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2013 (1) TMI 893 - ITAT MUMBAI

2013 (1) TMI 893 - ITAT MUMBAI - TMI - ITA No. 5720/Mum/2011 - Dated:- 23-1-2013 - SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER Appellant by : Shri Dillip J. Thakkar and Shri Rajesh P. Shah Respondent by : Shri A.P. Singh O R D E R PER RAJENDRA SINGH, AM: This appeal by the assessee is directed against the order dated 31.5.2011 of CIT(A) for the assessment year 2004-05. The assessee in this appeal has raised disputes on two different grounds which relate to adjust .....

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e. The book profit under the said provisions is computed on the basis of profit shown in the P&L Account prepared in accordance with provisions of Part-II and Part-III of Schedule-VI of Companies Act to which certain adjustments as provided in the Explanation-1 to Section 115JB(2) are required to be made. In the present case, the AO noted that the assessee had earned gross profit of ₹ 1,68,95,500/- from sale of its rights in the immovable property which had not been shown in the P& .....

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cordance with Part-II and Part- III of Schedule-VI of the Companies Act. He referred to the decision of the Tribunal in the case of M/s. Bombay Diamonds Co. P. Ltd. in ITA No.7488/Mum/07 order dated 30.11.2009 in which in an identical situation, the assessee had not shown the profit on sale of investments in P&L Account and AO had re-worked the profit for the purpose of Section 115JB. The Tribunal held that the AO had power to re-work the book profit by re-casting the P/L account in the mann .....

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the case of Apollo Tyres Ltd. vs. CIT (255 ITR 273) in which it was held that once accounts prepared as per Companies Act are verified by the authorities under Companies Act, it is not open to the AO to make changes in the accounts so prepared for the computation of book profit. The ld. AR also referred to the judgment of Hon'ble High Court of Bombay in case of CIT vs. Akshay Textiles Trading And Agencies P. Ltd. (304 ITR 401) and the judgment of same High court in case of CIT vs. Adbhut Tra .....

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in not routed by the assessee through P&L Account prepared under the Companies Act can be added to the book profit had been considered by the Hon'ble High Court of Bombay in the case of CIT vs. Veekaylal Investment Co. P. Ltd. (249 ITR 597) and it was held that the adjustment by the AO was correct. It was argued that it was within the power of AO to go into the accounts prepared by the assessee under the Companies Act and re-cast the accounts in case the same was not prepared correctly. .....

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nal in the case of Kopran Pharmaceuticals Ltd. Vs. DCIT (119 ITD 355) in which the Tribunal after referring to the judgment of Hon'ble Supreme Court in the case of Apollo Tyres (supra), held that the Hon'ble Supreme Court in the said case had laid down the general proposition of law whereas the judgment of the Hon'ble High Court of Bombay in case of Veekaylal Investment Co. P. Ltd. (supra) was specific on the issue of capital gain and, therefore, the judgment of Hon'ble High Cour .....

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n for the AO to say that P&L Account had not been prepared in accordance with the provisions of Companies Act. It was accordingly argued that the issue being clearly covered by the judgment of Hon'ble Supreme Court and the Hon'ble Jurisdictional High Court, adjustment made by AO on account of profit on sale of investment has to be deleted. 4. We have perused the records and considered the rival contentions carefully. The dispute raised in this appeal is regarding adjustment made by A .....

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VI of the Companies Act and, to such profit, certain adjustments as provided in the Explanation-1 to Section 115JB(2) is required to be made. The issue is whether the AO has power to re-cast the accounts prepared and certified by the authorities under the Companies Act. The case of the revenue is that, in case, accounts are not prepared in accordance with the provisions of Part-II and Part-III of Schedule VI of the Companies Act, the AO has the power to go into accounts and re-cast the same as .....

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255 ITR 273). In that case, the assessee had claimed arrears of depreciation in the P&L Account prepared under the Companies Act. The AO held that the accounts prepared were not in accordance with Part-II and Part-III of Schedule-VI of the Companies Act and, therefore, disallowed the arrears of depreciation which had been upheld up to the level of the High Court. The Hon'ble Supreme Court observed that Section 115J provisions of which were similar to those of 115 JB was introduced in the .....

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ng the assessing authority to rely upon the authentic statement of accounts of the company and while so looking into the accounts of the company, the AO had to accept the authenticity of the accounts. It was so held by the Hon'ble Supreme Court that the AO has only the power to examine whether books of account are certified by authorities under the Companies Act as having been properly maintained in accordance with the provisions of the Companies Act. The AO, thereafter, has limited power of .....

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ficer, thereafter, has the limited power of making increases and reductions as provided for in the Explanation to section 115J. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in the profit and loss account except to the extent provided in the Explanation. The use of the words in accordance with the provision of Parts II and III of Schedule VI to the Companies Act in section 115J was made for the limited purpose of empowering the Assessing Officer to rely .....

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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 of the company. 4.2 The revenue has relied on the judgment of Hon'ble High Court of Bombay in the case of Veekaylal Investment Co. P. Ltd. (supra), but the said judgment had bee .....

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e Companies Account cannot be added while computing to the book profit. The same position was reiterated by the Hon'ble High Court in case of CIT vs. Adbhut Trading Co. P. Ltd. (supra) in which it was held that once accounts including the P&L Account had been prepared and certified by authorities under the Companies Act, it was not open for the AO to state that P&L Account has not been prepared in accordance with the provisions of the Companies Act. The ld. DR pointed out that the Tr .....

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Tyres Ltd. (supra), as pointed out earlier. Moreover, the Tribunal in the case of Sumer Builders (P) Ltd. (supra) had no occasion to consider the latest judgment of the Hon'ble High Court of Bombay in the case of Adbhut Trading Co. P. Ltd. (supra) in which the Hon'ble High Court following the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) have allowed the claim of the assessee. In the case of Appolo Tyres Ltd. (supra), it has been clearly held that the AO .....

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