2008 (6) TMI 292 - AT - Income Tax

Summary

Issues:
Challenge to correctness of CIT(A)'s order on assessment under section 143(3) for the assessment year 2003-04.
Validity of the IT return filed by the assessee.
Eligibility of the loss incurred by the assessee for carry forward and set off against future incomes.
Compliance with section 140(c) regarding signing and verification of Income-tax return by a company.

Analysis:
The assessee, a public sector undertaking owned by the Government of Maharashtra, challenged the correctness of the CIT(A)'s order on assessment under section 143(3) for the assessment year 2003-04. One of the key findings was that the IT return filed by the assessee was considered non est due to not being signed and verified in accordance with section 140(c) of the Income-tax Act. Consequently, the CIT(A) held that the loss incurred by the assessee was not eligible for carry forward and set off against future incomes, a decision contested by the assessee.

The nature of the assessee-company was crucial in determining the validity of the IT return. The company was formed under the Maharashtra Krishna Valley Development Corporation Act, 1996, for construction of dams, canals, and irrigation schemes. The day-to-day affairs were managed by an executive committee as per the Act. The CIT(A) found fault with the Income-tax return being signed by the Chief Accounts and Finance of the Corporation, deeming it a violation of section 140(c). However, the tribunal disagreed, stating that the members of the executive committee could be considered directors under the Companies Act, fulfilling the requirement of section 140(c) for signing the return.

The tribunal clarified that in the absence of a managing director, any director could sign the Income-tax return for a company. As there were no designated directors in the assessee-company, the members of the executive committee were considered directors as per the Companies Act. Therefore, the signing by the Chief Accounts and Finance of the Corporation, a member of the executive committee, was deemed compliant with section 140(c). Consequently, the tribunal set aside the CIT(A)'s decision on the return being non est and held that the assessment framed by the Assessing Officer was time-barred, leading to the acceptance of the income returned by the assessee.

In conclusion, the tribunal allowed the appeal, ruling in favor of the assessee based on the compliance with section 140(c) and the time-barred assessment by the Assessing Officer.