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2016 (5) TMI 1035 - AT - Income TaxAddition for claiming the loss without the support of audited accounts - losses are claimed by the assessee on the investigation report carried out by KPMG - CIT(A) deleted the addition - Held that - Supreme Court in the case of Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME Court ) we find that income tax should be levied on the real profits. The real profit should be worked out on the basis of accounting principles and in the ordinary course of commercial trading. The accounting entries made in the books of accounts which are not in the conformity with accountancy principles cannot be regarded as conclusive evidence with regard to the actual profit or loss of the company. What is necessary to consider is the true nature of transaction whether resulting in profit or loss. In the instant case, we find that there were several financial irregularities as reported by KPMG but the AO rejected the same instead of verifying the genuineness of the report by holding that the matter is pending in the court of law. In our considered view the real income should be brought to tax and the AO should not merely rely on the data submitted by the assessee. Therefore we do not find any infirmity in the order of Ld CIT(A) - Decided against revenue Addition on account of excess depreciation claimed in the revised return of income - Held that - AO disallowed the excess depreciation claimed by the assessee in the revised return of income on the ground that the revised return of income was not supported with the Tax Audit Report. However, we further find that the AO did not point out any defect in the working of excess depreciation claimed by the assessee. Now in our view, it is not appropriate on the part of the AO to disallow the excess depreciation without giving any findings in the claim of the assessee. - Decided against revenue Addition on account of provisions written back without having the supporting evidence - Held that - The remand report of the AO that in the earlier years the provisions were disallowed by the assessee in the computation of income. Accordingly, in our view, the provision written back should be allowed as deduction from the total income of the assessee - Decided against revenue Profit declared in the original return of income held as book profit for the purpose of Section 115JB by CIT(A) - Held that - Section 115JB of the Act starts with nonobstante clause Notwithstanding anything contained in any other provision in this act, meaning thereby that the Section 115JB shall be applicable notwithstanding anything contained in any other provision of the Act and shall have overriding effect upon other provisions of the Act. The Section 115JB stipulates payment of Minimum Alternate tax based upon the book profit computed as per provisions of Section 115JB(2) of the Act. Book Profit shall be computed as per Section 115JB(2) of the Act which stipulates that Book Profit means net profit as shown in Profit and Loss Account prepared for financial year in accordance with Part II and III of Schedule VI to the Companies Act, 1956, also complying with other conditions as stipulated in Section 115JB(2) of the Act. Such book profit has to be increased by item Nos. (a) to (k) of the Said Explanation 1 to Section 115JB of the Act if they are debited to the Profit and Loss Account and from such profit item Nos. (i) to (viii) of the Explanation are to be reduced. The figure arrived at after the above exercise is the book profit of the assessee for the relevant previous years. In the instant case the profit declared in the original return of income was as per the requirement of section 115JB of the Act and the profit declared in the revised return does not meet the conditions laid down in the said section. Therefore we are of the view that there is no infirmity in the order of Ld. CIT(A) - Decided against the assessee.
Issues Involved:
1. Delay in filing appeals by the Revenue. 2. Claim of loss due to financial irregularities. 3. Excess depreciation claimed in the revised return. 4. Deduction for provisions written back. 5. Treatment of expenditure on debit cards. 6. Application of Section 115JB for Minimum Alternate Tax (MAT). Detailed Analysis: 1. Delay in Filing Appeals by the Revenue: The Revenue filed affidavits explaining the delay in filing appeals due to approval processes and weekly holidays. The assessee did not object to condonation of delay. The Tribunal condoned the delay and admitted the appeals for hearing. 2. Claim of Loss Due to Financial Irregularities: The assessee, a logistics and container manufacturing company, discovered financial irregularities through a KPMG report. The irregularities led to overstated income in assessment years (AY) 2007-08, 2008-09, and 2009-10. The assessee filed revised returns for AY 2008-09 and 2009-10, declaring losses. The Assessing Officer (AO) rejected the revised returns, citing pending judicial investigations and lack of independent audit findings. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the loss claims, noting no defects in the KPMG report and emphasizing real profits should be taxed. The Tribunal upheld CIT(A)'s decision, referencing the Supreme Court's judgment in CIT Vs. Lakshmi Machine Works, which emphasizes taxation on real profits. 3. Excess Depreciation Claimed in the Revised Return: The assessee claimed additional depreciation in the revised return, unsupported by a tax audit report. The AO disallowed the excess depreciation. CIT(A) directed the AO to verify the revised claim. The Tribunal found no infirmity in CIT(A)'s order, emphasizing the need for the AO to examine the revised depreciation claim. 4. Deduction for Provisions Written Back: The assessee claimed a deduction for provisions written back, which the AO disallowed due to lack of supporting evidence. CIT(A) allowed the deduction, noting the provisions were disallowed in earlier years. The Tribunal upheld CIT(A)'s decision, agreeing that provisions written back should be deductible. 5. Treatment of Expenditure on Debit Cards: The Revenue raised an issue about the treatment of debit card expenditure as revenue expenditure. The Tribunal found no such issue in the orders of CIT(A) or AO and dismissed it as infructuous. 6. Application of Section 115JB for Minimum Alternate Tax (MAT): The assessee challenged the application of Section 115JB, arguing that the book profit declared in the original return should not be considered due to fraudulent entries. CIT(A) held that the profit declared in the original return, approved in the AGM, should be considered for MAT purposes. The Tribunal upheld CIT(A)'s decision, citing the Supreme Court's ruling in Apollo Tyres Ltd. Vs. CIT, which limits the AO's power to alter book profits certified under the Companies Act. The Tribunal emphasized that Section 115JB has an overriding effect and the revised financial statements were not approved in the AGM, thus the original return's profit should be used for MAT. Conclusion: The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's cross-objections, affirming CIT(A)'s decisions on loss claims, depreciation, and provisions written back, while upholding the application of Section 115JB for MAT based on the original return's profit.
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