TMI Blog2021 (12) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing the tax liability under the provisions of section 115JB of the Act or not? - HELD THAT:- Admittedly, in the present case, the additional income disclosed for the purpose of computing the tax liability under the normal provisions of the I.T. Act does not fall any of the items mentioned in clauses (a) to (j) of the Explanation. We have carefully perused the audited financial statements wherein we find no qualification by statutory auditors on financial statements. Further, we note that financial statements were duly approved in Annual body of the company. Therefore, the Assessing Officer is not justified in adding back the additional income offered to tax under normal provision of Act to book profits for the purpose of computing the tax liability u/s 115JB of the Act. There is yet another reason to hold that mere admission in the statement recorded u/s 132(4) cannot form the basis of addition - addition of income disclosed under normal provisions of Act to book profits for the purpose of computing tax liability u/s 115JB is a pure question of law. The Hon ble Supreme Court in the case of CIT vs. V. Mr. P. Firm, Muar [ 1964 (10) TMI 13 - SUPREME COURT] laid down that if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 115JB of the Act. A notice u/s 153A was issued to the assessee-company on 28.12.2012. In response to the same, the return of income was filed on 01.02.2013 declaring total income of Rs.Nil. It must be stated here that the amount of declaration made u/s 132(4) of ₹ 65.02 crores was offered to tax under the normal provisions of the I.T. Act spread over a period commencing from the assessment years 2006-07 to 2011-12 as extracted by the Assessing Officer vide para 2 of the assessment order. The declaration of ₹ 65.02 crores pertains to the following three items :- (a) ₹ 42.52 crores on account of expenses debited to profit loss account before Commencement of commercial production for the period from 8th May 2010 to 31st December 2010 i.e. pre-operative expenses to be considered as part of fixed assets. (b) Disclosure on account of valuation difference in case of scrap / seconds of ₹ 11.74 crores. (c) Disclosure on account of disallowance of expenses booked in the regular books of accounts as expenses or capitalized amounting to ₹ 12.37 crores. 5. While filing the return of income in response to notice u/s 153A, the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s.144 of the IT Act. Accordingly, the claim of the assessee is rejected on this issue and addition on account of undisclosed income of ₹ 8.83 crores is being made to the book profit also and this income is being brought to tax under MAT i.e., sec. 115JB of the Act. 7. Being aggrieved by the above action of the Assessing Officer, an appeal was filed before the ld. CIT(A). It is contended before him that the difference in valuation of sale of scrap could only be to the extent of external sale of scrap and there cannot be any profit element in respect of scrap transfer from Baramati Plant to Jejuri Plant for re-processing. It is further contended that the assessee-company filed retraction statement on 09.11.2011 immediately after 3 months of the statement given u/s 132(4) of the Act. The assessee-company also filed a statement giving details about the total scrap/seconds generated, transfer to other units and sale to outsiders from both plants which are extracted by the ld. CIT(A) vide para 32.4 of his order. It was further contended that the price difference between the scrap sales/seconds sales to outside parties was only ₹ 5004 per MT for financial year 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. Ground raised by the appellant is hereby allowed. 9. Being aggrieved by that part of decision of the ld. CIT(A) which is against the Revenue, the Revenue is in appeal in ITA No.2751/PUN/2016 and the assessee is in appeal in ITA No.2783/PUN/2016 aggrieved by that part of order of ld. CIT(A) which is against the assessee. ITA No.2783/PUN/2016, A.Y. 2011-12 By Assessee 10. Now, we shall take up the assessee s appeal in ITA No.2783/PUN/2016 for the assessment year 2011-12 for adjudication. 11. The ground of appeal no.1 challenges the decision of the ld. CIT(A) sustaining the addition of ₹ 2,30,00,000/- on account of scrap out of the total disclosure of ₹ 8,83,00,000/- made on account of alleged difference in valuation of scrap. 12. We have carefully gone through the orders of the lower authorities as well as the written submissions filed before us. We consider it not necessary to dwell into the rival submissions made by both the parties as we find the approach of both the authorities is totally flawed for the reason that when the books of accounts stood rejected by both the authorities and when the assessee not challenged the action of the low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act is not in dispute. The dispute is only with regard to whether the amount so declared under the normal provisions of the I.T. Act is required to be added back to the book profits for the purpose of computing the tax liability u/s 115JB of the Act or not?. The provision of section 115JB is a separate code by itself and it overrides all other of the provisions of the Income Tax Act. The provisions of sub-section (2) of section 115JB requires an assessee to prepare a proper Profit Loss Account and Balance Sheet in accordance with the provisions of Schedule III of the Companies Act, 2013 as adopted by the members of the company in general board of meeting. The term books profits has been defined to mean that the books profit as disclosed in the Profit Loss Account as increased or decreased of the items mentioned in the Explanation 1 to section 115JB of the Act. The Hon ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT, 255 ITR 273 (SC) clearly held that for the purpose of computation of the book profits u/s 115JB, the Assessing Officer should adopt the profits as per the Profit Loss Account. The Assessing Officer should not go behind the profit shown in Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the Income-tax Act for the limited purpose of making the said account so maintained as a basis for computing the company's income for levy of income-tax. Beyond that, we do not think that the said sub-section empowers the authority under the Income-tax Act to probe into the accounts accepted by the authorities under the Companies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of section 115J of the Act, then it should be that income which is acceptable to the authorities under the Companies Act. There cannot be two incomes one for the purpose of the Companies Act and another for the purpose of income-tax both maintained under the same Act. If the Legislature intended the Assessing Officer to reassess the company's income, then it would have stated in section 115J that income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Karnataka High Court in the case of CIT vs. Gokaldas Images (P.) Ltd., 122 taxmann.com 160 (Kar.) is on the same lines of judgment following the ratio of the decision of the Hon ble Supreme Court in the case of Apollo Tyres Ltd. (supra). The relevant observation of the Hon ble Karnataka High Court in the case of CIT vs. Gokaldas Images (P.) Ltd. (supra) is as under :- 10. The Commissioner of Income-tax (Appeals) has held that as per section 115JB of the Act, the assessee being a company is liable to tax on book profits in accordance with the aforesaid provision and there is no exemption granted to the non-dividend company in this regard. However, the tribunal by placing reliance on decision of the Supreme Court in Apollo Tyres v. CIT [2002] 122 Taxman 562/255 ITR 273 has held that Assessing Officer while determining book profits under section 115JB of the Act cannot tamper with the profits as per profit and loss account prepared in accordance with the Companies Act except in the manner provided in Explanation 1 to section 115JB of the Act. Thus, it has been held that the additions made by the Assessing Officer while determining the book profits under section 115JB of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission to show that it is incorrect. 21. The fact that an assessee himself admitted to offer the income declared u/s 132(4) to book profits for the purpose of computing tax liability u/s 115JB cannot form the basis of assessment in view of well settled position of law by the Hon ble Kerala High Court in the case of M.K. Mohammad Kunhi vs. CIT, 92 ITR 341 (Ker.). The following judicial precedents are also as same line of proposition of law :- (i) CIT vs. Bharat General Reinsurance Co. Ltd., 81 ITR 303 (Delhi). (ii) R.B. Jessa Ram Fateh Chand vs. CIT, 81 ITR 409 (All.) (iii) Abdul Qayume vs. CIT, 184 ITR 404 (All.). (iv) Krishan Lal Shiv Chand Rai vs. CIT, 88 ITR 293 (P H). (v) CIT vs. Mrs. Doris S. Luiz, 96 ITR 646 (Ker.). (vi) Satinder Kumar (HUF) vs. CIT, 106 ITR 64 (HP). (vii) Isawardin Mewalal vs. CIT, 169 ITR 584 (MP). (viii) Greenview Restaurant vs. ACIT, 263 ITR 169 (Gau.). 22. The relevant observation of the decision of the Hon ble Allahabad High Court in the case of Abdul Qayume vs. CIT, 184 ITR 404 (All.) is as under :- An admission or an acquiescence cannot be a foundation for an assessment where the income is returned under an erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances mentioned under clauses (a) to (j) of Explanation. Therefore, the finding of the ld. CIT(A) that the additional income offered to tax under the normal provisions of the I.T. Act is not required to be made to book profits for the purpose of computing the tax liability u/s 115JB is sustained. Accordingly, the ground of appeal nos.2 and 3 raised by the Revenue stand dismissed. 30. In the result, the appeal filed by the Revenue in ITA No.2751/PUN/2016 for the assessment year 2011-12 stands dismissed. ITA No.2784/PUN/2016, A.Y. 2012-13 By Assessee ITA No.2752/PUN/2016, A.Y. 2012-13 By Revenue 31. Since, the facts and issues involved in both the cross appeals are identical, therefore, our decision in cross appeals vide ITA No.2783/PUN/2016 (filed by the assessee) and ITA No.2751/PUN/2016 (filed by the Revenue) for the assessment year 2011-12 shall apply mutatis mutandis to the remaining cross appeals filed by the assessee in ITA No.2784/PUN/2016 as well as by the Revenue in ITA No.2752/PUN/2016 for the assessment year 2012-13 respectively. Thus, the appeal filed by the assessee in ITA No.2784/PUN/2016 is allowed as well as the appeal filed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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