2014 (7) TMI 219 - HC - Income Tax

Modification of order u/s 154 of the Act Deletion of additional tax us 143(1A) of the Act - Adjustment made while computation of book profits u/s 115J of the Act Held that - Supreme Court in Assistant Commissioner of Income Tax Vs. J.K. Synthetics Ltd. 2001 (2) TMI 17 - SUPREME Court held that even where the loss declared by the assessee had been reduced by reasons of adjustments even then additional tax could be imposed - the CIT (A) as well as Tribunal was not justified in holding that no additional tax was chargeable where the net result of adjustment was a negative figure - Additional tax charged u/s 143(1A) of the Act could be deleted u/s 154 - an order passed u/s 250 or 254 of the Act by which the disallowance has been deleted has to be given effect to by a consequential act to be done by the Assessing Authority u/s 154 of the Act - Decided against Revenue.

Issues:
1. Adjustment of income and deductions under Section 115-J of the Income Tax Act, 1961.
2. Rectification application under Section 154 filed by the assessee against adjustments made by the Assessing Officer.
3. Appeal filed by the assessee against the order of the Assessing Officer.
4. Decisions of the appellate authority on various adjustments made by the Assessing Authority.
5. Disallowance under Section 43-B of the Income Tax Act.
6. Imposition of additional income tax under Section 143(1A) of the Act.
7. Appeal by the revenue against the order of the Tribunal.
8. Questions of law admitted under Section 260-A of the Income Tax Act.

Analysis:
1. The assessee filed the return of income for the assessment year 1990-91, which was processed under Section 143(1)(a) of the Income Tax Act. The Assessing Officer made adjustments including computation of book profits under Section 115-J of the Act, leading to additional tax and demand. The assessee filed a rectification application under Section 154 objecting to the adjustments. The appellate authority found certain adjustments incorrect and held that they were liable to be rectified under Section 154, except for the disallowance under Section 43-B, which was justified.

2. The appellate authority also found that no additional tax was chargeable where the net result of adjustment was a negative figure, citing a judgment of the Allahabad High Court. However, the Tribunal erred in affirming this finding as the Supreme Court had held that additional tax could be imposed even if the declared loss had been reduced due to adjustments. The Tribunal's decision on this ground could not be set aside as the appellant did not challenge the appellate authority's findings on other issues.

3. Section 143(1A) provides for the imposition of additional income tax based on adjustments made by the Assessing Officer. If adjustments are deleted by the appellate authority on merits, the obligation to pay additional tax under Section 143(1A) does not arise. The Tribunal's reliance on the Allahabad High Court judgment, later reversed by the Supreme Court, did not affect the ultimate outcome of the case. Therefore, the questions raised in the appeal became academic and were answered accordingly.

4. Additional tax charged under Section 143(1A) could be deleted under Section 154 if found not payable following an order by the appellate authority. The Assessing Authority has the power to delete additional tax under Section 154 if deemed unnecessary based on the appellate authority's decision. The appeal was dismissed as no merit was found in the arguments presented.

This detailed analysis covers the various issues involved in the legal judgment, highlighting the key arguments, decisions, and legal provisions applied throughout the case.

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