DCIT, Bangalore v. M/s Wintac Ltd.,, Bangalore

ITA 724/BANG/2009 | 2001-2002
Pronouncement Date: 12-04-2010 | Result: Allowed

Appeal Details

RSA Number 72421114 RSA 2009
Bench Bangalore
Appeal Number ITA 724/BANG/2009
Duration Of Justice 8 month(s) 23 day(s)
Appellant DCIT, Bangalore
Respondent M/s Wintac Ltd.,, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 12-04-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 12-04-2010
Date Of Final Hearing 29-03-2010
Next Hearing Date 29-03-2010
Assessment Year 2001-2002
Appeal Filed On 20-07-2009
Judgment Text
PAGE 1 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A' BEFORE SHRI GEORGE GEORGE K J.M. AND SHRI A MOHAN ALANKAMONY ITA NO.724/BANG/09 (ASST. YEAR 2001-02) THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-12(5) BANGALORE. - APPELLANT VS M/S WINTAC LIMITED #163 RESERVOIR ST. BASAVANGUDI BANGALORE-4. - RESPONDENT C.O.NO.44/BANG/2009 (ASST. YEAR 2001-02) (BY ASSESSEE) REVENUE BY : SHRI JASON P BOAZ & SMT. PREETHI GARG ASSESSEE BY : SHRI H A K RAO O R D E R PER GEORGE GEORGE : THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDE R OF CIT(A)- V BANGALORE DATED 12.5.2009 RAISING EIGHT GROUNDS AND THE ASSESSEE HAS FILED CROSS OBJECTION RAISING TWO GROUNDS. THE REL EVANT ASST. YEAR IS 2001-02. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOW S:- I) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ORDER PASSED U/S 154 IS WITH REGARD TO A DEBATABLE ISSUE WHICH IS CONTRARY TO THE FACTS OF THE CASE. PAGE 2 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 2 II) THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FA CT THAT IN THE ASSESSMENT ORDER THE AI HAD REJECTED T HE RECASTED P&L A/C AND REVISED FORM 29B FILED BY THE ASSESSEE. III) THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FA CT THAT THE ASSESSEE HAD NOT DISPUTED THE REJECTION OF RECASTED P&L A/C AND REVISED FORM NO.29B EITHER BEFORE THE CIT(A) OR BEFORE THE ITAT. IV) THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FA CT THAT THE TAX LIABILITY UNDER THE NORMAL PROVISIONS WAS MORE THAN THE MAT LIABILITY AS PER THE TOTAL INCOM E COMPUTED IN THE ASSESSMENT ORDER AS WELL AS THE ORD ER GIVING EFFECT TO THE CIT(A) ORDER AND THEREFORE TH ERE WAS NO NECESSITY TO SHOW THE COMPUTATION OF TAX LIABILITY U/S 115JB IN THOSE ORDERS. V) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT IN THE ORDER GIVING EFFECT TO ITAT'S ORDER TH E MAT LIABILITY WAS MORE THAN THE TAX LIABILITY DETERMINED UNDER NORMAL PROVISIONS AND THEREFORE A S THE AO HAD NOT COMPUTED THE MAT LIABILITY AND HAD NOT RAISED DEMAND ON THE BASIS OF MAT LIABILITY TH ERE WAS A MISTAKE APPARENT FROM RECORD REQUIRING RECTIFICATION U/S 154. VI) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT WHEN ONCE THE P&L A/C AND BALANCE SHEET WAS APPROVED BY THE SHAREHOLDERS IN THE GENERAL BODY MEETING THE SAME COULD NOT BE RE-CASTED TO ARRIVE AT A DIFFERENT FIGURE OF PROFIT FOR PURPOSE OF DETERMINI NG TAX LIABILITY U/S 115JB. VII) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ONLY POINT THAT WAS IN DISPUTE BEFORE THE ITAT IS W ITH REGARD TO TAXABILITY OF RS.25 CRORES RECEIVED AS CONSIDERATION TOWARDS THE SALE OF TECHNICAL KNOW-HO W AND THE DECISION OF THE ITAT ON THE SAID POINT DID NOT AFFECT THE COMPUTATION OF LIABILITY TO TAX U/S 115J B. PAGE 3 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 3 3. FACTS IN BRIEF ARE AS FOLLOWS:- THE ASSESSEE HAS FILED RETURN OF INCOME ON 31.10. 2001 SHOWING TOTAL LOSS OF RS.3 68 30 330/-. IN ADDITIO N CALCULATION U/S 115JB HAS BEEN MADE IN THE RETURN OF INCOME FILED AND TAX PAYABLE HAS BEEN WORKED OUT AT RS.38 26 607/- WHICH HAS BEEN PAID B Y THE ASSESSEE HIMSELF AS SELF-ASSESSMENT TAX. THIS HAS BEEN RECO RDED BY AO AT PARA 1 PAGE 1 OF HIS ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT (ON 18.3.2004) AFTER EXPIRY OF TIME ALLOWED U/S 139(5) THE ASSESSEE HAS FILED A REVISED CLAIM MAKING CERTAIN ADDITIONAL CLAIMS AN D DENYING LIABILITY U/S 115JB. ASSESSMENT U/S 143(3) HAS BEEN COMPLETED ON 30.3.2004 WITHOUT ACCEPTING THE CLAIM OF THE ASSESSEE MADE IN THE REV ISED STATEMENT. COMPUTATION OF INCOME UNDER THE NORMAL PROVISIONS O F THE INCOME TAX HAS BEEN MADE AFTER MAKING SOME ADDITIONS AT RS.19 14 8 7 470/-. THE AO AT PARA 9.1 ON PAGE 21 OF HIS ASSESSMENT ORDER HAS MEN TIONED THAT REVISED ESTIMATE FILED BY ASSESSEE REDUCING THE TAXABLE INC OME U/S 115JB IS REJECTED. THE RELEVANT FINDING OF THE ASSESSING OF FICER READS AS FOLLOWS:- 'ON THE SAME DAY A LETTER WAS ADDRESSED AND SERVED ON THE ASSESSEE REJECTING THE STATEMENT ON THE FOLLOWING GROUNDS:- A) THE REVISION OF INCOME IS PERMISSIBLE IN ACCORDANCE WITH SECTION 139(5) WITHIN ONE YEAR FROM THE END OF RELEVANT ASST. YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER. B) SINCE IT IS NOT COMPLYING TO THE ABOVE STATUTORY NORM REVISED STATEMENT FILED BY THE ASSESSEE REDUCING THE TAXABLE INCOME U/S 115JB IS REJECTED. PAGE 4 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 4 C) ASSESSEE FOR 19.3.2004 FILED A LETTER STATING THAT THE LETTER FILED ON 18.3.2004 IS NOT A REVISED RETURN BUT A REVISED STATEMENT. D) THE ABOVE LETTER IS AGAIN REJECTED AS THERE IS NO PROVISION IN THE STATUTE WHICH ALLOWS THE REVISION OF INCOME TO BE ACCEPTED BASED ON ANY STATEMENTS. 3.1 SUBSEQUENTLY THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(A). THE CIT(A) IN HIS ORDER DATED 13.12.2004 HAS ALLOWE D THE CLAIM OF THE ASSESSEE WITH REGARD TO THE SUM OF RS.25 CRORE CLAI MED IN THE REVISED CLAIM OF THE ASSESSEE AT PARA 9.1 OF HIS ORDER BUT HAS DIRECTED THAT THE SAME SHOULD BE TAXED AS CAPITAL GAINS. 3.2 BOTH THE ASSESSEE AND THE REVENUE WERE BEFORE ITAT AGAINST THE ORDER OF THE CIT(A). THE ITAT VIDE THEIR ORDER DATED 02.01.2006 HAS ADJUDICATED ON THIS AMOUNT OF RS.25 CRORE TO BE NOT TAXED AT ALL. 4. THE ORDER OF THE TRIBUNAL WAS GIVEN EFFECT TO B Y THE ASSESSING OFFICER VIDE HIS ORDER DATED 13.9.2006. CONSEQUENT TO GIVING EFFECT TO THE ITAT'S ORDER THE BUSINESS LOSS WAS R EVISED AT (-) RS.19 44 25 832/- AND LONG TERM CAPITAL LOSS WA S ASSESSED AT (-) RS.2 82 75 286/- UNDER NORMAL COMPUTATION. THE ASSESSING OFFICER REALIZING THAT THE BOOK PROFITS OF RS.4 93 42 945/- WAS OMITTED TO BE BROUGHT TO TAX U/S 115JB VIDE HIS ORDER DATED 13.9. 2006 (ORDER GIVING EFFECT TO ITAT ORDER DATED 2.1.2006) ISSUED A NOTI CE U/S 154 OF THE ACT CALLING FOR ASSESSEE'S OBJECTION. IN RESPONSE ASS ESSEE VIDE HIS LETTER DATED 12.6.2007 RAISED THE FOLLOWING CONTENTIONS:- PAGE 5 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 5 I) YOUR ATTENTION IS DRAWN TO THE RECAST PROFIT AND LO SS ACCOUNT FOR THE YEAR ENDED 31.3.2001 AND THE REVISE D REPORT IN FORM NO.29B FROM THE AUDITORS M/S RAO & SWAMI CAS BANGALORE DATED 12/3/2004 FILED BEFORE YOUR PREDECESSOR BEFORE PASSING OF THE ORDER U/S 14 3(3) FOR THE YEAR AND AS PER THE SAID CERTIFICATE THE T AX PAYABLE U/S 115JB IS RS. NIL. II) THERE IS NO REFERENCE TO MAT EITHER IN THE ORDER PASSED U/S 143(3) NOR IN THE ORDERS DATED 13.1.2005 15.4.2005 AND 13.9.2006 REJECTING THE ABOVE WHICH CLEARLY PROVE THAT OUR STAND HAS BEEN ACCEPTED BY T HE OFFICER. III) THE OFFICER HAD NOT AGREED WITH OUR SUBMISSION AN ORDER U/S 115JB WOULD HAVE BEEN PASSED QUANTIFYING THE MAT. 5. THE CONTENTIONS RAISED BY THE ASSESSEE WERE REJ ECTED AND ORDER U/S 154 WAS PASSED ON 25.6.2007 WHEREIN THE TAX PAYABLE U/S 115JB WAS DETERMINED AT RS.38 26 607/- (AS DISCLOSED BY T HE ASSESSEE IN THE ORIGINAL RETURN DATED 31.10.2001). THE RELEVANT FI NDING OF THE ASSESSING OFFICER READS AS FOLLOWS:- 'THE ABOVE CONTENTION OF THE ASSESSEE IS NOT CORRECT AS A DETAILED FINDING HAS BEEN GIVEN IN TH E ORDER U/S 143(3) AT PARA NOO.9.1 REJECTING THE SUBMISSION MADE BY THE ASSESSEE WITH REGARD TO SEC.115JB. AS REGARDS TO POINT THREE OF ASSESSEE'S SUBMISSIONS ABOVE THE ASSESSING OFFICER IN THE ORDER U/S 143(3) DATED 30.3.2004 HAS NOT COMPUTED THE INCOME U/S 115JB AS THE INCOME COMPUTED UNDER NORMAL PROVISIONS WAS MORE THAN THE BOOK PROFIT U/S 115JB'. 6. BEFORE THE FIRST APPELLATE AUTHORITY THE ASSES SEE MADE THE FOLLOWING CONTENTIONS:- PAGE 6 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 6 1. BY GROUND NO.2(A) AND 2(B) THE ASSESSEE HAS SUBMITT ED THAT THERE IS NO MISTAKE IN THE ORDER DATED 30.3.20 04 15.4.2005 AND 13.9.2006. OMISSION TO COMPUTE MAT I N THE ORDER 30.3.2004 CANNOT BE COMPUTED IN AN ORDER U/S 154 GIVING EFFECT TO THE APPELLATE ORDER. IF AT AL L THE SAME OUGHT TO HAVE BEEN DONE UNDER PROVISIONS OF SE CTION 263 OF THE I T ACT BY CIT. HENCE THE PRESENT ORDE R DATED 14.7.2007 BE CANCELLED. 2. THE CIT(A)-III VIDE ORDER DATED 13.12.2004 HAS HELD THE REVISED PROFIT AND LOSS ACCOUNT AND REVISED CERTIFI CATE ISSUED IN FORM 29B (WHICH HAS BEEN BASED ON ORDER O F ITAT HYDERABAD) MUST BE TAKEN COGNIZANCE BEFORE AN ASSESSMENT ORDER IS PASSED. THIS DECISION HAS BEEN ACCEPTED BY THE THEN ASSESSING OFFICER AS NO APPEAL HAS BEEN PREFERRED TO ITAT ON THIS ISSUE. HENCE THE P RESENT ORDER U/S 154 IS BAD-IN-LAW. THIS IS THE ISSUE RAI SED IN GROUND NO.2(C) AND (D). THE ORDER NOW PASSED IS U/ S 154 HENCE IS BAD IN LAW. THE SAME BE CANCELLED. 3. THE CONCLUSION THAT THE THEN AO IN THE ORDER DATED 30.3.2004 HAS NOT COMPUTED THE INCOME U/S 115JB AS THE INCOME COMPUTED UNDER NORMAL PROVISION WAS MORE THA N THE BOOK PROFIT U/S 115JB MENTIONED IN PARA 2 OF PR ESENT ORDER IS NOT SUPPORTED BY ANY DOCUMENTAL EVIDENCE. HENCE THE PRESENT ORDER PASSED BE CANCELLED. 4. IT IS A WELL KNOWN PRINCIPLE THAT AN ISSUE INVOLVED IS A DEBATABLE QUESTION THE SAME CANNOT BE SUBJECT OF A RECTIFICATION. BALARAM (T.S.) ITO V VOLKART BROTHE RS (1971) 82 ITR PAGE 50 (SC). THE CONTENTION OF THE AO THAT THE THEN AO HAS NOT COMPUTED MAT AS THE TAX PAYABLE UNDER 143(3) ORDER WAS MORE IS A DEBATABL E QUESTION AND HENCE PRESENT ORDER PASSED U/S 154 LE VYING MAT WITHOUT DISCUSSING THE CLAIM OF ASSESSEE IS BAD AND THE SAME BE CANCELLED. 5. CONCEDING FOR ARGUMENTS SAKE IF THE AO IS OF THE O PINION MAT HAS NOT BEEN LEVIED ON THE ASSESSEE THE AO OUG HT TO HAVE INITIATED PROCEEDINGS U/S 147 INSTEAD OF PR ESENT RECTIFICATION ORDER U/S 154. HENCE THE ORDER NOW PASSED BE CANCELLED. PAGE 7 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 7 7. THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE BY HOLDING THUS:- 'I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE. THE ONLY REASON FOR RECTIFYING THE ORDER U/S 154 IS THAT THE ASSESSEE HAS A BOOK PROFIT OF RS.4 93 42 945/- WHICH WAS OMITTED U/S 115JB OF THE ACT. NOTICE U/S 154 WAS ISSUED BUT THE APPELLANT OBJECTED THE PROPOSED RECTIFICATION ON THE GROUND THAT RECAST PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31.3.2001 AND REVISED REPORT IN FORM NO.29B FILED DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) HAS SHOWN NO TAX PAYABLE U/S 115JB. THERE WAS NO MAT COMPUTATION IN ORDER U/S 143(3) NOR IN ORDERS DATED 13.1.2005 15.4.2005 AND 13.9.2006 WHICH MEANS THE AO ACCEPTED THE STAND OF THE APPELLANT. IT IS SEEN TH AT THE AO NOTED THE FILING OF RECASTED STATEMENT OF INCOME. NO INCOME WAS OFFERED U/S 115JB WHEREAS IN THE ORIGINAL RETURN THE ASSESSEE DECLARED INCOME UNDER MAT AT RS.38 26 607/-. SINCE THE ASSESSEE IS NOT COMPLYING TO THE STATUTOR Y PROVISIONS U/S 139(5) REVISED STATEMENT FILED BY THE ASSESSEE REDUCING THE TAXABLE INCOME U/S 115JB IS REJECTED. THE ASSESSEE IN A LETTER DATED 19.3.2004 STATED THAT THE LETTER FILED ON 15.3.2004 IS NOT A REVISED RETURN BUT A REVISED STATEMENT. TH IS LETTER IS ALSO REJECTED AS THERE IS NO PROVISION IN THE STATUTE WHICH ALLOWS THE REVISION OF INCOME TO BE ACCEPTED BASED ON ANY STATEMENTS. THE APPELLANT TOOK UP THIS MATTER BEFORE CIT(A) IN GROUND NO.7 AND THE LEARNED CIT(A) HELD THAT THE APPELLANT HAD MADE THE CLAIMS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THIS FACT HAS ALSO BEEN REFERRED TO IN THE IMPUGNED ORDER. THE APPELLANT HAS NOT FILED REVISED RETURN OF INCOME AND ONLY A STATEMENT OF AFFAIRS CLAIMING RS.25 CRORES UNDER THE HEAD 'CAPITAL GAINS' WAS FURNISHED. IT IS AN ESTABLISHE D LAW THAT THE CLAIM MADE BY THE ASSESSEE DURING THE PAGE 8 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 8 COURSE OF ASSESSMENT PROCEEDINGS BEFORE FINALISATION OF ASSESSMENT HAS TO BE CONSIDERED. FURTHER THE INCLUSION OF A PARTICULAR INCOME IN TH E RETURN IS NOT DECISIVE REGARDING THE TAXABILITY. T HE AO WAS DIRECTED TO TAX A SUM OF RS.25 CRORES ON ACCOUNT OF TECHNICAL KNOW-HOW UNDER THE HEAD 'CAPITAL GAINS' BY EXCLUDING THE SAME FROM BUSINESS INCOME. THE AO GAVE EFFECT TO CIT(A)'S ORDER ON 13.1.05 AND DETERMINED THE INCOME AT RS.9 15 33 500/- AND TAX PAYABLE AT RS.2 07 04 585/-. THIS ORDER WAS SUBSEQUENTLY RECTIFIED U/S 154 ON 15.4.2005 DETERMINING THE INCOME AT RS.1 37 31 210/- AND TAX PAYABLE AT RS.31 03 253/- AND THE REFUNDABLE AMOUNT OF RS.62 63 484/-. THE ASSESSEE WENT TO ITAT AGAINST THE ORDER OF CIT(A) AND THE HON'BLE ITAT VIDE ITS ORDER DATED 24.1.06 PARTLY ALLOWED THE APPEAL OF THE APPELLANT AND DISMISSED THE APPEAL OF THE REVENUE. THE ITAT HELD THAT RS.25 CRORES IS CAPITAL RECEIPT AND NOT LIABLE FOR CAPITAL GAINS. THE AO GAVE EFFECT TO ITAT'S ORDER ON 13.9.2006 DETERMINING THE TOTAL INCOME OF BUSINESS AT RS.19 44 25 832/- AND LONG TERM CAPITAL LOSS TO RS.2 82 75 286/-. THE AO AGAIN ISSUED NOTICE U/S 154 ON 4.6.07 PROPOSING TO RECTIFY THE MISTAKE. THE APPELLANT OBJECTED TO THE PROPOSED RECTIFICATION AS THE ISSUE INVOLVED IS A DEBATABLE QUESTION NOT TO BE SUBJECT OF RECTIFICATION. THE A O REJECTED AND RECTIFIED THE ORDER IGNORING THE DIRECTION ISSUED BY CIT(A) THAT THE CLAIM MADE BEFORE THE AO MUST BE ACCEPTED. THE APPELLANT ALSO STATED THAT IF AT ALL NECESSARY THE SAME OUGH T TO HAVE BEEN DONE U/S 263 AND NOT U/S 154. WHEN THE AO ACCEPTED THE DECISION OF THE CIT(A)AND NOT FILED APPEAL BEFORE ITAT THE SAME CANNOT BE RECTIFIED U/S 154. HENCE ORDER U/S 154 IS BAD IN LAW. IT IS A WELL KNOWN PRINCIPLE THAT AN ISSUE WHICH IS DEBATABLE QUESTION CANNOT BE SUBJECT MATTER OF RECTIFICATION AS HELD IN BALARAM ITO V PAGE 9 OF 15 ITA NO.724/BANG/2009& C .O.NO.44/BANG/09 9 VOLKART BROTHERS (1971) 82 ITR 50 (SC). EVEN IF THE AO IS OF THE VIEW THAT THE AO HAS NOT COMPUTED MAT AS PAYABLE U/S 143(3) HE CAN INITIATE PROCEEDINGS U/S 147 AND NOT TO RESTRICT HIMSELF FROM RECTIFICATION U/S 154. IN VIEW OF THE ABOVE I AM OF THE OPINION THAT THE ISSUE RELATING TO TAX PAYABLE U/S 115JB AT RS.38 26 607/- IN THE ORIGINAL RETURN HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT BY THE CIT(A). THE QUESTION OF LEVYING TAX UNDER MAT U/S 154 DOES NOT ARISE. IT IS NOT OUT OF PLACE TO MENTION THAT THE CIT(A)'S ORDER HAS BEEN ACCEPTED BY THE AO AND RECTIFICATION U/S 154 IS BAD IN LAW AND NOT JUSTIFIED. THE ISSUE BEING A DEBATABLE ONE THE SAME CANNOT BE RECTIFIED U/S 154. THERE IS NO MISTAKE APPARENT FROM THE ORDER U/S 143(3) OF THE AO NOR FROM THE ORDER OF THE CIT(A). I THEREFORE DIRECT THE AO TO DELETE THE BOOK PROFIT DETERMINED U/S 115JB IN HIS RECTIFICATION ORDER U/S 154 ON 25.6.07'. 8. AGGRIEVED FOR REDRESSAL THE REVENUE IS IN APPE AL BEFORE US. 9. THE LEARNED DR SUBMITTED AS A RESULT OF GIVING EFFECT TO ITAT ORDER DATED 2/1/2006 THE MAT LIABILITY AS DIS CLOSED IN THE ORIGINAL RETURN WAS MORE THAN THE TAX LIABILITY DETERMINED U NDER THE NORMAL PROVISIONS. THE ASSESSING OFFICER HAVING NOT COMPU TED THE MAT LIABILITY IN HIS ORDER DATED 13.9.2006 THE SAME SU FFERED FROM A MISTAKE APPARENT FROM RECORD WARRANTING RECTIFICATION U/S 1 54 OF THE I T ACT. HE RELIED ON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF NICCO CORPORATION LTD. V CIT 272 ITR 58 WHEREIN IT WAS HELD ' FAILURE TO COMPUTE BOOK PROFITS U/S 115J CONSEQUENT UPON NIL A SSESSMENT ON THE BASIS OF APPEAL EFFECT FOR EARLIER YEAR ALLOWING CA RRY FORWARD OF UNABSORBED LOSS WAS A MISTAKE APPARENT AND THERE WA S MATERIAL ON RECORD JUSTIFYING RECTIFICATION'. PAGE 10 OF 15 ITA NO.724/BANG/2009& C.O.NO.44/BANG/09 10 9.1 IT WAS FURTHER SUBMITTED THAT ONCE THE P&L ACC OUNT AND BALANCE SHEET WAS APPROVED BY THE SHAREHOLDERS IN T HE GENERAL BODY MEETING THE SAME COULD NOT BE RECAST TO ARRIVE AT A DIFFERENT FIGURE OF PROFIT FOR THE PURPOSE OF DETERMINING TAX LIABILITY U/S 115JB OF THE I T ACT. FOR THIS PROPOSITION THE LEARNED DR RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF GUJARAT STATE PETROLEUM CORPORATION LTD. V JCIT 308 ITR (AT) 248 (AHMEDABAD) WHEREIN IT WAS HELD 'THE ASSESSING OFFICER WAS RIGHT IN ACCEPTING ONLY THE ACCOUNTS WHICH WERE AP PROVED BY THE ANNUAL GENERAL MEETING AND PLACED BEFORE THE AUDITOR OF TH E COMPANY AS WELL THE REGISTRAR OF THE COMPANIES' . 9.2. IT WAS FURTHER CONTENDED BY THE LEARNED DR T HAT THE SO-CALLED REVISED STATEMENT DECLARING NIL TAX LIABILITY UNDER THE MAT PROISION WAS FILED ONLY ON 18.3.2004 FEW DAYS BEFORE THE COMPLE TION OF THE ASSESSMENT AND THE SAME WAS BEYOND THE PERIOD PRESCRIBED U/S 1 39(5) OF THE ACT. IT WAS STATED THAT THE ASSESSING OFFICER IN THE ASSESS MENT COMPLETED ON 30.3.2004 HAD REJECTED THE RECAST P&L ACCOUNT AND R EVISED FORM 29B FILED BY THE ASSESSEE. THE REJECTION WAS NOT DISPUTED BE FORE THE CIT(A) NOR BEFORE THE ITAT (THOUGH A GROUND WAS RAISED BEFORE THE CIT(A) THE SAME WAS NOT DECIDED IN FAVOUR OF ASSESSEE). 10. THE LEARNED AR ON THE OTHER HAND RELIED ON THE FINDINGS OF THE CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT SUBSEQUENT TO THE ORDER OF THE ITAT WHEN THE SAME WAS GIVEN EFFECT VIDE ORDER DATED 13.9.2006 THE PAGE 11 OF 15 ITA NO.724/BANG/2009& C.O.NO.44/BANG/09 11 INCOME DETERMINED UNDER THE REGULAR PROVISIONS FELL SHORT OF MAT CALCULATION MADE BY THE ASSESSEE IN THE RETURN OF I NCOME FILED ON 31.10.2001. AT THIS STAGE THE AO WAS REQUIRED TO BRING BACK THE CALCULATION U/S 115JB MADE BY THE ASSESSEE IN THE R ETURN OF INCOME WHICH WAS MENTIONED IN THE ORIGINAL ASSESSMENT ORDER DATE D 30.3.2004 WHILE REJECTING THE REVISED CLAIM. THIS MISTAKE COMMITTE D BY THE ASSESSING OFFICER AT THE STAGE OF GIVING EFFECT TO THE ITAT O RDER HAS BEEN MADE GOOD BY PASSING THE ORDER U/S 154 DATED 25.6.2007. IT I S CLEAR THAT THIS IS A MISTAKE APPARENT FROM RECORD AND COVERED BY THE PRO VISIONS OF SECTION 154 OF THE ACT. IT IS TRUE THAT IN THE COURSE OF AS SESSMENT PROCEEDINGS ON 18.3.2004 AFTER THE EXPIRY OF TIME ALLOWED U/S 139 (5) THE ASSESSEE HAD FILED A REVISED PLEA MAKING CERTAIN ADDITIONAL CLAI MS AND DENYING THE LIABILITY U/S 115JB OF THE I T ACT. HOWEVER IT IS TO BE NOTED THAT THE REVISED PLEA WAS CATEGORICALLY REJECTED BY THE ASSE SSING OFFICER IN HIS ASSESSMENT COMPLETED ON 30.3.2004. THOUGH THE ASSE SSEE HAD FILED GROUNDS BEFORE THE CIT(A) WITH REGARD TO REJECTION OF RECAST P&L ACCOUNT AND REVISED FORM 29B THE CIT(A) HAD NOT DECIDED TH E ISSUE AS REGARDS TO MAT LIABILITY IN FAVOUR OF ASSESSEE. THEREFORE WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IN HIS ORDER DATED 12.5.2 009 THAT 'I AM OF THE OPINION THAT THE ISSUE RELATING TO TAX PAYABLE U/S 115JB AT RS.38 26 607/- IN THE ORIGINAL RETURN HAS BEEN DECIDED IN FAVOUR O F THE APPELLANT BY THE CIT(A)' IS ERRONEOUS. IT IS TO BE REITERATED THAT ASSESSEE'S REVISED CALCULATION U/S 115JB HAS NOT BEEN ADJUDICATED EITH ER BY THE CIT(A) IN HIS ORIGINAL ORDER OR BY THE ITAT. AS SUCH THE ACTIO N OF THE ASSESSING OFFICER IN BRINGING BACK THE CALCULATION U/S 115JB IS PERFECTLY WITHIN THE PRECINCTS OF LAW AND PERMITTED U/S 154 OF THE I T A CT. IN TAKING THE ABOVE VIEW WE ARE FORTIFIED BY THE DECISION OF THE HON'B LE KERALA HIGH COURT IN PAGE 12 OF 15 ITA NO.724/BANG/2009& C.O.NO.44/BANG/09 12 THE CASE OF CIT V MALAYALA MANORAMA CO. LTD. 253 IT R 378 (THOUGH THE KERALA HIGH COURT DECISION WAS REVERSED BY SUPREME COURT ON DIFFERENT POINTS) THE RELEVANT FACTS CONSIDERED BY HON'BLE HI GH COURT OF KERALA IS AS FOLLOWS:- 'IN THE RETURN FOR THE ASST. YEAR 1988-89 THE AS SESSEE DECLARED A LOSS OF RS.1 12 293/- AND CLAIMED A REFU ND OF TAX OF RS.8 62 730/-. THE DEPUTY COMMISSIONER REJECTED THE RETURN AND ASSESSED THE TAXABLE INCOME AT RS.47 26 270/- AND IMPOSED A TAX OF RS.25 99 448/- AND A SURCHARGE OF RS.1 29 972. THE ASSESSING AUTH ORITY DID NOT ALLOW THE DEDUCTION CLAIMED U/S 80VVA ON THE GROUND THAT THE PROVISION STOOD OMITTED WITH EFFECT FROM APRIL 1 1988 AND AFTER ADJUSTING THE ADVANCE TAX PAID AND THE TAX DEDUCTED AT SOURCE INCLUSIVE O F INTEREST IMPOSED A TAX OF RS.26 83 327/-. THE COMMISSIONER (APPEALS) ORDE RED MODIFICATION OF THE ORDER OF ASSESSMENT BY UPHOLDING SOME OF THE CL AIMS OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE RELATING TO DEPRECIATION IN THE LIGHT OF THE DECISI ONS FOR THE EARLIER YEARS AND TO GIVE EFFECT TO THE ORDERS OF THE APPELLATE A UTHORITY. THIS ORDER OF THE COMMISSIONER (APPEALS) WAS NOT APPEALED AGAINST BY THE REVENUE. THE DEPUTY COMMISSIONER GAVE EFFECT TO THE APPELLAT E ORDER AND RECOMPUTED THE INCOME AND ACCEPTED THE LOSS AS RS.4 1 50 280/-. AT THE TIME OF RECOMPUTING THE INCOME THE ASSESSING OFFIC ER DID NOT INVOKE SECTION 115J OF THE ACT OR MAKE AN ASSESSMENT BASED ON THAT SECTION. SUBSEQUENTLY THE ASSESSING AUTHORITY NOTICED THAT THE ASSESSEE HAD NOT ARRIVED AT THE BOOK PROFIT IN TERMS OF SCHEDULE XIV TO THE COMPANIES ACT 1956 FOR ASSESSMENT U/S 115J OF THE ACT AND ACCOR DINGLY HE COMPUTED THE BOOK PROFIT U/S 115J AT RS.17 26 617/- BY ADOPT ING THE RATE OF PAGE 13 OF 15 ITA NO.724/BANG/2009& C.O.NO.44/BANG/09 13 DEPRECIATION PROVIDED UNDER THE COMPANIES ACT AS AG AINST THE RATE OF DEPRECIATION ADOPTED BY THE ASSESSEE UNDER THE INCO ME TAX RULES 1962. THE ASSESSEE QUESTIONED THE VALIDITY OF THE ASSESSM ENT U/S 115J BEFORE THE COMMISSIONER (APPEALS) AND CONTENDED THAT THE ASSES SING OFFICER WAS NOT ENTITLED TO INVOKE SECTION 154 OF THE ACT ON TH E FACTS. THE COMMISSIONER (APPEALS) HELD THAT THE ASSESSING OFFI CER HAD JURISDICTION TO PROCEED TO ASSESS THE ASSESSEE U/S 115J OF THE A CT. THE TRIBUNAL REJECTED THE CONTENTION OF THE ASSESSEE AND HELD TH AT THE INCOME WAS DETERMINED FINALLY AFTER GIVING EFFECT TO THE ORDER OF THE COMMISSIONER (APPEALS) AND IF AT THAT STAGE IT WAS FOUND THAT SE CTION 115J HAD APPLICATION THE ASSESSING OFFICER HAD NECESSARILY TO APPLY SECTION 115J AND TO COMPLETE THE ASSESSMENT'. 11.1 ON A REFERENCE THE HON'BLE COURT HELD 'THAT AT THE TIME OF COMPLETION OF THE ORIGINAL ASSESSMENT FOR THE ASST. YEAR 1988-89 SECTION 115J HAD NO APPLICATION AND IT BECAME RELEVANT AND APPLICABLE ONLY ON THE ASSESSING OFFICER GIVING EFFECT TO THE DECISION OF THE COMMISSIONER (APPEALS). IT WAS AT THAT STAGE THE ASSESSING OFFI CER FAILED TO GIVE EFFECT TO SECTION 115J OF THE ACT AND PURPORTED TO PASS TH E ORDER GIVING EFFECT TO THE DECISION OF THE COMMISSIONER (APPEALS). THEREF ORE THERE WAS AN APPARENT OMISSION OR APPARENT MISTAKE IN THE ORDER OF THE ASSESSING AUTHORITY WHICH HAD CLEAR APPLICATION U/S 154'. 11.2 MOREOVER IT IS TO BE MENTIONED HERE THAT IN CASE THE ACTION OF THE ASSESSING OFFICER IS NOT SUSTAINED THE ASSE SSED INCOME WOULD FALL BELOW THE RETURNED INCOME U/S 115JB OF THE ACT WHI CH IS NOT PERMISSIBLE AS PER THE DICTUM LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF PAGE 14 OF 15 ITA NO.724/BANG/2009& C.O.NO.44/BANG/09 14 SHELLY PRODUCTS 261 ITR 367. FOR THE AFORESAID REA SONS WE ARE OF THE VIEW THAT THE CIT(A)'S ORDER IS NOT CORRECT AND NOT IN ACCORDANCE WITH LAW AND ACCORDINGLY WE REVERSE THE SAME AND ALLOW THE GROUNDS OF THE REVENUE. 13. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED. C.O.NO.44/BANG/2009 14. THE FOLLOWING QUESTIONS ARE RAISED BY THE ASSE SSEE IN THE CROSS OBJECTIONS:- I) THE ASSESSING OFFICER HAS OVERLOOKED THE DECISION O F THE CIT(A) THAT REVISED ACCOUNTS FILLED ON 12.3.200 4 MUST BE ACCEPTED AND IF THE SAME ARE ACCEPTED NO TA X IS PAYABLE U/S 115JB. II) THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT AO HAS GOT NO POWER TO RECAST THE ACCOUNTS AND SUBMITT ED THAT AS HELD BY SUPREME COURT IN APPOLLO TYRES AS SUCH NO TAX IS PAYABLE U/S 115JB. 14.1. WITH REGARD TO FIRST QUESTION THE REVISED A CCOUNTS AND THE FORM NO.29B IS DATED 12.3.2004 AND THE SAME WAS SUB MITTED TO THE ASSESSING OFFICER ON 18.3.2004. AS STATED IN THE ORDER OF THE TRIBUNAL IN ITA NO.724/BANG/09 THE CIT(A) IN HIS ORIGINAL ORDE R HAS NOT STATED THAT THE RECASTED P&L ACCOUNT AND REVISED FORM 29B MUST BE ACCEPTED. ON THE CONTRARY THERE IS NO FINDING RENDERED BY HIM IN FA VOUR OF THE ASSESSEE. 15. WITH REGARD TO SECOND QUESTION IT IS TRUE THA T AS PER THE DECISION OF THE HON'BLE SUPREME COURT REPORTED IN 255 ITR 273 THE ASSESSING OFFICER DOES NOT HAVE POWER TO RECAST THE ACCOUNTS SUBMITTED PAGE 15 OF 15 ITA NO.724/BANG/2009& C.O.NO.44/BANG/09 15 BY THE ASSESSEE. BUT IT IS TO BE MENTIONED THAT TH E ASSESSING OFFICER HAS NOT RECASTED THE ACCOUNTS SUBMITTED. ON THE CONTRA RY THE ACCOUNTS SUBMITTED ALONG WITH THE ORIGINAL RETURN OF INCOME HAS BEEN ACCEPTED IN TOTO AND THE RECASTED P&L ACCOUNT AND REVISED FORM NO.29B WAS REJECTED SINCE IT WAS FILED AFTER THE DUE DATE MENTIONED U/S 139(5) OF THE ACT. THE ASSESSEE HAS NOT DISPUTED THE REJECTION OF RECASTED P&L ACCOUNT AND THE REVISED FORM NO.29B EITHER BEFORE THE CIT(A) OR BEF ORE THE ITAT. 15.1 FOR THE ABOVE REASONS WE SEE NO MERITS IN TH E GROUNDS RAISED IN THE CROSS OBJECTION FILED BY THE ASSESSEE. 16. IN THE RESULT CROSS OBJECTION FILED BY THE AS SESSEE IS DISMISSED. THE ORDER IS PRONOUNCED ON ...12TH....APRIL 2010 SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE DTD.12/4/2010 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CI T(A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GUARD FILE. 7. GF ITAT NEW DELHI. MSP/9.4. BY ORDER ASST. REGISTRAR ITAT BANGALORE.