INCOME TAX ACT, 1961

Section 263 Section 115JB

Revision under section 263 - Erroneous and prejudicial order - Assessee declared additional income in earlier assessment year(s) in due compliance of the Settlement Commission - AO's alleged inaction in not disallowing the very sum(s) as prior period income for the purposes of MAT computation

Assessee-company was manufacturing sponge iron and TMT bars/rods. Its case before AO was that its additional income offered before settlement commission stood assessed in earlier assessment year(s) as settlement commission proceedings attaining finality qua the very figures included in the computation of income of the relevant assessment year. Therefore, assessee pleaded before AO to exclude the same so as to avoid double assessment. AO agreed to pleading of assessee. However, PCIT invoked revisionary jurisdiction under section 263 on allegation that action of AO resulted in under assessment of prior period income for purpose of section 115JB computation. Held: Once assessee declared additional income in earlier assessment year(s) 2010-11 to 2013-14 in due compliance of the Settlement Commission and got the same assessed under normal scheme than MAT assessment, there was hardly any scope left of under-assessment on relevant prior period income going by the Principal Commissioner's observations. Once said prior period income stood assessed under normal provisions in the corresponding earlier assessment year(s) 2010-11 to 2013-14, AO's alleged inaction in not disallowing the very sum(s) as prior period income for the purposes of MAT computation could neither be termed as erroneous nor causing prejudiced to interest of the revenue. Assessee admittedly incorporated its additional income in its books of account of the relevant previous year in the nature of its capital. The same therefore acquired the character of a capital receipt routed in profit and loss account as per part-I and part-II of Schedule-VI of the Company's Act. That being case, there was no loss or prejudice caused to revenue even otherwise also since a capital receipt not taxable under the normal provision could also not be added under section 115JB MAT computation. Thus, PCIT's revision directions qua former issue of prior period income's section 115JB MAT computation was not substantive and same was accordingly reversed.

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