2022 (12) TMI 694 - AT - Income Tax

Rectification u/s.154 adding prior years income as book profit u/s.115JB - HELD THAT - As noted that the assessee could prove before us that this income has already been offered in assessment year 2007-08 and this cannot be added again in assessment year 2009-10. We noted that since the assessee has already offered this income in assessment year 2007-08 and issue is settled, only adjustment was made in the books of account of financial year 2008-09 relevant to assessment year 2009-10 and this fact was in the knowledge of AO at the time of making adjustment and even this was explained during the course of rectification proceedings by the assessee. In view of the above, first of all the assessee has offered this in assessment year 2007-08, it cannot be added again and moreover, this being highly contentious issue and debatable whether this is to be assessed in assessment year 2007- 08 or 2009-10, it cannot be rectified while acting u/s.154 of the Act. Hence, we allow the appeal of assessee.

Summary

Issues:
Appeal against CIT(A) confirming AO's rectification u/s.154 adding prior years income as book profit u/s.115JB.

Issue 1: Rectification u/s.154 adding prior years income as book profit u/s.115JB

The AO rectified the assessment order for the assessment year 2011-12, adding Rs.99.31 lakhs as prior year income not taxed u/s.115JB of the Act. The CIT(A) upheld the AO's action, stating that the prior year income shown in the appropriation account is not eligible for computing Book Profit u/s 115JB. The CIT(A) distinguished the case from precedents cited by the appellant, emphasizing that the AO did not interfere with the Profit & Loss account for the relevant previous year. The Tribunal noted the appellant's argument that the income had already been offered in assessment year 2007-08 and should not be subject to double taxation. The Tribunal found that the income had indeed been offered in 2007-08 and was adjusted in the books for the relevant year 2009-10. As the issue was settled and debatable, the Tribunal allowed the appeal, stating that rectification u/s.154 was not appropriate for such a contentious matter.

Conclusion:
The Tribunal allowed the appeal, emphasizing that the prior year income had already been offered in a previous assessment year and should not be subject to double taxation. The Tribunal found the issue to be settled and debatable, concluding that rectification u/s.154 was not suitable for resolving such contentious matters.