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| DATE: | August 9, 2014 (Date of publication) |
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| Click here to download the judgement (canara_housing_153A_scope.pdf) |
S. 153A: AO is required to assess the “total income” and is not confined only to income which was unearthed during search. Law laid down in All Cargo Global Logistics disapproved
For AY 2008-09, the AO passed an assessment order u/s 143(3) on 31.12.2010. A search u/s 132 was condiucted on 12.04.2011 in the course of which incriminating material leading to undisclosed income was seized. The AO initiated proceedings u/s 153A of the Act calling upon the assessee to file return of income u/s 153A(1)(a) for six years. The assessee complied with the same. When the said return was under consideration, the CIT passed an order u/s 263 on the ground that the assessment order dated 31.12.2010 passed u/s 143(3) was erroneous and prejudicial to the interests of the revenue. The assessee filed an appeal to the Tribunal in which it claimed that as the assessments u/s 153A were open, the AO could pass appropriate orders thereon. The Tribunal, relying on All Cargo Global Logistics 137 ITD 287 (SB) (Mum) held that as the s. 143(3) order did not abate and had become final, the AO, in the s. 153A assessment had to confine himself to the incriminating material found during search and could not take into consideration other materials while making the s. 153A assessment. It consequently upheld the CIT’s power to revise the s. 143(3) order. On appeal by the assessee to the High Court, HELD reversing the Tribunal:
The Tribunal has proceeded on the assumption by virtue of the judgment of the Special Bench in All Cargo Global, the scope of enquiry u/s 153A is to be confined only to the undisclosed income unearthed during search and if there is any other income which is not the subject matter of search, the same cannot be taken into consideration. Therefore, the revisional authority can exercise the power u/s 263. In the entire scheme of s. 153A of the Act, there is no prohibition for the assessing authority to take note of such income. On the contrary, it is expressly provided u/s 153A of the Act that the AO shall assess or reassess the “total income” of six assessment years which means the said total income includes income which was returned in the earlier return, the income which was unearthed during search and income which is not the subject matter of aforesaid two income. If the CIT has come across any income that the assessing authority has not taken note of while passing the earlier order, the said material can be furnished to the assessing authority and the assessing authority shall take note of the said income also in determining the total income of the assessee when the earlier proceedings are reopened and that income also shall become the subject matter of said proceedings. In that view of the matter the reasoning given by the Tribunal is not justified. The CIT did not have jurisdiction to initiate any proceedings u/s 263 of the Act (Anil Kumar Bhatia 352 ITR 493 (Del) referred).
Sir
In this context the decision of the Hon. Bombay High Court [Nagpur Bench] in the case of C.I.T. v/s Murli Agro Products Ltd in ITA No.36/2009 decided on 29/10/2010 is relevant as it holds exactly the opposite view. In this connection the decision of Hon. M.P. High Court in the case of National Textile Corporation Ltd. v/s C.I.T. reported in 216 CTR Page 153 is relevant wherein it has been held that it is not open for the Tribunal to comment upon the decision of the jurisdictional High Court or to state that a particular provision of law was not brought to the notice of the Hon. Court
In view of the above legal position I have serious doubts whether in Maharashtra the said decision of Hon.Karnatake High Court can have binding precedent
Sunil Ganoo
Chartered Accountant Pune
Thank you for pointing out the judgement in CIT v/s Murli Agro Products. We were not aware of it. It is now posted here
Facts given in Murli Agro Products are : 3) The assessment year involved herein is AY 1998-99. Assessment order for AY 1998-99 was passed under Section 143(3) of the Income Tax Act, 1961 (for short, `IT Act’) on 29/12/2000 determining loss of Rs.43,02,246/-. Thereafter on 3/12/2003, there was a search action at the business/office premises of the assessee wherein several incriminating documents/articles were seized. On issuance of notice under Section 153A of the IT Act, dated 13/9/2004, the respondent-assessee filed return of income pursuant to the said notice on 29/8/2005 declaring loss of Rs.46,45,338/-. Thereafter the Assessing Officer passed an order on 30/3/2006 under Section 153A read with Section 143(3) of the IT Act, determining the concealed income at Rs.89,19,477/-. 4) On appeal filed by the assessee, the Commissioner of Income Tax (A) by his order dated 30/11/2006 deleted the concealed income computed by the Assessing Officer on 30/3/2006. Thereafter, the Assessing Officer gave effect to the order of the Commissioner of Income Tax (A) thereby restoring the total income (loss) at Rs.43,02,246/- as originally assessed on 29/12/2000. There is no dispute that the order of Commissioner of Income Tax (A) deleting the concealed income has attained finality.
On these facts, what the CIT appears to have done under S. 263 is that which he/she should have done 31-3-2003 years from the date of original assessment. having missed the bus he/she is trying to catch it in a circuitous way using the set aside assessment order for revision under s. 263. Decision of S C in Alagendran Finance (193 ITR 1), wherein it wa held that where revisionary jurisdiction is sought to be exercised with reference to an issue which is covered by the original order of assessment under section 143(3) and which does not form the subject matter to reassessment, period of limitation would start from the date of order passed under section 143(3), would be straight away applicable as 153A assessment is also akin to reassessment under section 147. HC need not have gone into the aspect of what should be the subject matter of 153A. Believe neither department nor the assessee would have taken it to the SC by filing SLP. In that event, in another case, the decision in Murli Agro case could be made a subject matter for re-consideration/review.