2008 (3) TMI 293 - HC - Income Tax

Application for settlement of case - Assessee paid additional tax with interest on May 26 2007 by amendment to section 245D (2) there was obligation to pay additional tax and interest on or before July 31 2007 Commission is not justified in rejecting the application holding that carry forward of loss of previous year to be ignored on total income assessee can carry forward the loss of the preceding assessment year - finding recorded that the application has abated has to be set aside

Summary

Issues:
1. Whether the carry forward loss is not to be taken into account for computing the total income.
2. Whether any payment made after 31st July, 2007 can be considered for the purpose of compliance with the requirement of Section 245C(1).

Analysis:
Issue 1:
The petitioner filed returns for assessment years 2003-2004, 2004-2005, and 2005-2006, and after a search operation, approached the respondent under Section 245C of the Income Tax Act. The respondent rejected the application as abated, stating that carry forward loss should not be considered for computing total income. However, the court held that the tax payable should be on the total income, which includes allowances and disallowances. The petitioner correctly paid tax considering the carry forward loss, and the respondent's decision was deemed erroneous.

Issue 2:
Regarding the payment deadline of 31st July, 2007, the court emphasized the mandatory nature of the provision. The petitioner paid the excess amount after the deadline, and the court cited a judgment to explain that the payment had to be made within the stipulated time. As the payment was made late, the application was deemed rejected. The court clarified that the respondent had no discretion to accept late payments, and the petitioner's argument based on a prior judgment was not applicable to the amended provision. Therefore, the late payment made by the petitioner was inconsequential, and the application was rightly rejected.

In conclusion, the court found in favor of the petitioner, setting aside the respondent's decision that the application had abated. The court emphasized that the tax payable should be calculated on the total income, including carry forward losses, and that the respondent's decision was erroneous. The court made the rule absolute, with no costs imposed.