COMMISSIONER OF INCOME TAX, GUWAHATI-2 vs. M/S. JAJODIA ENGINEERING PVT. LTD.

This is an Appeal filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the I.T. Act ) whereby the Commissioner of Income T ax in short the CIT, challenges the order dated 9.2.2012 (Annexure-C) of the Inc ome Tax Appellate Tribunal, Guwahati Bench in the I.T.A. No. 79/Gau/2010. By the impugned order, the Appellate Tribunal allowed the application filed by the res pondent, hereinafter referred to as the Assessee , and set aside the computatio n of the Assessing Officer (AO), taxing the book profit, in accordance with Sect ion 115JB of the I.T. Act.

For the assessment year 2006-2007 the assessee had electronically filed their return of income on 30.11.2006 showing NIL income. The case was processed under Section 143(1) of the I.T. Act and selected for scrutiny. Notice was issue d to the assessee who filed copy of their audited balance sheet and other docume nts. As per the return filed electronically, the assessee who were in furniture business had shown total income at Rs.24,15,43,513/- (sale of furniture at Rs.65 ,02,788/- + other miscellaneous income at Rs.23,50,40,725/-) and calculated net profit at Rs.7,95,62,134/-. However as per the audited profit and loss account s ubmitted, the assessee disclosed a net loss of Rs.4,08,72,066/-. Thus they were asked to explain the variation in the return submitted electronically and the au dited accounts.

The assessee explained that since this was the first year in which retur n of income was filed electronically, the person who was entrusted with the work had inadvertently punched the figure of miscellaneous income at Rs.23,50,40,725 /- (instead of Rs.11,46,06,525/-) and hence the assessee had later filed a corre cted copy of return. But the AO did not consider this corrected return as the sa me was filed beyond time and on that basis, proceeded to make the assessment of the Minimum Alternate Tax, in short MAT  under Section 115JB of the I.T. Act.

As the assessee had shown net profit at Rs.7,95,62,134/- and in the audi ted profit and loss account, a net loss of Rs.4,08,72,066/- was reflected, the M AT liability under Section 115JB was assessed at Rs.86,78,955/-, by the AO on 3 0.12.2008 (Annexure-A).

The aggrieved assessee then approached the CIT (Appeals) to challenge th e determination of book profit under Section 115JB of the I.T. Act by contendin g that the AO was not justified in calculating the book profit by ignoring the n et loss reflected in the audited profit and loss account prepared in accordance with the Part-II of Schedule VI of the Companies Act, 1956. However the Appellat e Authority considered that the figure of net profit was taken into consideratio n from the return filed by the assessee themselves. It was further held that the AO had not tampered with the figures for calculating the book profit. Thus it w as declared that the AO committed no error in rejecting the revised return of in come because it was filed after expiry of the statutory time limit and according ly the assessment for payment of MAT under Section 115JB of the I.T. Act, was u pheld through the order dated 9.2.2010 (Annexure-B), by the CIT (Appeals).

Aggrieved by the decision of the CIT(Appeals), the assessee approached t he Income Tax Appellate Tribunal, Guwahati Bench, where they contended that the departmental authorities are not entitled to tinker with audited accounts submit ted by the assessee which is prepared in accordance with the Schedule-VI of the Companies Act, 1956. On the other hand, the departmental representative contende d that the computation of MAT by the AO was upon due consideration of all materi al particulars furnished by the assessee and it is not a case of tinkering with the audited accounts, submitted by the assessee.

The Income Tax Appellate Tribunal considered the jurisdictional power of the AO in computing the MAT under Section 115JB of the I.T. Act and noted that the accounts furnished by the assessee are audited and certified, in accordance with Part-II & III of Schedule VI of the Companies Act, 1956. Hence it was opine d that the figures of the said return should be accepted and there should be no tinkering with the duly audited accounts, for computation of tax under Section 1 15JB of the I.T. Act. On the basis of such conclusion, the assessment of MAT by taking into account the book profit under Section 115JB of the I.T. Act by the A O was held to be unjustified and hence the assessment to tax was quashed.

We have heard the submission made by the respective counsel for the appe llant and the respondent.

Special provision for payment of tax is made by Section 115JB of the I.T . Act and in such cases where the tax liability of a company is less than 7.5% ( 10% for the assessment year 2007-2008) of the book profit, such book profit shal in (1998) 229 ITR 383 (SC) where the Apex Court opined that: The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law .

The assessee has the obligation to prepare his profit and loss account i n conformity with Part-II & III of Schedule VI of the Companies Act, 1956 and if the audited accounts satisfy the requirement of Part-II & III of Schedule VI of the Companies Act, 1956, the Income Tax Officer has no jurisdiction to re-dete  & & & & & & & &..while so looking into the accounts of the company, an AO under T Act has to accept the authenticity of the accounts with reference to the provi sions of the Companies Act which obligates the Company to maintain its account i n a manner provided by the Companies Act and the same to be scrutinized and cert ified by statutory auditors and will have to be approved by the company in its g

Tax, reported in (2008) 296 ITR 727 (Gau) held as follows: The decision in Apollo Tyres Ltd. (supra) on the other hand shows that the AO c annot scrutinize the P&L a/cs of the assessee company certified by the statutory auditors. The question raised and answered in that case in our considered view is of no held in the given context of the case at hand. The directors have forme d an opinion as to what is reasonably necessary for meeting the known liability against debts due. The P&L a/cs have been prepared as per relevant provision of the Companies Act, 1956 and the same is not in dispute. Regular accounting proce dures have been followed. The directors’ opinion shows that as against doubtful debts of Rs.51,79,064 and doubtful advance of Rs.2,40,132, as sum of Rs.11,52,22 1 has been provided for during the assessment year, as considered adequate by th e management in view of the continued efforts for recovery. Therefore, the claim of the assessee could not be rejected simply on the ground that the doubtful de bts have not been written-off as actual bad debt .

In the present case, at no stage of the proceedings, the departmental au thorities have concluded that the profit and loss account furnished by the asses see is not in compliance with the provisions of Part-II & III of Schedule VI of the Companies Act, 1956. Therefore having regard to the ratio in Apollo Tyres Lt d. (supra) the AO couldn’t have gone behind the figures in the profit and loss a ccount, certified by the statutory auditors of the assessee.

When the profit and loss account for the relevant years were prepared in accordance with the provisions of Part-II & III of Schedule VI of the Companies Act, 1956, the reference to any other figure than what is reflected in the audi ted profit and loss account, for determination of the book profit under Section 115JB by the AO would not be justified. But we find here that the AO had failed to take into account the corrected return although it was obliged to consider th

But in the instant case, there was no determination of the AO that the f inal accounts of the assessee were not prepared in accordance with the Schedule- VI of the Companies Act. Hence the determination of liability for payment of MAT under Section 115JB of the I.T. Act, by ignoring the profit and loss account wa s not through due process. When the corrected return in consonance with the audi ted profit and loss account was submitted, those figures should have been the ba sis for determination of MAT under Section 115JB of the I.T. Act.

In the proceeding under consideration, the Appellate Tribunal concluded that the end result as computed by the AO was of his own making and the assessee could not be held liable to tax for non-disclosure of the income which the asse ssee had returned but adjusted against brought forward losses. We find such obse rvation of the Tribunal with regard to the procedure adopted by the AO, is consi stent with the ratio of Apollo Tyres Ltd. (supra); Malayala Manorama Co. Ltd. vs . Commissioner of Income Tax, reported in (2008) 300 ITR 251 and also this Cour t’s decision in Amines and Plasticizers Ltd. vs. Deputy Commissioner of Income T ax reported in (2008) 296 ITR 727 (Gau). Therefore we declare that no substantia l question of law in this case is required to be decided as the issue is authori tatively decided by judicial pronouncements. Consequently this appeal by the rev enue is found devoid of merit and the same is dismissed by affirming the impugne d order of the Income Tax Appellate Tribunal.