ASST CIT 14(1)(2), MUMBAI vs. GODREJ SARA LEE LTD, MUMBAI

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ITA 118/MUM/2015Status: DisposedITAT Mumbai22 August 2016AY 2005-063 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the rectification order was passed beyond the prescribed limitation period. Therefore, the order of the First Appellate Authority (FAA) quashing the rectification order was upheld.

What were the facts?

The Assessing Officer (AO) passed a rectification order under Section 154 of the Income Tax Act, 1961, to add back a provision for diminution in the value of investment to the book profit. The assessee contended that the rectification order was barred by limitation.

What were the issues?

Whether the rectification order passed by the AO under Section 154 was barred by limitation. Whether the issue of book profit computation under Section 115JB was adjudicated in earlier proceedings.

Which sections of the Income-tax Act were involved?

Section 154,Section 115JB

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dated 09/10/2014, of the CIT(A)-21,Mumbai, the Assessing Officer(AO)has filed the present appeal. The effective ground of appeal is about questioning the order of the AO, passed u/s.154 of the Act,on 17/01/2014. 2.Assessee-company,engaged in the business of manufacturing/marketing of mosquito repellent,mats, coils etc., filed its return of income on 27/10/205, declaring income at Rs. NIL.The AO completed the assessment, u/s.143 (3) of the Act, on 28/11/2008, determining the income of the assessee at Rs. 6.46 crores under the normal provisions and at Rs.40.89 crores under the MAT provisions(u/s.115 JB of the Act).Aggrieved by the 143(3) order of the AO,the assessee preferred an appeal before the First Appellate Authority (FAA). An order giving effect to the order of the FAA was passed on 12/10/2011,revising the total income of the assessee at Rs.3.05 lakhs under normal provisions and at Rs.40.89 crores u/s.115JB.

On verification of the records,the AO held that the assessee had debited an amount of Rs.4.08 crores under the head ‘provision for diminution in the value of investment’,that it did not add back the said income to the book profit, that provision for diminution of value of investment was not an asset and liability,that it was not an allowable deduction, that same was to be added back to the total book profit, that the said mistake was apparent from the record. He issued a notice u/s.154 of the Act intimating the assessee about the proposed rectification. The assessee contended before him that there was no mistake apparent from the record.

118/M/15-Godrej Sara Lee However, the AO did not agree with the assessee and held that subclause(i) to explanation 1 to subsection(2) of section 115 JB was substituted with effect from 01/04/2001,that the amount of Rs.4.08 crores had to be added back to the net profit of the assessee to arrive at the book profit.Accordingly,he added sum of Rs.4.08 crores while the computing the book profit.

3.The assessee preferred an appeal before the First Appellate Authority (FAA), challenging order passed by the AO u/s.154 of the Act and argued that the rectification order was barred by time and was void ab initio. After considering the submission of the assessee and the orders passed by the AO, the FAA held that the AO had issued notice u/s.154 that was received by the assessee on 02/04/2012, that the rectification order was passed on 17/01/2014, that in the original assessment there was no addition of section 115 JB,that during the appellate proceedings this issue was not raised before him,that for counting the limitation period date to be recognised was date on which the original assessment was passed, that the order u/s.154 had to be passed within four years from the end of the assessment year in which the original assessment order was completed. Accordingly, he held that order passed by the AO on 17/01/2014 was barred by limitation.

4.During the course of hearing before us, the Departmental Representative (DR) relied upon the case of Tony Electronics Ltd. (320 ITR 378) of the Honorable Delhi High Court. The Authorised Representative(AR)relied upon the order of the FAA and referred to the cases of Seksaria Cotton Mills Ltd.(124ITR 570);Kirloskar Systems Ltd.(220Taxmann 1); Poonjabhai Vanmalidas (114ITR38);Shri NavDurga Bansal Cold Storage & Ice Factory(45 taxmann.com 447);Gautam Chand Jain(45SOT 61(Jab)(SMC);Syndicate Bank (65ITD 141); Precott Mills Ltd.(178 Taxmann 15);Vijaya Bank (323ITR166) and Yokogawa India Ltd. (204 Taxmann 305).He stated that the activation order was time-barred and hence was rightly quashed by the FAA.

5.We have heard the rival submissions and perused the material before us.We find that, while completing the original assessment, the AO had determined book profit of the assessee at Rs.40.89 crores,that the assessee had preferred an appeal before the FAA against the order of the AO passed u/s.143 (3) of the Act,that in the appeal it had not agitated the issue of 115 JB of the Act,that it had challenged the additions made by the AO under the normal provisions, that the matter had travelled up to the Tribunal, that neither in the order of the FAA nor in the 118/M/15-Godrej Sara Lee

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