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2010 (12) TMI 295 - AT - Income TaxRevision u/s 263 - erroneous decision - the assessment u/s 143(3) has been completed omitting to assess profit u/s 115JB resulting in short computation of tax to the extent of Rs. 7,33,55,613. The assessee had filed written submissions dated August 20, 2008 explaining that the gain arising on transfer of assets to wholly owned subsidiary being exempt u/s 47(iv) is not taxable u/s 115JB of the Act based on various judicial precedents - Held that - No additional facts were necessary before the Assessing Officer to come to the conclusion that the book profit u/s 115JB is wrongly computed. The Assessing Officer not examined the facts before him. The order passed by the Assessing Officer is very cryptic. There is no discussion or methodology of computation of book profit. It seems that he has accepted the computation of book profit as furnished by the assessee. - The order of the Assessing Officer is erroneous for want of proper enquiry. - Decided in favor of revenue.
Issues Involved:
1. Power of the Assessing Officer to recompute book profits under section 115JB of the Income Tax Act. 2. Justification of the Commissioner in invoking the provisions of section 263 of the Income Tax Act. Detailed Analysis: 1. Power of the Assessing Officer to recompute book profits under section 115JB of the Income Tax Act: The appellant, a limited company engaged in manufacturing and trading of cement, filed its return of income on October 31, 2004. The assessment was completed under section 143(3) on December 8, 2006. The CIT issued a notice under section 263 on July 11, 2008, stating that the assessment order was erroneous and prejudicial to the interests of the revenue because it omitted to assess profit under section 115JB, resulting in a short computation of tax amounting to Rs. 7,33,55,613. The assessee argued that the gain arising from the transfer of assets to a wholly-owned subsidiary, exempt under section 47(iv), should not be taxable under section 115JB, citing various judicial precedents. However, the CIT directed the Assessing Officer to compute the book profit after considering the gain arising from the transfer of assets as part of the book profit. The Tribunal, referring to the Special Bench's decision, held that section 47(iv) has no application in the computation of book profits under section 115JB, and the assessee is not entitled to exclude exempt capital gains in the computation of book profit. 2. Justification of the Commissioner in invoking the provisions of section 263 of the Income Tax Act: The assessee contended that the CIT erred in invoking section 263, arguing that the Assessing Officer had taken one of the possible views after full disclosure in the books of account. The assessee cited several decisions, including Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC), to support the contention that an order cannot be revised based on a change of opinion. The Tribunal emphasized that for section 263 to be invoked, the order must be both erroneous and prejudicial to the interests of the revenue. It was noted that the Assessing Officer had not computed the income under section 115JB or discussed the treatment of profit on the sale of assets to its subsidiary. The Tribunal found that the Assessing Officer had not applied his mind to the provisions of section 115JB, making the order erroneous and prejudicial to the interests of the revenue. The Tribunal concluded that the failure of the Assessing Officer to make an enquiry and record reasons for accepting the assessee's claim rendered the assessment order erroneous. Conclusion: The Tribunal dismissed the appeal of the assessee, holding that the CIT was justified in invoking section 263 as the Assessing Officer's order was erroneous and prejudicial to the interests of the revenue due to the failure to properly compute book profits under section 115JB and lack of proper enquiry. The order was pronounced in the open court on December 24, 2010.
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