January 2019

Sections 115JB and 254 Rectification of mistake – Tribunal accepting that assessee’s book profits to be computed after giving effect to deduction u/s. 54EC – AO passing order giving effect to directions issued by Tribunal – Notice of rectification issued thereafter on ground that deduction u/s. 54EC wrongly allowed – Not permissible Notice quashed

K. B. Bhujle
Advocate

38.  Meteor Satellite Pvt. Ltd. vs. ITO; 408 ITR 99 (Guj): Date of order: 16th April, 2018 A. Y. 2010-11

 

Sections 115JB and 254 Rectification of mistake – Tribunal accepting that assessee’s book profits to be computed after giving effect to deduction u/s. 54EC – AO passing order giving effect to directions issued by Tribunal – Notice of rectification issued thereafter on ground that deduction u/s. 54EC wrongly allowed – Not permissible Notice quashed

 

For the A. Y. 2010-11, the Tribunal accepted the assessee’s contention and held that the assessee’s profits ought to be computed u/s. 115JB of the Act after carrying out deduction u/s. 54EC. The Assessing Officer gave effect to the order and recomputed the assessee’s book profits according to the directions of the Tribunal and passed an order. Subsequently, he issued a notice u/s. 154 of the Act to rectify the order passed by him for giving effect to the order of the Tribunal on the ground that the book profits of the assessee had been wrongly computed by allowing deduction u/s. 54EC in contravention of the law for determining the book profits and that rectification of the order was to be carried out.

 

The assessee filed a writ petition and challenged the validity of the notice. The Gujarat High Court allowed the writ petition and held as under:

 

“i)    There was no error in the Assessing Officer’s order implementing the Tribunal’s directions. The Tribunal had directed the Assessing Officer to compute the assessee’s book profits in a particular manner which was correctly understood and given effect by him.


ii)    He had proposed to rectify his order giving effect to the Tribunal’s decision on the ground that there had been  an apparent error. However, as long as the order of the Tribunal stood, the assessment order was required to be implemented. Further, having implemented the order, it was not open for him to exercise power of rectification which was meant for correcting any err

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