2010 (9) TMI 47 - HC - Income Tax

MAT - Adjustment to book profit - Section 115J - Notice u/s 148 - AO made some additions and computed income under Section 115JA at Rs.9,77,60,292/- and book profit at the rate of 30% thereon, i.e., Rs. 2,93,28,087/- Held that as the notice under Section 148 of the Act, 1961 was barred by time, the consequential order on merits could not be implemented. In fact, in view of the assessment order under Section 143(3)/147 having been set aside, the consequential order passed under Section 154 has also to be set aside

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961 for the Assessment Year 1997-1998.
2. Validity of notice issued under Section 148 of the Act, 1961.
3. Computation of income under Section 115JA and subsequent appeals.

Analysis:
1. The appellant challenged the order of the Income Tax Appellate Tribunal (Tribunal) under Section 260A of the Income Tax Act, 1961 for the Assessment Year 1997-1998. The respondent-assessee initially filed a return showing income under Section 115JA but later revised it to show a loss. The Assessing Officer (AO) made additions and computed income under Section 115JA, which was appealed by the Commissioner of Income Tax (Appeals) and subsequently by the Revenue before the Tribunal. The Tribunal allowed the respondent's appeal, annulling the assessment order under Section 143(3)/147, leading to the dismissal of the Revenue's appeal.

2. The validity of the notice issued under Section 148 of the Act, 1961 was questioned. The AO issued a notice under Section 148 in 2003, leading to a reassessment under Section 143(3)/147 in 2005. The Commissioner of Income Tax (Appeals) held the notice under Section 148 as invalid, a decision upheld by the Tribunal. The Tribunal concluded that the notice was beyond the four-year limitation period and that the assessee had made a full disclosure, rendering the notice time-barred.

3. The computation of income under Section 115JA was a key aspect of the case. The AO initially computed the income under Section 115JA, which was contested by the assessee. Subsequent appeals and orders by the CIT(A) and Tribunal led to variations in the computed income. The Tribunal's decision to annul the assessment order under Section 143(3)/147 had implications on the computation of income under Section 115JA and the consequential orders passed by the AO and CIT(A). The dismissal of the Revenue's appeal based on the limitation of the notice under Section 148 further affected the computation of income and subsequent appeals.

In conclusion, the High Court dismissed the present appeal, emphasizing the time-barred notice under Section 148 and its impact on the consequential orders and computation of income under Section 115JA. The Court upheld the Tribunal's decision and highlighted the dismissal of the Revenue's appeal based on the limitation issue. The judgment underscores the importance of adherence to statutory timelines and the implications on subsequent assessments and appeals.