2018 (12) TMI 1974 - AT - Income Tax

Rectification u/s 154 - disagreement with the determination of book profit made by the assessee under Section 115JB - book profit u/s 115JB determined at amount as against NIL determined by the assessee - dHELD THAT - When the assessee carried the matter in appeal before the CIT(A), he assailed the action of the AO on points of law as also on facts. In particular, assessee pointed out that the necessary computation of book profit u/s 115JB was duly available in Form 29B at the time of assessment before the AO and in terms thereof, no liability arose. Therefore, if AO was to take a different view, the same could not be done by invoking Sec. 154 of the Act, which permitted the AO merely to rectify apparent mistakes. Points of difference between computation of book profit made by the Assessing Officer and that by the assessee were such, which involved debatable issues, and thus was outside the purview of Sec. 154 of the Act. So far as the assessee was concerned, it had cleared its stand which was very much before the Assessing Officer when he passed the original assessment order. Thus, the error of assessee not having declared its manner of computation of book profit under Section 115JB of the Act is not something which is reflected by the record. No doubt, the CIT(A) is justified in referring to the amendment made by the Finance (No. 2) Act, 2009 prescribing that Provision for bad and doubtful debt is not deductible for computing book profit, yet that is not the basis on which the Assessing Officer invoked the jurisdiction under Section 154 of the Act. Secondly, even if this aspect of the matter is held in favour of the Revenue, yet the other two aspects brought out by the assessee before the CIT(A), namely, non-consideration of prior period items of expenses and non-consideration of adjustment for lower of depreciation or loss, are issues which are well supported and consistent with the requirement of Sec. 115JB of the Act; and, the same have been unjustly denied by the lower authorities. If these aspects are kept in mind, the determination of book profit made by the Assessing Officer under Section 115JB of the Act is clearly untenable.Appeal of the assessee is allowed.

Summary

Issues:
Appeal against order under Section 154 of the Income Tax Act regarding determination of book profit under Section 115JB for Assessment Year 2010-11.

Analysis:

1. The appeal arose from an order passed by the Assessing Officer under Section 154 of the Income Tax Act, amending the assessment order under Section 143(3) to determine the book profit under Section 115JB at ?6,95,57,438. The Assessing Officer's action was upheld by the CIT(A), leading to the appeal before the Tribunal by the assessee.

2. The Assessing Officer issued a notice under Section 154, proposing rectification due to an alleged error in the assessment related to the book profit determination under Section 115JB. The assessee contended that the book profit computation was correctly reflected in Form 29B, resulting in NIL tax liability under Section 115JB. However, the Assessing Officer proceeded with the rectification, leading to the dispute.

3. The CIT(A) upheld the Assessing Officer's action, citing legal amendments and judgments to support the decision. The assessee contended that the adjustments made were debatable and not within the purview of Section 154. The Tribunal noted the conflicting computations and legal arguments presented by both parties.

4. The Tribunal emphasized that Section 154 allows rectification only for apparent mistakes and not for debatable issues. It observed that the Assessing Officer's decision to amend the assessment order based on differing book profit computations was beyond the scope of Section 154. The Tribunal found in favor of the assessee, setting aside the CIT(A)'s order and ruling the Assessing Officer's invocation of Section 154 as unjust in law and fact.

5. Consequently, the Tribunal allowed the appeal of the assessee, overturning the lower authorities' decisions and holding that the determination of book profit under Section 115JB by the Assessing Officer was untenable. The order was pronounced in open court on 12th December 2018.