In the case of Pr. Commissioner of Income Tax, Central-2 Mumbai (Appellant) V/S JSW Steel limited (Respondent), Income Tax Appeal 1934 of 2017, The Hon'ble High Court of Judicature at Mumbai, pronounced order on 05th February 2020 while settling the legal issue raised before it about the right to make revised claims by an assessee to whom notice under section 153A of the Act is issued.
The brief facts of the case are the assessee's case for the assessment year 2008-09 was selected for scrutiny under section 143(2) of the IT Act. During the pendency of the assessment proceedings, search was conducted under section 132 of the Act. After the search was completed a notice under section 153A of the Income Tax Act was issued to the assessee. Assessee who had filed the regular income tax return under section 139(1) revised his return in response to the notice under section 153A by declaring loss at a higher value than declared in the original return filed under section 139(1).
The assessing officer disallowed the revised new loss/fresh claim by the assessee while finalizing the assessment order under section 143(3) read with section 153A. The explanation offered by assessing officer was that the amount treated as revenue in the original return cannot be treated capital expenditure in the revised return the result of which was increase in loss.
The point of law was whether an assessee can revise his claim by altering the claims submitted in the original return after receiving a notice under section 153A which was based on the search action conducted by the department under section 132 of the Income Tax Act 1961.
The assessing officer held that the assessee cannot raise a new claim in the revised return filed against a notice under section 153A as the said claim was not there in the original return of income filed under section 139(1). The assessing officer while disallowing the claim treated the same as 'revenue receipt' reinstating the loss at the original value.
Aggrieved by the assessing officer's order the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) upheld the order of the assessing officer.
The Income Tax Appellate Turbinal after allowing assessee' s appeal decided the appeal in favor of assessee by setting aside the orders of assessing officer and the Commissioner of Income Tax (Appeals). The Appellate Tribunal was of the view that once the notice under section 153A is issued all proceeding with respect to assessment get abated and the assessee is free to alter the revised income tax return with alternations/changes if any.
Aggrieved by the order of The Income Tax Appellate Turbinal the department preferred an appeal before the Hon'ble High Court of Judicature at Bombay. The department through its council raised a question of law in the appeal which is reproduced hereunder:
'Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in holding that in the return of income filed under section 153A of the I.T.Act, 1961 or even during the course of assessment proceedings undertaken under section 153A of the I.T.Act, 1961 the assessee can lodge new claims, deductions or exemptions or relief which remained to be in regular return of income ?'
The view of the court was that once the notice under section 153A (1) is issued as a result of search action under section 132 and a return is filed by the assessee in response to the notice such return of income shall be treated as filed under section 139. 'The second proviso says that any assessment or reassessment proceedings falling within the said period of six assessment years pending on the date of initiation of search action under section 132 or making of requisition under Section 132 A shall abate'.
It is important to understand the word abate. The word abate as per different dictionaries mean to reduce or remove and its derivative is abatement. In the supreme court on words and phrases (1950-2008), 'abating' has been defined to mean 'extinguishment of the very right of action itself'; to 'abate', as applied to an action, is to cease, terminate, or come to an end prematurely.
Thus, the decision of the Hon'ble High Court of Judicature at Bombay was that once the assessment gets abated, it is open for the assessee to lodge a new claim in a proceeding under section 153(1) which was not there in the regular return filed by the assessee. Since the assessment was never made or finalized in the case of the assessee in such a situation. The case was decided by upholding the decision pronounced the Appellate Tribunal and dismissed the appeal of the department with a remark the appeal of the 'Revenue is found to be devoid of the merit.'
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