Sonali Kilaje 41-ITXA-1934-17(Judgment).doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL 1934 OF 2017 Pr. Commissioner of Income Tax, Central-2, R. No. 1920, Air India Building Nariman Point, Mumbai- 400 021. Appellant v/s. M/s. JSW Steel Ltd. (Sucessor on amalgamation of JSW Ispat Steel Ltd.) JSW Centre, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 Respondent Mr. A.R. Malhotra for Appellant. CORAM: UJJAL BHUYAN, & MILIND N. JADHAV, JJ. RESERVED ON : 20 JANUARY, 2020 PRONOUNCED ON : 05 FEBRUARY, 2020 JUDGMENT (PER MILIND N. JADHAV, J.) :- 1. present appeal under Section 260A of Income Tax Act, 1961 takes exception to order dated 28.09.2016 passed by Income Tax Appellate Tribunal, J Bench, Mumbai (hereinafter referred 1 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc to as ITAT/Tribunal), interalia, allowing assessee s appeal i.e. ITA No.33/Mum/2015. order has arisen out of orders of CIT (Appeals)-39, Mumbai, in Appeal Nos. CIT-39/IT-14-15 and 16/2013- 14 both of even date 02.10.2014. Assessments were finalised by DCIT, Central Circle 18 & 19, Mumbai for Assessment Years 2008-09, 2009-10 and 2010-11 under provisions of Section 153A read with Section 143(3) of Income Tax Act, 1961 (hereinafter referred to as said Act) by order dated 25.03.2013. impugned order is for Assessment Year 2008-09. 2. assessee is widely held public limited company engaged in various activities including production of sponge iron, galvanized sheets and cold-rolled coils through its steel plants located at Dolve and Kalmeshwar in Maharashtra. assessee filed original return of income on 30.09.2008 for Assessment Year 2008-09 declaring loss at Rs.104,17,70,752/- under provisions of Section 139(1) of said Act. assessee s case was selected for scrutiny under Section 143(2) of said Act on 03.09.2009. 2 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc 3. During pendency of assessment proceedings, search was conducted under Section 132 of said Act on ISPAT Group of companies on 30.11.2010. 3.1. Following search, notice under Section 153A of Act was issued. In response, assessee filed return of income declaring total loss at Rs.419,48,90,102/- on 29.03.2012. In this return of income assessee made new claim for treating gain on pre-payment of deferred VAT/sales tax on Net Present Value (NPV) basis for amount of Rs.318,10,93,993/- as capital receipt . 4. This new/fresh claim of assessee was disallowed by Assessing Officer (hereinafter referred to as AO) while finalising assessment under Section 143(3) read with Section 153A of said Act vide order dated 25.03.2013 by considering same as revenue receipt instead of capital receipt . reasoning given by AO was that assessee had availed of sales tax deferral scheme and State Government had permitted premature re-payment of deferred sales tax liability at NPV basis. Therefore, according to AO, assessee treated this as capital receipt even though same was 3 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17 (Judgment).doc credited to assessee s profit and loss account being difference between deferred sales tax and its NPV. 5. However, primary question that arose before AO was whether claim which was not made in earlier original return of income filed under Section 139(1) of said Act, could be filed and considered in subsequent return filed by assessee in pursuance to notice under Section 153A of said Act (which was consequent to search action conducted under Section 132 of said Act). AO held that assessee could not raise new claim in return filed under Section 153A which was not raised in original return of income filed under Section 139(1). Thereafter, claim was disallowed and was treated as revenue receipt . 5.1 By order dated 15.04.2013, first appellate authority i.e. Commissioner of Income Tax (Appeals) (hereinafter referred to as CIT(A) ) upheld order passed by A.O. In further appeal, I.T.A.T., however, by impugned order dated 28.09.2016, allowed assessee s appeal and set aside both orders passed by A.O. and C.I.T.(A). 4 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc 5.2 Hence appeal by revenue. 6. Shri A.R. Malhotra, learned counsel appearing on behalf of appellant opened his submissions by placing admitted position on record. He submitted that in original return dated 30.09.2008 filed under Section 139(1) of said Act, no claim regarding gain on pre-payment of deferred VAT/sales tax on NPV basis was made by assessee. assessee had in fact claimed said as revenue receipt. He submitted that now assessee claimed this as capital receipt in subsequent return which was filed by assessee pursuant to compliance of statutory notice received under Section 153A on 29.03.2012, which was in consequence to search action initiated under Section 132 of said Act on 30.11.2010. He, therefore, submitted that impugned order dated 28.09.2016 needs to be examined closely in realm of aforesaid admitted facts. 6.1. Mr. A.R.Malhotra drew our attention to proposed question of law in present appeal which reads thus : Whether on facts and in circumstances of case 5 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc and in Law, Hon ble Tribunal was justified in holding that in return of Income filed u/s. 153 of I.T. Act, 1961 or even during course of assessment proceedings undertaken u/s. 153A of I.T.Act, 1961 assessee can lodge new claims, deduction or exemption or relief which remained to be claimed in regular return of income? 6.2. Shri A.R.Malhotra submitted that Tribunal failed to interpret language and applicability of provisions of Section 153A in facts and circumstances of present case in its right perspective and true meaning. He submitted that it was incorrect on part of Tribunal to hold and conclude that assessee could lodge new claims, deductions, exemption or relief (which assessee had failed to claim in his regular return of income) which came to be filed by assessee under provisions of Section 153A of said Act. He submitted that conclusion arried at by Tribunal that assessee could make fresh claim in return of income filed under Section 153A of said Act was incorrect in law in as much as once assessment got abated under second proviso to Section 153A(1)of said Act, assessee was precluded from making any 6 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc new claim, deduction or exemption or relief which had remained to be claimed by assessee in original regular return of income which was filed earlier. He submitted that assessee had treated said receipts in original return of income as revenue receipt and credited same to his profit and loss account. Subsequently assessee had however made fresh claim in return of income which came to be filed on 29.03.2012 under provisions of Section 153A of said Act in consequence of search action, in which assessee had treated same receipts as capital receipt . He submitted that this change of stand on part of assessee in subsequent return should not have been allowed as it was contrary to stand taken by assessee in his original return of income. He fairly submitted that original return of income filed under Section 139(1) of said Act was processed under Section 143(1) of Act, but notice under Section 143(2) of said Act for scrutinizing said return of income was pending as on date of search conducted on assessee. 6.3. Shri A.R.Malhotran also drew our attention to order passed by CIT(A) and more specifically to para Nos. 6 to 6.3 of 7 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc said order. He submits that CIT(A) has correctly analyzed provisions of Section 153A and come to conclusion that assessment or reassessment made pursuant to notice under Section 153 of said Act are not de novo assessments. He submitted that CIT(A) has correctly held that assessee could lodge new claim, deduction, exemption or relief which had remained to be claimed in earlier regular return of income in course of assessment proceedings undertaken under Section 153A of said Act. He submitted that primary objection of revenue was that claim was not made by assessee in original return of income nor revised return of income was filed under Section 139(5) of said Act. Therefore, it was not open to assessee to use proceedings initiated under Section 153A of said act to lodge fresh claim. 6.4. Shri A.R.Malhotra has clarified that assessee had contended : (i) that there was no specific inhibition or restriction on assessee to make new claim, deduction, exemption and/or relief which was not claimed in original assessment; (ii) that under Section 153A of said Act, return filed is deemed to be return filed under Section 139(1) of Act; (iii) that provisions of said Act 8 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc would apply to same accordingly; (iv) that once assessment got abated, assessee was at liberty to make such claim/ addition as per normal assessment proceedings because assessment got abated and therefore AO retained original jurisdiction as well as jurisdiction conferred on him under Section 153A of said Act which was in consequence to search under Section 132 of said Act. 6.5. He, however, fairly referred to following two cases delivered by this Hon ble Court, viz; CIT Vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) and DCIT Vs Eversmile Construction Co. Pvt. Ltd. 65 DTR 39 in support of proposition that assessee was entitled to make fresh claim in return filed in pursuance to initiation of proceedings under Section 153A of Act which were referred to by Tribunal in impugned order. This stand of Mr. Malhotra is appreciated. 7. Submissions made by learned standing counsel have been considered. 8. At outset, we may advert to Section 153-A of Act. It deals with assessment in case of search or requisition. Sub-section (1) is relevant. It says that notwithstanding anything contained in Sections 9 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc 139, 147, 148, 149, 151 and 153, in case of person where search is initiated under Section 132 or books of account, etc. are requisitioned under Section 132-A, after 31.05.2003, assessing officer shall - (a) issue notice to such person for furnishing return of income in respect of each assessment year falling within six assessment years, within such time as may be specified and upon such return of income being filed, provisions of Act shall apply as if such return were return required to be furnished under Section 139; and (b) assess or re-assess total income of six assessment years immediately preceding assessment year relevant to previous year in which such search is conducted or requisition is made. 8.1. In other words, Section 153-A(1) provides that where person is subjected to search under Section 132 or his books of accounts, etc. are requisitioned under Section 132-A after 31.05.2003, assessing officer is mandated to issue notice to such person to furnish return of income in respect of each assessment year falling within six assessment years immediately preceding assessment year relevant to previous year in which search is conducted or requisition is made. Such returns of income shall be treated to be 10 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc returns of income furnished under Section 139. Once returns are furnished, income is to be assessed or re-assessed for six assessment years immediately preceding assessment year relevant to previous year in which such search is conducted or requisition is made. Thus, once Section 153-A(1) is invoked, assessment for 6 assessment years immediately preceding assessment year in which search is conducted or requisition is made becomes open to assessment or re- assessment. Two aspects are crucial here. One is use of expression notwithstanding in sub-section (1); and secondly, that returns of income filed pursuant to notice under Section 153-A (1)(a) would be construed to be returns under Section 139. use of non obstante clause in sub-section (1) of Section 153-A i.e., use of expression notwithstanding is indicative of legislative intent that provisions of Section 153-A(1) would have overriding effect over provisions contained in Sections 139, 147, 148, 149, 151 and 153. 8.2. Having noticed above, we may also refer to second and third proviso to Section 153-A(1). For sake of convenience, second and third proviso to Section 153A(1) of said Act which is relevant is reproduced below and reads thus : 11 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc Provided further that assessment or reassessment, if any, relating to any assessment year falling within period of six assessment years referred to in this [sub-section] pending on date of initiation of search under section 132 or making of requisition under section 132A, as case may be, shall abate: [Provided also that Central Government may by rules made by it and published in Official Gazette (except in cases where any assessment or reassessment has abated under second proviso), specify class or classes of cases in which Assessing Officer shall not be required to issue notice for assessing or reassessing total income for six assessment years immediately preceding assessment year relevant to previous year in which search is conducted or requisition is made. 8.3. second proviso says that any assessment or re- assessment proceedings falling within said period of six assessment years pending on date of initiation of search under Section 132 or making of requisition under Section 132-A shall abate. third proviso mentions that Central Government may frame rules to specify such class or classes of cases in which assessing officer shall not be required to issue notice for assessing or re-assessing total income for said six assessment years. 8.4. Reverting back to second proviso what is to be noticed is that as per this proviso, any assessment or re-assessment in respect of any assessment year falling within said period of six assessment years is pending on date of initiation of search or making of 12 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc requisition, those assessment or re-assessment proceedings shall abate. In other words, pending assessment or re-assessment proceedings on date of initiation of search or making of requisition shall abate. 8.5. That brings us to crucial expression, which is abate . ordinary dictionary meaning of word abate , as per Concise Oxford English Dictionary, Indian Edition, is to reduce or remove (a nuisance). Derivative of abate is abatement. In Black s Law Dictionary, Eighth Edition, abatement has been defined to mean act of eliminating or nullifying; suspension or defeat of pending action for reason unrelated to merits of claim. In Supreme Court on Words and Phrases (1950-2008), abating has been defined to mean extinguishment of very right of action itself ; to abate , as applied to action, is to cease, terminate, or come to end prematurely. 9. Therefore, from critical analysis of provisions contained in Section 153-A(1) of Act more particularly key expressions as referred to above, it is evident that assessments or re- assessments pending on date of initiation of search would stand 13 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc abated. Return of income filed by person concerned for six assessment years in terms of Section 153-A(1)(a) would be construed to be return of income under Section 139 of Act. 10. It will be trite to also refer to judicial decisions referred to and relied upon by assessee before Tribunal, viz; in case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) and which finds mention in Tribunal s order and more specifically in paragraph 17 & 18 of order which reads thus : 17. On other hand, while canvassing lead arguments, Mr. Dastur, learned senior counsel appearing for assessee - All Cargo Global Logistics Ltd. would submit that power under section of IT Act and its ambit and scope has rightly been interpreted in impugned judgment. Mr. Dastur submits that title of section itself is indicative of object and namely assessment in case of search or requisition. This section contains non-obstante clause so as to not to restrict powers which are conferred by virtue of section 153A in Assessing Officer. However, exercise of power under that provision is where search is initiated under section 132 or books of account or other documents or assets are requisitioned under section 132A of Act after 31st May, 2003. Then Assessing Officer shall issue notice to such person requiring him to furnish within such period as may be specified in notice, return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A and clause (b) postulates assessment or reassessment of total income of six years immediately preceding assessment year relevant to previous year in which such search is conducted or requisition is made. first proviso mandates that Assessing Officer shall assess or reassess total income in respect of each assessment year falling within such six assessment years. second proviso, according to Mr. Dastur, is important because assessment or reassessment, if any, relating to any 14 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc assessment year falling within period of six assessment years referred to in sub-section (1) pending on date of initiation of search under section 132 or making of requisition under section 132A, as case may be, shall abate. Equally, sub-section (2) of section 153A deals with situation where any proceeding initiated or any order of assessment or reassessment is made under sub-section (1) but that has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section or section 153, assessment or reassessment relating to any assessment year which has abated under second proviso to sub-section (1), shall stand revived with effect from date of receipt of order of such annulment by Commissioner. Further, proviso to this sub-section says that such revival shall cease to have effect if order of annulment is set aside.10 18. Mr. Dastur would submit that Revenue is protected completely in this case. power is of drastic nature and has to be exercised within constitutional parameters. However, though second proviso to sub-section (1) of section 153A would not apply in first three years of this case, yet, as far as second three year period is concerned, assessments were pending. proceedings in relation thereto abate. Now entire assessment in relation to second phase of three years can be made but foundation for all this and action under section 153A is search under section 132 or requisition of books of account and other assets under section 132A. In present case, notice under section 153A is founded on search. If there is no incriminating material found during search, then, Special Bench was right in holding that power under section 153A being not expected to be exercised routinely, should be exercised if search reveals any incriminating material. If that is not found, then, in relation to second phase of three years, there is no warrant for making order within meaning of this provision. In any event, issue stands concluded by Division Bench judgment of this Court rendered in case of Commissioner of Income Tax (Central) Nagpur vs. M/s. Murli Agro Products Limited in Income Tax Appeal No.36 of 2009 decided on 29th October, 2010. It is, therefore, apparent that law laid down by this Court is binding on Revenue. If that is binding then questions of law and with regard to applicability of section 153A need to be answered against Revenue and in favour of 15 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc assessee. 11. It will also be fruitful to extract relevant findings of Division Bench of this Court in case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (Bom.) (supra), para Nos.27, 28, 31 & 36 which read thus : 27. However, Revenue's argument was that once proceedings under section 153A of Act are initiated, then, original assessment / reassessment order already passed in assessment years covered under section 153A stand abated and Assessing Officer is obliged to pass fresh assessment / reassessment orders and determine total income afresh for those assessment years. Thus, earlier assessment orders abate as proceedings in which they are passed have no legal consequence was argument. Once notice under section 153A was issued and assessment order passed pursuant thereto, it is that order which was erroneous and prejudicial to interest of Revenue. 28. In dealing with those arguments, Division Bench outlined ambit and scope of powers conferred by section 153A and observed thus : 16 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc 8) We find it difficult to accept above contention raised on behalf of revenue. object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding existing provisions relating to search cases contained in Chapter XIV B of Income-tax Act, as stated in Memorandum explaining provisions in Finance Bill 2003 (see 260 ITR (St) 191 at 219) was that under existing provisions relating to search cases, often disputes were raised on question, as to whether particular income could be treated as `undisclosed income' or whether particular income could be said to be relatable to material found during course of search, etc. which led to prolonged litigation. To overcome that difficulty, legislature by Finance Act 2003, decided to discard Chapter XIV B provisions and introduce Sections 153A, 153B and 153C in IT Act. 9) What Section 153A contemplates is that, notwithstanding regular provisions for assessment/reassessment contained in IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in case of any person, Assessing Officer shall issue notice to 17 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc such person requiring him to furnish return of income within time stipulated therein, in respect of six assessment years immediately preceding assessment year relevant to previous year in which search is conducted or requisition is made and thereafter assess or reassess total income for those assessment years. second proviso to Section 153A provides for abatement of assessment/reassessment proceedings which are pending on date of search/requisition. Section 153A (2) provides that when assessment made under Section 153(A)(1)is annulled, assessment or reassessment that stood abated shall stand revived. 10) Thus on plain reading of Section 153A of Income-tax Act, it becomes clear that on initiation of proceedings under Section 153A, it is only assessment / reassessment proceedings that are pending on date of conducting search under Section 132 or making requisition under Section 132A of Act stand abated and not assessments/reassessments already finalised for those assessment years covered under Section 153A of Act. By circular No. 8 of 2003 dated 18-9-2003 (See 263 ITR (St) 18 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc 61 at 107) CBDT has clarified that on initiation of proceedings under Section 153A, proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, finalised assessments /reassessments do not abate, appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, argument of revenue, that on initiation of proceedings under Section 153A, assessments/ reassessments finalised for assessment years covered under Section 153A of Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A (1) what stands revived is pending assessment / reassessment proceedings which stood abated as per section 153A(1). 11) In present case, as contended by Shri Mani, learned counsel for assessee, assessment for assessment year 1998-99 was finalised on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in facts of present case, initiation of proceedings under Section 153A would not affect 19 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc assessment finalised on 29-12-2000. 12) Once it is held that assessment finalised on 29.12.2000 has attained finality, then deduction allowed under section 80 HHC of Income-tax Act as well as loss computed under assessment dated 29-12-2000 would attain finality. In such case, A.O. while passing independent assessment order under Section 153A read with Section 143 (3) of I.T. Act could not have disturbed assessment / reassessment order which has attained finality, unless materials gathered in course of proceedings under Section 153A of Income-tax Act establish that reliefs granted under finalised assessment/ reassessment were contrary to facts unearthed during course of 153 proceedings. 13) In present case, there is nothing on record to suggest that any material was unearthed during search or during 153A proceedings which would show that relief under Section 80 HHC was erroneous. In such case, A.O. while passing order under Section 153A read with Section 143(3) could not have disturbed assessment 20 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc order finalised on 29.12.2000 relating to Section 80 HHC deduction and consequently C.I.T. could not have invoked jurisdiction under Section 263 of Act. 31. We, therefore, hold that Special Bench's understanding of legal provision is not perverse nor does it suffer from any error of law apparent on face of record. Special Bench in that regard held as under : 48. provision under section 153A is applicable where search or requisition is initiated after 31.5.2003. In such case AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding year in which search etc. has been initiated. Thereafter he has to assess or reassess total income of these six years. It is obligatory on part of AO to assess or reassess total income of six years as provided in section 153A(1)(b) and reiterated in 1 st proviso to this section. second proviso states that assessment or reassessment pending on date of initiation of search or requisition shall abate. We find that there is no divergence of views in so far as provision contained in section 153A till 1 st 21 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc proviso. divergence starts from second proviso which states that pending assessment or reassessment on date of initiation of search shall abate. This means that assessment or reassessment pending on date of initiation of search shall cease to exist and no further action shall be taken thereon. assessment shall now be made u/s 153A. case of Ld. Counsel for assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to extent as undisclosed income is found in course of search. On other hand, it has been argued by Ld. Standing Counsel that abatement of pending assessment is only for purpose of avoiding two assessments for same year, one being regular assessment and other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. second proviso does not contain any word or words to effect that no reassessment shall be made in respect of completed assessment. language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and first proviso clearly 22 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against legislative intent and against very rule in this behalf that it should be supplied for purpose of achieving legislative intent. submissions of Ld. Counsels are manifold, foremost being that provision u/s 153A should be read in conjunction with provision contained in section 132(1), reason being that latter deals with search and seizure and former deals with assessment in case of search etc, thus, two are inextricably linked with each other. 49. Before proceeding further, we may now examine provision contained in sub-section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under sub- section (1) is annulled in appeal etc., then abated assessment revives. However, if such annulment is further nullified, assessment again 23 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc abates. case of Ld. Counsel is that this provision further shows that completed assessments stand on different footing from pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of provision and submissions, we find that this provision also makes it clear that abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. interpretation of Ld. Counsel, though not specifically stated, would be that on annulment of assessment made u/s 153(1), AO gets jurisdiction to assess total income which was vested in him earlier independent of search and which came to end due to initiation of search. 50. provision contained in section 132 (1) empowers officer to issue warrant of search of premises of person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have 24 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc not been produced, b) summons or notice has been or might be issued, he will not produce books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly income or property which has not been and which would not be disclosed for purpose of assessment, called as undisclosed income or property. We find that provision in section 132 (1) does not use word "incriminating document". Clauses (a) and (b) of section 132(1) employ words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all three conditions on satisfaction of which warrant of search can be issued will have to be taken into account. 51. Having held so, assessment or reassessment u/s 153A arises only when search has been initiated and conducted. Therefore, such assessment has vital link with initiation and conduct of search. We have mentioned that search can be authorised on satisfaction of one of three conditions enumerated earlier. Therefore, while interpreting provision contained in section 153A, 25 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside provision contained in section 132(1). 52. provision comes into operation if search or requisition is initiated after 31.5.2003. On satisfaction of this condition, AO is under obligation to issue notice to person requiring him to furnish return of income of six years immediately preceding year of search. word used is "shall" and, thus, there is no option but to issue such notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, word used is "shall" and, therefore, AO has no option but to assess or reassess total income of these six years. pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on date of initiation of search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. assessment has now to be made u/s 153A(1)(b) and first proviso. It also means that only one assessment will be made under aforesaid provisions as two 26 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then abated assessment or reassessment shall revive. This means that assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. question now is - what is scope of assessment or reassessment of total income u/s 153A (1)(b) and first proviso ? We are of view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to assessment had not been produced in course of original assessment and found in course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under aforesaid provision. Similar position will obtain in case where undisclosed income or undisclosed property has been found as consequence of search. In other words, harmonious 27 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc interpretation will produce following results :- a) In so far as pending assessments are concerned, jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on basis of findings of search and any other material existing or brought on record of AO, (b) in respect of non-abated assessments, assessment will be made on basis of books of account or other documents not produced in course of original assessment but found in course of search, and undisclosed income or undisclosed property discovered in course of search. 54. It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on basis of undisclosed income discovered in course of search. He was specifically questioned about jurisdiction of AO 28 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc to make original assessment along with assessment u/s 153A, merging into one. However he took evasive view submitting that this question need not be decided in his case although question of jurisdiction u/s 153A was vehemently pressed on account of which ground No.1 in appeal for assessment year 2004-05 was admitted as additional ground. He also wanted additional ground to be retained in case of any future contingency. 36. Similar is case with Division Bench judgment of High Court of Karnataka at Bangalore. There as well real estate firm was assessee. return of income was filed and when order under section 143(3) of Act came to be passed on 31 st December, 2010, for assessment year 2008-09 that search took place in premises of assessee on 12 th April, 2011. In course of search, incriminating material leading to undisclosed income was seized. Therefore, proceedings under section 153A of Act calling upon assessee to file return of income under section 153A(1)(a) came to be initiated by notice dated 13 th January, 2012. Return of income was filed pursuant to receipt of such notice and for six years as required by provision. When this return was under consideration on 14th March, 2013, 29 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc Commissioner of Income Tax initiated proceedings under section 263 of Act on ground that order dated 31 st December, 2010 in relation to return of income for assessment year 2008- 09 and holding that same is erroneous and prejudicial to interest of Revenue came to be passed. assessee filed his objection but Commissioner maintained his action under section 263. That is how aggrieved assessee carried matter in appeal to Tribunal and before Tribunal it was contended that once section 263 of Act has been invoked during pendency of proceedings under section 153A of Act, then, that was impermissible. That was impermissible for assessments including for assessment year 2008-09 stand reopened. Once they are reopened, then, there is no order of assessment in force and in regard to which any action under section 263 of IT Act can be initiated. It is in dealing with this argument and which was negatived by Tribunal that all observations of High Court of Karnataka have been made. In paragraphs 5 and 6, arguments have been noted and thereafter provision has been reproduced. In paragraph 9, extensive reference has been made to judgment in Anil Kumar Bhatia of High Court of Delhi (supra) and then following observations in paragraphs 10 and 11 are made : 30 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc 10. Section 153A of Acts start with non obstante clause. fetters imposed upon Assessing Officer by strict procedure to assume jurisdiction to reopen assessment under Sections 147 and 148, have been removed by non obstante clause with which sub section (1) of Section 153A opens. time-limit within which notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by non obstante clause. Section 151 which requires sanction to be obtained by Assessing Officer by issue of notice to reopen assessment under Section 148 has also been excluded in case covered by Section 153A. time-limit prescribed for completion of assessment or reassessment by Section 153 has also been done away with in case covered by Section 153A. With all stops having been pulled out, Assessing Officer under Section 153A has been entrusted with duty of bringing to tax total income of assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. Therefore, it is clear even if assessment order is passed under Section 143(1) or 143(3) 31 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc of Act, Assessing Officer is empowered to reopen those proceedings and reassess total income taking note of undisclosed income, if any, unearthed during search. After such reopening of assessment, Assessing Officer is empowered to assess or reassess total income of aforesaid years. condition precedent for application of Section 153A is there should be search under Section 132. Initiation of proceedings under Section 153A is not dependent on any undisclosed income being unearthed during such search. proviso to aforesaid section makes it clear assessing officer shall assess or reassess total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within period of six assessment years referred to in aforesaid sub- section on date of initiation of search under Section 132, said proceeding shall abate. If such proceedings are already concluded by assessing officer by initiation of proceedings under Section 153A, legal effect is assessment gets reopened. block assessment roped in only undisclosed income and regular assessment proceedings were preserved, resulting in multiple 32 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc assessments. Under Section 153A, however, Assessing Officer has been given power to assess or reassess total income of six assessment years in question in separate assessment orders.The Assessing Officer is empowered to reopen those proceedings and reassess total income, taking note of undisclosed income, if any, unearthed during search. He has been entrusted with duty of bringing to tax total income of assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of six assessment years, in which both disclosed and undisclosed income would be brought to tax. When once proceedings are initiated under Section 153A of Act, legal effect is even in case where assessment order is passed it stands reopened. In eye of law there is no order of assessment. Re-opened means to deal with or begin with again. It means Assessing Officer shall assess or reassess total income of six assessment years. Once assessment is reopened, assessing authority can take note of income disclosed in earlier return, any undisclosed income found during search or and also 33 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc any other income which is not disclosed in earlier return or which is not unearthed during search, in order to find out what is total income of each year and then pass assessment order. Therefore, Commissioner by virtue of power conferred under Section 263 of Act gets no jurisdiction to initiate proceedings under said provision because condition precedent for initiating proceedings under Section 263 is any order passed under Act by Assessing Officer is erroneous insofar as it is prejudicial to interest of revenue. Once order passed by Assessing Officer gets reopened, there is no order which can be said to be erroneous insofar as it is prejudicial to interest of revenue which confers jurisdiction on Commissioner to exercise power of jurisdiction. 12. In this perspective we are called upon to decide question projected by revenue as substantial question of law arising from order of Tribunal. We have considered grounds of appeal and orders passed by AO, CIT(A) and Tribunal with assistance of learned counsel for Appellant. From reading of above it is clear that Section 153A of said Act, provides for 34 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc procedure for assessment in search cases. As alluded to hereinabove, said section starts with non-obstante clause stating that it is, notwithstanding anything contained in section 147, 148 and 149 Further sub Section(a) of Section 153A(1) provides for issuance of notice to persons searched under Section 132 of Act to furnish return of income. However, second proviso to Section 153 of said act makes it clear that assessment relating to any assessment year filed within period of six assessment years pending on date of search under Section 132 of Act shall abate. Thus if on date of initiation of search under Section 132, any assessment proceeding relating to any assessment year falling within period of said six assessment years is pending, same shall stand abated and Assessing Authority cannot proceed with such pending assessment after initiation of search under section 132 of said Act. 13. In present case, search was conducted on assessee on 30.11.2010. At that point of time assessment in case of assessee for assessment year 2008-09 was pending scrutiny since notice under Section 143(2) of Act was issued and assessment was not completed. 35 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc Therefore, in view of second proviso to Section 153A of said Act, once assessment got abated, it meant that it was open for both parties, i.e. assessee as well as revenue to make claims for allowance or to make disallowance, as case may be, etc. That apart, assessee could lodge new claim for deduction etc. which remained to be claimed in his earlier/ regular return of income. This is so because assessment was never made in case of assessee in such situation. It is fortified that once assessment gets abated, original return which had been filed looses its originality and subsequent return filed under Section 153A of said Act (which is in consequence to search action under Section 132) takes place of original return. In such case, return of income filed under Section 153A(1) of said Act, would be construed to be one filed under Section 139(1) of Act and provisions of said Act shall apply to same accordingly. If that be position, all legitimate claims would be open to assessee to raise in return of income filed under Section 153A(1). 14. We would further like to emphasis on judgment passed by this Court in case of Continental Warehousing (supra) which 36 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc also explains second proviso to Section 153A(1). explanation is that pending assessment or reassessment on date of initiation of search if abated, then assessment pending on date of initiation of search shall cease to exist and no further action with respect to that assessment shall be taken by AO. In such situation assessment is required to be undertaken by AO under Section 153A(1) of said Act. 15. In view of above, we are in agreement with findings given by Tribunal in respect of allowing of assessee s appeal in paragraph -14 of order under challenge dated 28.09.2016, which reads thus : 14. From above discussion and precedence, scheme of assessment u/s 153A of Act in case of search, AO shall issue notice to searched person requiring him to furnish within such period as may be specified in notice, return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of sub- section (1) of section 153A and clause (b) postulates assessment or reassessment of total income of six years immediately preceding assessment year relevant to previous year in which such search is conducted. first proviso mandates that AO shall assess or reassess total income in respect of each assessment year falling within such six assessment years. second proviso postulates that assessment or reassessment, if any, relating to any assessment year falling within period of six assessment years referred to in sub-section (1) is pending on date of initiation of search u/s 132 of Act shall abate. In present case 37 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc before us, however, though second proviso to sub-section (1) of section 153A would not apply in first three years of this case, yet, as far as second three year period is concerned (which are pending before us), assessments were pending. proceedings in relation thereto abate. Now entire assessment in relation to second phase of three years can be made. pending assessment in that case may be undertaken u/s 153A of Act. abatement of pending assessment is for purpose of avoiding two assessments for same year i.e. one being regular assessment and other being search assessment u/s 153A of Act. In other words, these two assessments merge into one assessment. It means that completed assessments stand on different footing from pending assessments. Hence, in so far as pending assessments are concerned, jurisdiction to make original assessment and assessment u/s 153A of Act merge into one and in that case only one assessment for remaining set of years, where assessment is pending, is to be made separately on basis of search materials and regular material existing or brought on record before AO/Revenue. It means that assessee can make any new claim in return of income filed u/s 153A of Act or even during course of assessment proceedings undertaken u/s 153A of Act. In our view, and in view of second proviso to Section 153A (1) of Act, once assessment get abated it is opened both way i.e. for Revenue to make any additions apart from seized material even regular items declared in return can be subject matter if there is doubt about genuineness of those items and similarly assessee also can lodge new claim, deduction or exemption or relief which remained to be claimed in regular return of income, because assessment was never made in case of assessee in such situation. Hence, we allow this issue of assessee s appeal. 16. From above we conclude that in view of second proviso to Section 153A(1) of said Act, once assessment gets abated, it is open for assessee to lodge new claim in proceeding under Section 153A(1) which was not claimed in his regular return of 38 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Sonali Kilaje 41-ITXA-1934-17(Judgment).doc income, because assessment was never made/finalised in case of assessee in such situation. 17. We are therefore of considered opinion that present appeal filed by Revenue does not give rise to any substantial question of law. Thus, appeal filed by Revenue is found to be devoid of merit and same is liable to be dismissed. 18. appeal filed by Revenue is accordingly dismissed with no order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN,J.) 39 of 39 Uploaded on - 05/02/2020 Downloaded on - 06/02/2020 09:53:58 Pr. Commissioner of Income-tax, Central-2, Mumbai v. JSW Steel Ltd. (Sucessor on amalgamation of JSW Ispat Steel Ltd.)