Taxpayer Can't Make Fresh Claim Of Deduction U/S 80IA In Response To Notice U/S 153A After Search In Unabated Assessment: Hyderabad ITAT
The Hyderabad ITAT ruled that the assessee cannot make a fresh claim of deduction under Chapter VI-A of the Income Tax Act, for the first time, in the return of income filed in response to notice issued u/s 153A, pursuant to search conducted u/s 132 of the Act, in unabated/completed assessment as on the date of search. However, in case of abated assessments, like the AO who can make...
The Hyderabad ITAT ruled that the assessee cannot make a fresh claim of deduction under Chapter VI-A of the Income Tax Act, for the first time, in the return of income filed in response to notice issued u/s 153A, pursuant to search conducted u/s 132 of the Act, in unabated/completed assessment as on the date of search.
However, in case of abated assessments, like the AO who can make an assessment based on incriminating materials and any other information made available to him, including information furnished in return, the assessee may claim all deductions towards any income or expenditure, as if it is a first return of income and fresh assessment, added the ITAT.
The Special Bench comprising Justice (Retd.) C.V. Bhadang (President), Mahavir Singh (Vice President) and G. Manjunatha (Accountant Member) observed that provisions of Section 153A make it very clear that return filed in response to notice u/s 153A partakes the nature of return filed u/s 139.
However, said interpretation cannot be enlarged so as to say that even when the assessee has filed regular return u/s 139 without claiming any deduction and has only claimed deduction u/s 80IA(4) in response to notice u/s 153A, the same will be considered as if the assessee has made a claim on or before filing the return u/s 139(1), clarified the Bench.
Facts of the case:
The Respondent/ assessee, being engaged in the business of development of infrastructure projects, filed its original return which was accepted during the assessment. Later, a search and seizure operation was conducted and a notice u/s 153A was issued. In response, the assessee filed a return after claiming a deduction u/s 80IA(4) for the first time, in respect of profits & gains derived from the development of infrastructure projects. In scrutiny assessment, the AO rejected the fresh claim of deduction opining that the same cannot be claimed during the proceedings u/s 153A, as no such claim was made in the return originally filed by assessee u/s 139(1).
Observations of the Tribunal:
The Bench admitted that the assessee is carrying on the business of developing infrastructure projects and is otherwise eligible for deduction u/s 80IA(4), provided all other conditions are satisfied.
However, the fact remains that the assessee did not make any claim towards deduction u/s 80IA(4) in the return of income filed u/s 139(1), for all five assessment years, added the Bench.
Further, the Bench found that the assessee has made a claim for deduction u/s 80IA(4) for the first time, in the return of income filed in response to the notice issued u/s 153A, pursuant to search and seizure operation conducted u/s 132.
Referring to the decision of the Supreme Court in the case of PCIT Vs. Abhisar Buildwell, the Bench reiterated that in case of unabated/concluded assessments, the reassessment should be confined only to the incriminating material found as a result of the search, and if no incriminating material is found as a result of the search, the completed assessment cannot be disturbed.
Thus, the Bench emphasized that merely because, the separate schedule is provided for deductions under chapter VI- A, it cannot be construed that even in the case of filing return u/s 153A, the assessee can make a fresh claim.
Further, once the assessment is abated, the original return which has been filed loses its originality, and the subsequent return filed u/s 153A takes the place of the original return, added the Bench.
The Bench thus refused to consider the argument of the assessee that a return filed in response to notice u/s 153A shall be treated as return which was furnished u/s 139, by pointing out that said approach defeats the whole purpose of initiation of search and consequent assessments.
Therefore, the ITAT concluded that in order to claim any deduction u/s 80IA(4), the assessee should file its return on or before the due date prescribed u/s 139(1) and further, the said claim should be made in the return furnished.
Hence, the ITAT disposed of the case by answering the question of law in favour of the Revenue.
Counsel for Appellant/ Revenue: Mamata Choudhary and TH Vijaya Lakshmi
Counsel for Respondent/ Assessee: Senior Advocate K.K. Chaitanya along with Advocate S. Ramarao
Case Title: Deputy Commissioner of Income Tax Vs SEW Infrastructure Limited
Case Number: ITA Nos.1717 to 1720 & 1722/Hyd/2017