2013 (2) TMI 458 - AT - Income Tax

Validity of revised return - Revenue contested that there was no omission or wrong statement in the original return which may be revised - Held that - As in the original return, the assessee has shown the profit of Rs.9.73 crores from the sale of land. However, as per the decision of Hon ble High Court dated 09.03.2009, the assessee was not entitled to any profit from the sale of land but it was entitled only to the expenditure to the extent of actual investment and the cost of litigation. Therefore, there was no profit from the sale of land and, to that extent, there was certainly an omission in the original return. Though the order of the High Court was subsequent to the end of the relevant previous year, but nevertheless, it has effected the transaction entered into during the previous year which was liable to be taxed in the assessment year under consideration. Since the assessment of the said year was still pending, the assessee was fully justified in revising its return in the light of the decision of Hon ble Jurisdictional High Court. None of the decisions relied upon by the Revenue is applicable on the facts of the assessee s case. Thus when the assessee was not entitled to sale proceed of land, obviously, tax cannot be levied on such receipt from the sale of land. CIT(A) was fully justified in directing the AO to consider the revised return furnished by the assessee - against revenue.

Summary

Issues:
- Validity of revised return under Section 139(5) of the Income-tax Act, 1961.
- Consideration of events occurring after the close of the financial year for determining income.
- Justification of revising return based on High Court decision.
- Applicability of accounting method in determining income.

Analysis:

Issue 1: Validity of revised return under Section 139(5)
The Revenue contended that the revised return was not valid as there was no mistake or omission in the original return. However, the assessee argued that the revised return was filed within the time limit prescribed by Section 139(5) and was in accordance with the law. The Tribunal noted that the revised return was filed within one year from the end of the relevant assessment year and before the completion of regular assessment, thus meeting the statutory requirements. The Tribunal held that there was an omission in the original return as per the subsequent High Court decision, justifying the revision.

Issue 2: Consideration of post-financial year events
The Revenue argued that events occurring after the close of the financial year should not be considered for determining income. However, the Tribunal held that the High Court decision, though subsequent to the end of the relevant previous year, affected the transaction entered into during that year. As the assessment for that year was pending, the assessee was justified in revising the return based on the High Court decision.

Issue 3: Justification of revising return based on High Court decision
The Tribunal emphasized that the High Court's decision altered the nature of the transaction and the income derived from it. The assessee revised the return to reflect the correct income position as per the court order. The Tribunal upheld the CIT(A)'s decision to accept the revised return, considering the legal implications of the High Court's judgment.

Issue 4: Applicability of accounting method
The Revenue relied on decisions related to accounting methods to argue against the revision of the return. However, the Tribunal distinguished those cases, stating that in the present case, the nature of the amount received post-High Court decision was not income but a refundable amount as per the court order. The Tribunal clarified that the cash method of accounting does not preclude the revision of returns to reflect the correct income position.

In conclusion, the Tribunal upheld the CIT(A)'s decision, stating that the revised return was valid under Section 139(5) and justified by the High Court decision, despite events occurring after the financial year. The Tribunal dismissed the Revenue's appeal, emphasizing the importance of reflecting the accurate income position as per legal directives.