G.E. Conductors Pvt. Ltd v. ACIT

Case snapshot

Sections / provisions: 115JB

Questions before the Court / Tribunal

• Section 115JB could not be invoked for the first time while giving appeal effect to the order of CIT(A). There being no reference to section 115JB in the assessment order while framing assessment a rectification order could have been passed within the time permissible under law but section 115JB could not have been applied while giving appeal effect.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

G. E. Conductors Pvt. Ltd., Vs. Asstt. Commissioner of Income D-29, Focal Point, Tax, Central Circle-II, Jalandhar Jalandhar [PAN: AAECM 9822H] (Appellant) (Respondent)

Appellant by : Sh. Sandeep Vijh, CA Respondent by: Sh. Manpreet Singh Duggal, Sr. DR

The appeal has been filed by the assessee against the impugned order dated 12.06.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana in respect of the Assessment Year 2012-13.

At the outset it is submitted that the scheme of taxation for companies during the year under consideration was that taxable income was to be computed under the regular provisions of the Income Tax and thereafter, tax thereon was computed. Then following the provisions of section 115JB, the tax on book profits @ 18.50 % was to be computed. Section 115JB entails making adjustments to the profits as per the audited annual accounts, both in terms of additions and reductions to the profit as per the audited annual accounts which are specified in the section itself. The section is being enclosed at page no. 46 to 49 for ready reference. Both the figures of taxes were then to be compared and the one which was higher was the amount of tax actually due/ payable by the assessee.

3 ITA No. 137/Asr/2020 GE Conductors P. Ltd. v. Asstt. CIT The assessee has filed an appeal with the ld. CIT(A) against the order u/s 143(3) which was disposed off through order dated 8/5/2018. Section 115JB was not the subject of any ground of appeal. Copy of the order is enclosed at page no. 11 to 19 of the paper book. While giving effect to the order of the ld. CIT(A), the successor assessing officer has applied the provisions of section 115JB for the first time and taxed the assessee on the basis of section 115JB. The main contention is that section 115JB not having been applied or even considered in the assessment order dated 21/3/2014, rectification of the assessment order u/s 154, if permissible, could have been carried out up to 31/3/2018 i.e. four years from the end of the year in which the order sought to be rectified was passed. The issue had thus become time barred and could not be allowed back door entry while giving effect to the order of the ld. CIT(A).

Appellant / assessee submissions

At the outset it is submitted that the scheme of taxation for companies during the year under consideration was that taxable income was to be computed under the regular provisions of the Income Tax and thereafter, tax thereon was computed. Then following the provisions of section 115JB, the tax on book profits @ 18.50 % was to be computed. Section 115JB entails making adjustments to the profits as per the audited annual accounts, both in terms of additions and reductions to the profit as per the audited annual accounts which are specified in the section itself. The section is being enclosed at page no. 46 to 49 for ready reference. Both the figures of taxes were then to be compared and the one which was higher was the amount of tax actually due/ payable by the assessee.

Revenue / respondent submissions

The packaged judgment does not separately label the respondent's submissions in an independently extractable passage. No contention is inferred; read the full order.

Court / Tribunal analysis and reasoning

The reasoning is integrated into the packaged record. Read it with the facts, statutory text and operative directions; this editorial article does not invent missing reasons.

Operative decision and relief

3 ITA No. 137/Asr/2020 GE Conductors P. Ltd. v. Asstt. CIT The assessee has filed an appeal with the ld. CIT(A) against the order u/s 143(3) which was disposed off through order dated 8/5/2018. Section 115JB was not the subject of any ground of appeal. Copy of the order is enclosed at page no. 11 to 19 of the paper book. While giving effect to the order of the ld. CIT(A), the successor assessing officer has applied the provisions of section 115JB for the first time and taxed the assessee on the basis of section 115JB. The main contention is that section 115JB not having been applied or even considered in the assessment order dated 21/3/2014, rectification of the assessment order u/s 154, if permissible, could have been carried out up to 31/3/2018 i.e. four years from the end of the year in which the order sought to be rectified was passed. The issue had thus become time barred and could not be allowed back door entry while giving effect to the order of the ld. CIT(A).

Simply put, if a major mistake is committed by an Assessing Officer while framing assessment like not allowing a deduction and the assessee does not file an appeal or a rectification application the assessed income will become final and the assessee will not have any remedy. In this case also, the mistake in the assessment order could not have been rectified while passing the order giving appeal effect. Necessary relief may please be allowed.

7. In the result, the appeal filed by the assessee is allowed.

Ratio and legal principle

• The packaged judgment addresses Section 115JB could not be invoked for the first time while giving appeal effect to the order of CIT(A). There being no reference to section 115JB in the assessment order while framing assessment a rectification order could have been passed within the time permissible under law but section 115JB could not have been applied while giving appeal effect. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with section 115jb could not be invoked for the first time while giving appeal effect to the order of cit(a). there being no reference to section 115jb in the assessment order while framing assessment a rectification order could have been passed within the time permissible under law but section 115jb could not have been applied while giving appeal effect. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

Does this case match your facts?

Section / provision impact

• 115JB - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Heart Foundation of India v. CIT - ITAT Mumbai
• Ramesh Kumar Patodia Vs Citibank N.A. - Court / Tribunal to be verified
• ACIT vs. ARMEE INFOTECH - Court / Tribunal to be verified

Different outcome / possible distinction

• Commissioner of Central Excise and Service Tax , Kanpur Vs AR Polymers Pvt ltd - Quashed / set aside
• Ambaradi Seva Sahkari Mandali Ltd. & Others - Allowed

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Source class: Sanitized local full-judgment copy; official primary replacement pending · Repository status: Published