2021 (9) TMI 444 - AT - Income Tax

Rectification u/s 154 - Period of limitation as per section 154(7) - whether order passed four years after the end of the financial year is time barred? - HELD THAT - As the order dated 30/11/2018 passed u/s. 154 of the Act in which the impugned additions had been made are with reference to the original order of assessment, dated 26/12/2011. The time limit specified in the Act of four years is certainly crossed in the order dated 30/11/2018 passed in the present case. Hence, this order u/s. 154 is certainly time barred inasmuch as it has been passed four years after the end of the financial year in which order sought to be amended was passed. In the present case, the order u/s. 143(3) was passed on 26/12/2011 and the financial year is FY 2010-11. The impugned order passed dated 30/11/2018 is certainly beyond four years thereof. Hence, in our considered opinion, the assessee succeeds on the additional ground. The rectification order passed u/s. 154 in this case is accordingly time barred and hence, the same is squashed as such - Decided in favour of assessee.

Issues Involved:

1. Validity of the order passed under section 154 of the Income Tax Act, 1961.
2. Addition of interest on income tax refund to book profit under section 115JB.
3. Addition of pre-operative income to book profit under section 115JB.
4. Chargeability of interest under sections 234D and 220(2) of the Act.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed under Section 154:

The primary contention was that the rectification order dated 30.11.2018 was time-barred as per section 154(7) of the Act, which mandates that no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. The original assessment order under section 143(3) was dated 26.12.2011, making the last permissible date for rectification 31.03.2016. The Tribunal concluded that the rectification order was indeed time-barred and thus invalid. Consequently, the rectification order was quashed.

2. Addition of Interest on Income Tax Refund to Book Profit under Section 115JB:

The assessee argued that interest on income tax refund was not credited to the profit and loss account as per the accounting policy consistently followed, and thus, it should not be added to the book profit under section 115JB. The Tribunal noted that the interest on income tax refund was not a mistake apparent from the record and that the accounting policy followed by the assessee was in compliance with Accounting Standard 9. Given that the rectification order was quashed on the ground of being time-barred, this issue was rendered academic and not adjudicated upon.

3. Addition of Pre-operative Income to Book Profit under Section 115JB:

The assessee contended that pre-operative income was not credited to the profit and loss account and should not be added to the book profit. Additionally, if pre-operative income was to be added, pre-operative expenses should also be deducted. The Tribunal noted that the pre-operative income was not a mistake apparent from the record and that the accounting policy was in compliance with Accounting Standard 9. Similar to the previous issue, this matter was rendered academic due to the quashing of the rectification order.

4. Chargeability of Interest under Sections 234D and 220(2) of the Act:

The assessee challenged the levy of interest under sections 234D and 220(2), arguing that no intimation under section 143(1) was issued with respect to the revised return. The Tribunal did not specifically adjudicate this issue, as the primary ground of the rectification order being time-barred was upheld, rendering other issues academic.

Conclusion:

The Tribunal quashed the rectification order dated 30.11.2018 as it was passed beyond the permissible time limit under section 154(7). Consequently, the issues regarding the addition of interest on income tax refund and pre-operative income to book profit, as well as the chargeability of interest under sections 234D and 220(2), were not adjudicated upon as they were rendered academic. The appeal by the assessee was partly allowed on the ground of the rectification order being time-barred.

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