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TMI Blog2015 (6) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order passed is prejudicial to the interests of revenue as the income determined under the normal provisions was much more than the book profit computed u/s 115JB of the Act. Therefore, as one of the conditions of section 263 is not fulfilled, exercise of power u/s 263 is not valid. Accordingly, we set aside the impugned order of ld. CIT and restore the assessment order. - Decided in favour of assesse. - ITA No. 706/Hyd/2013 - - - Dated:- 25-3-2015 - Shri B. Ramakotaiah And Shri Saktijit Dey JJ. For the Appellant : Shri D.V. Anjaneyulu For the Respondent : Smt. G. Aparna Rao ORDER Per Saktijit Dey, J.M.: This appeal by assessee is directed against the order dated 09/01/2014 passed by ld. CIT-III, Hy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have not yet been acted upon, hence, there is no question of accrual of capital gain, but, AO rejecting the submissions of assessee proceeded to complete the assessment u/s 143(3) of the Act vide order dated 31/12/2010 computing long term capital gain (LTCG) at ₹ 79,69,38,698. Being aggrieved of such assessment order, assessee preferred appeal before CIT(A). 3. During the pendency of appeal before ld. CIT(A), ld. CIT in exercise of power u/s 263 of the Act called for assessment records of assessee for the impugned AY and after verification of the same was of the view that assessment order is erroneous and prejudicial to the interests of revenue as AO while completing assessment has not computed book profit as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to pay the tax computed under section 115JB. However, as AO has failed to compute book profit u/s 115JB of the Act, assessment order is erroneous and prejudicial to the interests of revenue. As far as the merits of the issue is concerned, ld. CIT held that for claiming relief u/s 115JB(2)(vii), the mandatory condition is there must be an order from BIFR u/s 17(1) of the Sick Industrial Companies Act, 1985. As in assessee s case, the Board has not passed any such order, no relief would be allowable u/s 115JB(vii). Ld. CIT, therefore, held that AO having failed to apply the provisions of section 115JB, the assessment order is erroneous and prejudicial to the interests of revenue. However, as far as the issue of applicability of section 40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain would be taxable in AY 2006-07 by virtue of which the income returned by assessee was restored, for that reason alone, it cannot be held that assessment order is erroneous and prejudicial to the interests of revenue. Ld. AR submitted, on the date assessment order was passed, the income computed under the normal provisions was more than the book profit computed u/s 115JB. Therefore, assessment order as was passed is in accordance with the statutory provisions and there was no need to compute book profit u/s 115JB of the Act. He submitted that at that stage, AO could not have foreseen or apprehended that the income determined by him would not be sustained by the appellate authority. Therefore, even if there might be an error in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of the assessment order, hence, invoking power u/s 263 is invalid. Keeping in view the aforesaid contention, we proceed to decide the issue. Undisputedly, assessee filed its return of income declaring Nil income after set off of brought forward losses of ₹ 36,00,51,214 under the normal provisions of the Act. Simultaneously, assessee also declared book profit at Nil under section 115JB of the Act on the plea that it being a sick company, there is no book profit. As can be seen from the show cause notices issued by AO on 30/11/10 and 18/11/10 in course of assessment proceeding, copies of which are placed at pages 27 to 34 of assessee s paper book, AO during the assessment proceeding did conduct enquiry with regard to applicabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, ld. CIT(A) while considering assessee s appeal against assessment order has held that capital gain is taxable in AY 2006-07 and as a result of which income returned by assessee was restored, that will not render assessment order erroneous and prejudicial to the interests of revenue. 7. While assuming jurisdiction u/s 263, ld. CIT has to examine the error and prejudice caused to revenue by virtue of assessment order on the basis of the facts and materials on record as on the date of completion of assessment. He cannot take into consideration any event subsequent thereto. As can be seen, ld. CIT upon considering the fact that by virtue of order of ld. CIT(A) passed on 25/03/13 income of assessee was again restored back to the returne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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