2015 (1) TMI 1383 - AT - Income Tax

Tribunal upholds CIT(A)'s order for reduced income assessment, dismisses Revenue's outdated appeal.

The Tribunal dismissed the Revenue's appeal for the assessment year 2006-07, upholding the CIT(A)'s order directing the Assessing Officer to compute the ... Finalization of assessment under section 143(3) denied - AO empowered to refund any amount due to the assessee as a consequence of assessment - Held that:- As section 143(3) of the Act stood for the assessment year 1989-90, there was no provision for refund after the regular assessment. In the present case, the assessment years involved are 2006-07 onwards, which pertain to period after section 143(3) of the Act was amended by the Finance Act (No.2) 1998 w.e.f. 01.10.1998. As per the amendment, the assessment under section 143(3) of the Act, inter-alia, envisages the Assessing Officer to grant refund of any amount due to the assessee consequent to the assessment and therefore, the Assessing Officer is statutorily empowered to determine the revised income which can be lower than the returned income. Therefore, the objection raised by the Revenue to the impugned order of CIT(A) is untenable in the eyes of the law, as it stood for the period under consideration. - Decided against revenue Issues:Appeal against order of CIT(A) directing the AO to take the taxable income lower than the returned income. Interpretation of section 143(3) of the Income Tax Act, 1961 regarding the power of the Assessing Officer to refund any amount due to the assessee. Application of CBDT's Circular dated 31.10.1989 and the decision of the Bombay High Court in the case of LML Ltd. Vs. ACIT.Analysis:Issue 1: Appeal against CIT(A) order on taxable incomeThe appeals by the Revenue involved a common issue regarding the determination of taxable income for the assessee. The lead case, ITA No.288/PN/2014 for assessment year 2006-07, was directed against the order of the CIT(A) dated 08.11.2013, arising from an order passed by the Assessing Officer under section 154 of the Income Tax Act, 1961. The Assessing Officer had made an addition to the income of the assessee, which led to a discrepancy in the total income declared. The assessee contended that there was a mistake apparent from the record, and the total income needed to be re-computed at a lower amount than initially assessed.Issue 2: Interpretation of section 143(3) of the Income Tax ActThe CIT(A) upheld the plea of the assessee by referring to the amendment made to section 143(3) of the Act by the Finance Act (No.2) 1998, which empowered the Assessing Officer to refund any amount due to the assessee as a consequence of assessment. The CIT(A) highlighted that the Assessing Officer was duty-bound to determine the revised income, which could be lower than the returned income. The CIT(A) directed the Assessing Officer to compute the total income at the revised lower amount, providing relief to the assessee.Issue 3: Application of CBDT's Circular and Bombay High Court decisionThe Revenue, in its appeal, relied on the CBDT's Circular dated 31.10.1989 and the decision of the Bombay High Court in the case of LML Ltd. Vs. ACIT. However, the Tribunal noted that these references were in the context of assessment year 1989-90, predating the amendments to section 143(3) of the Act by the Finance Act (No.2) 1998. The Tribunal emphasized that the Assessing Officer, post the amendment, had the statutory power to determine the revised income, which could be lower than the returned income. Therefore, the objections raised by the Revenue were deemed untenable in light of the prevailing law.In conclusion, the Tribunal dismissed the appeal of the Revenue for assessment year 2006-07 and applied the decision mutatis mutandis to the other appeals with identical circumstances. All the appeals of the Revenue were ultimately dismissed based on the interpretation of the relevant provisions of the Income Tax Act and the amendments made therein.