.04.2022 holding that Tribunal's power u/s 254 of the Act remain broad and unrestricted in entertaining fresh claim for the first time, even if, inconsistent with the assessee's original return. It also did not accept the Department's reliance on Goetze (India) Ltd. (supra) and clarified that limitation on raising new claims applies only to the AO and not to the Tribunal. (iii) He emphasized, that apart the above legal position, the purpose of an assessment is to compute the correct taxable income of the assessee as per the provisions of the Act and even if the deduction was not claimed in the return of income by the assessee, which was clearly allowable in law to the assessee, the assessing officer was duty bound to consider and allow such claim s....
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....y vs. CIT: 107 ITR 63 (Guj)]; v) It was also urged by the ld. Counsel that where grant of export incentives is a reward for meeting associated cost of infrastructure inefficiencies; for achieving a national objective/purpose in public interest, the same would be in the nature of capital receipt not liable to tax expounded in the following decisions: • CIT V. Ponni Sugar and Chemicals Limited: 306 ITR 392 • CIT vs. Chaphalkar Brothers: 351 ITR 309 (Bom HC) affirmed by Hon'ble Supreme Court vide orderdated 07.12.2017 in 400 ITR 279 (SC) • Shree Balaji Alloys vs. CIT: 333 ITR 335 (J&K) - SLP dismissed • DCIT vs. Reliance Industries Limited: 88 ITD 273 (Mum SB) vi) It was further stated by the Ld. Counsel that the finding of the AO/CIT(A) are erroneous as nature of the export incentives is determined of application of "purpose test" as has been held in Ponni Sugar (supra). vii) The NTPC judgement lays down the following conditions for admission of fresh claim by the Tribunal: (a) Claim is made for the first time before the Tribunal. (b) There must be a bonafide and good reasons as to why th....
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.... proceedings. Even if it is accepted that in the abated assessment everything is open however, the scope of unabated assessment, no new claim can be made at all because the assessment has to be completed based on incriminating material found in the course of search which is agreed by the ld. Counsel is well settled by the Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra). 53. We have heard the rival submissions and carefully perused the material placed on record. The principal issue for adjudication before us is whether the assessee is entitled to raise an additional claim before the appellate authority in the course of proceedings under Section 153A of the Act, specifically in respect of export incentives received under the Focus Product Scheme (FPS) and the Merchandise Exports from India Scheme (MEIS), which were not claimed as exempt income in the original returns, nor in the returns filed in response to notices issued under Section 153A. 54. It is an admitted factual position that the assessments for the Assessment Years 2012-13 to 2016-17 had attained finality prior to the date of search and are thus treated as 'unabated‟ assessments. The ass....
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.... Hon'ble Bombay High Court in the case of PCIT v. JSW Steel Ltd. [(2020) 115 taxmann.com 165 (Bom.)]. The Hon'ble High Court, after a comprehensive analysis of the statutory framework, held that upon initiation of search under Section 132, the assessment for the six preceding assessment years becomes open for reassessment under Section 153A. Where the assessment for a particular year was pending on the date of search, it is deemed to abate. In such a case, the jurisdiction of the Assessing Officer is not confined merely to the incriminating material found during the search but extends to conducting a fresh assessment de novo. 58. Most significantly, the Hon'ble Court held that once the assessment abates, it is not only open to the Revenue to make additions on the basis of search material or otherwise, but equally open to the assessee to lodge fresh claims, deductions, exemptions or reliefs which may not have been claimed earlier, including those that were not claimed in the original return filed under Section 139(1). The Court interpreted the legislative scheme of Section 153A(1), including its second proviso, to affirm that an abated assessment merges into the fresh 153A procee....
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....completed under Section 143(3), the claim raised by the assessee before the learned CIT(A) regarding the non-taxability of MEIS receipts deserves to be examined on merits, and cannot be denied on technical grounds. Since the lower authorities have not adjudicated the claim substantively, nor quantified the claim, we restore the matter to the file of the Assessing Officer for de novo adjudication in accordance with law. 63. However, the legal landscape changes materially when it comes to unabated assessments, i.e., those which had attained finality as on the date of search specifically, the assessments for A.Ys. 2012-13 to 2016-17 in the present case. It is now well-settled by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell Pvt. Ltd. [(2023) 149 taxmann.com 399 (SC)] that where the assessment for a given year has not abated on the date of search, the power of the Assessing Officer under Section 153A is restricted to making additions based on incriminating material found during the course of search. In the absence of such incriminating material, the concluded assessment cannot be disturbed, and any new issue whether in the nature of an addition by the AO or a fresh claim by....
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....on the other remains a grey area in the jurisprudence under Section 153A. It calls for principled clarification as to whether the bar on reassessment in unabated cases should operate with equal rigidity against a bonafide claim by the assessee that a particular receipt is not income in the first place. 68. Nonetheless, since both the Assessing Officer and the learned CIT(A) in the present case have declined to admit the assessee's claim solely on procedural grounds, citing Goetze (India) Ltd., without examining whether the claim could be entertained within the permissible contours of Section 153A, we consider it just and equitable to restore this issue to the file of the Assessing Officer. The AO shall now examine, in law and on facts, whether such a claim for exclusion of export incentives under the FPS scheme can be entertained in respect of the unabated assessment years, and pass a reasoned order after affording an adequate opportunity of hearing to the assessee. 69. Accordingly, in light of the foregoing discussion and judicial pronouncements, we hold that the additional claim made by the assessee in respect of A.Y. 2017-18, being an abated assessment, and A.Y. 2018-19, b....
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....eceipts not chargeable to tax are admitted, and the matter is restored to the file of the Assessing Officer. The Assessing Officer shall examine the claims on merits, quantify the amounts involved, and decide the issue afresh in accordance with law after granting due opportunity of hearing to the assessee. (ii). In respect of A.Ys. 2012-13 to 2016-17 (unabated assessment years), the issue relating to admissibility of the assessee's additional claim is also restored to the file of the Assessing Officer. The Assessing Officer shall determine, based on law and facts, whether such a claim can be entertained in the context of Section 153A proceedings in absence of incriminating material. The assessee shall be at liberty to raise all relevant contentions, and the Assessing Officer shall pass a reasoned order in accordance with law. 74. Now, coming to the grounds of appeal for A.Y.2020-21, assessee has raised following grounds of appeal. 1. The CIT (A) erred in law and on the facts by confirming the addition of Rs. 2,64,64,223/- made by AO treating MEIS license receipts received by the Appellant as income instead of capital receipt, ignoring the purpose test and ....
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....4,64,223/- by treating the same as a capital receipt. Notably, the amount was recorded in the Profit and Loss Account under "Other Operating Income" but was simultaneously excluded in the computation of taxable income. During the assessment proceedings, the assessee submitted that this sum was inadvertently considered a second time under the head "Indirect Income," thereby leading to duplication. To rectify the anomaly, the assessee submitted a revised computation of income during the assessment proceedings, reflecting corrected income at Rs. 36,53,13,640/-, accompanied by a detailed reconciliation of accounts and a rationale explaining the duplicative accounting error. 77. Before us ld. Counsel had filed a revised computation of income at Rs. 36,53,13,640/- excluding Rs. 5,29,28,446/- (Rs. *2,64,64,223/- + Rs. **2,64,64,223/-) (MEIS Receipts not chargeable to tax being capital receipt - Schedule 4) because the amount of Rs. 2,64,64,223/- was recorded twice in the books of account, once as MEIS and second time in ROSTCL. Particulars Tiruppur Mumbai Total Other Operating income as per the P&L Account for the year ended 31.03.2020 - - 21,81,07,710 Includ....
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....in the fold of section 2(24)(xviii), it would have explicitly included "Reward" in the list of taxable receipts. The deliberate omission of this term from the statutory definition reflects the legislative intent to treat MEIS scrips as distinct from subsidies or grants and, consequently, outside the ambit of taxable income. 81. We have duly considered the elaborate submissions advanced by the learned counsel for the assessee and perused the relevant material placed on record, including the assessment orders, computation statements, financial accounts, the policy framework of the MEIS scheme, and the legislative contours of Section 2(24)(xviii) of the Act. The primary issue that now arises for our consideration is whether the export incentive received under the MEIS scheme, amounting to Rs. 2,64,64,223/-, is liable to tax as a revenue receipt, or whether it partakes the character of a capital receipt outside the purview of the charging provisions of the Act. 82. To answer this question, it is imperative to closely examine the text and structure of Section 2(24)(xviii), which was inserted with effect from 01.04.2016 by the Finance Act, 2015. The said provision expanded the incl....
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....y. This distinction is not merely semantic but structural. The tradable duty credit scrips awarded under MEIS are not calculated based on cost, loss, or business exigency, but rather as a fixed percentage of FOB value of eligible exports. Such scrips, granted to stimulate economic activity and trade flows, partake the nature of a capital accretion rather than a revenue inflow. 86. In interpreting a charging provision like Section 2(24), it is well-settled that strict construction must apply. One cannot presume a legislative intention to tax a class of receipts unless such inclusion is unambiguously expressed or implied by necessary and inescapable construction. As the Hon'ble Supreme Court observed in Ponni Sugars and Chemicals Ltd. [(2008) 306 ITR 392 (SC)], where a subsidy or grant is linked not to trading operations but to a capital outlay or economic policy, it must be viewed as capital in nature. 87. Further, the contemporaneous introduction of both the MEIS scheme and clause (xviii) of Section 2(24), and the absence of any attempt to align their terminology, reinforces the conclusion that MEIS rewards were not meant to be covered under this clause. A taxing provision ca....