2020 (9) TMI 418 - HC - Income Tax

Computation of book profit u/s 115JB - AO treated the interest income as income from other sources thereby denying the deduction under Section 80 IA - whether the assessing officer was right in coming to the conclusion that the accounts of the assessee were not prepared in accordance with the Companies Act, 1956 ? - HELD THAT - Referring to decisions to emphasis the importance of following the accounting standards as prescribed under the 1956 Act, as already held by us, we find no question of law or substantial question of law arising on the said issue. Additions were made under the normal provisions of the Act as well as under Section 115 JB, which the assessee prayed for deletion and submitted that since it has received and admitted, the impugned receipts for the subsequent year, the additions made under the normal provisions of the Act, as well as under Section 115 JB may be deleted and the rate of tax remains the same in all these years under Section 115 JB. In fact, the ground raised by the assessee was to delete the impugned additions on the ground that the receipts have been subjected to the tax in the subsequent year whatever the assessee had received from TANGEDCO. The Tribunal did not agree with the assessee and sustained the addition, if such is the factual position, the natural consequences that is to flow is to issue a direction to the assessing officer to take appropriate action in so far as the assessments from the year 2010-2011 to 2014-2015, during which the assessee has been taxed on the said receipts. If such a consequential direction is not issued, then, the assessee would be subjected to double taxation which is unauthorised in Law. This issue can clearly be brought within the scope of Sub-Section (4) of 260 A and the Court would be justified in issuing appropriate direction to the assessing officer to reopen the assessments from the year 2010-2011 to 2014 -2015 on this issue alone and examine whether the assessee has paid taxes on these receipts, which addition have been sustained in the impugned assessment year 2009-2010 and after affording an opportunity to the assessee redo the assessment only on this aspect. Appeals are dismissed as no substantial question of law arises for consideration.

Issues Involved:
1. Whether the accounts of the assessee were prepared in accordance with the Companies Act, 1956.
2. Whether the additions made by the assessing officer were proper.
3. Whether the CIT(A) and the Tribunal were right in affirming the findings of the assessing officer.
4. Whether the Tribunal should have issued a direction to the assessing officer to take appropriate steps for assessment years 2010-2011 to 2014-2015.

Detailed Analysis:

1. Preparation of Accounts as per Companies Act, 1956:
The primary issue was whether the assessee's accounts were prepared in accordance with the Companies Act, 1956. The assessing officer found that the assessee did not recognize income in accordance with Schedule VI of the 1956 Act. The statutory auditors highlighted this in the audit report, noting the non-recognition of revenue and provisions for cash discounts. The assessing officer concluded that the assessee did not follow the matching concept for revenue and expenses and did not adhere to the accounting standards prescribed by the ICAI.

2. Propriety of Additions Made by Assessing Officer:
The assessing officer added ?41,76,92,807 under 'Delayed Revenue Recognition' as business income and treated interest income of ?5,93,84,195 as income from other sources, denying deduction under Section 80IA of the Act. The officer also computed the book profit under Section 115JB at ?2,23,21,63,807. The officer's decision was based on the finding that the assessee did not follow accounting standards properly and did not prepare financial statements as per Part II and Part III of Schedule VI of the 1956 Act.

3. Affirmation by CIT(A) and Tribunal:
The CIT(A) partly allowed the assessee's appeal but concurred with the assessing officer on key points, holding that the books of accounts were not prepared as per the 1956 Act. The Tribunal also upheld this view, finding that the accounts were not in accordance with the 1956 Act. The Tribunal noted that the income to be assessed in a particular year cannot be assessed in any other year, emphasizing the importance of following accounting standards.

4. Direction for Subsequent Assessment Years:
The assessee argued that the Tribunal should have directed the assessing officer to take appropriate steps for assessment years 2010-2011 to 2014-2015, during which the assessee received the disputed sums and was assessed to tax on these receipts. The Tribunal did not issue such a direction. The court found that if the assessee has paid taxes on these receipts in subsequent years, a direction should be issued to avoid double taxation. Consequently, the court directed the assessing officer to reopen assessments for the years 2010-2011 to 2014-2015 to ascertain if taxes were paid on the impugned receipts and to redo the assessment on this aspect alone.

Conclusion:
The appeals were dismissed as no substantial question of law arose for consideration. However, the court issued a direction to the assessing officer to reopen the assessments for the years 2010-2011 to 2014-2015 to ensure that the assessee is not subjected to double taxation. The court emphasized the importance of adhering to accounting standards and the provisions of the Companies Act, 1956.

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