2016 (7) TMI 524 - AT - Income Tax

Revision u/s 263 - disallowance under section 14A by applying Rule 8D - Held that - We find merit in the contention of assessee that the said Rule not being applicable to the year under consideration, i.e. A.Y. 200607, it cannot be said that there was any error in the order of the Assessing Officer in not making disallowance under section 14A by applying the said Rule. At the time of hearing before us, even the ld. D.R. has not been able to raise any material contention to dispute this position. We, therefore, hold that there was no such error in the order of the Assessing Officer calling for revision by the ld. CIT under section 263.- Decided in favour of assessee MAT - Not adding the profit arising from sale of shares while computing the book profit - Held that - It is observed that such profit was not credited by the assessee to the Profit & Loss Account for the year under consideration and the same was shown as liability in the balance-sheet. The amount of such profit, therefore, was not included in the profit as reflected in the Profit & Loss Account prepared by the assessee, which was duly audited and presented in the A.G.M. As held by the Hon ble Supreme Court in the case of Apollo Tyres (2002 (5) TMI 5 - SUPREME Court ), the profit reflected in the Profit & Loss Account, which is duly audited and presented before the A.G.M., cannot be tinkered with except by way of adjustments, which are permissible as per Explanation to Section 115JB. It is an undisputed position that the adjustment on account of profit arising from sale of shares, which was not credited to the Profit & Loss Account of the assessee-company is not covered by such Explanation. Moreover, it is also pertinent to note that this issue was examined by the Assessing Officer during the course of assessment proceedings and the claim of the assessee thereon was accepted by the Assessing Officer on such examination by applying his mind, as is evident from the relevant observations recorded by the Assessing Office. Thus we are of the view that there was no error in the order of the Assessing Officer in not including the profit arising from the sale of shares of M/s. Apeejay Finance Group Limited in the book profit as alleged by the ld. CIT in his impugned order calling for revision under section 263.- Decided in favour of assessee Not verifying the quantum of short-term capital gain declared by the assessee on sale of flats as per the relevant section 50 - Held that - As the assessee has not raised any argument to dispute or challenge the same. We, therefore, uphold the impugned order of the ld. CIT in so far as this issue is concerned. - Decided against assessee

Summary

Issues Involved:
1. Disallowance under section 14A not in accordance with Rule 8D.
2. Discrepancy in profit on sale of flats and shares.
3. Profit on sale of shares not credited to Profit & Loss Account.

Analysis:

1. Disallowance under section 14A:
The Assessing Officer disallowed a certain amount under section 14A, which the ld. CIT found to be incorrect. The ld. CIT determined that the disallowance should have been higher based on Rule 8D. The assessee argued that the Rule was not applicable for the relevant assessment year. The Tribunal agreed with the assessee, stating that since Rule 8D was not applicable for the year under consideration, the Assessing Officer's decision was not erroneous.

2. Discrepancy in Profit Calculation:
There were discrepancies in the profit calculations related to the sale of flats and shares. The ld. CIT found errors in the treatment of profits arising from the sale of shares of a specific company. The assessee contended that the profit was accounted for in the subsequent year as prior period income due to inadvertence, following Accounting Standard-5. The Tribunal upheld the assessee's argument, noting that the profit was not included in the Profit & Loss Account for the relevant year, as it was shown as a liability in the balance sheet. Since the adjustment was not covered by the Explanation to Section 115JB and the Assessing Officer had examined the issue, the Tribunal found no error in the original assessment.

3. Profit on Sale of Shares not Credited:
The ld. CIT raised concerns about the profit on the sale of shares not being credited to the Profit & Loss Account. The Tribunal observed that the profit was not included in the Profit & Loss Account, as it was shown as a liability in the balance sheet. Referring to the decision in the Apollo Tyres case, the Tribunal held that the profit in the audited Profit & Loss Account could not be altered except through permissible adjustments. Since the Assessing Officer had examined the issue and accepted the assessee's claim, the Tribunal concluded that there was no error in the original assessment regarding this issue.

In conclusion, the Tribunal partly allowed the appeal of the assessee, finding no errors in the original assessment regarding the issues raised by the ld. CIT. The Tribunal's decision upheld the arguments presented by the assessee regarding the treatment of profits and disallowances, based on the applicable legal provisions and accounting standards.