Karnataka High Court dismisses GMR's appeal in income tax case
Court held that assessment or re-assessment made in pursuance to Section 153A of Income Tax Act is not a de novo assessment
The Karnataka High Court upheld the order of the Income Tax Appellate Tribunal (ITAT) that the assessment or re-assessment made in pursuance to Section 153A of the Income Tax Act, 1961 was not a de novo assessment.
The matter titled GMR Infrastructure Limited v The Dy. Commissioner of Income-Tax was placed before a Division Bench of High Court of Karnataka comprising Justices Alok Aradhe and Hemant Chandangoudar.
The facts leading up to this appeal were that an order of assessment was passed under Section 143(1) of the Act on 15 January 2009 for the Assessment Year 2007-08 wherein the Appellant – Company had filed its return of income declaring returned loss of ₹5,87,56,498 under normal provisions and negative book profit of ₹9,18,53,736 as per the provisions of Section 115JB of the Act. Thereafter, an order of rectification was passed on 13 July 2010 by which refund of a sum of ₹10,55,000 was granted as an application was filed under Section 154 of the Act before the Assessing Officer pointing out the discrepancy in the short grant of TDS credit.
Later, a search and seizure operation u/S 132 of the Act was initiated on 11 October 2012 and a notice u/S 153A of the Act was issued to the Appellant – Company. The Appellant – Company, thus filed a letter requesting to treat the original return of income filed on 31 October 2017 u/S 139(1) of the Act as returned income in response to notice u/S 153A of the Act. The Assessing Officer made certain disallowances and determined the total income at Rupees Nil as against the amount of returned loss of ₹5,87,56,498 under normal provisions of the Act. The Income Tax Appellate Tribunal later confirmed the order of assessment which made the interest and administrative expenses u/S 14A of the Act to the extent of ₹18,74,89,400 by reference to the formula prescribed under Rule 80D of the Income Tax Rules and allowed disallowance of ₹4,94,32,158 u/S 14A of the Act as well. The present appeal challenged this order of the Tribunal.
The main issue which needed determination was whether the Tribunal was right in holding that the Appellant – Company was not entitled to raise a fresh claim during the assessment proceedings under section 153A of the Act pursuant to search action under section 132 of the Act.
The Appellant – Company submitted that the Income Tax Appellate Tribunal had erred in not appreciating the suo motu disallowance made by the Appellant out of abundant caution, considering similar disallowance made in the past Assessment years as there were no precedents. The Appellant contended with regard to the second proviso to Section 153A that the completed assessment could not be disturbed only in a case where there is any undisclosed income found in the course of search or any incriminating documents disclosing any undisclosed income. It further submitted that the Tribunal had also erred in upholding the disallowance of ₹4,94,32,158 u/S 14A of the Act.
The Respondent – Authority submitted there was no substantial question of law, which needed consideration.
The Court took into consideration the judgment of Jai Steels (India) Jodhpur v Acit' 36 Taxmann.Com 523 of the Rajasthan High Court, submitted by the Respondent and conferred with its decision.
The Court opined that the Income Tax Appellate Tribunal had rightly followed the decision of Jai Steels (India) and upheld that the assessment or re-assessment made in pursuance to Section 153A of the Act was not a de novo assessment. Therefore, it made the following observation:
"Therefore, it was not open to the assessee to claim and be allowed such deduction or allowance of expenditure which it had not claimed in the original assessment proceedings which in the case of the assessee stood completed vide order dated 15.01.2009 passed under Section 143(1) of the Act."
Thus, the appeal was dismissed for the above reasons by placing reliance on the judgment of the Rajasthan High Court.