TMI Blog2009 (11) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... the case the Tribunal was justified in holding that the assessee should have provided depreciation as per Schedule XIV to the Companies Act by the Companies (Amendment) Bill, 1988 on May 24, 1988, with retrospective effect from April 2, 1987 prior to the end of the accounting year of the assessee, i.e., April 30, 1987, when the depreciation of assets is required to be ascertained even though the books of account of the assessee were closed and the accounts were passed, in AGM ?" 2. The facts which are essential to be stated are that the assessee is a public limited company engaged in the business of manufacturing of synthetic blended yarn. For the assessment year 1988-89 relevant to the previous year ending on April 30, 1987, the assessee submitted its return on June 21, 1988, declaring its income at Rs. 35,77,693 which was later on revised by filing a revised return on March 6, 1989, declaring the income therein at Rs.25,42,627 on March 30, 1989. The assessee put forth a stand that the provisions contained in section 115J of the Act were not applicable to the case of the assessee. The income was assessed under section 143(1)(a) of the Act at Rs. 25,42,627 on March 30, 1989. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3) read with section 147 of the Act and he made an addition of Rs. 95,17,841 as excess depreciation charged in respect of the assessment year. The Tribunal, after recording the facts, came to hold that there was sufficient material, on record to have reasonable belief that the assessee had not disclosed fully or truly the material facts necessary for the year. 5. The issue relating to Rs. 95,17,841 was examined by the Tribunal in the light of relevant provision of section 115J of the Act and the provisions of the Companies Act and it finally concurred with the view of the first appellate authority that the assessee had charged excess depreciation for the relevant assessment year and the Revenue authorities were justified in disallowing the excess of charge of depreciation. The Tribunal, as is manifest from the order, dealt with both the appeals in a composite manner. The Tribunal, while dealing with the reopening of the assessment under section 147(a) of the Act, in paragraph 11 expressed the view as follows : "11. In the instant case it is not a case of the assessee that he has not charged excess depreciation in the relevant assessment year. Once it is an admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the end of the accounting year, we are of the view that the rates provided by the relevant law at that time are to be applicable for its ascertainment. In the instant case, on April 30, 1987, when the accounting year was ended, the depreciation should have been ascertained at the rates provided in Schedule XIV to the Companies Act which was applicable at the relevant point of time. We may agree with the submissions of the assessee that Schedule XIV was introduced after the closure of the books of account and its adoption by the AGM and its reopening was not permissible or advisable by the rules or guidelines laid down by the Institute of Chartered Accountants but in that eventuality the assessee could have notified the reasons of non-withdrawal of excess charged depreciation in its return of income filed after the date of introduction of Schedule XIV to the Companies Act. Moreover, in the succeeding accounting year the assessee did not write back the entire excess charged depreciation in its books of account and has only written back the excess charged depreciation for the period April 2, 1987 to April 30, 1987 on the ground that Schedule XIV was effective from April 2, 1987. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on April 30, 1987, the accounts were audited by the chartered accountant on June 30, 1987, and the accounts were also passed in the annual general meeting prior to passing of the Amendment Act on May 24, 1988. It is urged by Mr. Shrivastava that by the time the Act was passed on May 16, 1988, the accounts of the company were finalised, audited on June 30, 1987 and passed in the annual general meeting as the factual matrix would show. In this context, he has invited our attention to section 115J of the Act. The said provision reads as under : "115J. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 (hereinafter in this section referred to as the relevant previous year) is less than thirty per cent. of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent. of such book profit. Explanation.-For the purposes of this section `book profit' means the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y liable to pay tax on at least 30 per cent. of its book profits as shown in its own account. For the said purpose, section 115J makes the income reflected in the company's books of account the deemed income for the purpose of assessing the tax. If we examine the said provision in the above background, we notice that the use of the words `in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act' was made for the limited purpose of empowering the assessing authority to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, an Assessing Officer under the Income-tax Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its accounts in a manner provided by the Companies Act and the same to be scrutinised and certified by the statutory auditors and will have to be approved by the company in its general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requiremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J." 14. In CIT v. HCL Comnet Systems and Services Ltd. [2008] 305 ITR 409 (SC) their Lordships referring to the decision rendered in Apollo Tyres [2002] 255 ITR 273 (SC) have held as follows (page 413) : "From the above, it is evident that the Assessing Officer has to accept the authenticity of the accounts maintained in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act, which are certified by the auditors and passed by the company in the general meeting. The Assessing Officer has only the power of examining whether the books of account are duly certified by the authorities under the Companies Act and whether such books have been properly maintained in accordance with the Companies Act. The Assessing Officer does not have the jurisdiction to go beyond the net profit shown in the profit and loss account except to the extent provided in the Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Assessing Officer to examine the matter. The depreciation was properly claimed in the first instance. The learned senior counsel has commended us to the decision rendered in Amichand Investment P. Ltd. v. Deputy CIT (Assessment) [2008] 304 ITR 97 (Guj). In the said decision, the High Court of Gujarat was dealing with the assessment year 1988-89. In that context, the Bench after referring to the decision in Apollo Tyres [2002] 255 ITR 273 (SC) and interpreting section 115J of the Act held as under (page 104) : "10. Section 115] of the Act, more particularly, the Explanation permits increases of the amounts specified in clauses (a) to (f) provided any such amount is debited to the profit and loss account. Clause (a) which relates to the amount of income-lax paid or payable, can be added to the net profit as shown in the profit and loss account pro- vided such an amount of income-tax paid or payable is debited to the profit and loss account. Admittedly, in the present case, there is no debit to the profit and loss account as found by the Tribunal and the debit is to the dividend account. Thus, on a plain reading of the language employed by the statute the exercise undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year and consequent escapement of income chargeable to tax. Clause (b) contemplates the situation where though there has been no omission or failure as contemplated by clause (a), the Income-tax Officer has received some information on the basis whereof he has reason to believe that income chargeable to tax has escaped assessment. In these two situations, the Assessing Officer can assess or reassess such income or recompute the loss or the depreciation allowance subject to adherence to sections 148 to 153. In order to bring the cases of under assessment, assessment at too low a rate and of excessive relief granted under the Act within the mischief of escaped assessment, Explanation 1 appearing under section 147 includes such cases in cases of escaped assessment. Thus, by fiction the cases of under assessment, assessment of income at too low a rate and the cases of income where excessive relief has been granted are treated to be cases of escaped assessment. While learned counsel for the assessee maintains that the cases covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, it is not disputed that the assessee had disclosed the amount of interest accrued on the fixed deposit in the assessment year 1981-82. It is, however, contended that the details relating to the amount of interest were not furnished by the assessee. But the primary facts having been disclosed by the assessee, the Income-tax Officer had no jurisdiction to institute proceedings for reassessment. The impugned notice is without jurisdiction and deserves to be quashed." 23. Yet in another decision rendered in Indian Oil Corporation v. ITO [1986] 159 ITR 956 (SC) their Lordships have expressed thus (page 967) : "To confer jurisdiction under clause (a) of section 147 of the Act beyond the period of four years but within a period of eight years from the end of the relevant year under section 148 of the assessment year, two conditions were required to be fulfilled : the first is that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to tax had been underassessed or escaped assessment ; the second was that he must have reason to believe that such escapement or underassessment was occasioned by reason, so far as relevant for the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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