2016 (12) TMI 880 - AT - Income Tax

Rectification of mistake - period of limitation reckoned - non reducing the reversal of provisions for custom duty of ₹ 3.50 Cr from the book profits - Held that - No amendment shall be made after expiry of four years from the end of the financial year in which the order sought to be amended is passed. In our opinion the assessee has filed an application seeking amendment in the order passed on 23rd July 2007 giving effect to the tribunal decision dated 9th March 2007. The period of limitation has to be taken from 31st March,2008 and accordingly the application of the assessee is not barred by limitation provided u/s 154(7) of the Act. The case of the assessee is also supported by the decision of Peninsula Land Ltd Vs CIT (2008 (2) TMI 354 - BOMBAY HIGH COURT) in which it has been held that provisions of section 154(7) does not apply to order passing on the benefit allowed to the assessee by virtue of order passed by the appellate order but such power of the AO to pass order giving effect to any appellate order is inherent and traceable to section 143(3) and 144 of the Act. Accordingly we hold that the application of the assessee u/s 154 is not barred by limitation. On the second issue we are of the considered view that the provisions reversed of ₹ 3.50 Cr has to be reduced from the income under MAT as no deduction has been allowed earlier. In our opinion the order passed by the CIT(A) is not correct and therefore can not be sustained. Accordingly we set aside the same and direct the AO to reduce the provisions for custom duty reversed of ₹ 3.50 Cr from income under MAT. - Decided in favour of assessee

Summary

Issues involved:
1. Time limitation for filing application u/s 154 of the Income Tax Act.
2. Treatment of reversed provisions for custom duty in the calculation of income under MAT.

Analysis:

Issue 1: Time limitation for filing application u/s 154 of the Income Tax Act

The appeal was filed against the order of the Ld. CIT(A) regarding the time limitation for filing an application u/s 154 of the Income Tax Act. The appellant argued that the period of limitation should be reckoned from the date of the last order passed in the assessment year, not the assessment order date. The provisions for custom duty were created in AY 1988-89 and reversed in AY 1989-90. The AO did not exclude the reversed provisions of &8377; 3.50 Cr while computing income under MAT, leading to the rectification application filed by the assessee in 2009. The Tribunal held that the application was not time-barred under section 154(7) of the Act, as the limitation period should be calculated from the end of the financial year in which the order sought to be amended was passed. Citing the Peninsula Land Ltd case, the Tribunal concluded that the application was valid and not barred by limitation.

Issue 2: Treatment of reversed provisions for custom duty in the calculation of income under MAT

The second issue revolved around the treatment of reversed provisions for custom duty in the calculation of income under MAT. The provisions were disallowed by the AO and upheld by the tribunal in previous years. The AO did not allow the reduction of the reversed provisions of &8377; 3.50 Cr from the income under MAT in the order giving appeal effect. The Tribunal disagreed with the CIT(A) and directed the AO to reduce the provisions for custom duty reversed amount from the income under MAT. The Tribunal held that since no deduction was allowed earlier, the reversed provisions should be excluded from the income under MAT. Consequently, the appeal of the assessee was allowed, and the order of the CIT(A) was set aside.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, allowing the appeal and directing the AO to exclude the reversed provisions for custom duty from the income under MAT.