1993 (5) TMI 45 - AT - Income Tax

Summary

Issues Involved:
1. Determination of "book profit" u/s 115J.
2. Levy of additional tax u/s 143(1A).

Summary:

1. Determination of "book profit" u/s 115J:
The primary issue was whether the "book profit" should be considered as the net profit shown in the profit and loss appropriation account or the profit and loss account. The assessee argued that the book profit should be Rs. 5,13,210 as per the profit and loss appropriation account, while the Assessing Officer considered Rs. 1,90,94,437 as per the profit and loss account. The Tribunal noted that the term "book profit" is not defined in the Income-tax Act but is supposed to be the profit shown in the profit and loss account prepared as per the Companies Act. The Tribunal referred to the ITAT Special Bench decision in Sutlej Cotton Mills Ltd. v. Asstt. CIT, which held that the book profit should consider profits assessable as income under the Income-tax Act. The Tribunal concluded that the book profit in this case should be Rs. 1,10,57,136, computed by deducting prior period adjustments of Rs. 80,37,301 from the net profit of Rs. 1,90,94,437. The Tribunal also directed the Assessing Officer to examine the further allowance of Rs. 1,05,43,926 as depreciation for earlier years under clause (iv) of the proviso to the Explanation to section 115J.

2. Levy of additional tax u/s 143(1A):
The assessee contested the levy of additional tax, arguing that the variation made by the Assessing Officer was not due to any prima facie adjustment. The Tribunal held that the assessee's incorrect statement of book profit as per the profit and loss appropriation account constituted a prima facie error. Therefore, the adjustment made by the Assessing Officer was justified, and the levy of additional tax was confirmed in principle. However, the assessee was entitled to consequential relief in the amount of additional tax based on the final computation of net total income as per the Tribunal's directions.

Conclusion:
The appeal was partially allowed, with directions to the Assessing Officer to re-examine the allowance of depreciation for earlier years and to adjust the book profit accordingly. The levy of additional tax was confirmed in principle, subject to consequential relief based on the revised computation.