TMI Blog2016 (5) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... tax and the AO should not merely rely on the data submitted by the assessee. Therefore we do not find any infirmity in the order of Ld CIT(A) - Decided against revenue Addition on account of excess depreciation claimed in the revised return of income - Held that:- AO disallowed the excess depreciation claimed by the assessee in the revised return of income on the ground that the revised return of income was not supported with the Tax Audit Report. However, we further find that the AO did not point out any defect in the working of excess depreciation claimed by the assessee. Now in our view, it is not appropriate on the part of the AO to disallow the excess depreciation without giving any findings in the claim of the assessee. - Decided against revenue Addition on account of provisions written back without having the supporting evidence - Held that:- The remand report of the AO that in the earlier years the provisions were disallowed by the assessee in the computation of income. Accordingly, in our view, the provision written back should be allowed as deduction from the total income of the assessee - Decided against revenue Profit declared in the original return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri N.K.Poddar, Shri A.K. Tibrewal and Shri Amit Agarwal Ld. Authorized Representative appearing on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative appearing on behalf of Revenue. 2. At the threshold, it is noted that there is smallness of delay in filing of both the appeals by the Revenue. The Revenue has filed affidavits in this regard stating the reasons that the delay is occurred due to approval for filing of second appeal received followed with weekly holidays. Ld. AR for assessee submitted that considering the delay they should not be having any objection to the Bench for considering the delay of condonation. Thus, in our considered opinion, on the facts and circumstances, i.e. in this case deserves to be considered and same is condoned. We admit to hearing both the appeals. 3. Before carving out the specific issue of the case let us understand the brief history of the case. The assessee in the present case is a Limited Company and engaged in the business of transportation of goods and services with containers based logistics, manufacturer of specialty containers, and leasing of containers. For the assessment years 2008-09 and 2009-10, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment was framed u/s 143(3) of the Act but the same cannot be rectified as there is no provision under the income tax law. 3.1 For all the financial irregularities as noted by the assessee for the three years, effect in the books of accounts was given in the financial year 2009-10 corresponding to the assessment year 2010-11 because the assessee received the final report from KPMG on 30-04-2010. However the effect of all the financial irregularities were charged in the profit and loss account under the heading prior period adjustment in the books of accounts and the same was duly added back in filing the income tax return of the assessee for the assessment year 2010-11. 3.2 However the AO while framing the assessment for the assessment years 2008-09 and 2009-10 disregarded the deduction claimed in the revised return on the following grounds : 1. Losses on account of embezzlement are admissible only in the year in which such loss was detected and the amount crystallized on the basis of the final report submitted by the detective agency. 2. The claim of the assessee is based on the limited finding of the investigation report of KPMG and it does not give the Modus O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of loss claim in the revised return of income and added to the total income of the assessee. 6. Aggrieved assessee preferred an appeal to Ld CIT(A) where it submitted by the assessee that the AO has not pointed out any omission or error in the documents and explanation filed by the assessee during the course of assessment proceedings. The profit of the company was unnecessary inflated by showing more income and this fact has been duly investigated by KPMG after examination the financial irregularities, misconduct and falsification in the books of accounts. There was no embezzlement of cash or money but only the income was over stated by way of falsification of book entries. The learned CIT(A) accordingly and after considering the aforesaid facts of the case held that the loss claimed by the assessee is to be allowed under the normal provision of Income Tax Act. However regarding the income under Minimum Alternate Tax (MAT) Provisions / Section 115JB of the Act the Ld. CIT(A) held that the profit as declared by the assessee in the original return of income will be considered. The profit declared in the original return for the assessment years 2008-09 and 2009-10 have been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, include profits. According to the Law and Practice of Income Tax by Kanga and Palkhivala, the word profits in section 28 should be understood in normal and proper sense. However, subject to special requirements of the income-tax, profits have got to be assessed provided they are real profits. Such profits have got to be ascertained on ordinary principles of commercial trading and accounting. However, the Income-tax Act has laid down certain rules to be applied in deciding how the tax should be assessed and even if the results is to tax as profits what cannot be construed as profits, still the requirement of the Income-tax Act must be complied with. Where a deduction is necessary in order to ascertain the profits and gains, such deductions should be allowed. Profits should be computed after deducting the expenses incurred for business though such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act [See : page 455 of The Law and Practice of Income Tax by Kanga and Palkhivala] From the aforesaid decision of Hon ble Supreme Court in the case of Lakshmi Machine Works (supra) we find that income tax should be lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to ₹ 8,46,662/- in the normal profit/loss determination and in case of any variation he will pass a speaking order on the same. Being aggrieved by this order of the order of Ld CIT(A) Revenue is in appeal before us. 10. We have heard the rival contentions and perused the materials available on record. Before us both the parties relied on the orders of Authorities Below as favourable to them. At the outset we observe that the AO disallowed the excess depreciation claimed by the assessee in the revised return of income on the ground that the revised return of income was not supported with the Tax Audit Report. However, we further find that the AO did not point out any defect in the working of excess depreciation claimed by the assessee. Now in our view, it is not appropriate on the part of the AO to disallow the excess depreciation without giving any findings in the claim of the assessee. Accordingly, we find no infirmity in the order of the Ld CIT(A) and we uphold accordingly. Hence, this ground of Revenue s appeal is dismissed. 11. The 3rd issue raised by Revenue in this appeal is that the Ld CIT(A) erred in deleting the addition made by AO on account of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition made by AO in respect provisions written back when no supporting evidence could be provided by the appellant that such provisions were disallowed in earlier years. 19. The facts of the case in the year under appeal are identical to the facts for AY 2008-09 except the amount involved and the section under which the order has been passed. As the rest of the facts and circumstances are similar following our order for AY 2008-09 in para 5 to 7 and 12 to 14 of this order we decided the effective grounds of appeal for under appeal against the Revenue. 20. In the result, Revenue s appeal is dismissed. Coming to assessee s COs No. 50/Kol/2013 for A.Y. 08-09. 21. Assessee has raised following effective grounds:- 1. That the learned CIT(A) has correctly allowed deduction of ₹ 28,56,345 under the heading provision written back as the respective provisions made in the earlier years were never allowed as a business deduction to the Assessee Company in any of the years whatsoever.. 2. That the learned CIT(A) has rightly allowed depreciation in the sum ₹ 8,46,662, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return should not be considered for the purpose of MAT as that profit was the result of fraudulent/fictitious entries shown in the books of accounts. In actual there was loss under the normal provisions of the Act but the effect of fraudulent entries were not rectified in the year under consideration as the final report of KPMG was received on 30-4.2010 but was made in the financial year 2009-10 corresponding to the assessment year 2010-11. The ld. CIT(A) should have accepted the book profit as per the revised return of income. On the other hand the ld. DR relied on the order of Ld. CIT(A). 25. We have considered the rival contentions, material on records and case laws relied upon by the parties. We have observed that Section 115JB starts with non-obstante clause that Notwithstanding anything contained in any other provisions of this Act which means that this Section has an overriding effect upon the other provisions of the Act and before we proceed it is important to see the relevant clauses of Section 115JB of the Act which reads as under: Special provision for payment of tax by certain companies. 115JB (1) Notwithstanding anything contained in any other provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant previous year. Explanation 1,- For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by (a) to (e)** ** ** (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the provision contained in clause (38) thereof) or section 11 or section 12 apply; or ** ** ** If any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and as reduced by,- ** ** ** 25.1 We have observed hat Section 115JB of the Act starts with nonobstante clause Notwithstanding anything contained in any other provision in this act, meaning thereby that the Section 115JB shall be applicable notwithstanding anything contained in any other provision of the Act and shall have overriding effect upon other provisions of the Act. The Section 115JB stipulates payment of Minimum Alternate tax based upon the book profit computed as per provisions of Section 115JB(2) of the Act. Book Profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account the company. In the case in hand, we find that the assessee has filed the revised return declaring the loss as several financial irregularities were noticed in its books of accounts but the revised financial statements were not approved in the AGM of the company. In view of above, we dismiss the grounds No,3 to 5 of assessee s CO. 26. Ground No.6 raised in assessee s CO is regarding the expenditure on debit card in regard to support of Revenue s appeal. We have already dismissed this issue in Revenue s appeal in ITA No. 694/Kol/2013 hence, same is dismissed as infructus. 27. In the result, assessee s CO is partly allowed. Coming to CO. 51/Kol/2013 for AY 09-10. 28. Assessee raised following grounds:- 1. That the learned CIT(A) has correctly allowed deduction of ₹ 22,73,347 under the heading provision writte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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