By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi
Chartered Accountants
fiogf49gjkf0d
Assessment u/s.153A — Total income for each assessment year has to be done afresh without any reference to what was done in the original assessment and hence assessee is entitled to seek any relief on any addition made in the original assessment.
Facts:
In the original assessment u/s.143(3), the AO disallowed interest of Rs.58.86 lakh. The assessee-company did not agitate the disallowance of interest before the Appellate Authority. While filing return in response to notice u/s.153A, the assessee voluntarily disallowed the interest disallowance made in the original assessment, subject to reservation of right for contesting the allowability of entire interest during the course of assessment proceedings. When the matter came before the CIT(A), the assessee put forth details to support the deduction of interest. The learned CIT(A) forwarded the same to the AO and as per the remand report, the learned CIT(A) directed the AO to disallow interest of Rs.10.81 lakhs and ordered deletion of the remaining disallowance.
The viewpoint of the Department was that the assessee was not entitled to seek relief on any matters which had attained finality in the original assessment, as section 153A does not permit assessment at income lower than the one finally assessed in the original assessment.
Held:
U/s.153A the AO is required to make assessment afresh and compute ‘total income’ in respect of each of relevant six assessment years. As there is no specific restriction on jurisdiction of the AO in not including any new income to such fresh total income pursuant to search which was not added during the original assessment, in the like manner, there is no restriction on the assessee to claim any deduction which was not allowed in the original assessment. As it is a fresh exercise of framing assessment or reassessment, the assessee can argue about merits of the case qua addition made in the original assessment.
The judgment of the Supreme Court in the case of CIT v. Sun Engineering Works (P) Ltd., (198 ITR 297) was distinguished since in that case the Apex Court was considering provisions of section 147. Conditions for taking action u/s.147 vis-à-vis u/s.153A are different.
Also provisions of search assessment u/s.153A, etc. have been inserted by the Finance Act 2003 w.e.f. 1st June 2003. These provisions are successor of special procedure for assessment of search cases under Chapter XIV-B starting with section 158B. Whereas Chapter XIV-B required assessment of ‘undisclosed income’ as a result of search, which has been defined in section 158(b), section 153A dealing with assessment in case of search w.e.f. 1st June 2003 requires the AO to determine ‘total income’ and not ‘undisclosed income’.
Regarding the view that the income in assessment u/s.153A should not be reduced than original assessment, it needs to be noted that total income is not reduced simply on basis of making claim. The AO is fully empowered to consider the question of deductibility. Hence, assessment u/s.153A needs to be done afresh without any reference to the original assessment.
