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TMI Blog2021 (12) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... was a search and seizure action u/s 132 of the Income Tax Act, 1961 ('the Act') in the business premises of the appellant on 09.08.2011. During the course of search proceedings, certain documents and papers were seized and based on such documents and papers, the statement of the CEO of the assessee's company, namely, Shri Salil Taneja was recorded u/s 132(4) of the Act. During the course of statement recorded, the CEO of the assessee's company, namely, Shri Salil Taneja, made a declaration of additional income of Rs. 65.02 crores under the normal provisions of the Act for the assessment years 2006-07 to 2012-13. The CEO of the assessee's company, Shri Salil Taneja also agreed to add such additional income to book profits of the relevant years for the purpose of computing the tax liability u/s 115JB of the Act. A notice u/s 153A was issued to the assessee-company on 28.12.2012. In response to the same, the return of income was filed on 01.02.2013 declaring total income of Rs.Nil. It must be stated here that the amount of declaration made u/s 132(4) of Rs. 65.02 crores was offered to tax under the normal provisions of the I.T. Act spread over a period commencing from the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee as a result of search, various discrepancies were detected. There had been wrong claim of depreciation due to wrong claim of put to use of the asset-PQF Mill, wrong claim of expenses which were admittedly non genuine and inflated/ not incurred and unaccounted income not credited in the books arising out of misclassification/ under invoicing of scrap as discussed in detail above. Such discrepancies were not permitted by the accounting policies, the accounting standards adopted for preparing such accounts including P&L a/c and the methods and rates adopted for calculating the depreciation in accordance with the provisions of sec.210 of the Companies Act. On these issues the books of accounts of the assessee have been rejected u/s. 145(3) r.w.s.144 of the IT Act. Accordingly, the claim of the assessee is rejected on this issue and addition on account of undisclosed income of Rs. 8.83 crores is being made to the book profit also and this income is being brought to tax under MAT i.e., sec. 115JB of the Act." 7. Being aggrieved by the above action of the Assessing Officer, an appeal was filed before the ld. CIT(A). It is contended before him that the difference in valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been upheld only to the extent of Rs. 2.3 cr, the appellant had not accepted the same and therefore, no entry was passed in the books of account. The books of accounts have been certified by the Auditors and adopted at the AGM, the same cannot be subjected to revision as contended by the appellant. Only the adjustment provided within the section 115JB(1) can be made. No such adjustment is possible on account of the addition made for misclassification of scrap. Therefore, the AO was not justified in increasing the book profit on this account. No adjustment in the book profit is warranted on the addition made under normal provisions of the Act. The AO is directed to delete the addition made u/s 115JB of the Act. Ground raised by the appellant is hereby allowed." 9. Being aggrieved by that part of decision of the ld. CIT(A) which is against the Revenue, the Revenue is in appeal in ITA No.2751/PUN/2016 and the assessee is in appeal in ITA No.2783/PUN/2016 aggrieved by that part of order of ld. CIT(A) which is against the assessee. ITA No.2783/PUN/2016, A.Y. 2011-12 - By Assessee 10. Now, we shall take up the assessee's appeal in ITA No.2783/PUN/2016 for the assessment year 2011- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. Accordingly, ground of appeal no.1 raised by the assessee stands allowed. 16. The ground of appeal no.2 challenges the decision of the ld. CIT(A) not deleting the income disclosed on account misclassification of scrap from excluding the book profits for the purpose of computing the tax liability u/s 115JB of the Act. The issue on hand relates to whether the income surrendered to tax under the normal provisions of the I.T. Act/addition made to returned income is required to be added back to book profits for the purpose of computing the tax liability under the provisions of section 115JB of the Act or not?. The amount of disclosure made under the normal provisions of the I.T. Act is not in dispute. The dispute is only with regard to whether the amount so declared under the normal provisions of the I.T. Act is required to be added back to the book profits for the purpose of computing the tax liability u/s 115JB of the Act or not?. The provision of section 115JB is a separate code by itself and it overrides all other of the provisions of the Income Tax Act. The provisions of sub-section (2) of section 115JB requires an assessee to prepare a proper Profit & Loss Account and Balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that the accounts of the company are maintained in accordance with the requirements of the Companies Act. In spite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the Revenue that it is still open to the Assessing Officer to rescrutinise this account and satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. In our opinion, reliance placed by the Revenue on sub-section (1A) of section 115J of the Income-tax Act in support of the above contention is misplaced. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the Income-tax Act for the limited purpose of making the said account so maintained as a basis for computing the company's income for levy of income-tax. Beyond that, we do not think that the said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red a wrong profit and loss account. Once the accounts including the profit and loss account are certified by the authorities under the Companies Act it is not open to the Assessing Officer to contend that the profit and loss account has not been prepared in accordance with the provisions of the Companies Act, 1956. 2. In these circumstances, the deletion of the addition by the Tribunal by following the decision of the apex court in the case of Apollo Tyres Ltd. [2002] 255 ITR 273 (SC) cannot be faulted. In the result, we see no merit in the appeal. The appeal is accordingly dismissed with no order as to costs." 18. Further, the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Gokaldas Images (P.) Ltd., 122 taxmann.com 160 (Kar.) is on the same lines of judgment following the ratio of the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra). The relevant observation of the Hon'ble Karnataka High Court in the case of CIT vs. Gokaldas Images (P.) Ltd. (supra) is as under :- "10. The Commissioner of Income-tax (Appeals) has held that as per section 115JB of the Act, the assessee being a company is liable to tax on book profits in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala, 91 ITR 18 (SC). The relevant observation of the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. (supra) is reproduced as under :- "It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect." 21. The fact that an assessee himself admitted to offer the income declared u/s 132(4) to book profits for the purpose of computing tax liability u/s 115JB cannot form the basis of assessment in view of well settled position of law by the Hon'ble Kerala High Court in the case of M.K. Mohammad Kunhi vs. CIT, 92 ITR 341 (Ker.). The following judicial precedents are also as same line of proposition of law :- (i) CIT vs. Bharat General Reinsurance Co. Ltd., 81 ITR 303 (Delhi). (ii) R.B. Jessa Ram Fate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the books result stood rejected except by applying the flat rate of profit, this ground of appeal no.1 raised by the Revenue stands dismissed. 28. The ground of appeal nos.2 and 3 raised by the Revenue challenges the decision of the ld. CIT(A) deleting the additional income offered u/s 132(4) under the normal provisions of the I.T. Act to book profits for the purpose of computing the tax liability u/s 115JB of the Act. 29. Since in the assessee's appeal for the reasons stated therein, we hold that the Assessing Officer cannot go behind the profit as shown in the Profit & Loss Account except under the circumstances mentioned under clauses (a) to (j) of Explanation. Therefore, the finding of the ld. CIT(A) that the additional income offered to tax under the normal provisions of the I.T. Act is not required to be made to book profits for the purpose of computing the tax liability u/s 115JB is sustained. Accordingly, the ground of appeal nos.2 and 3 raised by the Revenue stand dismissed. 30. In the result, the appeal filed by the Revenue in ITA No.2751/PUN/2016 for the assessment year 2011-12 stands dismissed. ITA No.2784/PUN/2016, A.Y. 2012-13 - By Assessee ITA No.2752/PUN/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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