Assessee did not revise the return but during the assessment produced revised computation showing enhancement in expenses - Power of the AO to revised computation

Brief facts of the case:

the assessee filed a income-tax return for the assessment year 1999-2000 on December 31, 1999, declaring income of Rs. 1,60,03,15,698. The said return was processed under section 143(1)(a) on September 8, 2000, and, thereafter, the case was selected for scrutiny. During the course of assessment proceedings, the assessee, vide letter dated December 26, 2001, filed a revised computation of income thereby reducing the income to Rs. 1,33,21,90,698 by claiming further expenses of Rs. 26,81,25,000 on account of additional power cost and other expenses in connection with failure of transmission tower which earlier were not claimed in the original return.

The assessee, vide letter dated March 19, 2002, filed another revised computation of the income further reducing the income to Rs. 1,31,31,94,406 by claiming further deduction of Rs. 3,41,69,312 on account of the expenses being the cost of afforestation of mines and maintenance of roads, as these two were not claimed earlier in the original return.

Order of the AO

The Assessing Officer, after considering the facts of the case and statements made by the assessee, allowed the expenses claimed in the first revised computation of income to the extent of Rs. 26,81,25,000 but disallowed the expenses of Rs. 3,41,69,312 claimed in the second revised computation of income holding that the same are of capital nature. The assessment was completed at Rs. 1,46,88,61,184, vide the assessment order dated March 28, 2002.

Action by commissioner  (A)

CIT found that order is prejudicial to the interests of the Revenue and thereby set aside the order passed by the Assessing Officer with the directions that it may be reframed de novo after making enquiries as may be considered necessary.

Decision of the ITAT

The Tribunal, after hearing the parties, allowed the appeal of the assessee and set aside the order passed by the Commissioner of Income-tax (Appeals).

Decision of the honorable HC

Acceptance of revised computation of income without any revised return filed by the assessee as required under section 139(5) of the Act is not erroneous and prejudicial to revenue.

But, AO can not accept revised computation of income after the expiry of time limit to file a revised return as prescribed under section 139(5).

(For full text of judgment - visit 2008 -TMI - 30848 - DELHI HIGH COURT)