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2016 (10) TMI 972 - ITAT KOLKATA

2016 (10) TMI 972 - ITAT KOLKATA - TMI - Additions made during the course of assessment proceedings u/s.153A - Additional depreciation - Held that:- Section 153A of the Act, uses the expressing “pending assessment or reassessment". When a return is filed and acknowledgement or intimation issued u/s.143(1), the proceedings initiated by filing the return are closed, unless a notice u/s 143(2) of the Act is issued. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore .....

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ional depreciation could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee’s return of income being accepted u/s.143(1) of the Act prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section which time limit as per the law prevailing on the date when the Assessee filed return of income i.e., 30.10.2007, would expire on 31.12. .....

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Consequently, the CIT in exercise of his powers u/s.263 of the Act ought not to have or could not have directed examination of the said issue afresh by the AO. - Decided in favour of assessee. - ITA (SS) No. 58/Kol/2013 - Dated:- 19-10-2016 - Shri N. V. Vasudevan, J.M. And Shri M. Balaganesh, A.M. Assessee by : A. K. Tibrewal, FCA. Revenue by : Shri G. Mallikarjuna, CIT,DR ORDER Per Shri N. V. Vasudevan, J.M. This is an appeal by the assessee against the order dated 21/03/2013 of CIT Central-II, .....

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in setting aside the assessment u/s.153A read with section 143(3) when seen in the context that he directs the Assessing Officer to examine the applicability of Section147. 3. The assessee is a partnership firm and is engaged in the business of excavation, transportation of coal and other allied activities. For assessment year 2007-08 the assessee filed return of the income on 30.10.2007 declaring a total income of ₹ 82,47,737/-. The said return was accepted u/s.143 (1) of the Income Tax .....

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ead with section 143(3) of the Act dated 31.12.2010, wherein, the AO determined the total income of the assessee at ₹ 84,35,250/-. While concluding the assessment, one of the claim made by the Assessee that was considered by the AO was with regard to grant of additional depreciation in respect of dumpers and tippers etc. The AO made the following observation while allowing the claim of the assessee for additional depreciation: Depreciation: A question was raised as to the allowability of d .....

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y of claim of higher rate of depreciation on Dumpers, Tippers etc instead of prescribed depreciation rate on plant & Machinery- At the very outset reference be drawn to nature of business activities of the assessee and nature of transportation used. As a matter of fact the machinery and vehicles involved are either heavy vehicles or earth moving machinery. The case is fully covered by following cases decided by various courts wherein upon similar facts it was held by courts that the assessee .....

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nery is covered by earth movers have already been examined by courts and held in assesses favour. In this connection reference be drawn in the case of CIT v. Sibson Construction and Co. earthmoving machinery for purposes of depreciation. As per Sec 32 of the Income-tax Act 1961, depreciation is allowable at the prescribed rate. The proviso under clause ii of the sub-sec 1 of section 32 stated as under: provided also that where an asset being commercial vehicle is acquired by the assessee on or a .....

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nd road - roller ; (b) The expressions heavy goods vehicle , medium passenger motor vehicle , light motor vehicle , medium passenger motor vehicle maxi-cab , motor-cab , and road-roller , shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988) Further we are to state that we have claimed depreciation of dumpers and tippers which are registered under the motor vehicles Act 1988 ( 59 of 1988) as public carrier and for ready reference we ar .....

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GV or HCV. The A/ R has stated that HGV stands for Heavy Goods Vehicle and HCV for heavy Commercial Vehicle. At the course of assessment proceedings, it is explained by the A/R, that Depreciation Schedule for the present year furnished along with Form No.3CD, reveals that depreciation on Dumpers, Tippers etc which are brought forward from earlier years and are put to use prior to 1st day of April 1999 are claimed @ 30%, by treating them as Commercial Vehicle on the ratio as laid down in the deci .....

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the reason for such additional depreciation. The A/R has drawn attention to the submission given in the A.Y 2009-2010 in this respect, wherein the claim of additional depreciation on the newly purchased assets has been explained. Therefore, in light of the facts as narrated above and considering the documents filed by the assessee in support of its claim as also the settled position of law, no adverse inference is drawn as to the claim of depreciation of the assessee firm. (emphasis supplied) 5 .....

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reported in 116 Taxmann. 1(SC), mining activity does not mean manufacture or production and obviously a person doing contract of mining activity cannot be said to be engaged in manufacture or production of any article or thing. According to CIT, the assessee was, therefore, not entitled to additional depreciation u/s32(1) (iia) of the Act, since the condition for claiming additional depreciation is that the Assessee should be engaged in activity of manufacture of production. Accordingly the CIT .....

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additional depreciation. The assessee submitted that the return of income filed u/s.139(1) of the Act was accepted by the Revenue and no notice u/s.143(2) of the Act was issued within the time limit contemplated by law. Therefore, the claim for additional depreciation already allowed cannot be disallowed in the assessment u/s.153C of the Act, without there being incriminating material found in the course of search. The assessee also submitted that even a person doing mining activity can be consi .....

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n of mind as per law. This can be done only u/s.143(2) /142(1). Therefore, what was on record was only self assessment of income done by the assessee u/s.140A of the Act. The premises of the assessee were searched on 15.01.2009 with seizure of books and documents for various years,including for this A. Y. 2007-08 and notices u/s.153A were issued. For this year, the assessee filed a letter that the original e-return may be treates as return u/s.153A. Therefore, till stage there existed only retur .....

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true that books and documents were seized for a number of years including,this year, yet it is a fact that no separate additions were made to returned income, based on such seizure. The only fact that came on record was that the assessee is engaged in the business of transport contractor to firms/companies which are engaged in the business of mining and excavation (the sector that is held to be not in the business of manufacture of production). This being so the AO erred in allowing extra deprec .....

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153A/143(3) on 31.12.2010 is erroneous is so far as it is prejudicial to the interest of Revenue, as he failed to understand settled position of law in this respect and thereby reached a wrong conclusion and allowed the claim of additional depreciation. For this reason the assessment order dated 31.12.2010 is set aside with the direction that the AO shall pass appropriate order after giving opportunity of hearing to the assessee. 8. Aggrieved by the order of the CIT the assessee has preferred th .....

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course of search, disallowance of additional depreciation cannot be made by the AO. Since the AO does not have power to disallow the depreciation, the CIT in exercise of his powers u/s. 263 of the Act cannot direct the AO to disallow depreciation. It was further submitted by him that a person engaged in mining activity is entitled to additional depreciation. In this regard our attention was drawn to a decision of the Hon ble Kolkata High Court in the case of CIT vs. G.S Atwal reported at 128 Tax .....

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de in assessment u/s. 153A of the Act. 9. Ld. DR placed reliance on the order of the CIT and submitted that since the return of income originally filed by the Assessee u/s.139(1) of the Act were accepted in proceedings u/s 143(1) of the Act, there was no occasion for the AO to investigate the question regarding grant of additional depreciation. Therefore, in proceedings u/s.153A of the Act, the AO could go into the question regarding grant of additional depreciation. Since, the AO has jurisdicti .....

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ing out mining activity. It was a submission that the assessee s activity does not fall within the description of the definition of manufacture as given in section 2 (29BA) of the Act. 10. We have given a careful consideration to the rival submissions. It is not in dispute before us that with respect to the additions made during the course of assessment proceedings u/s.153A of the Act, there was no incriminating material found at the time of search and that the AO while concluding the assessment .....

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and that in any case on the date of search i.e. on 15.1.2009, the assessment for the impugned assessment year of 2007-08 was not pending. Therefore the assessment u/s.143(1) of the Act, for AY 2007-08 does not abate in terms of the Second Proviso to section 153A(1) of the Act. It is the plea of the learned counsel for the Assessee that the impugned additions made by the Assessing Officer could not have been made in the impugned assessment proceedings as they are not based on any material seized .....

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diately preceding the assessment year relevant to the previous year in which a search was conducted and, therefore, under these circumstances the Assessing Officer was duty bound to assess or reassess total income of such assessment years, and, therefore, the impugned additions were justifiably made in the assessment made under section 143(3) r.w.s. 153A(1) of the Act. 11. We shall first examine the scope of the proceedings u/s.153A of the Act. The Hon ble Delhi High Court in the case of CIT Vs. .....

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o returns, assessment and reassessment provisions. Prior to, the introduction of these three Sections, there was Chapter XIV-B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as 'block assessment' because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment .....

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After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the p .....

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, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the ear .....

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he disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the t .....

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clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the tot .....

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". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the asse .....

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eedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, .....

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er situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clu .....

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llowing view: Section 153A starts with a non obstante clause. The fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction t .....

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d by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if an assessment order is passed under Section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. The cond .....

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rred to in the aforesaid sub-section on the date of initiation of the search under Section 132, the said proceeding shall abate. If such proceedings are already concluded by the assessing officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has be .....

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be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means the Assessing Officer shall assess or reassess the total income of six .....

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ction to initiate proceedings under the said provision because the condition precedent for initiating proceedings under Section 263 is any order passed under the Act by the Assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the order passed by the Assessing officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to the interest of the revenue which confers jurisdiction on the Commissioner to exercise th .....

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iginal assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property disc .....

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essment of such income. 15. It is no doubt true that the Hon ble Karnataka High Court in the case of Canara Housing (supra) has not accepted the ruling of the Special Bench in the case of Alcargo logistics (supra). The Hon ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation ITA No.523/2013 judgment dated 21.4.2015 after referring to the decision of the Hon ble Delhi High Court in the case of Anil Kumar Bhatia (supra) and of the Hon ble Karnataka High Court in the cas .....

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ssessment year for which assessment have already been concluded and which do not abate u/s.153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search, the question to be decided is as to whether the proceedings u/s.143(1) of the Act can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act. Section 153A of the Act, uses the expressing pending assessment or reassessment". When a return is filed an .....

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