1999 (7) TMI 102 - AT - Income Tax

Summary

Issues Involved:
1. Set-off of profit on sale of assets from computation of Book Profit u/s 115JA.
2. Exclusion of notional income on account of customs duty on future import.
3. Legality of adjustment u/s 143(1)(a).

Summary of Judgment:

1. Set-off of Profit on Sale of Assets from Computation of Book Profit u/s 115JA:
The assessee, a public limited company, claimed that the profit on the sale of assets amounting to Rs. 6,02,35,000 should be excluded from the computation of Book Profit as per section 115JA. The CIT (Appeals) rejected this claim, distinguishing it from prior Tribunal decisions by noting that the assets in question were business assets, not investments, and had been depreciated in the past. The Tribunal, however, found that the assessee's adjustment was justified based on the legal position prevailing at the time of filing the return, referencing the Special Bench decision in Sutlej Cotton Mills Ltd. and the Third Member decision in Northern India Theatres (P.) Ltd. The Tribunal concluded that the Assessing Officer had no power to ignore this adjustment in a summary assessment u/s 143(1)(a) and set aside the CIT (Appeals) order, accepting the assessee's claim.

2. Exclusion of Notional Income on Account of Customs Duty on Future Import:
The assessee argued that the notional income from duty-free import entitlement, amounting to Rs. 2,28,34,000, should not be taxed as it was merely a book entry to improve the financial picture. The CIT (Appeals) and the Tribunal disagreed, noting that the income had accrued and was credited to the profit and loss account. The Tribunal emphasized that the statutory auditors had certified the profit and loss account as true and fair, and the Assessing Officer had no material to conclude otherwise. Therefore, the Tribunal upheld the CIT (Appeals) decision, rejecting the assessee's claim.

3. Legality of Adjustment u/s 143(1)(a):
The Tribunal highlighted that the Assessing Officer's power to make adjustments u/s 143(1)(a) is limited to apparent errors and prima facie inadmissible claims. The Tribunal found that the Assessing Officer had overstepped these bounds by making adjustments that required further inquiry, which should have been addressed through a notice u/s 143(2). The Tribunal reiterated that adjustments should be based on the information available in the return, accounts, or documents and should not involve debatable issues.

Conclusion:
The Tribunal allowed the appeal in part, directing the Assessing Officer to revise the assessment in line with its findings on the set-off of profit on the sale of assets and the exclusion of notional income. The appeal was thus partially allowed for statistical purposes.