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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC) dated 20.12.2021 pertaining to the Assessment Year 2017-18. 2. The grounds of appeal taken by the assessee reads as under :- “ On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in confirming the following actions of the Assessing Officer – i. In determining income u/s 115JB of the Act at 1,88,85,710/- against declared income of Rs.1,42,77,107/-;
The above action being arbitrary, fallacious, unlawful and untenable must be quashed with directions for relief.”
At the outset, ld. Counsel for the assessee submitted that he shall not be pressing ground no.2 above and the same is dismissed as not pressed.
Brief facts of the case are that in this case, Assessing Officer noted that as per the profit & loss account, assessee company has claimed other expenses amounting to Rs.4,60,86,000/-. AO noted that on query in this regard, assessee did not provide any supporting evidence. Therefore, out of the above said expenses, AO disallowed 10% resulting an addition of Rs.46,08,600/-. AO also increased the book profit u/s 115JB of the Income-tax Act, 1961 (for short 'the Act') of Rs.1,42,77,107/-.
On assessee’s appeal, ld. CIT (A) confirmed the AO’s action.
Against the above order, assessee is in appeal before us. We have heard both the parties and perused the records.
Ld. Counsel for the assessee contended that the disallowance u/s 37 of the Act by the AO cannot be imported u/s 115JB. In this regard, he referred to the decision of Hon’ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (2002) 255 ITR 273 wherein it was held that the AO, while computing income under section 115J, has only the power to examine whether the books of account were certified by the authorities under the Companies Act, as having been properly maintained in accordance with the Companies Act. The AO thereafter has only limited power of making increases and decreases as ./2022 provided for in the Explanation to section 115J of the Act. Thus, the Hon’ble Supreme Court have made it clear that the AO does not have the jurisdiction to go beyond the net profits shown in the profit & loss account, except to the extent provided in the Explanation to section 115J of the Act.
We note that this decision was referred to ld. CIT (A) who distinguished it by holding that it is not rendered with reference to section 115JB. We find that this proposition of the ld. CIT (A) is wholly unacceptable. The ratio of Hon’ble Supreme Court in Apollo Tyres Ltd. (supra) holds the field as for the purpose of computation of book profit u/s 115JB also. That adjustment has to be done only as specified in Explanation to section 115JB. The disallowance in the present case is u/s 37 of the Act. It is nobody’s case that this falls under the adjustment stipulated u/s 115JB of the Act. Hence, respectfully following the precedent of Hon’ble Apex Court, we set aside the orders of the authorities below and delete the addition. 9. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on this 20th day of January, 2023.