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2014 (11) TMI 718 - AT - Income TaxPower of CIT to invoke section 263 - Computation of book profits u/s 115JB Prior paid expenses reduced Held that:- Following the decision in Apollo Tyres Ltd. Versus Commissioner of Income Tax [2002 (5) TMI 5 - SUPREME Court] While assessing a company for income-tax u/s 115J the correctness of the P&L a/c prepared by the assessee-company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Sch. VI to the Companies Act cannot be examined by the AO; AO does not have the jurisdiction to go behind the net profit shown in the P&L a/c except to the extent provided in the Explanation to s. 115J - Starting point for computation of book profits for purposes of s. 115JB should be the amount which is the final balance in the P&L a/c carried to balance sheet and in doing so even the extraordinary items have to be debited to the P&L a/c. When the P&L A/c of the assessee is drawn up in accordance with the provisions of Part II of Schedule 6 to the Companies Act, 1956 and is certified by Auditor, then, the AO cannot make any other modification to the book profit computed in the P&L A/c except as provided under Explanation 1 of section 115JB - the AO after examining the details has computed the book profit in the assessment order - Therefore, there cannot be non-application of mind by the AO - The view taken by the AO in computing book profit u/s 115JB being an acceptable view, the assessment order passed cannot be considered to be erroneous - Therefore, one of the conditions for invoking jurisdiction u/s 263 of the Act is not satisfied thus, exercise of power u/s 263 of the Act is not justified thus, the order of the CIT is set aside Decided in favour of assessee.
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