Case Law Details
Madras High Court recently held in Tax Case (Appeal) Nos.1615 and 1616 of 2005 (Commissioner of Income Tax v NEPC India Limited) decided on 06/07/2012 that Even if the revised return is validly rejected as belated and hence invalid, in a scrutiny assessment the Assessing Officer cannot totally ignore the information therein.
Facts of the case: The assessee-company initially filed u/s 139(1), a return supported by regular accounts, and showing substantial book profit and offering MAT. However thereafter its accounts came to be inspected by the Registrar of Companies who gave certain directions to modify its Annual Accounts. On the basis of those directions the assessee revised its profit and loss account and balance sheet which resulted in its income being negative. The corrected accounts were placed before the shareholders for their approval. Note no.7 of the Notes attached and forming part of the accounts was approved by the shareholders in the annual general meeting. The assessee however filed the revised return based on the revised accounts, showing a book loss, beyond the time limit prescribed in section 139(5).
While processing the return under S 143(1) the AO treated the ‘revised’ return as invalid, and took notice of only the ‘original’ return. During the course of scrutiny of the assessment under Section 143(2), the assessee requested the Assessing Officer to take cognizance of revised return of income filed for the purpose of arriving at the tax liability under Section 115JA and to arrive at the taxable income under the provisions of the Income Tax Act, excluding Section 115A provisions also. Reiterating the view already taken by the Assessing Officer that the revised return of income was non est in the eye of law, the Assessing officer rejected the revised returns filed by the assessee and the amount was computed based on the materials gathered from various sources after giving opportunity to the assessee.
Though the assessee was not successful before the Commissioner of Income tax (Appeals), the Income tax Appellate Tribunal allowed the assessee’s appeal, and remanded the assessment to the Assessing Officer to examine the issue, as to whether the accounts was revised solely with a view to wriggle away from the demand of tax. The Tribunal further pointed out that in the original accounts the sales and thereby the income had been overstated. In any event, if such attempt was made only to do away with the tax being demanded on the basis of 30% of book profits, such issue had to be looked into once again by the officer. Aggrieved by the same, the Revenue preferred the present appeals before the High Court.
The High Court’s decision: Following the decisions of the Supreme Court in Apollo Tyres Ltd v. Commissioner of Income Tax (255 ITR 273), and Malayala Manorama Co. Ltd. v. Commissioner of Income Tax (300 ITR 251) the High Court has held that once the assessee has filed revision of balance sheet and profit and loss account, on the basis of what has been objected to by the Department of Company Affairs and the same had been placed before the annual general meeting and approved, it is not open to the Assessing Officer to reject the accounts or rescrutinize the accounts to satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. Once the book results show negative, the question of invoking the provisions under Section 115 JA does not at all arise. Therefore the question to be decided, the High Court has gone on to observe, was whether the revised profit and loss account and balance sheet in the form of revised returns would really have to be considered by the Assessing Officer within the meaning of Section 139(5), as the same has already been rejected as non est in the eye of law. The High Court did not find any justification in the contention of the Revenue that the revised results do not merit any consideration. Even if the revised return is treated as a time barred one, when once the assessment is made under Section 143(2) based on the materials gathered, the Assessing Officer cannot fight shy of considering the materials coming in the form of the direction of the Department of Company Affairs and its effect on the account results.
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