2019 (6) TMI 1214 - AT - Income Tax

Rectification u/s 154 for recomputing book profit u/s 115JB - book profit computed on the basis of return filed by the assessee voluntarily u/s 153A - for computation of book profits assessee make adjustment in sale and reduced the profit - HELD THAT - No cogent explanation was given by the assessee in the course of the assessment proceedings as regards as the quantum of purchase - sale figure which was rectified and the decrease in sale from 149% of purchase to 127% of purchase. The order of the CIT(A) is completely silent on this issue. CIT(A) also didn t elucidate as to how the book profit was correctly computed at 9, 29, 04, 504/- in the order dt.26.12.2012 u/s.251/153A/143(3) of the Act. We note that provision of section 115JB is a code itself and hence whatever mentioned in the section should be followed to compute book profit. We are of the view that the Assessing Officer should examine what is additions or deductions in the book profit as computed by assessee company as per the provisions of Companies Act. Provisions relating to adjustments by way of increase and decrease to the net profit shown by the assessee in profit and loss account are very explicit in section 115JB. The items which are to be added to the net profit have been listed out in Explanation 1 to that section. A.O./CIT(A) should adhere to that list and cannot travel beyond these items. The provisions of section 115JB do not leave any room for adjustment by the AO other than those mentioned in Explanation 1 to Section 115JB to the net profit reflected in the accounts of any assessee. We note that neither AO nor ld. CIT(A) explained the provision of section 115JB in relation to computation of book profit. Under the circumstances we set aside the order of ld. CIT(A) and remit the issue back to the file of A.O. with the direction to compute the book profit as per the provisions of section 115JB - Appeals of the revenue are allowed for statistical purposes.

Issues:
Appeals filed by revenue against orders by Commissioner of Income Tax (Appeals) for assessment years 2008-09 and 2009-10 regarding rectification u/s 154 for recomputing book profit u/s 115JB.

Analysis:
1. The appeals were heard together due to common issues. The assessee's appeal for 2009-10 was considered the lead case.
2. The revenue raised grounds of appeal challenging the CIT(A)'s decision on rectification u/s 154 for book profit calculation under section 115JB.
3. The assessee initially declared a book profit of &8377; 17,44,73,626, but the assessment was completed at &8377; 9,29,04,504 due to inadvertence, leading to a rectification notice u/s 154.
4. The CIT(A) deleted the addition made by the Assessing Officer, citing no mistake in the book profit calculation as per previous orders.
5. The Revenue appealed against the CIT(A)'s decision.
6. The Revenue submitted that the book profit was incorrectly computed, leading to a demand of &8377; 2,18,62,624.
7. The CIT(A) order was defended by the assessee's counsel.
8. The Tribunal noted the lack of explanation on purchase-sale figures and the incorrect computation of book profit. The provisions of section 115JB should be strictly followed for book profit calculation.
9. The Tribunal emphasized adherence to the explicit adjustments listed in section 115JB and remitted the issue back to the Assessing Officer for proper computation as per the law.
10. Both appeals of the revenue were allowed for statistical purposes.

This judgment highlights the importance of correctly computing book profit under section 115JB and the necessity to adhere to the provisions of the law while making such calculations. The Tribunal stressed the need for precise adjustments as per the explicit provisions of the statute, emphasizing the role of the Assessing Officer in ensuring compliance with the law.

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