TMI Blog2022 (1) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... uent years by invoking section 11. Considering the ratio laid down in the above decision, we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue. Assessment u/s 153A - Addition of undisclosed income on the ground that assessee has diverted funds to another sister entity which is not in accordance with the objectives and general accounting principle - HELD THAT:- The undisputed facts are that on the date of search the assessment for the current assessment year was not pending and therefore it has attained finality and thus it was unabated on the date of search. Therefore the AO has no jurisdiction to make addition in an unabated assessment year without there being incriminating materials and accordingly the jurisdiction of the AO can not be justified. We note that the ld CIT(A) passed a very reasoned and speaking order after following the decision of Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] , Murli Agro Products Ltd [ 2010 (10) TMI 1052 - BOMBAY HIGH COURT] and Pr. CIT vs. Meeta Gutgutia [[ 2018 (7) TMI 569 - SC ORDER] - Therefore we do not find any infir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served upon the assessee. The assessee carried forward the loss from earlier years and claimed the same against the current year surplus, however, according to the AO carry forward of losses and setting off against the subsequent years can not be allowed and accordingly the assessment was framed vide order dated 28.12.2018 passed under section 153C read with section 143(3) of the Act. 4. The aggrieved assessee filed an appeal before the Ld. CIT(A) and the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under: 7.3.1. I have considered the facts of the case, the findings of the A.O. as incorporated in the assessment order, and the submissions of the assessee in this regard. In assessment order, the A.O. has not allowed set off in respect of losses brought forward from previous years and also not allowed the losses of the current year to be carried forward. It Is observed that while disallowing such claim, Id. AO has not placed reliance on any incriminating documents found during the course of search which could be said to be adversely affecting the case of the assessee as to this issue. 7.3.2. It was submitted in the online submissions filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry forward of losses was relevant. That, in the case of a Charitable Trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of subsequent years. We do not find any merit in this argument of the Department Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the Trust for charitable and religious purposes in the earlier years against the income earned by the Trust in the subsequent year will have to be regarded as application of income of the Trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and that such adjustment will have to be excluded from the income of the Trust under section 11 (1)(a) of the Act. Our view is also supported by the Judgment of the Gujarat High Court in the case of CIT v. Shr Plot Swetamber Murti Pu'ak Jain Mandal [1995] 211 ITR 293 . Accordingly, we answer question No. 3 in the affirmative i.e., in favour of the assessee and against the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(a). The deficit arising out of excess of expenditure over Income during the previous year relevant to the assessment year should, therefore, be set off against the surplus of income over expenditure relating to subsequent year in computing the taxable income of the later assessment year. (emphasis supplied) In the case of CIT vs. Shri Gujrati Samaj (Regd) reported in 257 ITR 397, Hon'ble High Court of Madhya Pradesh had decided that : In view of 8. 11(1)(a) it cannot be said that the expenditure incurred in the earlier year cannot be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year would not amount to such income being applied for charitable or religious purposes. Having regard to s. 11(1 )(a) when the income of the trust is used or put to use to meet the charitable or religious purposes it is applied for charitable purpose and the said application of the income for charitable or religious purposes takes place in the year in which the income is adjusted to meet the expenses incurred for charitable or religious purposes. Thus even if the expenses for charitable and religious purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer in not allowing the setoff of earlier years loss against current year's income. ............ Respectfully following the said decision, we hold that excess of expenditure in earlier years can be adjusted against income of subsequent years and such adjustment would be application of income for subsequent years and therefore we direct the Assessing Officer to allow the claim of the assessee for set off of excess expenditure of earlier years against current year's income following the above decision of the Hon'ble Jurisdictional High Court (supra). 7.3.4. It is found that the other Judicial decisions relied upon by the assessee also supports the case of the appellant. In fact, it is evident that the Hon'ble Courts, including the Hon'ble Jurisdictional High court, and the Tribunal has consistently pronounced that in case of Charitable Trust excess expenditure over income is to be allowed to be carried forward for setting off against income of subsequent years. 7.3.5. Furthermore, it is found that the decision in the case of CIT vs. Institute of Banking Personnel Selection (supra) has subsequently been followed by the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of CIT vs. Institute of Banking Personnel Selection (IBPS) (supra) wherein it has been held by the Hon ble High Court that the carry forward of deficit of earlier years and setting it off against the surplus of the subsequent years is allowable. We also note that the SLP filed by the department against this decision has been dismissed as reported in 106 taxmann.com 204. Similarly, in the case of CIT vs. Subros Educational Society (supra) the Hon ble Supreme Court has held that the excess expenditure incurred by the charitable institution in the earlier years could be allowed to be set off against the subsequent years by invoking section 11. Considering the ratio laid down in the above decision, we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue. ITA No.156/M/2021 A.Y. 2012-13 8. The issue involved in this appeal is identical to the one as stated above in ITA No.155/M/2021 for A.Y. 2011-12. Therefore, our findings in ITA No.155/M/2021 for A.Y. 2011-12, mutatis mutandis, would apply to this appeal as well. Accordingly, this appeal of the Revenue is dismissed. ITA No.157/M/2021 A.Y. 2013-14 9. Ground Nos.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Rai to another Trust of the group Pd. Dr. D Y Patil University, as donation was in fact usage charges for filming in the studio belonging to the assessee trust and the same was required to be taxed as income of the assessee trust. The AO, while making this addition has not referred to any incriminating material found during the course of search to form an opinion or belief that the said amount was taxable in the hands of the assessee. 9.3.3. The Appellant has contended that In the assessment order, the Assessing Officer has referred to statement of Mr. Ajay Rai while making addition of ₹ 20,00,0007- on account of donation received. It is submitted that these evidences do not reflect any notings of incriminating nature calling for the addition in the present case. In the assessment order, at page 8, the Assessing Officer has stated that in statement of Shri Ajay Rai, he has confirmed having made payment of ₹ 20 lakhs to another institution, namely, D. Y. Patil Hospital and research Centre, Navi Mumbai for using the sports stadium of the appellant for certain shootings carried out by him. Based on the said statement, the Assessing Officer concluded that the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record that the AO had failed to bring on record any incriminating material in the assessment order. 9.3.7. It is pertinent to note here that the Section 153A(1) of the Act starts with a non-obstante clause and disregards the normal provisions of the assessment prescribed under the Act in the case of a search operation carried out u/s 132 of the Act. By virtue of clause (a) of section 153A(1), the AO is required to issue notice calling for Returns of Income for the six assessment years prior to the date of search. The further consequences of a search carried out u/s 132 are mentioned in clause (b), whereby the A.O. is required to assess or reassess the total income of those six Assessment Years. As such, the AO has no option but to make an assessment in respect of all the six Assessment Years concerned as he has to bring the proceedings to a logical conclusion by making an assessment of the returns filed for all these Assessment Years. 9.3.7. Having said so, the next question, which arises is what are the issues which could be taken up for assessment u/s 153A of the Act, for the assessment years which abate. In such a scenario, the second proviso to Section 153A(1) sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finality. 9.3.11. The next question which needs to be answered is what is the scope of assessment/ reassessment under the provisions of section 153A of the Act for the assessments/reassessments which have not abated and those which have attained finality. 9.3.12. The use of the phrase 'so far as maybe' in section 153A(1)(a) implies that all e provisions of the Act as contained under Chapter XIV prescribing the procedure 'for assessment or under any other Chapter of the Act with respect to the return of income filed u/s 139 of the Act shall be applicable to the returns filed pursuant to notice issued u/s 153A/153C of the Act. The applicability of those provisions which are inconsistent with the provisions of section 153A are restricted by the use of the phrase 'so far as may be'. As such, for the assessments proceedings which are abated, the AO gets all the powers prescribed under the law, as if the assessment is being made for the first time. Thus, if the assessment is made for the first time, all the provisions of assessment, relevant for making of an assessment u/s 143(3) shall be applicable. 9.3.13. As far as the assessments/reassessments, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section. 9.3.15. Further, upon perusal of SLP No. 18560 of 2015 dated 12/10/2015 admitted by Hon'ble Supreme Court against the decision of Hon'ble Bombay High Court rendered in CIT Vs. Continental Warehousing Corporation [supra], it is found that Hon'ble Apex Court has only admitted SLP against the ruling of the Hon'ble Bombay High Court's finding. However, it is seen that the Hon'ble Apex Court has not stayed or suspended the operation of the decision of the Hon'ble Bombay High Court in any manner and therefore, at the moment, the decision of jurisdictional High Court is binding. 9.3.16. A similar view has been taken by the Hon'ble Bombay High Court (Nagpur Bench) in case of Murli Agro Products Ltd Vs. CIT 49 Taxman.com 172in ITA No 36 of 2009, wherein it has been held that on initiation of proceedings U/s. 153A, it is 5nly the assessment proceedings that are pending on the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). 11. In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1 998-99 was finalized on 29-12-2000 and search was conducted thereafter on 3-122003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalized on 29-12-2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no addition can be made for a particular assessment year without there being an incriminating material that relates to the said assessment year which would justify such an addition. The Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax, Central IT, New Delhi Vs. Meeta Gutgutia [2018] 96 taxmann.com 468 (SC) has dismissed the SLP in the case and thus upheld the decision of Hon'ble Delhi High Court that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year. 9.3.23. .. .. . 9.3.24. In view of the aforesaid detailed discussion and respectfully following the judicial precedents, I am of the view that assessments which are completed u/s 143(3) of the Act, do not abate. Further, proceedings u/s 153A/153C of the Act does not empower the AO to re-adjudicate the same issues again, unless fresh incriminating material is found during the course of search and in such cases the AO does not have jurisdiction to make additions/disallowances whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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