M/s. Maithan Ispat Ltd., Kolkata V. DCIT, Central Circle - VI, Kolkata, Kolkata

ITSSA 89/KOL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0138 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: S K TULSIYAN
• Keywords: Search and seizure; Question of law; Revenue expenditure; Reassessment proceedings
• Section: 153A; 32; 148; 263; 132; 10; 11; 139

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.(SS).A NO.89/KOL/2011 #$ %&/ ASSESSMENT YEAR: 2007-08 M/S. MAITHAN ISPAT LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX, (PAN:AADCM7360B) CENTRAL CIRCLE-VI, KOLKATA (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 06.05.2014 DATE OF PRONOUNCEMENT: 30.05.2014 FOR THE APPELLANT: SHRI S. K. TULSIYAN, ADVOCATE FOR THE RESPONDENT: SHRI RAVI JAIN, CIT, DR / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), CENTRAL-1, KOLKATA IN APPEAL NO. 244/CIT(A),C-1/CC-VI/09-10 DATED 09.02.2011. A SSESSMENT WAS FRAMED BY DCIT,CC- VI, KOLKATA U/S.143(3)/153A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 31 .12.2009. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENSES AT RS.64,53,786/-, BEI NG EXPENSES RELATING TO RAW MATERIAL, BUT DISALLOWED BY TREATING THE SAME AS CAPITAL EXPENDIT URE BY HOLDING THAT BUSINESS HAS NOT YET BEEN SET UP. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GRO UND NO. 2: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS.64,53,786/- BEIN G RELATED TO ACQUISITION OF RAW MATERIALS, BY TREATING THE SAME AS CAPITAL EXPENDIT URE. 3. BRIEFLY STATED FACTS RELATING TO THE ABOVE ISSUE ARE THAT DURING AY 2007-08, ASSESSEE HAS INCURRED EXPENSES TO THE TUNE OF RS.64,53,786/- BEI NG RELATED TO PROCUREMENT OF RAW MATERIAL. CLAIM OF ASSESSEE IS THAT PROCUREMENT OF RAW MATERI AL HAD TAKEN PLACE BEFORE COMMENCEMENT OF ACTUAL PRODUCTION BUT AFTER SETTING UP OF THE BUSIN ESS AND IT HAS BEEN CLAIMED AS PRE-PRODUCTION EXPENSES BY THE ASSESSEE COMPANY IN SCHEDULE 17 OF ITS BALANCE SHEET UNDER THE HEADING PRE- COMMISSIONING REVENUE EXPENDITURE. THE AO DISALLO WED THESE EXPENSES HOLDING THE SAME TO BE CAPITAL IN NATURE BEING INCURRED BEFORE COMMENCE MENT OF BUSINESS OR SETTING UP OF BUSINESS. 2 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 THE CIT(A) ALSO CONFIRMED ON THE PREMISE THAT THE C OMMERCIAL PRODUCTION HAS STARTED IN THE FACTORY PREMISES OF THE ASSESSEE COMPANY FROM 16.08 .2006 AND ALL THESE ABOVE EXPENSES WERE INCURRED TILL 15.08.2006 I.E. THE DATE BEFORE THE C OMMENCEMENT OF PRODUCTION AND THEREFORE, THE ASSESSEE ITSELF HAS RIGHTLY DEBITED UNDER THE HEAD PRE-COMMISSIONING REVENUE EXPENDITURE. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE OF THESE EXPENSES. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF ALL, IT IS TO BE NOTICED THAT THE PRE-COM MISSIONING REVENUE EXPENSES OF RS.64,53,786/- CONSISTS OF THE FOLLOWING EXPENSES: INTEREST ON WORKING CAPITAL : RS. 28,14,101/- UPFRONT FEES : RS. 13,10,000/- INSURANCE & OTHER CHARGES : RS. 23,29,685/- RS. 64,53,786/- BEFORE US IT WAS EXPLAINED THAT ALL THE EXPENSES IN CURRED WERE FOR THE PROCUREMENT OF RAW MATERIAL BEFORE START OF COMMERCIAL PRODUCTION IN T HE FACTORY OF THE ASSESSEE COMPANY. IT WAS FURTHER EXPLAINED THAT THE BUSINESS OF THE ASSESSEE COMPANY WAS TO PRODUCE SPONGE IRON FOR WHICH IRON ORE, COAL AND OTHER SIMILAR PRODUCTS FOR MED PART OF RAW MATERIAL WHICH ULTIMATELY WILL GIVE END PRODUCT I.E. SPONGE IRON. THE ASSESS EE EXPLAINED THAT BESIDES THE DIRECT COST OF THE SAID RAW MATERIAL CERTAIN OTHER EXPENSES LIKE UPFRO NT FEE, INTEREST ON WORKING CAPITAL AND INSURANCE AND OTHER CHARGES FOR PROCUREMENT OF RAW MATERIAL ETC. HAD TO BE INCURRED. THE ASSESSEE CLAIMED THAT BY VERY NATURE THESE EXPENSES ARE REVENUE AND WHICH WERE DEBITED AS PRE-COMMISSIONING REVENUE EXPENSES. ASSESSEE EXP LAINED THAT THIS MEANS THAT THESE WERE BEFORE THE PRODUCTION STARTS BUT ACTUALLY THE BUSIN ESS WAS SET UP BEFORE THE START OF COMMERCIAL PRODUCTION. THE ASSESSEE EXPLAINED THE INTEREST ON WORKING CAPITAL I.E. FOR SANCTION/RENEWAL OF WORKING CAPITAL LIMIT AND THIS INTEREST WAS PAID TO PUNJAB NATIONAL BANK AND SBI ON CASH CREDIT LIMITS EXTENDED TOWARDS WORKING CAPITAL TO THE ASSE SSEE. THE ASSESSEE HAS ENCLOSED THE ENTIRE DETAIL OF INTEREST PAID TO THESE BANKS AND ALSO SAN CTIONED LETTERS FROM BANKS SANCTIONING THE WORKING CAPITAL CREDIT/LOAN FACILITY. THE ASSESSEE CLAIMED THAT THE UPFRONT FEE PAID BY THE ASSESSEE COMPANY WAS PROCESSING FEE PAID TO BANK ON ACCOUNT OF WORKING CAPITAL SO EXTENDED BY THEM AND THE DETAILS WERE FILED BEFORE THE AO AS WELL AS BEFORE CIT(A) AND EVEN NOW BEFORE US. THE ASSESSEE HAS ALSO PAID INTEREST CHARGES FO R ENSURING THE PURCHASE OF RAW MATERIAL PARTICULARLY IMPORTED RAW MATERIAL. THE ASSESSEE H AS OBTAINED INSURANCE POLICIES FROM ROYAL SUNDARAM ALLIANZ INSURANCE CO. LTD. FOR THE IMPORT OF COAL. THE OTHER CHARGES IN RESPECT OF LETTER OF CREDIT, DIFFERENCE IN FOREIGN CURRENCIES FOR IMPORT OF RAW MATERIAL I.E. COAL AND OTHER 3 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 CHARGES BEING CHARGES FOR TESTING OF COAL AND IRON ORE WERE INCURRED. THE ASSESSEE CLAIMED THAT THE ABOVE EXPENSES CLEARLY SHOW THAT THESE ARE EXPE NSES RELATING TO RAW MATERIAL COST AND ACCORDINGLY, THE SAME SHOULD BE ALLOWED AS REVENUE EXPENDITURE. IT MEANS THAT THE ASSESSEE HAS ALREADY SET UP ITS BUSINESS AND THE ASSESSEES FACT ORY HAS ALREADY DONE TRIAL RUN AND IT WAS IN THE PROCESS OF STARTING OF PRODUCTION I.E. W.E.F. 16.08 .2006. THE CIT(A) AS WELL AS THE AO ADMITTED THAT THE COMMERCIAL PRODUCTION HAD COMMENCED IN THE FACTORY PREMISES FROM 16.08.2006 AND FOR THAT BUSINESS HAS ALREADY BEEN SET UP. LD. COU NSEL FOR THE ASSESSEE BEFORE US REFERRED TO THE CASE LAW OF HONBLE SUPREME COURT IN THE CASE OF CW T VS. RAMARAJU SURGICAL & COTTON MILLS LTD. (1967) 63 ITR 478 (SC) WHEREIN THE SET UP OF B USINESS HAS BEEN EXPLAINED AS UNDER: THE WORD 'SET UP' IN THE PRINCIPLE CLAUSE, IN OUR OPINION, IS EQUIVALENT TO THERE WORD 'ESTABLISHED', BUT OPERATIONS FOR ESTABLISHMENT CAN NOT BE EQUATED WITH THE ESTABLISHMENT OF THE UNIT ITSELF OR ITS SETTING UP. THE APPLICABI LITY OF THE PROVISO HAS, THEREFORE, TO BE DECIDED BY FINDING OUT WHEN THE COMPANY COMMENCED O PERATIONS FOR ESTABLISHMENT OF THE UNIT, WHICH OPERATION MUST BE ANTECEDENT TO THE ACTUAL DATE ON WHICH THE COMPANY COMMENCED OPERATIONS FOR ESTABLISHMENT OF THE PRIN CIPAL CLAUSE. THIS IS ALSO THE MEANING THAT THE BOMBAY HIGH COURT DERIVED IN THE CASE IN WESTERN INDIA VEGETABLE PRODUCTS LTD., WHERE THAT COURT WAS CONCERNED WITH THE INTERPRETATION OF THE EXPRESSION 'SET UP' AS USED IN SECTION 2(11) OF THE INCOME-TA X ACT. THE COURT HELD: 'IT SEEMS TO US THAT THE EXPRESSION 'SETTING UP' MEANS, AS IS DEFIN ED IN THE OXFORD ENGLISH DICTIONARY, 'TO PLACE ON FOOT' OR 'TO ESTABLISH', AND IN CONTRADIST INCTION TO 'COMMENCE'. THE DISTINCTION IS THIS THAT WHEN A BUSINESS IS ESTABLISHED AND IS REA DY TO COMMENCE BUSINESS, THEN IT CAN BE SAID OF THAT BUSINESS THAT IT IS SET UP. BUT BEFORE IT IS READY TO COMMENCE BUSINESS IT IS NOT SET UP'. THIS VIEW WAS EXPRESSED WHEN THAT COURT WA S CONSIDERING THE DIFFERENCE BETWEEN THE MEANING OF THE EXPRESSION 'SETTING UP A BUSINES S' AND 'COMMENCING OF BUSINESS'. IN THAT CASE BEFORE US, THE PROVISO DOES NOT EVEN REFE R TO COMMENCEMENT OF THE UNIT. THE CRITERION FOR DETERMINING THE PERIOD OF EXEMPTION I S BASED ON THE COMMENCEMENT OF THE OPERATION FOR THE ESTABLISHMENT OF THE UNIT. THESE OPERATION FOR ESTABLISHMENT OF THE UNIT CANNOT BE SIMULTANEOUS WITH THE SETTING UP OF THE U NTIL, AS URGED ON BEHALF OF THE COMMISSIONER, BUT MUST PRECEDE THE ACTUAL SETTING U P OF THE UNIT. IN FACT, IT IS OPERATION FOR ESTABLISHMENT OF A UNIT WHICH ULTIMATELY CULMIN ATE IN THE SETTING UP OF THE UNIT. 5. IN ANOTHER CASE, HONBLE BOMBAY HIGH COURT IN TH E CASE OF WESTERN INDIA VEGETABLE PRODUCTS LTD. VS. CIT (1954) 26 ITR 151 (BOM), WHE REIN IT IS HELD AS UNDER: THEREFORE IF THIS CASE WERE TO BE APPLIED TO THE P RESENT ASSESSEE, THEN WE WOULD BE DRIVEN TO THE CONCLUSION THAT, IF ANYTHING, THE TRI BUNAL HAS TAKEN A VIEW OF THE CASE VERY FAVOURABLE TO THE ASSESSEE BECAUSE ON THE FACTS OF THIS CASE IT WOULD SEEM THAT THE INCOME-TAX OFFICER WAS RIGHT IN HOLDING THAT THE NE T EXPENSES PRIOR TO THE 1ST OF NOVEMBER, 1946, SHOULD NOT BE ALLOWED AS PERMISSIBL E DEDUCTIONS. THAT IS WHY IT IS IMPORTANT TO CONSIDER WHETHER THE EXPRESSION USED I N THE INDIAN STATUTE FOR SETTING UP A BUSINESS IS DIFFERENT FROM THE EXPRESSION MR. JUSTI CE ROWLATT WAS CONSIDERING, VIZ., 'COMMENCING OF THE BUSINESS.' IT SEEMS TO US, THAT THE EXPRESSION 'SETTING UP' MEANS, AS IS DEFINED IN THE OXFORD ENGLISH DICTIONARY, 'TO PL ACE ON FOOT' OR 'TO ESTABLISH', AND IN CONTRADISTINCTION TO 'COMMENCE'. THE DISTINCTION IS THIS THAT WHEN A BUSINESS IS ESTABLISHED AND IS READY TO COMMENCE BUSINESS THEN IT CAN BE SAID OF THAT BUSINESS THAT IT IS SET UP. BUT BEFORE IT IS READY TO COMMENCE BUSIN ESS IT IS NOT SET UP. BUT THERE MAY BE AN INTERREGNUM, THERE MAY BE AN INTERVAL BETWEEN A BUS INESS WHICH IS SET UP AND A BUSINESS 4 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 WHICH IS COMMENCED AND ALL EXPENSES INCURRED AFTER THE SETTING UP OF THE BUSINESS AND BEFORE THE COMMENCEMENT OF THE BUSINESS, ALL EXPEN SES DURING THE INTERREGNUM, WOULD BE PERMISSIBLE DEDUCTIONS UNDER SECTION 10(2). NOW, APPLYING THAT TEST TO THE FACTS HERE, THE COMPANY ACTUALLY COMMENCED BUSINESS ONLY ON THE 1ST OF NOVEMBER, 1946, WHEN IT PURCHASED A GROUND-NUT OIL MILL AND WAS IN A POSITI ON TO CRUSH GROUND-NUTS AND PRODUCE OIL. BUT PRIOR TO THIS THERE WAS A PERIOD WHEN THE BUSINESS COULD BE SAID TO HAVE BEEN SET UP AND THE COMPANY WAS READY TO COMMENCE BUSINESS, AND IN THE VIEW OF THE TRIBUNAL ONE OF THE MAIN FACTORS WAS THE PURCHASE OF RAW MAT ERIALS FROM WHICH AN INFERENCE COULD BE DRAWN THAT THE COMPANY HAD SET UP ITS BUSINESS; BUT THAT IS NOT THE ONLY FACTOR THAT THE TRIBUNAL HAS TAKEN INTO CONSIDERATION. THE TRIBUNA L HAS, AS POINTED OUT IN THE STATEMENT OF THE CASE, SCRUTINIZED THE VARIOUS DETAILS OF THE EXPENSES GIVEN IN THE ORDER OF THE APPELLATE ASSISTANT COMMISSIONER AND HAVING SCRUTI NIZED THOSE EXPENSES THE TRIBUNAL HAS COME TO THE CONCLUSION EVEN ON AN INTERPRETATI ON MORE FAVOURABLE TO THE ASSESSEE THAN THE ONE WE ARE GIVING TO THE EXPRESSION 'SETT ING UP' THAT THESE EXPENSES DO NOT SHOW THAT THE BUSINESS WAS SET UP PRIOR TO THE 1ST OF SE PTEMBER, 1946. IN OUR OPINION, IT WOULD BE DIFFICULT TO SAY THAT THE DECISION OF THE TRIBUN AL IS BASED UPON A TOTAL ABSENCE OF ANY EVIDENCE. AS WE HAVE OFTEN SAID, WE ARE NOT CONCERN ED WITH THE SUFFICIENCY OF EVIDENCE ON A REFERENCE. IT IS ONLY IF THERE IS NO EVIDENCE WHI CH WOULD JUSTIFY THE DECISION OF THE TRIBUNAL THAT A QUESTION OF LAW WOULD ARISE WHICH W OULD INVOKE OUR ADVISORY JURISDICTION WHICH AFTER ALL IS A VERY LIMITED JURISDICTION. IN THE ABOVE CASE BEFORE HONBLE BOMBAY HIGH COURT, THE ASSESSEE COMPANYS OBJECT WAS TO RUN OIL MILL AND IN THIS LINE OF BUSINESS OPERATION IT WAS THE CASE OF THE AO THAT ASSESSEES BUSINESS WAS SET UP ONLY WHEN IT MADE FIRST PURCHAS E OF GROUNDNUT OIL. HONBLE BOMBAY HIGH COURT UPHELD ITATS VIEW THAT THE FIRST PURCHASE OF RAW MATERIAL IS INDICATIVE OF SETTING UP OF BUSINESS BUT STILL SOME TIME WOULD HAVE BEEN TAKEN IN MAKING ARRANGEMENTS FOR PURCHASE, THEREFORE, ADDITIONAL CUSHION OF ONE MONTH WAS ALLO WED IN COMPUTING SET UP DATE. IT CLEARLY EMERGES THAT THE DATE OF SET UP OF BUSINESS OPERATI ON HAS TO BE NECESSARILY AND PARTICULARLY ANALYZED IN THE CONTEXT OF OBJECTS FOR WHICH BUSI NESS IS STARTED. IT MEANS THAT BUSINESS WAS HELD TO BE SET UP OR COMMENCED WHEN THE FIRST PURCH ASE OF THE RAW MATERIAL WAS MADE AND ALSO THE TIME TAKEN FOR ARRANGEMENTS OF SUCH PURCHASE WA S CONSIDERED TO BE ALLOWED IN COMPUTING THE DATE OF SET UP. SIMILARLY, HONBLE GUJARAT HIG H COURT IN THE CASE OF CIT VS. SARABHAI SONS PVT. LTD. (1973) 90 ITR 318 (SC) HAS HELD THAT THER E IS A CLEAR DISTINCTION BETWEEN COMMENCEMENT OF BUSINESS AND SETTING IT UP. FOR THE PURPOSE OF SECTION 3(1)(D) (UNDER 1922 ACT) WHAT IS REQUIRED TO BE CONSIDERED IS SETTING U P OF A BUSINESS. WHEN A BUSINESS IS ESTABLISHED AND IS READY TO START BUSINESS IT CAN B E SAID TO BE SET UP. THE BUSINESS MUST BE PUT IN SUCH A SHAPE THAT IT CAN START FUNCTIONING AS A BUS INESS OR A MANUFACTURING ORGANISATION. FINALLY, HONBLE GUJARAT HIGH COURT HELD AS UNDER (FROM HEAD NOTES): ON THE FACTS, THAT THE NEW BUSINESS COULD NOT BE S AID TO BE READY TO DISCHARGE THE FUNCTION FOR WHICH IT WAS ESTABLISHED, NAMELY, THE MANUFACTURE OF SCIENTIFIC INSTRUMENTS AND COMMUNICATION EQUIPMENT UNTIL THE MACHINERY NEC ESSARY FOR THE PURPOSE OF MANUFACTURE WAS INSTALLED. OBTAINING LAND ON LEASE, PLACING ORDERS FOR MACHINERY AND RAW MATERIALS WERE MERELY OPERATIONS FOR THE SETTIN G UP OF THE BUSINESS. IN THE PRESENT CASE, THE BUSINESS COULD NOT BE SAID TO BE SET UP U NTIL JULY, 1966, WHEN THE MACHINERY HAD 5 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 BEEN INSTALLED AND THE FACTORY WAS READY TO COMMENC E BUSINESS. REVENUE EXPENDITURE INCURRED BEFORE THAT DATE WOULD NOT BE A PERMISSIBL E DEDUCTION IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1966-67. 6. FROM THE ABOVE CASE LAWS AND LEGAL POSITION, A C LEAR DISTINCTION HAS BEEN DRAWN BETWEEN ACTIVITIES THAT ARE FOR THE PURPOSE OF SETTING UP O F BUSINESS AND ACTIVITIES WHICH CONSTITUTES BUSINESS ACTIVITIES CARRIED OUT IN THE PERFORMANCE OF BUSINESS ACTIVITIES OF THE CONCERN OR FOR CARRYING OUT THE OBJECT WITH WHICH THE BUSINESS IS ESTABLISHED. ACCORDINGLY, THE PERFORMANCE OF ANY SETTING UP ACTIVITY WOULD NOT LEAD TO THE COMME NCEMENT OF BUSINESS. HOWEVER, THE PERFORMANCE OF ANY ACTIVITY OF BUSINESS WOULD LEAD TO COMMENCEMENT OF BUSINESS AND THE BUSINESS WOULD BE HELD TO BE SET UP. THE CARRYING O N THE FIRST ACTIVITY IS THE INTEGRAL PART TO THE CARRYING ON THE BUSINESS LEADS UP TO SETTING UP OF OR COMMENCEMENT OF BUSINESS. FROM THE FACTS OF THE ASSESSEES CASE, THE MAIN BUSINESS ACT IVITY BEING PRODUCTION OF SPONGE IRON, THE PROCUREMENT/PURCHASE OF RAW MATERIAL BEING COAL AND IRON ORE IS THUS VERY MUCH A BUSINESS ACTIVITY. IT IS CLEAR IN THE PRESENT CASE, WHEN IT S BUSINESS OBJECT AND MAIN BUSINESS ACTIVITY IS PRODUCTION AND SALE OF SPONGE IRON THE RELATED ACTI VITY OF PROCUREMENT OF MATERIAL FOR PRODUCTION AMOUNTS TO SETTING UP OF BUSINESS. FROM THE SANCTION LETTERS OF THE BANK IT IS CLEAR THAT THE CASH CREDIT LIMIT SHOWN WAS EXTENSION OF W ORKING CAPITAL AND THE VERY FACT THAT THE LOAN WAS SOUGHT FOR WORKING CAPITAL AND THE SAME WAS DUL Y EXPLAINED BY THE BANK FOR SUCH PURPOSE CLEARLY RECONFIRMS THE COMMENCEMENT OF ASSESSEES B USINESS. WORKING CAPITAL EMPLOYMENT MEANS THAT THE WORKING OF THE BUSINESS HAS STARTED AND THAT MEANS WHEN NO DOUBT THAT BUSINESS HAS COMMENCED ITS WORKING. IN SUCH CIRCUMSTANCES A ND GOING BY THE VERY NATURE OF THE EXPENSES INCURRED I.E. INTEREST ON WORKING CAPITAL, UPFRONT FREE AND INSURANCE AND OTHER CHARGES ARE IN THE NATURE OF REVENUE EXPENDITURE AND WE ALL OW THE SAME. WE DIRECT THE AO ACCORDINGLY. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 7. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A), CONFIRMING THE ACTION OF THE AO IN DISALLOWING CARRY FORWARD OF BU SINESS LOSS ON THE GROUND THAT THE ASSESSEE HAS FILED BELATED RETURN OF INCOME FILED THE RETURN U/S. 139(1) OF THE ACT, IGNORING SECOND PROVISO TO SECTION153A(1) OF THE ACT. FOR THIS, AS SESSEE HAS RAISED FOLLOWING GROUND NO.3: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO IN NOT ALLOWING THE CARRY FORWA RD OF BUSINESS LOSS OF RS.2,65,26,210/- ON THE ALLEGED GROUND OF FILING OF BELATED RETURN U /S. 139(1) OF THE I. T. ACT, 1961, IGNORING THE PROVISIONS OF SECTION 153A OF THE ACT. 8. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE RELEVANT ASSESSMENT YEAR INVOLVED IS ASSESSMENT YEAR 2007-08. A SEARCH AND SEIZURE OPERA TION U/S 132 OF THE ACT WAS CARRIED OUT BY 6 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 THE INVESTIGATION WING OF THE DEPARTMENT ON ASSESSE ES GROUP OF CASES ON 20.09.2007. DURING THE COURSE OF SEARCH VARIOUS DOCUMENTS AND BOOKS OF ACCOUNTS WERE FOUND AND SEIZED FROM THE PREMISES OF THE ASSESSEE. PURSUANT TO THE SEARCH N OTICE U/S. 153A OF THE ACT DATED 05.09.2008 WAS ISSUED AND SERVED ON THE ASSESSEE ON 03.10.2008 . THE DUE DATE FOR FILING OF RETURN U/S. 139(1) OF THE ACT FOR THE RELEVANT AY 2007-08 WAS 1 .10.2007. AS THE SEARCH WAS CONDUCTED ON GROUP CASES OF THE ASSESSEE, THE ASSESSEE HAD NOT F ILED ANY RETURN OF INCOME U/S. 139(1) OF THE ACT FOR THE REASON THAT THE PROCEEDINGS I.E. ASSESS MENT PROCEEDINGS HAVING ABATED FOR THE CONCERNED YEAR IN VIEW OF THE 2 ND PROVISO TO SECTION 153A(1) OF THE ACT. WE FIND THA T THE AO HAS MERELY DISALLOWED THE LOSS BY OBSERVING AS UNDE R: BUSINESS LOSS OF 2,65,26,210/- INCLUDED IN THE TOT AL LOSS ASSESSED IS NOT ALLOWED TO BE CARRIED FORWARD SINCE THE RETURN WAS FILED AFTER THE DUE DATE. THE CIT(A) ALSO DISMISSED THE GROUND RAISED AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND SECOND PROVISO TO SECTION 153(1) OF THE ACT BY OBSERVING AS UNDER: THE ABOVE PROVISO ONLY STATES THAT THE ASSESSMENT OR REASSESSMENT PROCEEDING PENDING ON THE DATE OF SEARCH WILL GET ABATE. NO WHERE IT MENTION THAT THE LEGAL OBLIGATION FILING RETURN WILL BE ABATE. THE PENDING ASSESSMENT OR REA SSESSMENT PROCEEDING MEANS ANY PROCEEDING INTIATED OR PENDING BEFORE THE A.O . HE NCE THE A.O HAS NOT TO PROCEED WITH THE PROCEEDINGS OF THE ASSESSEE WHICH WERE PENDING ON THE DATE OF SEARCH. 4.4 MOREOVER THE LEGAL OBLIGATION OF THE ASSESSEE U NDER SECTION 139 IS NOT WAIVED, OR ABATE AFTER SEARCH PROCEEDING WILL BE FURTHER CLEAR FROM THE READING OF THE PROVISION OF SUBSECTION 2 OF SECTION 153A OF THE ACT, WHICH READ S, AS UNDER: (2) IF ANY PROCEEDING INITIATED OR ANY ORDER OF ASS ESSMENT OR REASSESSMENT MADE UNDER SUB-SECTION (1) HAS BEEN ANNULLED IN APPEAL OR ANY OTHER LEGAL PROCEEDING, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTION ( 1) OR SECTION 153, THE ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNULMENT BY THE COMMISSIONER. THE PLAIN READING OF ABOVE SECTION CLARIFY THAT IF THE PROCEEDING INITIATED OR ASSESSMENT MADE UNDER SECTION 153A IS ANNULLED THE ABATED ASSE SSMENT OR REASSESSMENT PROCEEDING WILL BE REVIVED. FURTHER SECTION 153(4) PROVIDE SP ECIAL LIMIT FOR COMPLETING THE ASSESSMENT OF THE ABATED ASSESSMENT OR REASSESSMENT PROCEEDING. FURTHER, IF THE LEGISLATURE HAS THE INTENTION OF WAIVING THE REQUIR EMENT OF FILNG VOLUNTARY RETURN UNDER SECTION 139(1) OR 139(3) NECESSARY AMENDMENT WOULD HAVE ALSO BEEN MADE IN SECTION 139 OF THE ACT, EXTENDING THE TIME LIMIT FOR FILING RET URN, IF PROCEEDNG INTATED UNDER SECTION 153A IS ANNULLED IN APPEAL OR LEGAL PROCEEDING. 4.5. HENCE CONSIDERING ABOVE AND THE PROVISION OF T HE ACT, IT IS HELD THAT IN ORDER TO CLAIM CARRY FORWARD OF THE LOSS SUSTAINED IN ANY PREVIOUS YEAR UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION OR UNDER THE HEAD CAPITA L GAIN IT IS MANDATORY TO FILE RETURN WITHIN THE DUE DATE AS PER PROVISION OF SECTION 139 (3) READ WITH SECTION 139(1) OF THE ACT. ACCORDINGLY THE GROUND NO 2 TAKEN BY THE APPELLANT IS DISMISSED. 7 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 AGGRIEVED, NOW ASSESSEE CAME IN APPEAL BEFORE TRIBU NAL. 9. BEFORE US, LD. COUNSEL FOR THE ASSESSEE RELIED O N SECOND PROVISO TO SECTION 153(1) OF THE ACT. HE ARGUED THAT IN VIEW OF SECOND PROVISO TO S ECTION 153(1) MAKES IT CLEAR THAT ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR FAL LING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS, WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH U/S. 132 OR REQUISITION U/S. 132A OF THE ACT SHALL STAND ABATED. EXPLAINING THE ABOVE S ECOND PROVISO, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE SECOND PROVISO PROVIDES THAT IF ON THE DATE OF INITIATION OF SEARCH OR REQUISITION U/S. 132 OR 132A OF THE ACT. ACCORDING TO HIM, ANY ASSESSMENT OR REASSESSMENT PROCEEDINGS RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS IS PENDING THAN THE PENDING PROCEEDINGS SHALL STAND ABATED AND FRES H ASSESSMENT CAN BE DONE BY ISSUING NOTICE U/S. 153A OF THE ACT. THIS PROVISO IS SPECIFICALLY ENACTED TO AVOID MULTIPLICITY OF PROCEEDINGS OF ASSESSMENT OF A PARTICULAR ASSESSMENT YEAR OF TH E SAME PERSON. THIS PROVISO IS SPECIFICALLY BROUGHT OUT BY LEGISLATURE TO AVOID, ON THE SAME MA TERIAL, ONE REGULAR ASSESSMENT AND ANOTHER ASSESSMENT PURSUANT TO SEARCH U/S. 153A OF THE ACT. LD. COUNSEL FOR THE ASSESSEE EXPLAINED THE WORD ABATEMENT MEANS THE ACT OF ELIMINATING OR NU LLIFYING THE ORDER OF SUSPENSION OR DEFEAT OF OPENING ACTION. ACCORDING TO HIM, ASSESSMENT CAN B E SAID TO BE PENDING IF AO IS STATUTORILY REQUIRED TO FRAME ASSESSMENT OR ASSESS THE INCOME O F THE ASSESSEE FOR A PARTICULAR ASSESSMENT YEAR. LD. COUNSEL FOR THE ASSESSEE ALSO EXPLAINED T HE PROVISION WITH RESPECT TO PENDENCY OF PROCEEDINGS VIS--VIS SECOND PROVISO TO SECTION 153 A AND SECTION 245A OF THE ACT WHEREIN THIS PENDENCY OF ASSESSMENT IS DISCUSSED. IN TERM OF TH E ABOVE, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE INCOME-TAX ACT NOWHERE DEALS WITH WHAT FOR MS PENDENCY OF ASSESSMENT BUT A SUITABLE SUPPORT CAN BE DRAWN AND IMPORT CAN BE TAKEN FROM S ECTION 245A OF THE ACT. IN VIEW OF THE ABOVE, LD. COUNSEL FINALLY STATED THAT BOTH THE AUT HORITIES BELOW HAVE ERRED IN NOT APPRAISING THE FACT THAT THERE WAS A SEARCH IN THE CASE OF THE ASS ESSEE AS ON 20.09.2007 AND THE DUE DATE OF FILING OF RETURN OF INCOME FOR AY 2007-08 U/S. 139( 1) OF THE ACT WAS TO END ON 31.10.2007. IT MEANS THAT THERE IS NO REQUIREMENT FOR FILING OF RE TURN IN RESPONSE TO NOTICE U/S. 139(1) OF THE ACT AS THERE WAS A SEARCH AND PURSUANT TO SEARCH AS SESSMENT HAS TO BE FRAMED U/S. 153A OF THE ACT. ON THE OTHER HAND, THE LD. CIT, DR HEAVILY RELIED O N THE ORDER OF CIT(A) AND REASONING GIVEN BY HIM. 10. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS ARE VERY CLEAR THAT A SEARCH HAS TAKEN PL ACE IN THE PREMISE OF THE ASSESSEE COMPANY ON 8 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 20.09.2007 AND RELEVANT ASSESSMENT YEAR INVOLVED IS 2007-08. THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME U/S. 139(1) OF THE ACT BEFORE THE DATE OF SEARCH I.E. 20.09.2007. NOW QUESTION ARISES WHETHER THE ASSESSMENT PROCEEDINGS FOR AY 20 07-08 IN ASSESSEES CASE WERE PENDING OR NOT ON THE DATE OF SEARCH. WE HAVE TO GO TO THE RE LEVANT PROVISION I.E. SECOND PROVISO TO SECTION 153A(1), WHICH READS AS UNDER: ASSESSMENT IN CASE OF SEARCH OR REQUISITION. 153A. [(I)] NOTWITHSTANDING ANYTHING CONTAINED IN S ECTION 139, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CASE OF A PERSO N WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 3LST DAY OF MAY, 2003, THE A SSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNIS H WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN RE SPECT 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 FURNISH ED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSME NT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE: PROVIDED THAT THE ASSESSING OFFCER SHALL ASSESS OR REASSESS THE TOTAL NCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESS MENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATNG TO ANY ASSESSMENT YEAR FALLNG WITHIN THE PERIOD OF SIX ASSESSMENT YEARS R EFERRED TO IN THIS [SUB-SECTION] PENDING ON THE DATE OF INITIATIOTION OF THE SEARCH UNDER SE CTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE; 11. THE RELEVANT PROVISION WAS EXPLAINED IN DEPARTM ENTAL CIRCULAR NO. 7 OF 2003 DATED 5 TH SEPTEMBER, 2003 WHEREIN THE SPECIAL PROCEDURE FOR A SSESSMENT OF SEARCH CASES UNDER CHAPTER XIV HAS BEEN EXPLAINED AS UNDER: 65.4 THE NEW SECTION 153A PROVIDES THE PROCEDURE F OR COMPLETION OF ASSESSMENT WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF A CCOUNT, OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER 3 LST MAY, 2003. IN SUCH CASES, THE ASSESSING OFFICER SHALL SSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH, WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE, RETURN OF INCOME IN RESPECT OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH. THE SEARCH WAS CONDUCTED UNDER SECTION 1 32 OR REQU ISITION WAS MADE UNDER SECTION 132A. 65.5 THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME OF EACH OF THESE SIX ASSESSMENT YEARS. ASSESSMENT OR REASSESSMENT, IF AN Y, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS P ENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR REQUISITION UNDER SECTI ON 132A, AS THE CASE MAY BE, SHALL ABATE. IT IS CLARIFIED THAT THE APPEAL, REVISION OR RECTIFICATION PROCEEDINGS PENDING ON THE DATE OF INTIATION OF SEARCH U/S. 132 OR REQUISITIO N SHALL NOT ABATE. SAVE AS OTHERWISE PROVIDED IN THE PROPOSED SECTION 153A, SECTION 153B AND SECTION 153C, ALL OTHER 9 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 PROVISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMEN T OR REASSESSMENT MADE UNDER SECTION 153A. IT IS ALSO CLARIFIED THAT ASSESSMENT OR REASS ESSMENT MADE UNDER SECTION 153A SHALL BE SUBJECT TO INTEREST, PENALTY AND PROSECUTION, IF APPLICABLE. IN THE ASSESSMENT OR REASSESSMENT MADE IN RESPECT OF AN ASSESSMENT YEAR UNDER THIS SECTION, THE TAX SHALL BE CHARGEABLE AT THE RATE OR RATES AS APPLICABLE TO SU CH ASSESSMENT YEAR. FROM THE ABOVE PROVISIONS OF SECTION 153A (NEWLY IN SERTED W.E.F. 01.06.2003 BY THE FINANCE ACT, 2003) PROVIDES A NEW PROCEDURE FOR ASS ESSMENT IN CASE OF SEARCH OR REQUISITION MADE U/S. 132 OR 132A OF THE ACT ON OR AFTER 01.06.2003. THE PROVISIONS OF SECTION 153A OPEN WITH A NON-OBSTANTE CLAUSE AND OV ERRIDE THE PROVISION OF SECTIONS 139, 147, 148, 149, 151 AND 153 OF THE ACT. THE NEW SEC TION 153A OF THE ACT PROVIDES THAT IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UN DER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSET ARE REQUISITIONED U/S. 132A OF THE ACT AFTER 31.05.2003, THE AO SHALL NOTWITHSTANDING ANYTHING CONTAINED IN ABOV EMENTIONED SECTIONS, ISSUES NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH PE RIOD AS MAY BE SPECIFIED IN THE NOTICE THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS AS REFERRED TO IN CLAUSE (B) OF SECTION 153A(1) OF THE ACT. IT IS SPECIFICALLY PRESCRIBED THAT THE PROVISIONS OF THE ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WAS A RETURN REQUIRED TO BE FURNISHED U/S. 139 OF THE ACT . HOWEVER, THE SECOND PROVISO TO SECTION 153A(B) OF THE ACT SPECIFICALLY PROVIDES TH AT THE ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN SECTION 153A PENDING ON THE DATE OF THE INITIATION OF THE SEARCH U/S. 132 OR REQUISITION U/S. 132A OF THE ACT, AS THE CASE MAY B E, SHALL ABATE. HERE, THE LEGISLATURE HAS PARTICULARLY USED THE WORD SHALL ABATE AND SPECIF ICALLY IT IS ALSO MENTIONED THAT RETURN HAS TO BE FILED U/S. 153A(1)(A) OF THE ACT AND SUCH RET URN IS TO BE TREATED AS THE RETURN OF INCOME REQUIRED TO BE FURNISHED U/S. 139 OF THE ACT . THERE IS NO SCOPE FOR FURTHER INTERPRETATION IN ANY WAY THAT IN THE PRESENT CASE BEFORE US FOR THE RELEVANT AY 2007-08 THE ASSESSMENT PROCEEDINGS WILL NOT ABATE, BECAUSE THE RETURN OF INCOME FOR THIS ASSESSMENT YEAR IS PENDING TO BE FILED AND CONSEQUE NTLY ASSESSMENT IS ALSO PENDING. 12. FURTHER, IN THIS CONNECTION RELIANCE WAS PLACED BY THE ASSESSEE ON SECTION 245A OF THE ACT WHEREIN THE ISSUE OF PENDENCY OF ASSESSMENT HAS ELABORATELY CONSIDERED, HOWEVER, A RELATION TO CASE BEFORE SETTLEMENT COMMISSION. I T IS TO BE RECORDED THAT PENDENCY OF ASSESSMENT HAS NOWHERE BEEN DEFINED IN THE ACT. TH US, IT IS SUITABLE DRAW SUPPORT AND IMPORT AND MEANING OF PENDENCY OF ASSESSMENT FROM S ECTION 245A OF THE ACT AS THE SAID SECTION LAYS DOWN IN CLEAR TERMS WHAT AMOUNTS TO P ENDING ASSESSMENT. THE PROVISIONS OF 10 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 SECTION 245A OF THE ACT I.E. THE DEFINITION SECTION IN CHAPTER XIX-A FOR SETTLEMENT OF CASES EXPLAINS THE PENDING ASSESSMENT BY WAY OF EXP LANATION APPENDED TO THIS SECTION. THE RELEVANT EXPLANATION READS AS UNDER: 245A. EXPLANATION- FOR THE PURPOSES OF THIS CLAUSE- (I) A PROCEEDING FOR ASSESSMENT OR REASSESSMENT OR RECO MPUTATION REFERRED TO IN CLAUSE (I) OF THE PROVISO SHALL BE DEEMED TO HAVE C OMMENCED FROM THE DATE ON WHICH A NOTICE UNDER SECTION 148 IS ISSUED; (II) A PROCEEDING FOR ASSESSMENT OR REASSESSMENT FOR ANY OF THE ASSESSMENT YEARS REFERRED TO IN CLAUSE (B) OF SECTION 153A IN CASE O F A PERSON REFERRED TO IN SECTION 153A OR SECTION 153C; (III) A PROCEEDING FOR MAKING FRESH ASSESSMENT REFERRED T O IN CLAUSE (IV) OF THE PROVISO SHALL BE DEEMED TO HAVE COMMENCED FROM THE DATE ON WHICH THE ORDER UNDER SECTION 254 OR SECTION 263 OR SECTION 264, SETTING ASIDE OR CANCELLING AN ASSESSMENT WAS PASSED; [(IIIA) A PROCEEDING FOR ASSESSMENT OR REASSESSMENT FOR ANY OF THE ASSESSMENT YEARS, REFERRED TO IN CLAUSE (B) OF SUB-SECTION (1) OF SEC TION 153A IN CASE OF A PERSON REFERRED TO IN SECTION 153A OR SECTION 153C, SHALL BE DEEMED TO HAVE COMMENCED ON THE DATE OF ISSUE OF NOTICE INITIATING SUCH PROC EEDING AND CONCLUDED ON THE DATE ON WHICH THE ASSESSMENT IS MADE;] (IV) A PROCEEDING FOR ASSESSMENT FOR ANY ASSESSMENT YEAR , OTHER THAN THE PROCEEDINGS OF ASSESSMENT OR REASSESSMENT REFERRED TO IN CLAUSE (I) OR [CLAUSE (IV) OF THE PROVISO OR CLAUSE (IIIA) OF THE EXPLANATION], SHALL BE DEEMED TO HAVE COMMENCED FROM THE 1 ST DAY OF THE ASSESSMENT YEAR AND CONCLUDED ON THE DA TE ON WHICH THE ASSESSMENT IS MADE;] FROM THE ABOVE PROVISION OF SECTION 145A, IT CLARIF IES THE TERM ASSESSMENT YEAR, WHICH ITSELF SIGNIFIES THAT ASSESSMENT PROCEEDINGS HAVE BEGAN WI TH THE 1 ST DAY OF THE SAID YEAR. SUB-CLAUSE (4) OF THIS EXPLANATION TO SECTION 245A OF THE ACT CLARIFIES A PROCEEDING FOR ASSESSMENT FOR ANY ASSESSMENT YEAR WHEN TO COMMENCE I.E. FROM THE 1 ST DAY OF THE ASSESSMENT YEAR AND CONTINUES ON THE DATE ON WHICH THE ASSESSMENT IS MADE. HENCE , THIS PROVISION OF SECTION 245A IS SUITABLE TO DRAW SUPPORT AND IMPORT TO THE MEANING OF PENDIN G ASSESSMENT. EXPLAINING THE SECOND PROVISO TO SECTION 153A(1)(B) OF THE ACT, IT PROVID ES THAT IF ON THE DATE OF SEARCH OR REQUISITION U/S. 132 OR 132A OF THE ACT ANY ASSESSMENT OR REASS ESSMENT PROCEEDINGS RELATING TO THAT PARTICULAR ASSESSMENT YEAR FALLING WITHIN THE SIX A SSESSMENT YEARS, IS PENDING, THEN THE PENDING PROCEEDINGS FOR THE REGULAR ASSESSMENT SHALL STAND ABATED AND FRESH ASSESSMENT CAN BE DONE ONLY U/S. 153A OF THE ACT. IN SUCH CIRCUMSTANCES, THE ASSESSEE IN THE PRESENT CASE IS NOT SUPPOSED TO FILE ITS RETURN OF INCOME U/S. 139(1) O F THE ACT BECAUSE HE STATUTORILY REQUIRED TO FILE RETURN OF ITS INCOME IN RESPONSE TO NOTICE U/S. 153 A OF THE ACT AND HE HAS DONE ACCORDINGLY AND MAKE CLAIM OF LOSS. NEITHER THE AO NOR CIT(A) HAS DOUBTED THE GENUINENESS OF CLAIM OF LOSS RATHER ON TECHNICAL ISSUE THAT IT HAS NOT CLAIMED T HE LOSS IN THE RETURN OF INCOME TO BE FILED U/S. 11 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 139(1) OF THE ACT, DISALLOWED THE LOSS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ALLOW THE CLAIM OF LOSS OF ASSESSEE AND REVERSE THE ORDER S OF THE LOWER AUTHORITIES. WE DIRECT THE AO ACCORDINGLY. 13. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING RECEIPT OF RS.96,972/-. FOR THIS ASSESSEE HAS RAIS ED FOLLOWING GROUND NO.4: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO IN TREATING THE AMOUNT OF RS.96 ,972/- AS THE INCOME OF THE APPELLANT COMPANY DISREGARDING THEREBY THE FACT THAT THE SAID RECEIPT HAD BEEN DIRECTLY LINKED TO THE ACQUISITION OF FIXED ASSETS. 14. LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL OF ASSESSEE AT THE TIME OF HEARING. HENCE, THE SAME IS DISMISSED BEING NOT PRESSED. 15. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO ADDITION CONFIRMED BY CIT(A) ON ACCOUNT OF ASSESSEES CLAIM OF REDUCTION OF INCO ME, BEING ALREADY OFFERED TO TAX IN ASSESSMENT YEARS 2005-06, 2006-07, FOR AN AMOUNT OF RS.12,37,178/- LEADING TO DOUBLE TAXATION OF THE SAME AMOUNT. FOR THIS ASSESSEE HAS RAISED F OLLOWING GROUND NO.5: 5. THAT THE LD. CIT(A) HAS ERRED IN NOT ADJUDICATI NG ON THE ISSUE RAISED BEFORE HIM IN RESPECT OF THE REDUCTION TOWARDS INCOME OFFERED TO TAX OF RS.12,37,178/- WHICH HAD ALREADY BEEN TAXED BY THE AO IN THE AY 2005-06, 200 6-07, 2007-08 LEADING TO DOUBLE TAXATION OF THE SAME AMOUNT. 16. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STA TED THAT THE FOLLOWING AMOUNTS WERE OFFERED IN THREE ASSESSMENT YEARS ON ACCOUNT OF INT EREST INCOME CREDITED TO PRE-COMMISSIONING REVENUE EXPENSES: FINANCIAL YEAR 2004-05 RS.5,25,955/- FINANCIAL YEAR 2005-06 RS.6,14,251/- FINANCIAL YEAR 2006-07 RS. 96,972/- LD. COUNSEL FOR THE ASSESSEE STATED THAT THREE AMOU NTS TOTALLING TO RS.12,37,178/- HAVING BEEN ALREADY SUBJECTED TO TAX, A SUM OF RS.64,53,786/- S TANDING ON THE DEBIT SIDE OF P&L ACCOUNT UNDER THE HEAD PRE-COMMISSIONING REVENUE EXPENSES SHOULD BE INCREASED TO RS.76,90,964/- DURING THE RELEVANT ASSESSMENT YEAR. WHEN THIS FAC T WAS CONFRONTED TO LD. CIT, DR, HE MADE A PRELIMINARY OBJECTION THAT THIS ISSUE IS NOT ARISIN G FROM THE ORDERS OF THE LOWER AUTHORITIES. IN TURN, WHEN THE SAME WAS REFERRED TO LD. COUNSEL FOR THE ASSESSEE HE FAIRLY CONCEDED THAT THIS ISSUE IS NOT ARISING FROM THE ORDERS OF THE LOWER A UTHORITIES BUT FOR THE PROPER COMPUTATION OF INCOME THIS ISSUE NEEDS ADJUDICATION BECAUSE IT WIL L AFFECT THE INCOME OF THE ASSESSEE. ON THIS LD. CIT, DR AGREED THAT THE ISSUE CAN BE REMITTED B ACK TO THE FILE OF THE AO FOR FRESH 12 IT(SS)A NO. 89/K/2011 M/S. MAITHAN ISPAT LTD. AY 2007-08 ADJUDICATION IN TERM OF THE ABOVE FACTS. WE FIND T HAT THE PLEA OF ASSESSEE IS GENUINE AND ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE AO. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. 18. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.05. 2014. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH MAY, 2014 ,- #./ 0 JD.(SR.P.S.) 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT M/S. MAITHAN ISPAT LTD., 9, A.J.C. BOSE ROAD, 6 TH FLOOR, KOLKATA-17 2 *+() / RESPONDENT DCIT, CENTRAL CIRCLE-VI, KOLKATA 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #