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TMI Blog2014 (6) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... to go behind the net profit shown in the Profit Loss A/c., except as provided in the statute, in those cases where the accounts have been properly maintained. When the Statute provides for computation of book profit of the assessee being a Company which has computed the total income under this Act in respect of any previous year, it has to be implied that the legislature intended to mean that the assessee, being a Company, has computed total income correctly as per the provisions of the Act. If the total income has not been correctly computed, then the bar created limiting the jurisdiction of the Assessing Officer would not be operative. For the aforesaid reasons, the findings of the learned Tribunal indicated above are reversed. Net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... …………………………………… ………………………… In the instant case, there is no dispute to the fact that the assessee has computed the depreciation as per Schedule XIV of the Companies Act but had not chosen to provide the same in its Profits & Loss A/c. and has shown the same as per the Notes on Accounts. The Profit & Loss A/c. prepared by the assessee as per Part II & III of Schedule VI of the Companies Act clearly shows that the Profit & Loss A/c. was prepared by the assessee was completely in accordance with the said provisions which laid down that depreciation could be charged to the Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to Section 115JA. As a corollary, the assessee is also not empowered to tinker with the book profit shown in the Profit & Loss A/c. except the extent provided in the Exemption to Section 115J." The assessee has come up in appeal. Mr. Khaitan, learned Senior Advocate, appearing for the appellant, submitted that the learned Tribunal fell into a patent error in not appreciating that notes of account are a part of the balance sheet or profit and loss accounts, as the case may be, under sub-Section 6 of Section 211 of the Companies Act. He drew our attention to a judgment of the Delhi High Court in the case of CIT-vs-Sain Processing And Weaving Mills P. Ltd., reported in 325 ITR 565, wherein for reasons discussed in the judgment the Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account as per the Companies Act. Therefore, we are of the view that the order passed by the Assessing Officer was not erroneous, which is one of the pre-conditions for invoking jurisdiction under section 263 of the act. Since it was not erroneous, it could not have been termed to be prejudicial to the interest of the Revenue. In this view of the matter, we set aside the order of the learned Commissioner of Income-tax. In the result, ground No.2 is allowed."" Mr. Khaitan submitted in reply that the Apex Court in the case of Apollo Tyres Ltd. [supra] held at page 280 as follows: " Therefore, we are of the opinion, the Assessing Officer while computing the income under section 115J has only the power of examining whether the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he net profit shown in the Profit & Loss A/c., except as provided in the statute, in those cases where the accounts have been properly maintained. Even sub-section 1 of Section 115JA, provides as follows: 115JA. (1) Notwithstanding anything contained in any other provisions of this Act, where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 [but before the 1st day of April, 2001] (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " Because of the prescribed accounting standard which had to be followed by the assessee in view of the provisions of section 115JA(2) read with section 211 of the 1956 Act, the assessee was required to show the prior period items/extraordinary items separately so that their impact on the current profit or loss could be perceived. The fact that the assessee adopted the alternative approach of showing such items in the statement of profit and loss after determination of current net profit or loss, did not mean that these items were not to be taken into account in computing the net profit as envisaged in section 115JA. Thus, what the assessee had done was only to indicate the prior period items/extraordinary items separately. This did not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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