2015 (8) TMI 314 - AT - Income Tax

Cash deposits found in the Bank account assessed under section 68 - Held that - The assessee claims to have maintained regular books and further claimed that sufficient cash balance was available in the books. However, we notice that the tax authorities have made the impugned addition without considering the explanation of the assessee as well as the books of accounts maintained by the assessee, which we consider to be not proper. Accordingly, we are of the view that this issue requires consideration de nova by considering the books of accounts and explanations of the assessee. Accordingly, we set aside the order of ld. CIT(A) on this issue and restore the same to the file of the AO to examine this issue afresh in the light of discussions made supra and take appropriate decision in accordance with the law, after providing necessary opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Computing book profit under section 115JB of the Act by adding Capital loss - Held that - The assessing officer has proceeded to compute the Book Profit u/s 115JB of the Act against the provisions of the Act. It is well settled proposition that the provision of sec. 115JB is a complete code by itself and hence the book profit should be computed strictly in accordance with the provisions contained therein. The net profit disclosed in the Profit and Loss account prepared in accordance with the Companies Act should be the starting point to which the additions and deductions prescribed in that provision are required to be added and deduction. Accordingly the Book Profit should be arrived. In this connection, we may gainfully refer to the decision rendered by the Hon ble Supreme Court in the case of Apollo Tyres Ltd (2002 (5) TMI 5 - SUPREME Court ). On the contrary, we notice that the assessing officer has taken the total income computed before setting off of the brought forward business under normal provisions of the Act, as the starting point, which is legally not correct. Accordingly, the Ld CIT(A) was not justified in confirming the same. Accordingly, we set aside the order of Ld CIT(A) on this issue also and direct the assessing officer to compute the book profit strictly in accordance with the provisions of sec. 115JB of the Act, as discussed above.- Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Addition made under section 68 of the Income Tax Act for unexplained bank deposits.
2. Computing book profit under section 115JB of the Act by adding capital loss.

Analysis:

Issue 1: Addition under Section 68 of the Income Tax Act
The assessee challenged the addition made under section 68 for unexplained bank deposits. The AO assessed a certain amount as income of the assessee due to unexplained cash deposits in the bank account. The ld. CIT(A) reduced the amount but confirmed a portion of it. The assessee argued that proper books of account were maintained, and the cash deposits were reflected in the records. The Tribunal noted that the assessee provided relevant extracts from the cash book showing deposits and withdrawals, indicating a sufficient cash balance to explain the bank deposits. Referring to a similar case precedent, the Tribunal found that the tax authorities made the addition without considering the explanations and books of accounts properly. Consequently, the Tribunal set aside the order of the CIT(A) and directed a fresh examination by the AO.

Issue 2: Computing Book Profit under Section 115JB
The second issue involved the addition of a loss on the sale of a house property while computing the book profit under section 115JB of the Act. The AO computed the book profit based on incorrect methodology, deviating from the provisions of the Act. The Tribunal emphasized that the book profit should strictly adhere to the provisions of section 115JB, starting from the net profit disclosed in the Profit and Loss account prepared as per the Companies Act. Citing a Supreme Court decision, the Tribunal found the AO's approach incorrect and directed a proper computation of book profit in accordance with the Act. Consequently, the appeal by the assessee was treated as allowed for statistical purposes.

In conclusion, the Tribunal's judgment addressed the issues of unexplained bank deposits and the correct computation of book profit under section 115JB, emphasizing adherence to statutory provisions and proper consideration of explanations and books of accounts in tax assessments.