Verified income disclosures cannot be duplicated in assessment, and consequential tax and interest must be recomputed.

Disclosures of application of income in the return and Form 10B, once scrutinised and found to match with no mismatch, could not be disallowed on the basis of an earlier prima facie adjustment; the addition was unsustainable and had to be deleted. Gross total income also could not be computed by duplicating amounts already considered in the assessment, as that produced double inclusion and an inflated taxable base; the computation required correction. Tax under section 115BBI and interest under sections 234B and 234C, being consequential to the final taxable income, had to be recomputed on the revised figures in favour of the assessee.

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Issues: (i) whether the application of income disclosed by the assessee in the return and Form No. 10B could be disallowed despite scrutiny verification and an express finding that there was no mismatch; (ii) whether the gross total income could be computed by duplicating amounts already considered in the assessment computation; (iii) whether the tax under section 115BBI and the interest under sections 234B and 234C required recomputation consequential to the corrected income.

Issue (i): whether the application of income disclosed by the assessee in the return and Form No. 10B could be disallowed despite scrutiny verification and an express finding that there was no mismatch.

Analysis: The application of income out of current year receipts and accumulated funds had been fully disclosed in the return and Form No. 10B. During scrutiny, the Assessing Officer examined the supporting material and recorded that there was no difference between the return and Form No. 10B, and that the disclosures were verified and found in order. Once the alleged mismatch stood ably resolved on merits, the additions based on the earlier prima facie adjustment had no surviving basis. The assessee was not making a fresh claim outside the return, but seeking effect to disclosures already on record.

Conclusion: The disallowance of the application of income was not sustainable and had to be deleted in favour of the assessee.

Issue (ii): whether the gross total income could be computed by duplicating amounts already considered in the assessment computation.

Analysis: The computation annexed to the assessment order repeated components that had already been taken into account through the section 143(1) adjustment, resulting in double inclusion and artificial inflation of the taxable base. A computation cannot stand where it conflicts with the findings recorded in the body of the assessment order and continues additions that were rendered unsustainable after scrutiny verification. The correct income had to reflect the accepted disclosures and eliminate duplication.

Conclusion: The gross total income computed by duplication was unsustainable and required correction in favour of the assessee.

Issue (iii): whether the tax under section 115BBI and the interest under sections 234B and 234C required recomputation consequential to the corrected income.

Analysis: The tax and interest computations were wholly dependent on the final taxable income. Once the additions were deleted and the computation was corrected, the consequential levy under section 115BBI and the interest under sections 234B and 234C necessarily had to be recomputed on the revised figures in accordance with law.

Conclusion: The tax and interest were directed to be recomputed consequentially in favour of the assessee.

Final Conclusion: The additions and computational distortions were held unsustainable, and the assessment had to be redone on the basis of the verified disclosures and the findings recorded in scrutiny.

Ratio Decidendi: Where disclosures in the return and statutory audit report are scrutinized and accepted on merits, the assessment computation must conform to those findings and cannot sustain duplicate or inconsistent additions.

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