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TMI Blog2004 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 event section 115J can be applied and any determination and/or computation thereunder can be made in proceeding under section 154? The facts to the extent relevant for consideration of the questions as framed above, briefly stated, are as under: The assessee filed a return on August 12, 1988, showing total income of Rs. 36,00,000 being 30 per cent, of the book profit which was higher than the total income as per computation of the assessee at Rs. 29,97,170 as per the provisions of the Act. Subsequently, the assessee filed a revised return of income showing a total income of Rs. 39,75,514 which was more than 30 per cent, of the book profit. The assessment was completed under section 143(3) of the Act on March 25, 1991, and the total income was determin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 under section 115J lapsed after the order of assessment was made under section 143(3) of the Act. After such lapse the liability, it was held, could not be revived. The Revenue aggrieved by the said order preferred an appeal before the Income-tax Appellate Tribunal. By its order under appeal the Tribunal allowed the appeal in the following terms and for the reasons contained therein which read as under: "... It is apparent from the above facts that the assessee was liable to be assessed under section 115J of the Act. We are of the view that in not considering section 115J of the Act while giving effect to the Tribunal's order dated 29th September, 1992, reducing the total income to nil for the assessment year under appeal is a mistake of law. We are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 book profit. Judged in the light of the above it is apparent that when the order dated 12 September 29,1992, was passed by the Assessing Officer under section 154 giving effect to the carried forward loss for the earlier assessment year 1986-87, the income for the assessment year 1988-89 with which we are concerned was reduced to "nil". The provisions of section 115J were accordingly attracted. While passing the order under section 154 dated September 29, 1992, the Assessing Officer without applying the provisions of section 115J determined that the assessee was entitled to refund of the entire amount of tax paid by it. This, in our view, was a glaring mistake. The question, however, is as to whether the same could be rectified in exercise of the power conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 original assessment. This was rectified by resort to section 35 of the Income-tax Act. The Income-tax Officer later discovered that this was also erroneous and by a second order of rectification he levied additional income-tax and also charged interest on income which the company had failed to pay in advance under the then section 18A of the Act. The Supreme Court held that the order was not without jurisdiction and that the Income-tax Officer was required to calculate the interest in the manner provided under the provisions of the Act and had to add to the assessment. Section 154 of the Income-tax Act, 1961 (which corresponds to section 35 of the Indian Income-tax Act, 1922) empowers the income-tax authorities to rectify any mistake "apparent from the record". In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- 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 the accounts of the assessee. The power conferred upon the Assessing Officer, in the light of the deeming provision contained in section 115J, is limited. The Assessing Officer cannot go behind the profit and loss account for computing the fictional income (30 per cent, of the book profits). Also there was material on record based on which such rectification could be made. There is the income-tax return filed by the assessee based whereupon in the original assessment, the Assessing Officer computed the profit as per the profit and loss account. The return, as noticed supra, was filed under section 115J. The present is a case where the Assessing Officer invoked the jurisdiction to rectify the assessment order. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in S. Sankappa v. ITO [1968] 68 ITR 760 (SC). The contention of the assessee has accordingly to be rejected. We observe that the questions of law as framed are not happily worded in the context of the order of the Income-tax Appellate Tribunal which we have extracted elsewhere in this judgment. As noticed, the power under section 154 was invoked by the Assessing Officer as according to him there was a mistake while passing the order under section 154 dated September 29, 1992, as the provision of section 115J was not taken into account while computing the refund. The Income-tax Appellate Tribunal by its order under appeal upheld the said action of the Assessing Officer and in our view rightly. Therefore, all the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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