2007 (5) TMI 228 - HC - Income Tax

Revenue contend that order passed by the AO was prejudicial to the Revenue, as the AO had accepted the revised computation of income without any revised return filed by the assessee revised claim on expenses incurred made during assessment proceeding is not a new claim but it just enhancing of quantum of expenditure - since there is no reason how by allowing the legitimate deduction, a prejudice has been caused to the Revenue, order of assessment made by AO on basis of revised claim is valid

Issues Involved:
1. Whether the order passed by the Assessing Officer was erroneous and prejudicial to the Revenue due to the acceptance of the revised computation of income without a revised return filed by the assessee as required under section 139(5) of the Income-tax Act, 1961.
2. Whether the revised computation of income could be accepted even after the expiry of the time limit to file a revised return as prescribed under section 139(5) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Erroneous and Prejudicial Order
The Revenue contended that the Assessing Officer's order was erroneous and prejudicial to the Revenue because the revised computation of income was accepted without a revised return filed by the assessee as required under section 139(5) of the Act. The Revenue argued that the revised return must be filed within one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. The revised computation of income submitted by the assessee was beyond this stipulated time and was not signed by a competent authority as prescribed under section 140(c) of the Act. Therefore, the Revenue claimed that the acceptance of the revised computation made the provision redundant and was a breach of section 140(c).

The Tribunal found that the Commissioner of Income-tax did not dispute that the Assessing Officer had reached a conclusion after considering relevant facts and evidence. The Commissioner did not show any disagreement on the allowability of the deduction legally to the assessee and did not find any fault in the action of the Assessing Officer. The Tribunal observed that the Commissioner did not demonstrate how allowing the legitimate deduction caused prejudice to the Revenue. The Tribunal concluded that the Commissioner had no jurisdiction to revise the order of assessment made by the Assessing Officer since the order was not found erroneous.

Issue 2: Acceptance of Revised Computation Beyond Time Limit
The Revenue argued that the revised computation of income should not be accepted beyond the period prescribed under section 139(5) of the Act. The assessee, on the other hand, argued that the Commissioner of Income-tax (Appeals) did not find the order passed by the Assessing Officer erroneous. The assessee maintained that the original return was valid and only a further claim of expenditure was made, which was duly disclosed in the original return. The assessee contended that the correction of the return did not mean that the original return was withdrawn.

The Tribunal noted that the assessee had incurred additional power costs and other expenses in connection with the failure of the transmission tower, which were wholly and exclusively for business purposes. The assessee claimed one-fifth of the total expenditure in the original return and later claimed the whole amount through a letter during the assessment proceedings. The Tribunal observed that the Assessing Officer allowed the claim after considering all relevant facts and evidence, and the same was in accordance with the law.

The Tribunal referred to section 139(5) and section 140 of the Act, highlighting that the revised return must be filed within one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. However, the Tribunal found that the assessee's correction of the return through an authorized representative was sufficient and did not require a revised return signed by a specified person.

The Tribunal also referred to the Allahabad High Court's decision in Dhampur Sugar Mills Ltd. v. CIT, which distinguished between a revised return and the correction of a return. The Tribunal concluded that the order passed by the Assessing Officer in accepting the revised computation of income was not erroneous and prejudicial to the Revenue. The revised computation of income was accepted within the prescribed period.

Conclusion:
The High Court held that the order passed by the Assessing Officer was not erroneous and prejudicial to the Revenue and that the revised computation of income could be accepted within the prescribed period. The appeal filed by the Revenue was dismissed, and no order as to costs was made.

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