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2022 (6) TMI 1488 - AT - Income TaxAssessment u/s 153A - MAT determination - computation of book profits u/s. 115JB - return of income filed in response to notice u/s. 153C of the Act had recomputed the profits u/s. 115JB after adjusting impairment of assets and depreciation on Windmill - HELD THAT - CIT (A) did not go into the merits of the case stating that the assessee s the return of income filed in response to notice u/s. 153C of the Act had recomputed the profits u/s. 115JB after adjusting impairment of assets and depreciation on Windmill. This contention of the CIT (A) is not correct as there is no estoppel in tax laws. CIT (A) ought to have examined the adjustment under the provisions of the Act before deciding whether the said adjustments are correctly done in accordance with law. He cannot confirm the adjustments merely based on the fact that the assessee himself has made such adjustment. On the issue of whether the AO / CIT (A) can make adjustments to book profits computed u/s. 115JB, we notice that similar issue came up for consideration before this Tribunal in the case of DCIT v. M/s. Cauvery Aqua Pvt. Ltd. 2017 (10) TMI 638 - ITAT BANGALORE as held that the AO was not competent to go into the computation of Book Profits u/s 115JB of the Act except to the limited extent of making additions and reductions as laid out in Explanation (1) to sec. 115JB of the Act. We find that the ld CIT (A) has also tested the claim of depreciation as per the provisions of Explanation (1) to sec. 115JB while coming to the view that the AO was not authorized to make the addition while re-working the extent of depreciation claimed by the assessee. The accounts of the assessee have been certified by the Statutory Auditors. The accounting policies followed by the assessee have not been found fault with by the Statutory Auditors or the authorities concerned under the Companies Act. In such cases, the AO is not permitted to make any variation by holding that the assessee has not followed the mandate of the Accounting Standards and the provisions of Companies Act while preparing its financial statements. The object of sec. 115JB of the Act is to bring to tax the book profits as shown by the company to its shareholders and keeping in view the aforesaid object behind sec. 115JB of the Act and the judicial pronouncements on the scope of the AO s powers computing the book profits, we do not find any reason to interfere with the impugned order passed by the ld CIT (A) on this issue and therefore uphold the same We are of the considered view that the issue should go back to the CIT(Appeals) to examine the case afresh on merits and decide the adjustment to be made under section 115 JB in accordance with the provisions of the Act. Justification for the AO to hold that the write off of investments amounts to diminution in the value of assets - On perusal of the materials on record it is clear that the investments have indeed been written off by the assessee in the books of accounts and it is not provision made. Therefore it will not fall within the Explanation to section 115JB(2). In view of the above and respectfully following the decision of the coordinate bench of the Tribunal in the case of M/s. Cauvery Aqua Pvt. Ltd. (supra), we delete the addition made by the AO. Thus, this appeal is partly allowed. Validity of assessment order passed u/s. 153A r.w.s. 143(3) - assessment without any incriminating material - HELD THAT - In the present case, the time limit for issue of notice u/s. 143(2) has expired on 30/09/2012 and the search happened on 18/12/2012. Hence on the date of search the proceedings for the assessment year 2011-12 would be unabated proceedings and the additions made in the assessment would be restricted to materials found in the course of search which are incriminating. We notice that the various additions made by the AO are not related to any incriminating materials found in search - Thus additions made by the AO for the assessment year 2011-12 is to be deleted. Disallowance made u/s.14A with reference to the provisions of Rule 8D(2)(ii) (iii) - HELD THAT - We notice that coordinate bench of the Tribunal in assessee s own case 2014 (8) TMI 1249 - ITAT BANGALORE had directed the AO to examine and include only interest that is not attributable to any particular income / receipt for the purpose of arriving at the disallowance u/s. 8D(2)(ii) of the I.T. Rules - thus we direct the AO to recompute the interest and the disallowance should be restricted to the amount of exempt income earned by the assessee.
Issues Involved:
1. Validity of the assessment made under section 153A. 2. Computation of book profits under section 115JB. 3. Addition of deemed dividend. 4. Disallowance under section 14A read with Rule 8D. 5. Interest under sections 234A, 234B, and 234C. Detailed Analysis: 1. Validity of the Assessment under Section 153A: The assessee challenged the validity of the assessment made under section 153A, arguing that there was no valid search conducted, and hence, the provisions of section 153A were not applicable. The CIT(A) rejected this legal ground, stating that the validity of a search cannot be questioned before him. The Tribunal noted that the assessee did not press this ground during the hearing, and hence, it was dismissed as not pressed. 2. Computation of Book Profits under Section 115JB: The issue revolved around the computation of book profits at Rs. 120,97,36,141, which included adjustments towards impairment loss and depreciation on windmills. The Tribunal observed that the CIT(A) did not examine the merits of these adjustments and merely confirmed them based on the fact that the assessee had included them in the return filed in response to the notice under section 153A. The Tribunal cited the decision in the case of DCIT v. M/s. Cauvery Aqua Pvt. Ltd., which held that the AO has limited power to make adjustments to book profits as per the Explanation to section 115JB. The Tribunal remanded the issue back to the CIT(A) to examine the adjustments afresh on merits. 3. Addition of Deemed Dividend: The AO made an addition of Rs. 59,68,494 as deemed dividend, which was deleted by the CIT(A). The Tribunal upheld the deletion, noting that the CIT(A) had rightly deleted the protective assessment of deemed dividend. 4. Disallowance under Section 14A read with Rule 8D: For the assessment year 2011-12, the assessee contended that the additions made by the AO were not based on any incriminating material found during the search and hence should be deleted. The Tribunal agreed, citing the decision in the case of Sree Lakshmi Venkateshwara Minerals vs. DCIT, which held that additions in unabated assessments must be based on incriminating material found during the search. Consequently, the additions made by the AO were deleted. For the assessment year 2012-13, the AO made a disallowance under section 14A by applying Rule 8D. The Tribunal directed the AO to recompute the disallowance, ensuring it does not exceed the exempt income earned by the assessee, following the decision in the case of GMR Enterprises. 5. Interest under Sections 234A, 234B, and 234C: The ground relating to interest under sections 234A, 234B, and 234C was noted to be consequential in nature and would be adjusted based on the final outcome of the other issues. Conclusion: The Tribunal allowed the appeals partly, remanding the issue of computation of book profits back to the CIT(A) for fresh examination and deleting the additions made under section 14A for the assessment year 2011-12. The disallowance under section 14A for the assessment year 2012-13 was directed to be recomputed in line with judicial precedents. The issues relating to the validity of the assessment under section 153A and the addition of deemed dividend were dismissed or upheld as per the findings.
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