Rajasthan High Court – Jaipur
Harshvardhan Johari vs Dy. Commissioner Of Income Tax … on 27 March, 2025
[2025:RJ-JP:14217-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Income Tax Appeal No. 48/2020
Harshvardhan Johari, T-2, Pallavi Apartments, Opp. Laxmi Vilas
Hotel, Tonk Road, Jaipur. Present Address- 34, Harshvardhan
Building, Hind Hotel, Chaura Rasta, Tripolia Gate, Jaipur. Raj -
302002 Pan Afvpj2660R
----Appellant
Versus
Dy. Commissioner Of Income Tax, Central Circle-03, New C.r.
Building, Janpath, Statue Circle, Jaipur.
----Respondent
For Appellant(s) : Mr. Dileep Shivpuri
For Respondent(s) : Mr. Siddharth Bapna with
Mr. Meyhul Miittal
HON'BLE MR. JUSTICE AVNEESH JHINGAN
HON'BLE MR. JUSTICE MANEESH SHARMA
Judgment
27/03/2025
AVNEESH JHINGAN, J:-
1. This is an application (I.A. No.1/2024) filed for framing
additional substantial question of law.
2. After arguing the application at length, learned counsel for
the applicant submits that instead of proposed substantial
question of law in the application following additional substantial
question of law be admitted:
(i) Whether in the facts of the case to
determine the pendency of the proceedings as
per Section 153A, the date of issuance of
notice would be relevant or date of search?
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (2 of 10) [ITA-48/2020]
3. Learned counsel for the non-applicant could not raise any
serious objection to the acceptance of the prayer.
4. The substantial question of law framed here in above shall be
considered while deciding the appeal.
5. The application is allowed.
6. This appeal is filed against the order of the Income Tax
Appellate Tribunal, Jaipur (for short ‘the tribunal’) dated
11.03.2020 relating to assessment year (for brevity ‘AY’) 2010-11.
7. In this appeal, following substantial questions of law have
been formulated:-
“(i) Whether in the facts of the case to
determine the pendency of the proceedings as
per Section 153A’ the date of issuance of
notice would be relevant or date of search?
(ii) Whether on the facts and circumstances of
the case the assessment order of the Appellant, for
Assessment year 2010-11, framed on 10.03.2016,
one year beyond the normal time-limit, in view of
Explanation of Section 153B, was not barred by
time limitation, hence invalid, since the reference
allegedly made under section 90 of the Income-Tax
Act was illegal, without jurisdiction, without
statutory authority, and void ab initio?
(iii) Whether on the facts and circumstances of
the case the ITAT erred in law in holding that the
expenses on education of the Appellant were
personal expenses, having been incurred prior to
setting up on business, totally ignoring evidence on
record that the business of the Appellant had
commenced in the financial year 2008-09 and
return showing substantial turnover, gross profit
and taxable income had been filed right from
Assessment year 2009-10 onwards?”
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (3 of 10) [ITA-48/2020]
8. The brief facts are that appellant is an income tax assessee.
On 05.09.2011 search was conducted at the residence and
business premises of the appellant. On 10.10.2010, appellant filed
income tax returns for AY 2010-11. Notice dated 14.09.2012 was
issued under Section 153-A of the Income Tax Act, 1961 (for short
‘the Act’) and the assessment was finalised on 10.03.2015,
disallowing the education expenses to the tune of
Rs.1,11,35,190/-. The first appeal was dismissed on 26.05.2017.
The appellant being unsuccessful in the tribunal is before this
court.
Substantial question of law No.1
9. Learned counsel for the appellant submits that assessment
proceedings for AY 2010-11 were complete as no notice was
issued under section 143(2) of the Act. Addition under section
153-A in completed assessment was wrongly made without there
being incriminating material seized during the search.
10. Learned counsel for the revenue submits that before expiry
of time to issue notice under section 143(2), the search was
conducted on 05.09.2011 when the proceedings were pending.
11. From Section 143(2) and the proviso thereto, the position
merges that the Assessing Officer (A.O.), if considers expedient to
verify that there is no understated income or excess loss
computed or that there is underpayment of tax, shall serve a
notice on the assessee to produce the evidence to support the
return.
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (4 of 10) [ITA-48/2020]
The proviso prescribes that notice cannot be issued after expiry of
six months from the end of the financial year in which return is
furnished.
12. The relevant provisions of Section 153-A of the Act is quoted
below:-
“Assessment in case of search or requisition.
153A. (1) Notwithstanding anything contained in
section 139, section 147, section 148, section
149, section 151 and section 153, in the case of a
person where a search is initiated under section
132 or books of account, other documents or any
assets are requisitioned under section 132A after
the 31st day of May, 2003, the Assessing Officer
shall–
(a) issue notice to such person requiring him to
furnish within such period, as may be specified in
the notice, the return of income in respect of each
assessment year falling within six assessment
years referred to in clause (b), in the prescribed
form and verified in the prescribed manner and
setting forth such other particulars as may be
prescribed and the provisions of this Act shall, so
far as may be, apply accordingly as if such return
were a return required to be furnished under
section 139;
(b) assess or reassess the total income of six
assessment years immediately preceding the
assessment year relevant to the previous year in
which such search is conducted or requisition is
made:
Provided that the Assessing Officer shall assess
or reassess the total income in respect of each
assessment year falling within such six
assessment years:
Provided further that assessment or
reassessment, if any, relating to any assessment
year falling within the period of six assessment
years referred to in this 72[sub-section] pending
on the date of initiation of the search under
section 132 or making of requisition under section
132A, as the case may be, shall abate.: ****
***”
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (5 of 10) [ITA-48/2020]
13. By Finance Act, 2003, Section 153-A to 153-D were
introduced in Chapter XIV of the Act laying down special
procedure for assessment in cases of search or requisition made
on or after 01.06.2003. There was deviation made from the earlier
regime which are as follows:-
(i) the assessment /reassessment of ‘total income’ was to be
made for each of relevant preceding year by passing separate
order for each assessment year, instead of initiation of parallel
proceedings for the undisclosed and regular income.
(ii) The concept of assessment for broken period i.e. from 1st April
to the date when the search was conducted, was no longer there.
(iii) The normal rates of the tax applicable in each year were to be
applied.
(iv) The pending assessment or reassessment proceedings, on
date of initiating of search or requisition, abated. In case of
annulment of the assessment/reassessment under Section 153A
the abated assessment or reassessment revived.
(v) The provisions of Section 153A to 153D brought within ambit
not only the cases of assessee on whom the search was conducted
or requisition made but also assessee to whom the seized material
related to or belonged to.
14. The heading of Section 153-A is assessment in cases of
search or requisition. The section starts with a non-obstante
clause and operates inspite of the provisions of sections 139, 147,
148, 149, 151 and 153. It mandates the AO for issuing notices to
furnish income tax returns for the relevant AY or years
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (6 of 10) [ITA-48/2020]
and for each of the six assessment years preceding the
assessment year relevant to previous to year in which search was
conducted.
First proviso stipulates assessing or reassessing the total income
for each of the six assessment years preceding to the relevant AY
in which search was conducted and also for the relevant year.
As per the second proviso the assessment or reassessment for the
relevant AY or the six years preceding thereto pending on the date
of initiation of search or making requisition shall abate.
15. In the case in hand, the return was furnished in financial
year 2010-11 and the notice under section 143(2) of the Act could
have been issued till 30.09.2011. Before expiry of the limitation to
issue notice under section 143(2) the search was conducted on
the premises of the appellant on 05.09.2011. By operation of 2 nd
proviso to section 153-A pending assessment or reassessment
abetted.
16. The reliance on Principal Commissioner of Income Tax vs.
Abhisar Buildwell P. Ltd. is of no avail. The Supreme Court in the
case of Abhisar Buildwell P. Ltd. (supra) was dealing with
following question.
“11. The question which is posed for
consideration in the present set of appeals
is, as to whether in respect of completed
assessments/unabated assessments,
whether the jurisdiction of AO to make
assessment is confined to incriminating
material found during the course of search
under Section 132 or requisition under
Section 132A or not, i.e., whether any
addition can be made by the AO in absence(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (7 of 10) [ITA-48/2020]of any incriminating material found during
the course of search under section 132 or
requisition under Section 132 A of the Act,
1961 or not.”
It was held that on a search or requisition of an assessee, it
is mandatory to issue notice under Section 153A for filing
returns in respect of relevant preceding years. The AO
assumes jurisdiction to assess or reassess ‘total income’ for
the relevant preceding years. The pending assessment and
reassessment abate by operation of the provision of section
153A. The completed and unabated assessments could not be
reopened in absence of an incriminating seized material
relating to the concerned assessment years. The assessment
and reassessment under Section 153A has to be of the ‘total
income’, taking into consideration the returned income (if
return is filed), incriminating material result of search or
requisition and other material. In case no incriminating
material was found in search, the department can reopen
completed/unabated assessment under Sections 147 & 148 of
the Act.
17. The Supreme Court held that in case of complete assessment
the addition under section 153-A can only be done on the basis of
incriminating material relating to relevant AY recovered during
search. For the second proviso to section 153-A to be operative
the assessment or reassessment should be pending on date of
initiation of search. In the present case, before expiry of limitation
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (8 of 10) [ITA-48/2020]
for issuance of notice under section 143(2) search was conducted.
In other words on date of search the assessment was pending.
Substantial question of law No.2
18. Learned counsel for the appellant after arguing at length
realizing that the substantial question of law No.2 is not arising
out of the order of the tribunal, is not pressing this appeal qua the
question No.2 with liberty to avail remedies in accordance with
law.
19. The appeal qua the substantial question of law No.2 is
disposed of as not pressed with liberty as prayed for.
Substantial question of law No.3
20. Section 37 deals with general expenditures made wholly and
exclusively for purpose of business or profession which can be
claimed as deduction from the business or professional income.
The exception is to the expenses prescribed under section 32 to
36 and being in nature of capital or personal expenses of the
assessee.
21. The appellant claimed expenses incurred for pursuing degree
of B.Sc(Hons.) in Business Management and M.sc in Finance from
London. The bachelors degree was pursued during the year 2006
to 2009 and masters degree in 2010-11. The deduction for
education expenses was disallowed for not having been incurred in
AY 2010-11 and that the expenses for perusing B.sc related to
period prior to setting up of the business. Moreover apart from
bald statement, there was no material produced to substantiate
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (9 of 10) [ITA-48/2020]
the nexus of the studies with the business started that too after
completion of Bachelors degree. The expenses were held to be
personal in nature.
22. Learned counsel for the appellant argues that the education
pursued in London helped the appellant for better management of
the business. Submission is that the business was established in
the AY 2009-10 yet the authorities disallowed the deduction in AY
2010-11.
23. Learned counsel for the respondent contends that the
tribunal recorded finding that the deduction claimed was not
substantiated by producing evidence of having a direct relation to
the operation of the business.
24. The bachelors degree was pursued from 2006 to 2009 and
admittedly the business was established in AY 2009-10. There is
nothing on record to prove that while pursuing the bachelors
degree in London the business was started by proprietor in
Rajasthan.
25. The other angle needs to be considered is that the expenses
were incurred in AY 2007-08, 2008-09 and 2009-10 and 2011-12
but there is no basis made out for claiming these deductions in AY
2010-11.
26. The decisions of the High Courts relied upon by the appellant
before the tribunal were rightly distinguished and are not
applicable to the fact of the case.
(Downloaded on 18/04/2025 at 11:08:50 PM)
[2025:RJ-JP:14217-DB] (10 of 10) [ITA-48/2020]
27. No case is made out for interference in the findings recorded
that these expenses were personal in nature and were not relating
to the assessment year in which deduction was claimed.
28. In view of the above discussion, the question Nos.1 and 3
are answered against the assessee and question No.2 is disposed
of as not pressed with liberty as prayed for.
29. The appeal is disposed of.
(MANEESH SHARMA),J (AVNEESH JHINGAN),J
Chandan/56
Reportable: Yes
(Downloaded on 18/04/2025 at 11:08:50 PM)
Powered by TCPDF (www.tcpdf.org)
[ad_1]
Source link