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2016 (7) TMI 524 - ITAT KOLKATA

2016 (7) TMI 524 - ITAT KOLKATA - TMI - Revision u/s 263 - disallowance under section 14A by applying Rule 8D - Held that:- We find merit in the contention of assessee that the said Rule not being applicable to the year under consideration, i.e. A.Y. 200607, it cannot be said that there was any error in the order of the Assessing Officer in not making disallowance under section 14A by applying the said Rule. At the time of hearing before us, even the ld. D.R. has not been able to raise any mater .....

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sheet. The amount of such profit, therefore, was not included in the profit as reflected in the Profit & Loss Account prepared by the assessee, which was duly audited and presented in the A.G.M. As held by the Hon’ble Supreme Court in the case of Apollo Tyres (2002 (5) TMI 5 - SUPREME Court ), the profit reflected in the Profit & Loss Account, which is duly audited and presented before the A.G.M., cannot be tinkered with except by way of adjustments, which are permissible as per Explanation to S .....

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he relevant observations recorded by the Assessing Office. Thus we are of the view that there was no error in the order of the Assessing Officer in not including the profit arising from the sale of shares of M/s. Apeejay Finance Group Limited in the book profit as alleged by the ld. CIT in his impugned order calling for revision under section 263.- Decided in favour of assessee - Not verifying the quantum of short-term capital gain declared by the assessee on sale of flats as per the relevan .....

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led by the assessee is directed against the order of ld. Commissioner of Income Tax, Central-1, Kolkata dated 17.01.2011 passed under section 263 of the Income Tax Act, 1961. 2. The assessee in the present case is a Company, which filed its return of income for the year under consideration originally on 30.11.2006 declaring total income at nil and book profit under section 115JB at ₹ 95,36,199/-. Subsequently the revised returns were filed by the assessee declaring the same results but cla .....

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e prejudicial to the interest of the Revenue:- (i) Disallowance of ₹ 1,572/- made by the Assessing Officer under section 14A was not in accordance with Rule 8D of the Income Tax Rules; (ii) The profit on sale of eight flats was shown by the assessee in the accounts at ₹ 3,25,26,172/- while the same was shown at ₹ 1,96,63,330/- in the computation of total income under the head short-term capital gain ; (iii) The profit on sale of shares of M/s. Apeejay Finance Group Limited amou .....

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by the assessee on the issue of the profit arising from sale of shares of M/s. Apeejay Finance Group Limited credited in the accounts for the subsequent year:- 1. Section 11SJB(2) stipulates mandate on every company to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part 11 and III of schedule VI to Companies Act, 1956 in terms of the accounting principles and accounting standards laid down in the provisions of Section 210 of Companies Act .....

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n the later year as Prior Period income /expenses if there was any error or omission or exceptional circumstances. The capital gain of ₹ 1,51,80,800/- which actually arose during the period relevant to assessment year 2006-07 but omitted to be considered through inadvertence was therefore accounted for in the immediate succeeding year in terms of AS-5 and under the head "Prior-period income". Therefore, your view that the company violated the accounting principle /accounting stan .....

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n of ₹ 1,51,80,500/- is in direct contrast with the spirit and intention of Explanation1 attached to Section 115JB(2) . 4. As regards the issue of disallowance under section 14A, it was submitted by the assessee before the ld. CIT that the disallowance of ₹ 1,572/- under section 14A was made by the Assessing Officer after examining the working filed by the assessee by applying his mind and there was no case for revision under section 263 on this issue. 4.1. As regards the issue of sh .....

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sing Officer was not found acceptable by the ld. CIT. According to him, the treatment of profit arising from the sale of shares of M/s. Apeejay Finance Group Limited as given by the assessee was not in accordance with Part II & III of Schedule 6 of the Companies Act and it was thus a case of misrepresentation of accounts by the assessee with a view to reduce the book profit for the year under consideration. He held that this profit was required to be added while computing the book profit and .....

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- as made by the Assessing Officer. He was also of the view that the working of short-term capital gain made by the assessee on sale of flats as per section 50 was wrong and the same was accepted by the Assessing Officer without necessary examination. He, therefore, set aside the order passed by the Assessing Officer under section 143(3) holding the same to be erroneous as well as prejudicial to the interest of the revenue and directed the Assessing Officer to complete the same afresh as per law .....

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assessment year 2008-09 and the same, therefore, was not applicable to the year under consideration, i.e. A.Y. 2006-07. As regards the other error allegedly pointed out by the ld. CIT in the order of the Assessing Officer in not making addition on account of profit arising from the sale of shares of M/s. Apeejay Finance Group Limited while computing the book profit under section 115JB, the ld. counsel for the assessee reiterated before us the submissions made on behalf of the assessee before the .....

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e of shares was not reflected in the Profit & Loss Account, but the same was shown as liability in the balance-sheet. He contended that since the Profit & Loss Account prepared by the assessee was duly audited and presented before Annual General Meeting, there was no question of tinkering with the same and the adjustment, if any, to the profit reflected in the Profit & Loss Account is only permitted as given in Explanation to Section 115JB as held, inter alia, by the Hon ble Supreme .....

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nsel for the assessee submitted that the Assessing Officer in the order passed under section 143(3) read with section 263 has already examined this issue and decided the same in favour of the assessee. He contended that the assessee has thus no grievance left on this issue so as to challenge the impugned order of the ld. CIT on this aspect of the matter. 7. The ld. D.R., on the other hand, submitted that the treatment given by the assessee in not crediting the profit arising from the sale of sha .....

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he book profit and the assessee cannot be allowed to take benefit of such omission. 8. We have considered the rival submissions and also perused the relevant material available on record. As regards the error allegedly pointed out by the ld. CIT in the order of the Assessing Officer in not making disallowance under section 14A by applying Rule 8D, we find merit in the contention of the ld. counsel for the assessee that the said Rule not being applicable to the year under consideration, i.e. A.Y. .....

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in the order of the Assessing Officer in not adding the profit arising from sale of shares of M/s. Apeejay Finance Group Limited while computing the book profit, it is observed that such profit was not credited by the assessee to the Profit & Loss Account for the year under consideration and the same was shown as liability in the balance-sheet. The amount of such profit, therefore, was not included in the profit as reflected in the Profit & Loss Account prepared by the assessee, which wa .....

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