2023 (3) TMI 612 - AT - Income Tax

Rectification of mistake u/s 154 - non- inclusion of surrendered income in the Book Profits of the assessee as per section 115JB - re-computing the book profits u/s.115JB by considering the adhoc disclosure made during the course of survey as income of the Appellant for the purpose of computation of book profits u/s. 115 JB - HELD THAT:- We are in agreement with the assessee in this regard that it is surely not a clear case of the amount being invariably included in the book profits of the assessee on the basis of the facts before us. In the absence of any incriminating material found, substantiating the surrender made, the same cannot invariably be said to represent the profit of the assessee for disclosure to its shareholders.

If the surrender was corroborated with some undisclosed asset or incriminating document found, revealing the nature and manner of earning the income surrendered, it necessarily represented profits which needed to be disclosed in the profit and loss account also for the benefit of shareholders of the company. But without any incriminating material and without any clue about the nature of the disclosure also, the same could not be said to invariably represent undisclosed income/profits of the assessee to be included in its profit and loss account.

The assessee at its discretion may include the surrender in its income for paying taxes thereon, but this fact ipsodixit will not mandate inclusion of the surrender in its Book Profits also.

Therefore it is not plain and simple that the surrender made during survey, on adhoc basis without any incriminating material found, was to be necessarily included in its profit and loss account/ book profits. We agree with assessee that to arrive at such a conclusion required a long drawn process of reasoning and debate.

For the above reasons therefore, we hold, that the non- inclusion of surrendered income in the Book Profits of the assessee as per section 115JB of the Act, was not a patent error amenable to rectification u/s 154 of the Act.The adjustment so made, therefore, is directed to be deleted. Decided in favour of assessee.