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Issues Involved:
The judgment addresses the following Issues: 1. Whether profit on sale of land carried to capital reserve can be added to book profit u/s 115J? 2. Whether non-recurring profits not included in book profits can be added by the assessing officer to re-work the book profit u/s 115J? Issue 1: Profit on Sale of Land and Capital Reserve: The assessee, a company not substantially interested by the public, transferred the profit from the sale of land to 'capital reserve,' which the assessing officer added to the book profits under section 115J of the Income Tax Act. The Commissioner of Income Tax (Appeals) upheld this addition, but the Income Tax Appellate Tribunal allowed the appeal. The High Court, citing the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax, held that the assessing officer cannot go behind the net profit shown in the profit and loss account except as provided in the explanation to section 115J. Therefore, the Tribunal was correct in reversing the assessing officer's order. Issue 2: Non-Recurring Profits and Book Profit Re-calculation: The assessing officer sought to add non-recurring profits, not part of the book profits, to re-calculate the book profit u/s 115J. The High Court, following the decision in Apollo Tyres case, reiterated that the assessing officer's power is limited to examining whether the books of account are properly maintained and making adjustments as per the explanation to section 115J. The Court held that the assessing officer cannot exceed this jurisdiction, as clarified in the Apollo Tyres case, and therefore upheld the Tribunal's decision to allow the appeal. The High Court, in light of the legal principles established in the Apollo Tyres case, dismissed the revenue's appeal, affirming the Tribunal's decision.
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