2014 (4) TMI 810 - AT - Income Tax

Admission of additional grounds - Exclusion of income and expenditure relating to demerged units Held that - Assessee company was declared a sick industrial company by the Board for industrial and financial structuring (BIFR) - The revised rehabilitation scheme stipulated inter alia demerger of 3 units of the assessee - assessee s original return of income was filed on the basis of then available audited accounts which included the profit/loss of the demerged units - Assessing Officer passed assessment order dated 21.12.2009 which was based on the claims / figures as per original return of income thus, assessee could not file the revised return along with the revised financial statements before the Assessing Officer and the same were filed before the Ld. CIT(A) as additional evidences under Rule 46(A) of the Income Tax Rules the additional grounds are admitted - CIT(A) should have adjudicated the additional grounds of appeal raised by the assessee seeking exclusion of income and expenditure relating to demerged units Decided in favour of Assessee.

Summary

Issues:
Admission of additional grounds of appeal seeking exclusion of income and expenditure relating to demerged units to implement a Rehabilitation Scheme sanctioned by BIFR.

Analysis:
The appeal pertains to the assessment year 2007-08 and challenges the orders of CIT(A) dated 25.11.2011. The assessee sought admission of additional grounds of appeal related to the exclusion of income and expenditure concerning demerged units to give effect to a Rehabilitation Scheme approved by BIFR. The assessee company, declared a sick industrial company by BIFR, submitted a revised rehabilitation scheme involving the demerger of 3 units. Despite delays, the rehabilitation scheme was eventually implemented. The original return of income filed by the assessee did not reflect the revised scheme's impact, resulting in a loss declaration of Rs. 1472.56 lacs, later revised to Rs. 43.58 lacs. The assessing officer's assessment order was based on the original return figures. The revised financial statements were submitted to the CIT(A) as additional evidence under Rule 46(A) of the Income Tax Rules, but the CIT(A) did not adjudicate the additional grounds.

The Tribunal found merit in the assessee's plea to consider the issues in light of the revised return and figures. Consequently, the additional grounds were admitted, and it was held that the CIT(A) should have adjudicated the grounds seeking exclusion of income and expenditure related to demerged units. The issues were remitted back to the Assessing Officer for fresh adjudication, with instructions to provide the assessee a proper opportunity to be heard and consider the revised submissions. As a result, the appeal was allowed for statistical purposes.

This judgment emphasizes the importance of considering revised financial information in assessing income and expenditure, especially in cases involving rehabilitation schemes sanctioned by regulatory bodies like BIFR. It underscores the need for proper adjudication of additional grounds raised by the assessee to ensure a fair and accurate assessment based on updated financial data.