39. Search and seizure – Assessment u/s. 153A – A. Ys. 2003-04, 2006-07 to 2008-09 – Assessee can claim deduction in return u/s. 153A or first time before appellate authorities

CIT vs. B. G. Shirke Construction Technology P. Ltd.; 395
ITR 371 (Bom):

The assessee was engaged in the execution of construction
contracts. On 18/12/2008, there was a search and seizure action u/s. 132 of the
Income-tax Act, 1961 upon the assessee. Pursuant thereto, notices u/s. 153A
were issued for the A. Ys. 2003-04, 2006-07 to 2008-09. As the assessment for
the A. Ys. 2007-08 and 2008-09 were pending before the Assessing Officer, they
stood abated in view of the second proviso to section 153A(1) of the Act.
Consequently, the assessee filed the returns of income for the subject
assessment years u/s. 153A read with section 139(1) of the Act. In its returns
of income, the assessee had offered the income on account of execution of
contracts but had not excluded the amounts retained by its customers till the
completion of the defect liability period after completion of the contract.
This amount could not be quantified in a short time available to file the
returns of income. Therefore, the assessee had filed a note along with its
returns of income pointing out the aforesaid facts and its seeking appropriate deduction
when completing the assessments. The note also pointed out that the said amount
had inadvertently not been claimed as a deduction in its original returns of
income. During the assessment proceedings, the assessee quantified its claim
year wise placing reliance on relevant clause of the contract with its
customers, so as to claim deduction to the extent the customers have retained
(5–10%). The Assessing Officer quantified the claim amount but did not allow
the claim holding that he does not have power to allow the claim in view of the
judgment of the Supreme Court in Goetze (India) Ltd. vs. CIT 284 ITR 323
(SC). The Tribunal held that although it is undisputed that the computation of
income did not reflect the actual quantification of the amount of retention
money held by the customers which cannot be subject to tax, but the note filed
along with the return of income indicated the claim in principle. The
quantification was explained during the assessment proceedings along with the
relevant clauses of each contract with its customers. The Tribunal held that
the decision of Supreme Court in Goetze (India) Ltd., will not apply to the
present facts as in this case the claim for deduction on account of retention
money had been made along with the return of income, only the quantification of
the amount was made during the assessment proceedings.

The Tribunal held that the claim for deduction was to be
allowed. The Tribunal further held that even if the quantification made during
the assessment proceedings was considered to be a fresh claim and could not
have been entertained by the Assessing Officer, there was no bar/impediment in
raising the claim before the appellate authorities for consideration.
Accordingly, the Tribunal allowed the assessee’s claim for deduction. 

On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under:

“i)  The consequence of notice u/s. 153A(1) of the
Income-tax Act, 1961 is that the assessee is required to furnish a fresh return
of income for each of the six of the assessment years in regard to which a
notice has been issued. Section 153A(1) itself provides that on filing of the
return consequent to notice, the provisions of the Act will apply to the return
of income so filed. Consequently, the return filed u/s. 153A(1) of the Act is a
return furnished u/s. 139 of the Act. Therefore, the provisions of the Act
would be otherwise applicable in the case of a return filed in the regular
course u/s. 139(1) of the Act would also continue to apply in the case of a
return filed u/s. 153A of the Act.