2006 (7) TMI 254 - AT - Income Tax

Summary

Issues:
- Rectification of assessment order under section 154 of the IT Act for the assessment year 1996-97.

Analysis:
1. The appeal by the Revenue was against the order of the CIT(A) dated 8th March, 2002, concerning the assessment year 1996-97. The main issue revolved around the rectification of the assessment order under section 154 of the IT Act. The AO had modified the earlier assessment order to adjust unabsorbed depreciation and losses, leading to a recomputation of income for the year in question.

2. The assessee contended that the AO's attempt to rectify the assessment order for the year 1996-97 was actually aimed at altering the determination of losses for previous assessment years covered by an order dated 17th April, 1995. The assessee argued that the AO was time-barred from rectifying the order dated 17th April, 1995, under section 154, as the four-year time limit had elapsed. Therefore, the assessee claimed that the rectification for the year 1996-97 was legally flawed and should be set aside.

3. The CIT(A) supported the assessee's position by comparing the computations of losses and unabsorbed depreciation as determined by the AO in the order dated 17th April, 1995, with those in the impugned order of 30th March, 2001. The CIT(A) found that the losses attempted to be rectified by the AO pertained to previous years beyond the time limit for rectification, leading to the cancellation of the impugned order.

4. The Departmental Representative argued that the rectification made by the AO was valid and that the CIT(A) had erred in considering the time-barred aspect instead of the merits of the rectification. It was contended that since the losses were partly adjusted in the year 1996-97, the AO had the authority to pass the rectification order.

5. Upon thorough consideration of the arguments, the Tribunal found in favor of the assessee. The Tribunal noted that while the rectification was made for the year 1996-97, it essentially aimed to adjust unabsorbed depreciation from previous years, which had already been finalized in the order dated 17th April, 1995. As the time limit for rectification had expired for the earlier order, the AO's rectification for the year 1996-97 was deemed unjustified and against the provisions of the Act. Consequently, the Tribunal upheld the CIT(A)'s decision to cancel the rectification order of 30th March, 2001.

6. In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the cancellation of the rectification order under section 154 for the assessment year 1996-97.