2017 (4) TMI 1620 - AT - Income Tax

Rectification of mistake u/s 154 - MAT addition u/s 115JB - period of limitation - addition on account of book profit u/s 115JB in respect to provision for diminution in view of long term investment by resorting through rectification u/s 154 - whether the order of the AO u/s 154 to rectify the order giving effect to the Tribunals order is bar by limitation or not? - HELD THAT - In this case since the original order was subjected to appeal and hence provisions of section 154(IA) of the Act would be applicable. We notice from the provision of Section 154(1A) of the Act which provides that the AO can rectify the order in respect of a matter other than the matter which has been considered and decided by the appellate/revisional authority. In the instant case since the issue of diminution in value of an asset for calculating book profit was not a subject matter of appeal or revision, the original order u/s. 143(3) of the Act dated 27th February 2004 is the order which can be rectified by the AO and since the order passed in 2004 cannot be rectified after a period of 4 years, the order passed under 154 of the Act dated 29th March 2014 is barred by section 154(7) of the Act. It is a settled position that the AO while giving effect to the Tribunal's order cannot go beyond the directions of the Tribunal and since in the instant case the issue of calculation of book profit qua diminution in the value of an asset was not the subject matter of the appeal, the Revenue is not justified in contending that the order is within the time limit. Hon ble Supreme Court in the case of Alagendran Finance Ltd 2007 (7) TMI 304 - SUPREME COURT was dealing with section 263(2) of the Act read with clause(c) to Explanation 263(1) which is identical to section 154(1A) as held that since issue of lease equalization fund was not the subject matter of reassessment proceedings, the limitation for revising the assessment order qua lease equalization fund will start from the original assessment order passed u/s. 143(3) of the Act and not from the date of reassessment order passed u/s. 147 - Decided in favour of assessee.

Issues Involved:
1. Legality of the rectification order passed under section 154 of the Income Tax Act.
2. Time-barred nature of the rectification order under section 154 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legality of the Rectification Order Passed Under Section 154 of the Income Tax Act:

The Revenue appealed against the order of CIT(A) which deleted the addition made by the AO on account of book profit under section 115JB of the Act in respect to provision for diminution in view of long-term investment of Rs. 19,15,16,662/-. The AO had rectified the original assessment under section 154 of the Act, citing a retrospective amendment in the Finance Act, 2009. The AO's rectification included adding the provision for diminution in value of long-term investments, which was initially allowed in the original assessment order dated 27-02-2004. The AO argued that the rectification was necessary due to the retrospective amendment which required such provisions to be added back to the book profit under section 115JB of the Act.

2. Time-barred Nature of the Rectification Order Under Section 154 of the Income Tax Act:

The CIT(A) held that the rectification order passed under section 154 of the Act was time-barred. The original assessment was completed on 27-02-2004, and the issue of provision for diminution in the value of investments was not a matter of appeal before the CIT(A) or ITAT. According to section 154(7), the rectification should be made within four years from the end of the financial year in which the order sought to be amended was passed. The notice for rectification was issued on 21-01-2014, which was beyond the permissible period, making it time-barred. The CIT(A) followed a similar decision in the case of a group concern of the assessee, where the rectification was also held to be barred by limitation.

Tribunal's Analysis:

The Tribunal examined whether the rectification order dated 29-03-2014, which aimed to give effect to the retrospective amendment, was barred by limitation. The Tribunal noted that the issue of book profit adjustment for the provision for diminution in asset value was never a subject matter of appeal before the CIT(A) or the Tribunal. The Tribunal referenced the order in the case of ACIT vs. M/s Godrej Sara Lee Ltd., which held that the rectification order was barred by limitation as it was passed beyond the four-year period from the original assessment order.

The Tribunal also considered the provisions of Section 154(1A), which allows rectification of an order in respect of a matter other than the matter considered and decided by the appellate/revisional authority. Since the issue of diminution in asset value was not a subject of appeal, the original order dated 27-02-2004 was the one that could be rectified, and the rectification should have been done within four years from the end of the financial year in which the original order was passed.

The Tribunal referenced the Supreme Court's decision in the case of Alagendran Finance Ltd., which held that the limitation period for rectification starts from the date of the original order if the issue was not a subject of appeal. The Tribunal concluded that the rectification order dated 29-03-2014 was indeed time-barred and upheld the CIT(A)'s decision.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming that the rectification order under section 154 of the Act was barred by limitation. The rectification should have been made within four years from the date of the original assessment order, and since it was not, the addition made by the AO was deleted. The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld.

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