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TMI Blog2000 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal for our consideration. 3. The assessee was a domestic company and has since been merged with Usha Beltron Ltd. being another domestic company w.e.f. 1st Oct., 1997. The assessee was engaged in the business of, inter alia, manufacture and sale of steel wires and ropes for industrial units. In the return of income filed for the assessment year under appeal, the total income worked out to a loss. Since the assessee had disclosed profits in the P L a/c for the previous year relevant to the assessment year under appeal, the assessee made a computation of its book profit for the purpose of the provisions of s. 115JA of the Act and disclosed an amount of Rs. 4,35,57,179 being 30 per cent of the book profit as its deemed total income in the relevant assessment year. Thus, the aggregate of income-tax and surcharge on such deemed total income worked out to Rs. 1,87,29,590. In the return of income, the assessee, after claiming credit of the tax deducted at source, payment of advance tax and self assessment tax claimed an amount of Rs. 423 as refundable. 3.2 The return of income filed by the assessee was processed by the AO under s. 143(1)(a) of the Act as per intimation dt. 20t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court in the case of T.S. Balaram, ITO vs. Volkart Bros. Ors. (1971) 82 ITR 50 (SC) and submitted that the Supreme Court held that a mistake apparent from the record must be an obvious and patent mistake and not something which could be established by a long drown process of reasoning of points on which there may conceivably be two opinions. It is also suggested that the assessee also relied on before the learned CIT(A) the decision of the Calcutta High Court in the case of CIT vs. Satya Narayanan Bhalotia (1994) 74 Taxman 34 (Cal) and submitted that the Calcutta High Court held that when a mistake has to be discovered on the interpretation or construction of the provisions of the Act it can never be a mistake apparent from the record. 3.3 Relying on the aforesaid decisions the assessee contended that the provisions made by the assessee for doubtful debts and advances amounting to Rs. 1,56,00,000 would not be construed as a provision made for meeting liabilities and, therefore, the same could not be disallowed while computing the book profit under s. 115JA of the Act. Similarly, for the disallowance made with respect to the provision made for wealth-tax amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental Representative justified the orders of the authorities below and submitted that the provisions made for doubtful debts of Rs. 1,56,00,000 and the wealth-tax liability of Rs. 1,25,000 created by the assessee were covered respectively by the provision of cl. (c) and cl. (a) of Explanation to s. 115JA of the Act. In regard to the alternative plea of the assessee for jurisdiction of the AO to make prima facie adjustment under s. 143(1)(a) of the Act the learned Departmental Representative relied on the order of the CIT(A), the relevant portion of which we have stated hereinabove. 5. We have carefully considered the orders of the authorities below and the rival submissions of the learned representatives. We have gone through the statement of facts of the case filed before learned CIT(A) and the cases relied upon by the learned authorised representative of the assessee in the statement of facts, filled before the learned CIT(A) and the cases cited before us. In order to consider the issue involved we consider it necessary to state the scope of the relevant part of the s. 143(1)(a) and s. 115JA of the Act. 6. Sec. 143(1)(a) of the Act, as it stood at the material time, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he act, as stated hereinabove, we also consider the term 'provision' and 'reserve'. Since the terms 'provision' and 'reserve' have not been defined in the Act, it is necessary to consider the meaning assigned to them in the Companies Act as the relevant section deals with the assessment of companies. In this respect we may state that the Bombay High Court in the case of Petrosil Oil Co. Ltd. vs. CIT (1999) 155 CTR (Bom) 445 : (1999) 236 ITR 220 (Bom) held by following a decision of the apex Court in the case of Howrah Trading Co. Ltd. vs. CIT (1959) 36 ITR 215 (SC) that for the purpose of considering a provision of the Act dealing with the assessment of companies, undefined words used in the said provision may be interpreted by importing the definition accorded to it in the companies Act. The terms 'provision' and 'reserve' have been defined in cl. 7(1) of Part III of Sch. VI to the Companies Act as under: "(a) The term 'provision' has been defined to mean, subject to sub-s. (2) of the said clause, any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of hearing of the appeal, learned authorised representative of the assessee also referred to pp. 6 and 7 of the paper book which is a copy of the affidavit of the learned authorised representative of the assessee stating that no submission either oral or written was made before the learned CIT(A) that the provision for bad debts and advances were reflected in the balance sheet as reduction from the value of the relevant assets for the purpose of computing the book profit under s. 115JA of the IT Act as stated by the learned CIT(A) in the impugned order. He urged that it was submitted that the provision for doubtful debts was made on the basis of a prudent and bona fide decision which was taken after considering the chances of recovery of the impugned debts and advances and that the said provision was reflected in the balance sheet as on 31st March, 1997, as reduction from the value of the relevant assets being debts and advances and such reflection was done as per the provision of the Companies Act, 1956. 9. In view of the above, we hold that the sum of Rs. 1,56,00,000 and Rs. 1,25,000 could not be added back to the net profit for the purpose of computing the book profit wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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