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2015 (6) TMI 93 - ITAT HYDERABAD

2015 (6) TMI 93 - ITAT HYDERABAD - TMI - Revision u/s 263 - directing AO to compute book profit u/s 115JB of the Act - Held that:- . It is well known that ld. CIT can exercise power u/s 263 of the Act, on fulfillment of the twin conditions enshrined in the said provision cumulatively. The conditions are, an order sought to be revised must be erroneous as well as prejudicial to the interests of revenue. In absence of any one of the aforesaid conditions, exercise of power u/s 263 becomes invalid. .....

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d. CIT and restore the assessment order. - Decided in favour of assesse. - ITA No. 706/Hyd/2013 - Dated:- 25-3-2015 - Shri B. Ramakotaiah And Shri Saktijit Dey JJ. For the Appellant : Shri D.V. Anjaneyulu For the Respondent : Smt. G. Aparna Rao ORDER Per Saktijit Dey, J.M.: This appeal by assessee is directed against the order dated 09/01/2014 passed by ld. CIT-III, Hyderabad u/s 263 of the Act for the AY 2008-09. 2. Briefly the facts are, assessee a company is engaged in manufacturing and sale .....

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veloper. As per the terms of the development agreement, assessee was to receive 11.655% of the constructed area. Besides constructed area, the developer also agreed to pay interest from refundable deposits of ₹ 10 crores and non-refundable deposits of ₹ 43.10 crores to assessee. Further, as per the development agreement dated 08/07/07, the developer agreed to pay an additional amount of ₹ 11 crores to the owner of the land as non-refundable consideration. On going through the d .....

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roceeded to complete the assessment u/s 143(3) of the Act vide order dated 31/12/2010 computing long term capital gain (LTCG) at ₹ 79,69,38,698. Being aggrieved of such assessment order, assessee preferred appeal before CIT(A). 3. During the pendency of appeal before ld. CIT(A), ld. CIT in exercise of power u/s 263 of the Act called for assessment records of assessee for the impugned AY and after verification of the same was of the view that assessment order is erroneous and prejudicial to .....

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ing u/s 263 of the Act. It was submitted by assessee that section 115JB would apply where the income assessed and tax thereon under the normal provisions is less than the book profit and tax thereon. However, since in case of assessee, the income determined by AO and the consequent income-tax there on is much more than the book profit as well as the tax to be paid thereon, neither there is any error in the assessment order nor it is prejudicial to the interests of revenue. Further, it was submit .....

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being the case, income returned by assessee in the return of income stands restored and assessee would be liable to pay the tax computed under section 115JB. However, as AO has failed to compute book profit u/s 115JB of the Act, assessment order is erroneous and prejudicial to the interests of revenue. As far as the merits of the issue is concerned, ld. CIT held that for claiming relief u/s 115JB(2)(vii), the mandatory condition is there must be an order from BIFR u/s 17(1) of the Sick Industria .....

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er with a direction to AO to compute book profit u/s 115JB of the Act. Being aggrieved of the order of ld. CIT, assessee is before us. 4. Ld. AR submitted before us, invoking power u/s 263 of the Act for the purpose of directing AO to compute book profit u/s 115JB of the Act is without jurisdiction as AO has enquired into the matter and examined the issue in course of assessment proceeding. Ld. AR referring to the show cause notice issued by AO on 18/11/10 and 21/12/10 as well as assessee s repl .....

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fit. Ld. AR submitted, ld. CIT while exercising power u/s 263 of the Act, can consider the assessment order to be erroneous and prejudicial to the interests of revenue on the basis of the facts and materials on record as on the date of completion of assessment. However, in the present case, only because ld. CIT(A) subsequently passed the order holding that capital gain would be taxable in AY 2006-07 by virtue of which the income returned by assessee was restored, for that reason alone, it cannot .....

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ned by him would not be sustained by the appellate authority. Therefore, even if there might be an error in the assessment order for not computing the book profit, but, there is no prejudice caused to revenue as income computed under normal provisions was much more than the book profit u/s 115JB and the demand raised on such income computed under normal provisions is enforceable as per the provisions of law. Ld. AR submitted, as there was no prejudice caused to revenue by virtue of the assessmen .....

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licable. Ld. DR submitted, assessee s claim that section 115JB is not applicable as it is a sick company having accumulated losses, cannot be accepted in absence of an order from BIFR u/s 17(1) of the Act, Sick Industrial Companies Act, 1985. 6. We have considered the submissions of the parties and perused the materials on record. We have also carefully applied our mind to the decisions relied upon by ld. AR. At the outset, it needs to be put on record that the primary contention of ld. AR while .....

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of the Act on the plea that it being a sick company, there is no book profit. As can be seen from the show cause notices issued by AO on 30/11/10 and 18/11/10 in course of assessment proceeding, copies of which are placed at pages 27 to 34 of assessee s paper book, AO during the assessment proceeding did conduct enquiry with regard to applicability of section 115JB. From the reply submitted by assessee on 30/11/10, a copy of which is at page 32 of paper book, it is seen that assessee submitted .....

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h tax along with interest was computed at ₹ 23,78,47,932. Whereas the book profit as per the assessee s computation, which is also not disputed by ld. CIT, is ₹ 45,08,84,000 and tax thereon is ₹ 4,64,41,052. Therefore, the income computed under the normal provisions and tax thereon being much more than the tax payable on the book profit computed u/s 115JB of the Act, AO proceeded to complete assessment and enforce the demand under the normal provisions of the Act without comput .....

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income returned by assessee was restored, that will not render assessment order erroneous and prejudicial to the interests of revenue. 7. While assuming jurisdiction u/s 263, ld. CIT has to examine the error and prejudice caused to revenue by virtue of assessment order on the basis of the facts and materials on record as on the date of completion of assessment. He cannot take into consideration any event subsequent thereto. As can be seen, ld. CIT upon considering the fact that by virtue of orde .....

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