Input tax credit can be adjusted while computing additional tax liability under a circular on belated revised returns.

A binding departmental circular on belated revised returns was construed to permit computation of "additional tax liability" after adjusting input tax credit already available, rather than confining the expression to gross liability alone. The Karnataka HC rejected the Revenue's narrower reading as inconsistent with the ordinary meaning of the circular. The revisional authority's order was also found unsustainable because it had not properly applied the circular or earlier controlling decisions, so the adverse order was quashed and the revision was remitted for reconsideration after hearing the parties.

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Issues: (i) Whether the circular governing belated revised returns permitted acceptance of a return filed beyond six months where it disclosed additional tax liability after adjustment of input tax credit; (ii) whether the revisional order rejecting the assessee's claim was sustainable in light of the circular and the earlier decisions of the Court.

Issue (i): Whether the circular governing belated revised returns permitted acceptance of a return filed beyond six months where it disclosed additional tax liability after adjustment of input tax credit.

Analysis: The circular was treated as binding and its expression "any additional tax liability" was read to mean the net additional tax liability after giving credit for tax already paid and input tax available for adjustment. A narrower construction excluding input tax credit was rejected as inconsistent with the ordinary meaning of additional tax liability.

Conclusion: The circular permitted adjustment of input tax credit while computing additional tax liability, and the Revenue's restrictive interpretation was rejected.

Issue (ii): Whether the revisional order rejecting the assessee's claim was sustainable in light of the circular and the earlier decisions of the Court.

Analysis: The revisional authority had not correctly applied the circular and had not properly considered the earlier decisions of the Court, including the distinction drawn in the precedent relied upon by the Revenue. The impugned order was therefore found unsustainable and the matter required fresh consideration.

Conclusion: The revisional order was quashed and the revision proceedings were restored for reconsideration after hearing the parties.

Final Conclusion: The assessee succeeded to the extent that the adverse revisional order and consequential demand could not stand, but the controversy was sent back for a fresh decision on the merits by the revisional authority.

Ratio Decidendi: A binding departmental circular on belated revised returns must be construed to allow computation of additional tax liability after adjustment of input tax credit, and a revisional order that ignores such circular and controlling precedent is liable to be set aside and remanded for reconsideration.

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