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CASE NO.: Appeal (civil)  3073 of 2008

PETITIONER: M/s. Kvaverner John Brown Engg.(India)(P) Ltd

RESPONDENT: Assistant Commissioner of Income Tax, Bangalore

DATE OF JUDGMENT: 29/04/2008

BENCH: S.H. KAPADIA & B. SUDERSHAN REDDY

JUDGMENT: JUDGMENT O R D E R

CIVIL APPEAL NO.3073 OF 2008 (Arising out of S.L.P.(C) No.7082/2007) W I T H CIVIL APPEAL NO. 3074 OF 2008 (Arising out of S.L.P.(C) No.7171/2007)

       Leave granted.         The short question which arises for determination in these civil appeals is : whethe r  the appellant-assessee was liable to pay additional tax on account of adjustment on its  return for the assessment year 1996-97 and 1997-98 under Section 143(1)(a) read with  Section 143(1A) of the Income-tax Act, 1961 vide order dated 17.12.1997.         During the relevant assessment years, appellant claimed deduction under Section  80-O of the Income-tax Act, 1961 (for short "1961 Act") in respect of qualifying income  brought into India in convertible foreign exchange.  In its return, appellant indicated  the qualifying income as gross figure.  By way of adjustment, under Section 143(1)(a) of  the 1961 Act, the ITO restricted the qualifying income to the net figure.  In other  words, assessee claimed gross income, earned in foreign exchange, as qualifying income  whereas the ITO granted deduction by restricting the claim of the assessee to the net  income.           On 17.12.1997 the question : as to whether the eligible income should be taken at th e  gross figure or net figure, was the question of interpretation.  There were several  conflicting decisions on this point.  Therefore, according to appellant, Section 143(1)(a)  was not applicable and consequently the appellant is not liable to pay additional tax  under Section 143(1A).  At this stage, it may be noted that subsequently regular  assessment was carried out by the ITO under Section 143(3).  We are not concerned in  this case with regular assessment under Section 143(3).           The only point raised by the appellant is that it is not liable to pay additional ta x as  Section 143(1)(a), as it stood during the relevant year, was not applicable to the facts of  this case because a moot point had arisen which could not have been a matter of  adjustment under that section and which point needed consideration and  determination only under regular assessment vide Section 143(3) of the 1961 Act.           We find merit in this civil appeal.  As stated above, we are concerned with the  assessment years 1996-97 and 1997-98.  One of the main conditions stipulated by way of  the first proviso to Section 143(1)(a), as it stood during the relevant time, referred to  prima facie adjustments.  The first proviso permitted the Department to make  adjustments in the income or loss declared in the return in cases of arithmetical errors  or in cases where any loss carried forward or deduction or disallowance which on the  basis of information available in such return was prima facie admissible but which was  not claimed in the return or in cases where any loss carried forward, or deduction or  allowance claimed in the return which on the basis of information available in such  return was prima facie inadmissible.  In the present case, therefore, when there were  conflicting judgments on interpretation of Section 80-O, in our view, prima facie

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adjustments contemplated under Section 143(1)(a) was not applicable and, therefore,  consequently appellant was not liable to pay additional tax under Section 143(1A) of  the 1961 Act.         Before concluding, we may reiterate that in this case we are not concerned with the  order of the assessment passed by the ITO later on under regular assessment under  Section 143(3) of the 1961 Act.         For the above reasons, the impugned judgment is set aside and the civil appeals,  filed by the assessee, stand allowed with no order as to costs.