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TMI Blog2008 (1) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... urned/assessed income, then it should be set off or adjusted against the interest expenditure of Rs. 62,35,207 and Rs. 34,62,611 for the assessment years 2001-02 and 2002-03 respectively. The facts of the case are as follows. The assessee-company, during the years under consideration, was in the process of setting up a liquidated petroleum gas (LPG) terminal at Okhla. Pending the commencement of commercial operation, expenses were treated as pre-operative expenses in the books of account which were to be capitalized on commencement of commercial operation. Interest as mentioned above was earned on money kept in fixed deposit on lien with the bank against the bank guarantee issued by the banker. The said interest was offered by the assessee to tax under the head "Income from other sources" in the returns of income, which was accepted as such under the provisions of section 143(1). The assessee, later on, realizing the mistake that the said income was wrongly offered to tax, filed an application under section 154 before the Assessing Officer contending therein that there was a mistake in offering the interest income for tax. The assessee submitted that it had kept the deposit with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls in depth and, therefore, it could not be said that the issue was covered under the provisions of section 154 of the Income-tax Act. Regarding the Central Board of Direct Taxes Circular, he observed that it related to the applicability of the Supreme Court decision rendered subsequently. In this case, the judgment in the case of CIT v. Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC) was rendered on April 23, 1999, which was much before the date when the returns were filed by the assessee and therefore the circular of the Central Board of Direct Taxes was not applicable. The Commissioner of Income-tax (Appeals) accordingly upheld the order of the Assessing Officer rejecting the applications of the assessee filed under section 154. He also rejected the alternate contention of the assessee, based on the same reasoning, that interest income should be adjusted against the interest expenditure, as the said issue was not covered by the provisions of section 154 of the Act. Aggrieved by the decision of the Commissioner of Income-tax (Appeals), the assessee is in appeal before the Tribunal. Before us, the learned authorised representative reiterated the submissions made befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 154 can be made based on interpretation and application of law in the light of judicial pronouncements. Reference was also made to Circular No. 68 dated November 7, 1971, issued by the Central Board of Direct Taxes vide F. No. 245/17/71A in which it was clarified that subsequent interpretation of law by the Supreme Court would constitute a mistake apparent from record. The learned authorised representative further argued that it was the duty of the Assessing Officer to allow deductions, which are allowable under law even if no specific claim was made by the assessee. Reliance was placed on the judgment of the hon'ble High Court of Bombay in the case of Smt. Archana R. Dhanwatay [1982] 136 ITR 355. The Central Board of Direct Taxes Circular No. 14 dated April 11, 1995, was also quoted in which it was clarified that it was the duty of the Assessing Officer to draw the attention of the assessee to any benefit or deduction to which the assessee was clearly entitled to even if the same was omitted to be claimed in the return of income. It was thus argued that the Assessing Officer was duty bound to compute the total income correctly in accordance with law. Alternatively, it was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do justice. Reliance was placed on the judgment of the hon'ble Supreme Court in the case of L. Hirday Narain [1970] 78 ITR 26. It was also submitted that the Tribunal had wide powers under section 254 while dealing with appeal and it had power to consider the question of law arising from facts on record in the assessment proceedings even if the same was not raised before the lower authorities as held by the hon'ble Supreme Court in case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. As regards the judgment of the hon'ble Supreme Court in case of Goetze (India) Ltd. [2006] 284 ITR 323 relied upon by the learned Departmental representative, it was submitted the said case was distinguishable as it related to the power of the Assessing Officer to entertain a claim by the assessee made otherwise through a revised return. The hon'ble Supreme Court had made it clear in that case that the judgment did not impinge upon the power of the Tribunal to entertain the claim using the appellate powers. The attention of the learned authorised representative was drawn to the decision of the Ahmedabad Bench of the Tribunal in the case of Choice Aquaculture P. Ltd. v. ITO [2006] 283 ITR (AT) 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the setting up of the project. Reliance was placed on the judgment of the hon'ble Supreme Court in the case of Bokaro Steels [1999] 236 ITR 315 in which it was held that receipts inextricably linked with the process of setting up of plant in the pre-commencement period shall go to reduce the cost of the project and could not be taxed as revenue receipt. Subsequently in the case of Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 the hon'ble Supreme Court reiterated the same position. In that case, the assessee had received interest income on deposits kept for opening letter of credit for purchase of machinery in connection with the setting up of the plant and it was held that interest income was not taxable. In view of these judgments, the assessee requested that there was a mistake apparent from the record in the intimation as the interest income had been taxed contrary to the judgments of the hon'ble Supreme Court. The case of the assessee is that the facts available in the auditor's report clearly showed that the interest had been received on lien money kept with the bank in connection with the setting up of the project and during the relevant period business had not comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer under the provisions of section 143(1), were earlier empowered to make prima facie adjustments to the income returned by the assessee. The said provisions are reproduced below as a ready reference: "143.(1)(a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,- (i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section(2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and (ii) if any refund is due on the basis of such return, it shall be granted to the assessee; Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely: (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him: Provided further that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the return is made: Provided also that where the return made is in respect of the income first assessable in the assessment year commencing on the 1st day of April, 1999, such intimation may be sent at any time up to the 31st day of March, 2002." It is thus clear that the Assessing Officer under the amended provisions of section 143(1) is not empowered to make any adjustment to the returned income. Even if a claim is apparently allowable, the Assessing Officer is not empowered to modify returned income by allowing such claim. In this case, the Assessing Officer had accepted the returned income and issued refund/raised demand on the basis of returned income. It cannot therefore be said that the Assessing Officer had acted contrary to the provisions of the Act. We do not see any error in the order of the Assessing Officer. The Assessing Officer can amend the intimation only if there is an apparent mistake in the intimation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with appeal against the assessment orders have wide powers. When appeal is filed against the assessment order, entire assessment is open before the first appellate authority, i.e., the Commissioner of Income-tax (Appeals) who has powers coterminous with that of the Assessing Officer. He can do what the Assessing Officer can do in relation to the assessment and also can do what the Assessing Officer had failed to do. The powers of the Tribunal while dealing with the appeal against the order of the assessment are also wide. The Tribunal, as held by the hon'ble Supreme Court in case of National Thermal Power Co. Ltd. [1998] 229 ITR 383, can entertain any question of law having bearing on the tax liability of the assessee even if no such claim had been made before the lower authorities provided, the same could be adjudicated on the basis of facts found by the lower authorities. But such powers are only in relation to the appellate jurisdiction relating to the assessment. The case of National Thermal Power Co. Ltd. [1998] 229 ITR 383 (SC) related to appeal against the order of assessment made by the Assessing Officer under section 143(3). The powers of appellate authorities in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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