2013 (1) TMI 114 - AT - Income Tax

Addition of business advances to the book profit for the calculation of MAT u/s 115JB - assessee contested as nothing can be added to book profit to calculate MAT except those items which are mentioned in clauses (a) to (g) of explanation (1) of section 115JB - Held that - The net profit after making addition comes to Rs. 18, 80, 627/- (15, 10, 627 3, 70, 000(loans & advances). This amount of Rs. 18, 80, 627/- is required to be considered as net profit as per the Profit & Loss account shown by the assessee. Contention of the assessee that only specified adjustment is required to be made is agreeable but the facts of the case under consideration are different because agreed addition before the A.O. is a part and parcel of net profit as shown by the assessee in Profit & Loss Account and therefore this is not a part of adjustment. There is no restriction in calculating correct net profit as per Profit & Loss account which includes agreed addition where assessee stated having no business relationship with those persons and as was pre occupied by some personal work was unable to produce persons & in order to buy peace of mind and having assurance not to impose penalty offer the amount which he has received from those persons be treated as their income. Thus when the net profit of the assessee is the net profit shown in the Profit & Loss account plus agreed addition that will be the net profit as per the assessee and in the light of the fact that the A.O. did not make any extra adjustment. The AO has made correct net profit accepted by the assessee therefore no infirmity neither in the order of A.O. nor in the order of CIT(A) - against assessee.

Summary

Issues involved: Appeal against order under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2008-09. Addition of Rs. 3,70,000 to book profit for Minimum Alternate Tax (MAT) calculation under section 115JB of the Income Tax Act, 1961.

Analysis:

1. Issue 1: Appeal against order under section 143(3): The appeal was filed by the assessee against the order dated 01.03.2012 passed by the ld. CIT(A)-II, Agra for the Assessment Year 2008-09. The assessee raised grounds of appeal stating that the order passed under section 143(3) by the Assessing Officer and confirmed by the CIT(A) was wrong, unjust, and illegal. However, as the assessee did not make specific submissions regarding this ground during the proceedings, this ground of appeal was rejected.

2. Issue 2: Addition to book profit for MAT calculation: The main issue revolved around whether the addition of Rs. 3,70,000 should be included in the calculation of book profit under section 115JB of the Income Tax Act, 1961. The AO had computed the book profit under section 115JB, including the admitted addition of Rs. 3,70,000. The assessee contended that the AO was not authorized to make adjustments in book profit for calculation under section 115JB, except those provided in the said section, citing relevant case law. The CIT(A) upheld the AO's decision, stating that the addition was rightly made. The Tribunal analyzed the provisions of section 115JB and noted that the net profit as per the Profit & Loss account should include the agreed addition made by the assessee before the AO. As the agreed addition was part of the net profit shown in the accounts, it was not considered an extra adjustment but a correct net profit accepted by the assessee. Therefore, the Tribunal confirmed the CIT(A)'s order, dismissing the appeal of the assessee.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the addition of Rs. 3,70,000 to the book profit for the purpose of MAT calculation under section 115JB of the Income Tax Act, 1961.