2016 (6) TMI 738 - HC - Income Tax

MAT liability under section 115JB - ITAT set aside the computation of the Assessing Officer (AO), taxing the book profit, in accordance with section 115JB of the Income-tax Act - Held that - In the instant case, there was no determination of the Assessing Officer that the final accounts of the assessee were not prepared in accordance with the Schedule VI to the Companies Act. Hence the determination of liability for payment of minimum alternate tax under section 115JB of the Income-tax Act, by ignoring the profit and loss account was not through due process. When the corrected return in consonance with the audited profit and loss account was submitted, those figures should have been the basis for determination of the minimum alternate tax under section 115JB of the Income-tax Act. In the proceeding under consideration, the Appellate Tribunal concluded that the end result as computed by the Assessing Officer was of his own making and the assessee could not be held liable to tax for non-disclosure of the income which the assessee had returned but adjusted against brought forward losses. We find such observation of the Tribunal with regard to the procedure adopted by the Assessing Officer, is consistent with the ratio of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME Court ), Malayala Manorama Co. Ltd. v. CIT reported in 2008 (4) TMI 20 - SUPREME COURT and also this court s decision in Amines and Plasticizers Ltd. v. Deputy CIT (Assessment) reported in 2006 (11) TMI 112 - GAUHATI HIGH COURT

Summary

Issues Involved:
1. Whether the Assessing Officer (AO) can disregard the audited profit and loss account for the computation of Minimum Alternate Tax (MAT) under section 115JB of the Income-tax Act.
2. The validity of the corrected return filed by the assessee beyond the statutory time limit.
3. The jurisdiction of the AO in determining book profit under section 115JB of the Income-tax Act.
4. The acceptance of figures in the audited accounts prepared as per Schedule VI to the Companies Act, 1956.

Detailed Analysis:

Issue 1: Whether the Assessing Officer (AO) can disregard the audited profit and loss account for the computation of Minimum Alternate Tax (MAT) under section 115JB of the Income-tax Act.

The court noted that the assessee had electronically filed their return showing nil income, which was later corrected due to an inadvertent error. The AO, however, did not consider the corrected return as it was filed beyond the statutory time limit and proceeded to assess the MAT liability based on the original return. The Income-tax Appellate Tribunal quashed this assessment, stating that the AO should not have disregarded the audited profit and loss account prepared according to Parts II and III of Schedule VI to the Companies Act, 1956. The court upheld this view, emphasizing that the AO has no jurisdiction to re-determine the book profit by substituting figures from the audited return filed by the assessee.

Issue 2: The validity of the corrected return filed by the assessee beyond the statutory time limit.

The assessee explained that the error in the initial return was due to the first-time electronic filing, and a corrected return was subsequently filed. The AO rejected this corrected return as it was beyond the statutory time limit. The Commissioner of Income-tax (Appeals) upheld this rejection, but the Tribunal found that the AO should have considered the corrected return for the purpose of assessment. The court agreed with the Tribunal, stating that the figures in the corrected return should have been the basis for determining the MAT liability.

Issue 3: The jurisdiction of the AO in determining book profit under section 115JB of the Income-tax Act.

The court referred to the Supreme Court's rulings in Apollo Tyres Ltd. v. CIT and Malayala Manorama Co. Ltd. v. CIT, which established that the AO has limited power to examine whether the books of account are certified as properly maintained under the Companies Act. The AO cannot embark upon a fresh inquiry into the entries made in the books of account. The court reiterated that the AO's jurisdiction is confined to making corrections as provided in the Explanation to section 115JB and cannot go behind the net profit shown in the audited profit and loss account.

Issue 4: The acceptance of figures in the audited accounts prepared as per Schedule VI to the Companies Act, 1956.

The court emphasized that the accounts prepared in accordance with Parts II and III of Schedule VI to the Companies Act, 1956, should be accepted by the AO. The AO's failure to take into account the corrected return and the subsequent tinkering with the final accounts prepared according to the Companies Act was deemed unjustified. The court found that the Departmental authorities did not establish that the profit and loss account was not in compliance with the Companies Act, and thus, the determination of MAT liability was not through due process.

Conclusion:

The court concluded that the AO's assessment of MAT liability by disregarding the audited profit and loss account and the corrected return was unjustified. The Tribunal's decision to quash the AO's assessment was consistent with the Supreme Court's rulings and the Gauhati High Court's own precedents. Consequently, the appeal by the Revenue was dismissed, affirming the impugned order of the Income-tax Appellate Tribunal.