After assessment was completed u/s 153A (of Income Tax Act, 1961), jurisdiction u/s 263 (of Income Tax Act, 1961) cannot be invoked

1. The assessee company which was engaged in the business of manufacture and trading of edible oils, filed its return of income for the A.Y. 2007-08 and for the A.Y. 2008-09. Thereafter, there was a search and seizure operation in the case of the assessee and its group concerns. Accordingly, notices under section 153A (of Income Tax Act, 1961) for both the assessment years were issued. In response to the said notices, assessee filed its return of income for both the A.Ys declaring the same income which was declared in its original return of income. Thereafter, the A.O. completed the assessment under section 143(3) (of Income Tax Act, 1961) read with section 153A (of Income Tax Act, 1961) after verification of the details filed by the assessee and accepting the income returned by the assessee.

2. CIT, by exercising his jurisdiction under section 263 (of Income Tax Act, 1961), perused the assessment record and observed that the assessee had received Rs.25 lakhs as Central subsidy (Food Proceeding) for each of the A.Ys which had been approved for the expansion of edible oil refinery. He observed that it is a capital subsidy and the amount was remitted to the company in two installments of Rs.25 lakhs each during the F.Ys. 2006-07 and 2007-08 and the same was also reflected in the balance sheet for the years ending 31.03.2007 and 31.03.2008. He observed that the same should have been added to the total income of the year of receipt. It directed the A.O. to verify the Central subsidy for the relevant A.Ys and also directed the A.O. to re-do the assessment denovo.

3. On appeal, the ITAT held as under:

“But as rightly pointed out by the Ld. Counsel for the assessee, the assessments in the case of the assessee got concluded by virtue of non-issuance of notices under section 143(2) (of Income Tax Act, 1961). Therefore, the A.O. could not have considered any other material, other than the material found during the course of search, during the assessments completed under section 143(3) (of Income Tax Act, 1961) read with section 153A (of Income Tax Act, 1961). The Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (cited supra) has clearly held that the assessments under section 143(3) (of Income Tax Act, 1961) read with section 153A (of Income Tax Act, 1961)/153C have to be confined only to the material found during the course of search. Further, even on merits, we find that the Central subsidy given for installing the food processing units in the specified areas is not asset specific but is industry specific. Therefore, it cannot be treated as income of the assessee. Therefore, the assessment order is not erroneous in so far as it is prejudicial to the interests of the Revenue. Hence, on both the counts, we hold that the order of the Ld. CIT under section 263 (of Income Tax Act, 1961) is not sustainable. The appeals of the assessee for both the assessment years are accordingly allowed.”

Case Reference - M/s. Saraiwala Agro Refineries Ltd v The DCIT

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES "A" : HYDERABAD

BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND

SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER

ITA.No.224 & 225/Hyd/2015

(Assessment Years 2007-08 & 2008-09)