The Commissioner of Income Tax vs The Thiruvambadi Rubber Company Ltd.

Ramachandran Nair, J.—The question raised in the appeal filed by the Revenue is whether the Tribunal was justified in confirming the order of C.I.T.(Appeals) cancelling the rectification order issued u/s 154 of the Income Tax Act, whereby tax liability was computed under the MAT scheme u/s 115JA of the Act in the case of the respondent-assessee. We have heard Standing Counsel for the appellant and Adv. Sri.A.Kumar appearing for the respondent-assessee. Assessee is a plantation company which returned loss for the assessment year 1997-98. The Assessing Officer processed the return and issued intimation u/s 143(1)(a) of the Act accepting the loss returned. However, later the Assessing Officer noticed that assessee had received profit on sale of rubber trees and so much so, book profits should have been considered for assessment u/s 115JA of the Act. Besides notice u/s 154, notice u/s 143(2) was also issued and thereafter rectification order as well as separate order u/s 143(3) were issued for the very same assessment determining 30% book profit at Rs. 8,43,740/-. The assessee carried the rectification order in appeal without challenging Section 143(3) order and contended that the original order namely, intimation issued u/s 143(1)(a), does not suffer from any mistake justifying rectification. The assessee''s contention was accepted by the first appellate authority, which was confirmed by the Tribunal, against which this appeal is filed by the Revenue.

The contention of Revenue is that the Tribunal as well as the first appellate authority went wrong in holding that there was no mistake in the original assessment. According to Standing Counsel, in the case of companies covered by Chapter XIIB, it was the duty of the Assessing Officer to consider the book profit and see whether income computed is less than 30% of the book profit and if so, to make assessment on the book profit in terms of the said provisions. Even though counsel for the assessee contended that there is no mistake in the intimation issued u/s 143(1(a), we are unable to accept the same because u/s 115JA it is mandatory on the part of the Assessing Officer to compare the income computed by him under the provisions of the Act with 30% of the book profit and if 30% of the book profit is more than the income computed under the provisions of the Act, it was his duty to make assessment u/s 115JA treating 30% of the book profit as deemed income assessable under the Act. In this case admittedly the Assessing Officer has not considered the application of Section 115JA and so much so, the assessment so completed without referring to Section 115JA is a patently mistaken order which calls for correction in proceedings u/s 154. In fact, in our view, Section 143(3) assessment is possible after issuing notice u/s 143(2) even without rectifying Section 143(1)(a) order because the Supreme Court has in COMMISSIONER OF income tax VS. GUJARAT ELECTRICITY BOARD reported in (2003) 260 ITR 84 held that a 143(3) assessment is permissible even after issuing intimation u/s 143(1)(a). However, in this case, the Assessing Officer in the course of rectification u/s 154 determined the book profit and in the separate order issued u/s 143(3) he has incorporated the book profit and made regular assessment. The contention of counsel for the assessee is that the Assessing Officer is not justified in making assessment u/s 115JA in proceedings initiated to rectify intimation u/s 143(1)(a). However, we notice that simultaneously notice was issued u/s 143(2) and a regular assessment was also completed u/s 143(3), copy of which is produced before us by Standing Counsel for the department. It is seen that the income determined u/s 115JA in the rectification proceedings is adopted and incorporated in the regular assessment. Therefore, the objection raised is only technical because regular assessment is also simultaneously completed making assessment on book profit. As already noticed, by issuing intimation u/s 143(1)(a) without considering the application of Section 115JA based on book profit, the Assessing Officer has committed a mistake and the same could be rectified in proceedings u/s 154. Further, the relevance of the rectification proceeding disappears when a regular assessment u/s 143(3) is completed assessing book profit u/s 115JA. Consequently the order of the Tribunal as well as the first appellate authority are not tenable. We, therefore, allow the appeal by setting aside the orders of the Tribunal and that of the first appellate authority. However, since assessee has raised dispute about the quantum of income and tax determined under the MAT assessment u/s 115JA, matter is remanded to the Tribunal for rehearing on the quantum relief sought by the assessee. The Tribunal is directed to dispose of the appeal after hearing both sides within a period of three months from the date of receipt of copy of this judgment.