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TMI Blog1999 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... and other allied items. For the previous year ended on 31-3-1997, the return filed by the assessee was processed under section 143(1)(a) of the Act. In the return filed, the assessee had disclosed negative income of Rs. 7 crores plus. In the computation sheet attached to the return of income, the assessee had made certain adjustments to arrive at the loss computed and had also made calculation of minimum alternative tax under section 115JA. The relevant extract of the computation sheet reads as under:--- A. "Total loss computed under provisions of Income-tax Act, 1961 for assessment year 1997-98 Rs. 74,356,618 Computation of Minimum Alternative Tax under section 115-JA Profit before tax as per the profit loss account for the financial year ended 31-3-1997 50,658,000 Less: Book Profit on sale of assets 60,235,000 ---------------------- Revised loss as per profit loss account drawn up in accordance with Parts II and III of Schedule VI to Companies Act, 1956 9,577,000" B. 'Adjusted in view of decisions of Calcutta and Delhi Tribunals, the reason being that profit as per profit loss account prepared in accordance with provisions of Parts II III of Schedule VI o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le account and crediting miscellaneous income account and these credit and debit entries were merely book entries and did not give rise to any income and hence the same was excluded from taxable income. 5. The CIT (Appeals), however, did not agree with the assessee's representations. He distinguished the Tribunal's decisions, by stating that in both the cases the Tribunal was concerned with the income chargeable under the head 'capital gains' and further in both the cases the assets transferred were not business assets but were held on account of investment whereas in the case of the assessee, the facts were otherwise in the sense that the assets were business assets on which depreciation allowance was allowed in past and further in computing the profits and gains of business, the depreciation allowance was claimed by the assessee for the previous year and in determining the written down value of the block of assets, the appropriate adjustment for sale of such fixed assets was also considered and further no income under the head 'capital gains' was chargeable in assessee's case for this year. Moreover, the assessee prepared the profit and loss account as per the provisions of Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Taxman 341 (SC) in the case of Godhra Electricity Co. Ltd. v. CIT it was submitted that notional income can never be brought to tax. The entries were passed in the books only to improve the financial picture of the assessee-company. 7. The learned Senior Departmental Representative while placing strong reliance on the order passed by the CIT (Appeals), submitted that entries in the accounts are not conclusive, placing reliance on in the case of Workmen of Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77 (SC). Pressing into service the decision in the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 /22 Taxman 11 (SC), it was submitted that the proper way is to construe a statutory provision is the purpose of the Statute has to be kept in mind and if it is found that the assessee has adopted a device to avoid tax, the same could not be encouraged. Further in this case, attempt was made by the assessee by passing entries to take out something which was taxable. Sale of assets is taxable income. Besides, with regard to import entitlement, clause (iii-b) of section 28 was applicable and not clause (iii-a) of section 28. He further emphasized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med income relating to certain companies. This section was brought into the Statute Book vide Finance (No. 2) Act of 1996 with effect from 1-4-1997 and is said to be in pari materia with earlier section 115J which has been rendered inoperative with effect from the assessment year 1991-92 by an amendment made to sub-section (1) by the Finance Act, 1990 with effect from 1-4-1990. The rationale offered by the Government for the introduction of section 115JA remains the same as was given when somewhat similar provisions were introduced for the first time by the Finance Act, 1983 with effect from 1-4-1984. These provisions were contained in section 80VVA and remained on the Statute Book from assessment year 1984-85 to assessment year 1987-88 i.e., for a period of 4 years. The provisions were again reintroduced by the Finance Act, 1987 by introduction of a new section 115J and these provisions remained in force from assessment year 1988-89 to 1990-91 i.e., for a period of three assessment years. The successive Finance Ministers at various stages stated that it seemed reasonable that profitable and prosperous companies should contribute at least a small proportion of their profits to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the profit on the sale of electrical transformer and the immovable property and it was further held that such capital profits yield only capital gains and they do not partake the character of business profits and in this case the two decisions of the jurisdictional High Court, namely, Pt. Deo Sharma v. CIT [1953] 23 ITR 226 (All.) and CIT v. Sugauli Sugar Works (P.) Ltd. [1983] 140 ITR 286 (Cal.) were also applied. 9.1 Such being the position with regard to the profit on the sale of assets, the assessee rightly made adjustments while filing the return of loss and the Assessing Officer had no power to ignore this adjustment made by the assessee in the return of income. In the summary assessment, the Assessing Officer has powers to make adjustments firstly of arithmetical errors in the return, accounts and documents and secondly of carried forward loss etc. which on the basis of information available in the returns, accounts or documents, is prima facie admissible but not claimed or is prima facie inadmissible but is claimed. In the case under consideration the Assessing Officer has not kept in mind the legal position narrated above and failed to ascertain whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to file return of loss on the basis of legal position as prevailed at the time of filing of the return. He has also failed to take note of the fact that the provisions of section 115JA were pari materia with section 115J and the judicial pronouncements were available in regard to the meaning of book profit as understood qua similar provision and whether the profit on sale of assets giving rise to the capital gain could be taken out of the book profits or not. He has also stated that no adjustment could be made in the profit and loss account prepared by the company and it was binding on the assessee as also on the department. But this finding is totally contrary to the decision of the Special Bench in the case of Sutlej Cotton Mills Ltd. where power of the Assessing Officer to make the adjustment to the profit shown as per the profit and loss account has been recognized by stating 'the power to adjust the book profit will have to be conceded to the Assessing Officer'. The CIT (Appeals) in the light of above discussion, should have favourably considered the contention of, the assessee that when two views were possible, the view favourable to the assessee should be taken, esp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s limited only to this extent viz., the determination of the liability as ascertained from the return as filed and the likeness ends there. The differences are many. Firstly, the power under section 143(1) may be exercised only in the circumstances mentioned in section 143(1) and section 154 is not so limited. Secondly, section 154 requires an opportunity to be given to the assessee whereas there is no such opportunity under section 143(1) and thirdly, the consequences of a rectification do not result in the payment of additional tax, whereas an adjustment under section 143(1) does. The intimation, as far as the Assessing Officer is concerned, is final, except these few differences, the effect of adjustment in both the sections would be same, that is to say, apparent adjustment. The adjustments sought to be made by the assessee should be so apparent from the evidence placed before the Assessing Officer under section 143(1) that he would immediately agree to the stand taken by the assessee, but no such evidence was ever placed before the Assessing Officer and, therefore, we cannot find fault with the Assessing Officer whose order is confirmed by the CIT (Appeals). We uphold the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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