TMI Blog2000 (9) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------ Rs. 3,339,518.79 ------------------ 3. The Assessing Officer did not accept the aforesaid profit of Rs. 10,01,856 declared under section 115JA on the ground that the assessee had not worked out 30% of the real and correct book profit of Rs. 1,03,59,205. He noted that the adjustments made in the real and correct book profit before arriving at the book profit of Rs. 33,39,518 were not correct and permissible. He, therefore, ignored the aforesaid adjustment made by the assessee and making prima facie adjustment under section 143(1)(a) of the Act, he took the book profit at Rs. 1,03,59,205. 30% of this was worked out by the Assessing Officer at Rs. 31,07,762 which was determined as the taxable income under section 115JA of the Act. 4. Aggrieved the assessee preferred first appeal before the Id. CIT(A). It was argued before him on behalf of the assessee that the Assessing Officer was not justified in determining the book profit at Rs. 1,03,59,205 instead of Rs. 33,39,518 shown by the assessee and as such t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire contracted period of loans are capitalised as a part of the acquisition cost of the said assets on the basis that this expenses accrue at the time of availment of loans. For the purpose of this computation it has been assumed that loans shall be repaid on due date and adjustment on account of future fluctuation in the amount of interest owing to change in the interest will be accounted for in the years in which such changes occur. As a result of the above, loss after depreciation is lower by Rs. 29,38,067.41 and net fixed asset are higher by Rs. 1,73,03,618-15 and accumulated losses are lower by Rs. 29,38,057.4l." 8. The above note was given in the balance-sheet for the assessment year 1993-94. Similar notes appeared in the balance-sheet of the financial years 1994-95 and 1995-96 and in the financial year 1996-97 relevant to the assessment year 1997-98 covered under the present appeal change in the method of accounting with regard to the above interest was made and the following note appeared : "To comply with the Generally Accepted Accounting Principles and the guidelines issued by the Institute of Chartered Accountants of India, the company has from current year chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) 7. Bombay Steam Navigation Co. (1953) (P.) Ltd. v. CIT [1965] 56 ITR 52 (SC) 11. The ld. AR further submitted that the impugned prima facie adjustment by the Assessing Officer to arrive at higher book profit would also be found to be unwarranted and uncalled for on the ground that in the assessment made under section 143(3) for the assessemnt year in question the taxable income was determined at Rs. 44,24,953 and this was higher than the 30% of the book profit as determined by the Assessing Officer at Rs. 33,39,518 and hence the book profit was ignored. He added that it was a different thing that subsequently the taxable income was reduced but that was the subsequent development which was not relevant at the time of assessment. Thus according to the Assessing Officer in the assessment made under section 143(3), the provisions of section 115JA of the Act were not applicable. He, therefore, contended that the higher book profit determined by the Assessing Officer under section 143(1)(a) of the Act was unwarranted and irrelevant. 12. The ld. AR further submitted that even if there were two possible interpretations, with regard to the determination of the book profit in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining to several previous years and depreciation also pertaining to several previous years which was not inconformity with above provisions of the Companies Act, and the I.T. Act. He referred to the observations in the case of Sipani Automobiles Ltd. that if book profit is wrongly stated then the Assessing Officer can make adjustment under section 143(1)(a) of the Act he added that the facts of the present case were similar to those of the aforesaid decided case. He referred to the ITAT Delhi Bench 'E' decision in the case of Care Heart India Ltd. v. Dy. CIT 65 TTJ (Delhi) 345 wherein it was held that while computing the book profit under section 115JA the Assessing Officer can correct errors in accounts and book profit is to be taken on the basis of the corrected account. It was held that it was open for the Assessing Officer to examine whether book profit is computed in accordance with the law. The amount reflected in the P L A/c was not sacrosanct. He also referred to the legislative background of introduction of section 115JA of the Act, and added that the assessee must pay tax on 30% of real book profit in accordance with the provisions of section 115JA of the Act instead o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Council of Institute of Chartered Accountants, to capitalise the interest pertaining to the term loans. In respect of asset purchased on deferred credit basis for the period after commencement of production and had been giving a note of account as reproduced above in terms of the advice of the Research Committee of the Council of Institute of Chartered Accountants. it was only when subsequently the assessee wanted to come out of the clutches of section 115JA of the Act or reduce its liability under section 115JA drastically, that after so many years it decided to reverse the practice under the shelter of the current accounting practice. We are of the view that the subsequent reversal of the accounting practice and the claim of adjustment on account of interest and depreciation from the real and correct book profit as above, was not with bona fide intention but was prompted with the intention of reducing the tax liability under section 115JA of the Act. It will be totally wrong and against the provisions of section 115JA to allow such an action of the assessee. 20. The ld. AR of the assessee in his argument before us relied upon the Supreme Court decision in the case of Challa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of determining taxable income under section 115JA of the Act. In this connection the ld. DR also appropriately referred to the decision of ITAT Delhi Bench 'E' in the case of Care Heart India Ltd. wherein it was held that while computing the book profit under section 115JA the Assessing Officer can correct errors in accounts and the book profit is to be taken on the basis of the corrected amount. While processing the case under section 143(1)(a) the Assessing Officer is duty bound to go through the P L Account as also the computation of book profit declared under section 115J of the Act to verify whether the profit declared by the assessee is in accordance with the provisions of law and the accounting principles followed by the assessee from year to year. In the course of this verification, the Assessing Officer hit upon the wrong adjustment claimed by the assessee with regard to the interest and depreciation which was neither in accordance with the accounting method followed by the assessee in the past nor it was in accordance with the provisions of law. The matter clearly fell within the purview of proviso (3) of section 143(1)(a) of the Act. it will be wrong to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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