M/s JSW Steel Ltd. vs. Dy. CIT; [ITA Nos. 33, 34 & 35/Mum/2015; Date of order: 28th September, 2016; A.Y.: 2008-09; Mum. ITAT] Section 153A – Once the assessment gets abated, the original return filed u/s 139(1) is replaced by the return filed u/s 153A – It is open to both parties, i.e., the assessee and Revenue, to make claims for allowance or disallowance – (Continental Warehousing Corporation 374 ITR 645 Bom. referred)

16. The Pr. CIT-2 vs.
M/s JSW Steel Ltd. (Successor on amalgamation of JSW Ispat Steel Ltd.) [Income
tax Appeal No. 1934 of 2017] Date of order: 5^th
February, 2020 (Bombay High Court)

M/s JSW Steel Ltd. vs.
Dy. CIT; [ITA Nos. 33, 34 & 35/Mum/2015; Date of order: 28^th
September, 2016; A.Y.: 2008-09; Mum. ITAT]

Section
153A – Once the assessment gets abated, the original return filed u/s 139(1) is
replaced by the return filed u/s 153A – It is open to both parties, i.e., the
assessee and Revenue, to make claims for allowance or disallowance – (Continental
Warehousing Corporation 374 ITR 645 Bom. referred)

The assessee is a widely-held public
limited company engaged in various activities, including production of sponge
iron, galvanised sheets and cold-rolled coils through its steel plants located
at Dolve and Kalmeshwar in Maharashtra. The company filed its original return
of income on 30^th September, 2008 for A.Y. 2008-09 declaring loss at
Rs. 104,17,70,752 under the provisions of section 139(1) of the Act.

During pendency of the assessment
proceedings, a search was conducted u/s 132 on the ISPAT group of companies on
30^th November, 2010. Following the search, a notice u/s 153A was
issued. In response, the assessee filed return of income declaring total loss
at Rs. 419,48,90,102 on 29^th March, 2012. In this return, the
assessee made a new claim for treating gain on pre-payment of deferred VAT /
sales tax on the Net Present Value (NPV) basis for an amount of Rs.
318,10,93,993 as ‘capital receipt’.

This new / fresh claim of the assessee
was disallowed by the A.O. while finalising the assessment u/s 143(3) r/w/s
153A of the Act by considering the same as ‘revenue receipt’ instead of
‘capital receipt’. The reasoning given by the A.O. was that the assessee had
availed of the sales tax deferral scheme and the State Government had permitted
premature re-payment of deferred sales tax liability on the NPV basis.
Therefore, according to the A.O., the assessee treated this as capital receipt
even though the same was credited to the assessee’s profit and loss account
being the difference between the deferred sales tax and its NPV.

However, the
primary question that arose before the A.O. was whether the claim which was not
made in the earlier original return of income filed u/s 139(1) could be filed
and considered in the subsequent return filed by the assessee in pursuance of
notice u/s 153A of the Act (which was consequent to the search action conducted
u/s 132). The A.O. held that the assessee could not raise a new claim in the
return filed u/s 153A which was not raised in the original return of income
filed u/s 139(1). Thereafter, the claim was disallowed and was treated as
‘revenue receipt’.

Aggrieved by the aforesaid order, the
assessee preferred an appeal before the CIT(A) who upheld the order passed by
the A.O.

Still aggrieved, the assessee filed an
appeal to the Tribunal. The Tribunal held that the assessee could lodge new
claims, deductions, exemptions or relief (which the assessee had failed to
claim in his regular return of income) which came to be filed by the assessee
under the provisions of section 153A of the Act.

But the Revenue, aggrieved by the order
of the ITAT, filed an appeal to the High Court. The Court held that in view of
the second proviso to section 153A of the Act, once assessment got
abated, it meant that it was open for both the parties, i.e., the assessee as
well as Revenue, to make claims for allowance, or to make disallowance, as the
case may be. That apart, the assessee could lodge a new claim for deduction,
etc. 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 loses its originality and the subsequent return
filed u/s 153A of the Act (which is in consequence to the search action u/s
132) takes the place of the original return. In such a case, the return of
income filed u/s 153A(1) would be construed to be one filed u/s 139(1) 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 u/s 153A(1).

The Court further emphasised on the
judgment passed by it in the case of Continental Warehousing (Supra) which
also explains the second proviso to section 153A(1). The explanation is
that pending assessment or reassessment on the date of initiation of search if
abated, then the assessment pending on the date of initiation of search shall
cease to exist and no further action with respect to that assessment shall be
taken by the A.O. In such a situation, the assessment is required to be
undertaken by the A.O. u/s 153A(1) of the Act.

In view of the second proviso to
section 153A (1), once assessment gets abated, it is opened both ways, i.e.,
for the Revenue to make any additions apart from seized material, even regular
items declared in the return can be subject matter if there is doubt about the
genuineness of those items, and similarly the assessee also can lodge new
claims, deductions or exemptions or relief which remained to be claimed in the
regular return of income, because assessment was never made in the case /
situation. Hence, the appeal filed by the Revenue is liable to be dismissed.