2012 (7) TMI 661 - HC - Income Tax

To consider claims made in a revised return which was filed beyond time - the transaction of inter divisional transfer between one Unit and another is not by way of sale - Held that - As the revision of the book results on the changed nature of transaction was itself on account of the objection raised by the Regional Director, Department of Company Affairs, thus contention of the Revenue is not acceptable that the revised results do not merit any consideration. Even if the revised return is treated as a time barred one, when once the assessment is made under Section 143(2) based on the materials gathered, the department cannot deny of considering the materials coming in the form of the Regional Director s direction and its effect on the account results. As the revised profit and loss account and balance sheet were approved by the shareholders in the annual general meeting to be treated as revised claim it cannot be read as an intention that the revision was done with a view to revise the liability of the assessee under the Act - no hesitation in remanding the matter back to the Assessing officer to examine the issue once again as regards the valuation - against revenue.

Summary

Issues Involved:
1. Validity of the Tribunal's decision to remand the matter to the Assessing Officer for considering claims made in a revised return filed beyond the time limit prescribed under Section 139(5).
2. Tribunal's failure to provide a finding on how the Assessing Officer could consider claims made in a revised return filed beyond time.

Detailed Analysis:

Issue 1: Validity of Tribunal's Decision to Remand the Matter
The Tribunal remanded the matter to the Assessing Officer to consider the revised return of income, even though it was filed beyond the time limit prescribed under Section 139(5). The Tribunal's rationale was based on the fact that the revised profit and loss account and balance sheet were a result of objections raised by the Regional Director of Company Affairs. The Tribunal noted that the inter-divisional transfer of windmills should not have been shown as sales, and this correction was necessary to reflect the true state of affairs.

The High Court emphasized that under Section 115JA, an assessment to Minimum Alternate Tax (MAT) arises only when the total income computed under the Act is less than 30% of its book profit. The court cited the Supreme Court's decision in Apollo Tyres Ltd. v. Commissioner of Income Tax, which held that the Assessing Officer has limited power to examine whether the books of account are certified by the authorities under the Companies Act. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the profit and loss account except to the extent provided in the Explanation to Section 115J.

Applying this principle, the High Court held that once the assessee has revised its balance sheet and profit and loss account based on objections from the Regional Director and these revised accounts were approved in the annual general meeting, it was not open to the Assessing Officer to reject or rescrutinize these accounts. The court concluded that the revised accounts should be considered, and the question of invoking Section 115JA does not arise if the book results show a negative outcome.

Issue 2: Tribunal's Failure to Provide a Finding
The Tribunal did not provide a specific finding on how the Assessing Officer could consider claims made in a revised return filed beyond the prescribed time limit. The High Court observed that even if the revised return is treated as time-barred, once the assessment is made under Section 143(2) based on the materials gathered, the department cannot ignore the materials coming from the Regional Director's direction and its effect on the account results.

The High Court noted that the revision of the book results was due to the objection raised by the Regional Director, and this revision was approved by the shareholders in the annual general meeting. Therefore, the revised accounts should be treated as a revised claim, and there was no basis to assume that the revision was done to evade tax liability. The court remanded the matter back to the Assessing Officer to examine the issue again, uninfluenced by the Tribunal's observations regarding valuation, and to consider the nature of the transaction as an inter-divisional transfer rather than a sale.

Conclusion:
The High Court dismissed the appeals, holding that the revised profit and loss account and balance sheet, approved by the shareholders and based on the Regional Director's objections, should be considered by the Assessing Officer. The matter was remanded back to the Assessing Officer for a fresh examination, focusing on the nature of the transaction and without being influenced by the Tribunal's earlier observations.