TMI Blog2004 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of law arising out of an order dated May 2, 2000, passed by the Income-tax Appellate Tribunal, "C" Bench, Calcutta, in income-tax appeal being I.T.A. No. 425/Cal of 1995 for the assessment year 1988-89, were framed: (1) Whether the determination and/or computation under section 115J is required to be made in an order under section 143(3) and not having been so made the liability, if any, under section 115J lapses and cannot be introduced by seeking to rectify a subsequent order under section 154? (2) Whether in a case where according to the Department the determination and/or computation under section 115J was required to be made in the original order of assessment under section 143(3) but was not made, can such determination and/or computation under section 115J be made by seeking to rectify a subsequent order under section 154? (3) Whether an order under section 154 can be said to suffer from a mistake apparent from the record by reason of non-determination/non-computation of income under section 115J when according to the Department such determination and/or computation was required to be made in the original assessment under section 143(3)? (4) Whether and in any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88-89 was reduced to "nil" and the assessee had the book profit in the profit and loss account, the provisions of section 115J were attracted for determination of income at 30 per cent, of the adjusted book profit. The authorised representative of the assessee expressed no objection to the rectification of the said order and the Assessing Officer vide order dated October 21, 1992, passed a rectification order under section 154 of the Act and computed the total income under section 115J at Rs. 35,66,740. It is against the said order of rectification passed under section 154 on October 21, 1992, that the income assessable under section 115J at 30 per cent, of the book profit was determined and it is that order which was questioned by the assessee by an appeal before the Commissioner of Income-tax (Appeals). The appeal was allowed by the learned Commissioner of Income-tax (Appeals) holding that there was no mistake in the order under section 154 dated February 10, 1992, which the Assessing Officer wanted to rectify by the order dated October 21,1992. It was further held that section 154 is not the forum for creating charge under section 115J. It was further held that liability und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss than thirty per cent, of its book profit, fictionally it will be deemed that its total income chargeable to tax for the relevant previous year was an amount equal to thirty per cent, of such book profit. The total income of the assessee shall first be computed in accordance with the provisions of the Income-tax Act and if the total income so computed be less than thirty per cent, of the book profit, then the profit and loss account of the company for the relevant previous year shall have to be prepared under sub-section (1A) of section 115J in accordance with Parts II and III of Schedule VI to the Companies Act. The book profit so arrived at under the Companies Act shall be suitably adjusted so as to satisfy the requirements of the Explanation. ..." It is thus clear that section 115J has a scheme of its own. The total income of the assessee is in the first instance required to be computed in accordance with the provisions of the Income-tax Act and only if the total income so computed be less than 30 per cent, of the book profit then fictionally it will be deemed that the total income chargeable to tax of the said company would be an amount equal to 30 per cent, of the adjusted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [1961] 41 ITR 732. contended that when on an examination of the record the Assessing Officer discovers that he has made a mistake he can rectify the error which may be an error of fact or of law. In Asok Textiles Ltd. [1961] 41 ITR 732 (SC), the earlier judgments have been considered and it was observed that the discovery of an error on the basis of assessment due to an initial mistake in determining the written down value (Maharana Mills (Pvt.) Ltd. [1959] 36 ITR 350 (SC) is a mistake from the record and so is a misapplication of the law even though the law came into operation retrospectively (M.K. Venkatachalam's case [1958] 34 ITR 143 (SC)). The Supreme Court thereupon held in Asok Textiles Ltd.'s case [1961] 41 ITR 732 that "the Income-tax Officer can under section 35 of the Act, examine the record and if he discovers that he has made a mistake, he can rectify the error and the error which can be corrected may be an error of fact or of law". In that case the assessee-company had declared a dividend and become liable to pay additional income-tax with respect to excess dividends under the Finance Act, 1952, but this fact was overlooked by the Income-tax Officer in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add back: (i) Depreciation for Separate consideration 52,14,174 (ii) Provision for taxation 18,00,000 ----------- 70,14,174 -------------- 1,70,03,308 -------------- thereafter the Assessing Officer deducted and added what according to the Assessing Officer were admissible and inadmissible under various provisions. From the order of rectification dated October 21, 1992, subject matter of appeals before the Commissioner of Income-tax, Income-tax Appellate Tribunal and leading to this appeal, shows that the computation under section 115J of the Act has been made as follows: ---------------------------------------------------------- Rs. ---------------------------------------------------------- Tax payable under section 115J of the Income-tax Act. Book profit 1,00,89,134 Add : Provision for taxation 18,00,000 Profit 1,18,89,134 provision of Rs. 35,66,740 ---------------------------------------------------------- On the facts of the instant case there is no debatable question involved in computing the book profits which as noticed supra, the Assessing Officer had computed in his original assessment order based upon the return and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed upon the statutory provision barring the exercise of such power of rectification under section 154. Neither of the two conditions exist in the case on hand. As already noticed supra, under the scheme of section 115J the Assessing Officer is required in the first instance to compute the total income of the assessee in accordance with the provisions of the Income-tax Act and it is only if the total income so computed be less than 30 per cent, of the book profit that under section 115J the assessment is to be made on the adjusted book profit. The fiction in section 115J has to be given effect to at that stage. Further we are of the view that Mr. Deb, learned counsel for the Revenue, is right in contending that when proceedings are taken for rectification of assessment under section 154 those proceedings must be held to be proceedings for assessment. In proceedings under section 154 what the Assessing Officer does is to correct errors in, or rectify, the order of assessment made by him, and orders making such corrections or rectifications are, therefore, clearly part of the proceedings for assessment. It was so held in the context of section 35 of the Indian Income-tax Act, 1922, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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