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TMI Blog2016 (9) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, however the cruxes of the issues are as follows:- i) The learned Commissioner of Income Tax (Appeals) has erred in upholding the order of the learned Assessing Officer, in re-computing the book profit under section 115JB of the Act, by including the profits of `34,11,86,517/ - (derived on account of capital assets credited to the reserves `32,11,24,002/- in the balance sheet directly without routing it through the profit & loss account)in the book profit while determining the tax liability under section 115JB of the Act. ii) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer for disallowing the cost of improvement of ` 3,10,00,000/- under the normal computation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of the assessee for computing the book profit. While arriving at such decision, the learned Assessing Officer observed as under:- "14. After considering the reply of the assessee and the following factual and legal position, the assessment of the assessee is completed. 14.1 The two assets sold by the assessee are fixed assets as defined in Accounting Standard (AS)10 prescribed by lCAl. 14.2 Losses arising from the retirement or gains or losses arising from disposal of fixed assets which is carried at cost should be recognised in the profit and loss Statement. 14.3 As per notification by the council of lCAl, Accounting Standard (AS)10 is one of the standard made mandatory. 14.4 The Companies Act,1956, as well as many statutes r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dards issued by ICAI. 14.9 Only when the accounts of a company are prepared in accordance with Part II & III of Schedule VI of the Companies Act, 1956, the Assessing Officer will not have the power to restate the profit of a company. 14.10 In the case of the company the qualification by the statutory Auditor clearly establishes the fact that the profit and loss account of the company has not been prepared as required by Part II and Part III of Schedule VI of the Companies Act. 14.11 Part B of Part II of Schedule VI lays down that the profit and loss account shall be so made and as to disclose the results of the working of the company during the period covered by the account. Para 2(b) lays down that profit and loss account shall discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction, building redoing, land filling, excavation, fencing, repair works, land developments and allied civil work. Such extensive civil work was not noticed by the purchaser who had already paid the advance of Rs. 25.00 Crores. 14.15 The purchaser had proposed to purchase the property in as is where is condition. The assessee's claim that it started additional construction after the receipt of the advance of Rs. 25,00,00,000/- and spent Rs. 3,10,00,000/- within the registration date is a story that does not accord with human probabilities. The effect of this entry in the books was that, not only the capital loss under normal provisions of the Income tax Act was overstated by Rs. 3.10 Crores but also the book profit was further und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore tax as per the P&L Account audited by the Statutory Auditor (-) ` 1,01,69,416 Add: Profit on sale of properties ` 34,11,86,517 Reworked book profit ` 33,10,17,101 4. The learned Commissioner of Income Tax (Appeals) after elaborately considering the issue upheld the order of the learned Assessing Officer. 5. Before us, the learned Authorized Representative vehemently argued against the orders of the Revenue authorities by citing various decisions. On the other hand, the learned Departmental Representative relied on the orders of the Revenue. 6. We have heard the rival submissions and carefully perused the materials available on record and the provisions of Companies Act, 1956 as well. Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or incurred on account of membership of a partnership firm (to the extent not adjusted from any previous provision or reserve. (b) Profits or losses in respect of transactions of a kind not usually undertaken by the company or undertaken in circumstances of an exceptional or non-recurring nature, if material in amount . (c) Miscellaneous income." 7. From the above, it is apparent that whatever be the nature of profit or loss is incurred by the assessee it has to be disclosed in the profit and loss account mandatorily as per the provisions of the Companies Act, 1956. Only the assets & liabilities and the profit/loss carry forwarded from the profit and loss account are disclosed in the balance sheet. The format of balance sheet as pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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