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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI INTURI RAMA RAO & SHRI S. S. VISWANETHRA RAVI
ORDER PER BENCH : These are the appeals filed by the assessee directed against the different orders of ld. Commissioner of Income Tax (Appeals)-2, Kolhapur [‘the CIT(A)’] dated 15.11.2017 for A.Y. 2012-13 and 14.12.2017 for A.Y. 2013-14 & 2014-15 respectively. 2. Since the identical facts and common issues are involved in all the above captioned three appeals, we proceed to dispose of the same by this common order.
2 345 & 346/PUN/2018 3. For the sake of convenience and clarity, the facts relevant to the appeal in ITA No.80/PUN/2018 for the assessment year 2012-13 are stated herein.
The appellant raised the following grounds of appeal :- “1] The learned CIT(A) erred in confirming the action of the learned A.O. in making an addition of Rs.6,47,41,354/- to the book profit computed u/s 115JB of the Act. 2] The learned CIT(A) erred in rejecting the profit and loss account and the balance sheet prepared by the appellant company for the purposes of Income Tax Act by incorporating the provision for liability on account of additional cane price declared and paid by the appellant company after the annual accounts placed before the AGM were approved. 3] The learned CIT(A) erred in holding that for the purposes of working out book profit u/s 115JB, the learned A.O. was justified in considering the profit and loss account prepared by the appellant company which was placed before an approved by the AGM and the appellant company had no right to prepare a separate profit and loss account for the purposes of the Income Tax Act and computation of the book profit u/s 115JB. 4] The learned CIT(A) failed to appreciate that the appellant company could prepare a separate profit and loss account and Balance Sheet for the purposes of Income Tax Act and determination of book profit u/s 115JB and it was not necessary that the book profit u/s 115JB was to be computed as per the profit and loss account approved in the AGM. 5] The learned CIT(A) failed to appreciate that the Accounting Policies and Accounting Standards adopted for preparing the profit and loss account for the purposes of Income Tax Act were the same as that adopted for preparing the profit and loss approved by the AGM and therefore, in view of the first proviso to sub section 2 of section 115JB, the appellant was justified in preparing a separate profit and loss account. 6] The learned CIT(A) erred in holding that the first proviso to sub section 2 of section 115JB was not applicable for A.Y. 2012 - 13 without appreciating that the said proviso was applicable for the current asst. year and accordingly, in view of the said proviso, the appellant company was permitted to prepare a separate profit and loss account for the purposes of Income Tax Act vis-a- vis the profit and loss account placed before the AGM.
3 345 & 346/PUN/2018 7] The learned CIT(A) erred in not appreciating that for the earlier years, the appellant had prepared separate profit and loss account for the purposes of Income Tax Act and determination of book profit u/s 115JB which was accepted by the A.O. and therefore, there was no reason to reject the same in the current year. 8] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal
.”
5. Briefly, the facts of the case are as under : The appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and sale of sugar and its allied products. The return of income for the assessment year 2012-13 was filed on 25.09.2012 declaring total income of Rs.8,95,28,947/- under normal provisions of Act and book profits under the provisions of section 115JB of the Income Tax Act, 1961 (‘the Act’) of Rs.24,20,65,807/-. The return of income was revised on 22.11.2013 declaring total income of Rs.6,02,56,140/- under the normal provisions of the Income Tax Act. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-2, Sangli (‘the Assessing Officer’) vide order dated 26.03.2014 passed u/s 143(3) of the Act at total income of Rs.30,68,07,161/- under the provisions of section 115JB of the Act. The brief factual matrix leading to the addition of book profits is as under :-
4 345 & 346/PUN/2018 The assessee is engaged in the business of manufacture and sale of sugar. During the course of previous year relevant to the assessment year under consideration, the assessee company purchased sugarcane at the rate of Rs.2,000/- per MT. The same was debited to the Profit & Loss Account and accordingly, the annual accounts were prepared and audited financial statements like Profit & Loss Account, Balance Sheet were laid before the Annual General Meeting (AGM) and got approved. However, subsequently, it was decided to pay an additional cane price of Rs.175/- per MT and accordingly, additional cane price was made in the books of accounts of Rs.29,00,02,398/- maintained for the next financial year i.e. F.Y. 2012-13. However, for the purpose of Income Tax Act, the provision created towards additional cane price of Rs.29,00,02,398/- was claimed, which was allowed under the normal provisions of the I.T. Act. Even for the purpose of computing the tax liability under the provisions of section 115JB of the Act, the Profit & Loss Account, Balance Sheet were re-cast by including liability towards additional cane price. The Assessing Officer disallowed the said claim by holding that re-cast the Profit & Loss Account and Balance Sheet are not in accordance with Accounting Policies and Accounting Standards. The Assessing 5 ITA Nos.80, 345 & 346/PUN/2018 Officer was of the opinion that in the annual accounts prepared for the purpose of Companies Act which were laid before the AGM, no provision was made towards the additional cane price payable and the assessee was not supposed to prepare two sets of financial statements one under the Companies Act and another for Income tax purposes, accordingly, denied the liability credits towards additional cane price and had proceeded to compute the tax liability taking the profits as shown in the Profit & Loss Account for Companies Act purposes. Accordingly, the Assessing Officer brought the difference amount to tax under the provisions of section 115JB of the Act.
On appeal before the ld. CIT(A), the ld. CIT(A) confirmed the action of the Assessing Officer by placing reliance on the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT, 255 ITR 273 (SC).
Being aggrieved, the appellant is in appeal before us in the present appeal.
The ld. AR for the appellant submits that an assessee is entitled to prepare two sets of accounts; one for the purpose of Companies Act and another for the purpose of Income Tax Act. It is not necessary that the tax liability under the provisions of section 6 345 & 346/PUN/2018 115JB is to be computed as per the Profit & Loss Account and Balance Sheet, as approved in the AGM. It is further submitted that the Profit & Loss Account and Balance Sheet is prepared for the purpose of Income Tax Act had also adopted the same Accounting Policies and Accounting Standards adopted for the preparation of the Profit & Loss Account and Balance Sheet for the purpose of Companies Act. Finally, he submitted that in the earlier years, similar claim was came to be allowed by the Assessing Officer and also for subsequent assessment years 2016-17. Therefore, in the absence of any change in the facts and law, the claim of the assessee should be allowed on the principle of consistency. In support of proposition, he placed reliance on the decision of the Hon’ble Supreme Court in the case of Radhasoami Satsang vs. CIT, 193 ITR 321 (SC).
On the other hand, ld. CIT-DR placed reliance on the order of the ld. CIT(A) and submits that the order of the ld. CIT(A) is well- reasoned and no interference is required. Further, he submits that an assessee is not entitled to prepare two sets of accounts viz. one for the purpose of Income Tax Act and another for the purpose of Companies Act.
7 345 & 346/PUN/2018 10. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to computation of book profits for the purpose of computing the tax liability u/s 115JB of the Act. The provisions of section 115JB is self-constrained code and its create legal fiction, in the case of the companies, regarding the total income, where the income of an assessee computed under the normal provisions of the I.T. Act is less than the book profits, the book profits of the companies are deemed to be total income of the assessee. The provisions of section 115JB also prescribe the manner in which the book profits are to be computed. The provisions of section 115JB(2) stipulate that the Profit & Loss Account for the relevant period is to be prepared in accordance with the provisions of the Companies Act, 1956. The preparation of annual accounts including the Profit & Loss Account and Balance Sheet should be in consonance with the provisions of section 210 of the Companies Act, 1956 as well as the Accounting Policies and Accounting Standards. It is further provided that the annual accounts including Profit & Loss Account prepared for the purpose of Income Tax Act shall follow the same Accounting Policies and Accounting Standards, adopted for preparing the annual accounts for the purpose of Companies Act as laid before the AGM in 8 ITA Nos.80, 345 & 346/PUN/2018 accordance with the provisions of the Companies Act. It is further provided that in case where the company had adopted a financial year under the Companies Act, which is different from the previous year for the purpose of Income Tax Act, the same Accounting Policies and Accounting Standards which are adopted for the purpose of preparing annual accounts under the Companies Act shall be adopted. This would clearly show the Legislative intent that while preparing the annual accounts for the purpose of Income Tax Act and the Companies Act, there should not be any difference in the Accounting Policies and Accounting Standards adopted for the purpose of preparation of annual accounts for both the purposes i.e. Income Tax Act and the Companies Act. In the present case, the assessee had prepared annual accounts without providing for liability towards additional cane price and the same were adopted in the annual accounts and laid before the AGM. However, for income-tax purposes, the appellant company had prepared a different set of annual accounts wherein the liability towards additional cane price was provided. Therefore, the question is which sets of annual accounts was prepared in accordance with provisions of section 210 of the Companies Act, 1956. One set of annual accounts prepared for the purpose of Companies Act and laid 9 345 & 346/PUN/2018 before the AGM, there is no qualification in the auditor’s report on the annual accounts of the companies. Moreover, the liability towards additional cane price had not accrued as on the date when the annual accounts were approved by the AGM. Second set of annual accounts providing the liability towards additional cane price were not even approved by the AGM and even not submitted to the Registrar of the Companies. Therefore, there is no material on record indicating the first set of annual accounts are not in accordance with the provisions of section 210 of the Companies Act. The very fact that the annual accounts were re-cast by providing liability towards additional cane price goes to prove that the appellant company had not followed the same Accounting Polices and Accounting Standards which are adopted in the former set of annual accounts. Therefore, the second set of annual accounts cannot be adopted for the purpose of computing the tax liability under the provisions of section 115JB of the Act. Therefore, the Assessing Officer had rightly rejected second set of annual accounts prepared by the appellant company for the purpose of computing the tax liability u/s 115JB of the Act. Therefore, we do not see any reasons to interfere with the orders of the lower authorities.
10 345 & 346/PUN/2018 As regards to the other argument relating to the ‘principle of consistency’, we are of the considered opinion that the principle of res-judicata, has no application in the income-tax proceedings. The principle of consistency comes into play only in cases where two views are possible and the Assessing Officer had adopted one of the possible view and that view is legally sustainable. The principle of consistency cannot be applied in the present case, as the approach of the Assessing Officer is in accordance with settled position of law. Thus, the contention of the appellant on ‘principle of consistency’ cannot be accepted. Hence, the grounds of appeal filed by the appellant company stand dismissed.
11. In the result, the appeal filed by the assessee in ITA No.80/PUN/2018 for A.Y. 2012-13 stands dismissed. ITA Nos.345 & 346/PUN/2018, A. Ys. : 2013-14, 2014-15 :
12. Since the facts and issues involved in all the above three appeals are identical, therefore, our decision in ITA No.80/PUN/2018 for A.Y. 2012-13 shall apply mutatis mutandis to the remaining two appeals of the assessee in ITA Nos.345 & 346/PUN/2018 for A.Y. 2013-14 and 2014-15 respectively.
11 345 & 346/PUN/2018 Accordingly, the appeals of the assessee in ITA Nos.345 & 346/PUN/2018 for A.Y. 2013-14 and 2014-15 are dismissed. 13. To sum up, all the above three appeals filed by the assessee stand dismissed. Order pronounced on this 29th day of June, 2022.