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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G. MANJUNATHA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against the order dated 31.07.2015 passed by the Commissioner of Income Tax (Appeals)-16 (for short ‘the CIT(A), Mumbai, for the assessment year 2010-11, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the order passed by the AO u/s 154 of the Income Tax Act, 1961 (for short the ‘Act’).
2. The brief facts of the case are that the assessee company engaged in the activity of trading in derivatives having income from short term capital gain, dividend and interest from investments filed its return of income for the assessment year under consideration declaring the total income at Rs. 15,707/-. The case was selected for scrutiny and the AO passed the assessment order u/s 143 (3) of the Act determining the total income at Rs. 12,15,373/- under the normal provision of the Act and Rs. (-)89,12,662/- u/s 115JB of the Act after making disallowance of expenses towards custody Assessment Year: 2010-11 charges delay payment charges and out of pocket expenses amounting to Rs. 95,765/- claimed by the assessee and further making disallowance u/s 14A r.w.r. 8D of the Income Tax Rules. 3. Subsequently, on the basis of the audit report pointing out that liability u/s 115JB has been incorrectly worked out in the assessment order, AO issued notice u/s 154 of the Act to the assessee on 11.11.2013 for rectification of the assessment order. In response thereof, the assessee’s representative opposed the rectification u/s 154 of the Act. However, the AO rejecting the contention of the assessee passed the order u/s 154 of the Act and determined the total income u/s 115JB to Rs. 68,17,840/-. The assessee challenged the action of the AO before the Ld. CIT (A). The Ld. CIT (A) dismissed the appeal of the assessee and confirmed the order passed by the AO. Against the said findings of the Ld. CIT (A) the assessee is in appeal before the Tribunal. 4. The assessee has challenged the impugned order passed by the Ld. CIT(A) on the following effective grounds:-
1. “The learned CIT (A) erred in confirming the addition made by the AO in order u/s 154 of the Income Tax Act, although there was no mistake apparent from record in the assessment order u/s 143 (3) dated 04.01.2013.
The learned CIT (A) failed to take into consideration that the issue is debatable and no addition can be made by passing an Order u/s 154. 3. Without prejudice, the learned CIT (A) erred in computing the adjusted Book profit u/s 115JB at Rs. 6,68,17,840/- as against Rs. (1,00,64,922), as per the return of income, thereby not allowing deduction of Rs. 7,92,35,053/- claimed and allowed, being unabsorbed loss brought forward and thus erroneously raising liability to pay tax.”
5. Before us, the Ld. counsel for the assessee submitted that since the AO had determined the total income of the assessee at Rs. 12,15,373/- under the normal provisions of the Act at Rs. and Rs.(-) 89,12,662/-under the provision of MAT u/s 115JB and passed the assessment order u/s 143 (3) of the Act, the Assessment Year: 2010-11 Ld. CIT (A) ought to have set aside the order passed by the AO u/s 154 of the Act. The Ld. counsel further pointed out that the assessee had furnished all relevant details required for computation of minimum alternative tax in order to substantiate book loss of Rs. 1,00,64,992/- The Ld. counsel further pointed out that the AO in its notice dated 11.11.2013 had not indicated unabsorbed loss of earlier year allowed by the predecessor is a mistake apparent on record. The AO had also not indicated that whether loss claimed by the assessee was genuine or not. The Ld. counsel without prejudice submitted that the Ld. CIT (A) has erred in computing the adjusted Book Profit u/s 115JB at Rs. 6,68,17,840/- as against Rs. 1,00,64,922/- as per the return of income thereby not allowing deduction of Rs. 7,92,35,053/- claimed and allowed being unabsorbed loss brought forward and thus erroneously raising liability to pay tax. The Ld. counsel relied on the decision of the ITAT, Kolkata in the case of DCIT vs. Binani Industries Ltd., A.Y. 2009-10, decision of the SMC Bench of Chandigarh Tribunal in the case of M/s City Clinic Pvt. Ltd. vs. ACIT, ITA No. 112/Chd/2017 to substantiate its claim.
On the other hand, the Ld. Departmental Representative (DR) supporting the order passed by the Ld. CIT (A) submitted that since as per section 115JB (2) (k) (iii) the amount of loss forward or unabsorbed depreciation whichever is less as per the books of account is to be taken for the computation u/s 115JB, the Ld. CIT (A) has rightly upheld the findings of the AO. The Ld. DR further submitted that since there is no merit in the appeal of the assessee, the same is liable to be set aside. 7. We have heard the rival submissions and also perused the material on record in the light of the rival contention of the parties and also gone through the cases relied upon by the assessee and the revenue authorities. The Ld. CIT (A) has upheld the order passed by the AO u/s 154 of the Act by following the judgment of the Hon’ble High Court of Punjab & Haryana in the case of Woollen Textiles Mills P. Ltd. vs. CIT 111 ITR 205 and the judgment of the Hon’ble High Court of Rajasthan and Jaipur in the case of CIT vs. Bagpatia Assessment Year: 2010-11 Food Industries 175 CTR 173 (2002). The findings of the Ld. CIT (A) are as under:-
“4.3 In section 115JB (2)(k)(iii) it is clearly mentioned that the amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account is to be taken for computation u/s 115JB. The Hon’ble High Court of Punjab & Haryana in the case of India Woollen Textile Mills (P) Ltd. Vs. C.I.T. 111 ITR 205 (1978) has held that where a statutory provision is completely lost sight of the matter can be treated an error apparent on record for purpose of rectification. In the concluding paragraph, the Hon’ble High Court gave its findings which are reproduced for ready reference as under:-
Shri B.S. Gupta, learned counsel for the assessee, argued that the question whether taxation reserve and dividend reserve could not be treated as reserve, notwithstanding the explanation was a debatable question and therefore, the ITO was not justified in invoking s. 13 of the Companies (Profits) Surtax Act, 1964. It is clear from the order of the ITO that the notice under s. 13 was issued as he had completely overlooked the Explanation. It is not disputed that where a statutory provision is completely lost sight of the matter can be treated as an error apparent on record and rectified under s. 13 of the Act. The further question whether there was any debatable issue to be decided by the ITO despite the explanation was a question which the assessee should have raised before the subordinate Tribunals. From a perusal of the orders of the ITO, the AAC and the Tribunal, we do not see that any such question had been raised. The assumption throughout was that the “taxation reserve “dividend reserve” and surplus” fall within the mischief of the explanation. We are, therefore, constrained to answer the reference against the assessee. There will be no order as to costs.”
Similarly, the Hon’ble High Court of Rajasthan & Jaipur Bench in the case of CIT vs. Bagpatia Food Industries 175 CTR 173 (2002) has held that if the excessive relief of ……….. rebate is allowed then provisions of section 154 can be invoked. Assessment Year: 2010-11
In view of the cases cited above, the submissions of the appellant has no merit in stating that the AO has not mentioned anything about the allowance or disallowance of the brought forward loses of the previous year which has been set off against the book profit income as specified in Section 115JB. The Hon’ble High Court in the case of Annamallais Agencies (supra) has clarified that the record for purposes of section 154 is not confined to assessment order only but also includes the return and documents accompanying it. Therefore, the submission of the appellant on this account has no merit. The inference drawn by the AO is based on all material informations available on record filed by the appellant during the course of assessment proceedings and attached with return of income. Similarly, as discussed above there is a clear cut violation of the statute i.e. section 115JB(2)(k)(iii). The Court in India Woollen Textile Mills (P) Ltd. (supra) have given a clear cut finding that where statutory provisions is completely lost sight of, the matter can be treated as an error apparent on record. While framing the assessment u/s 143 (3), the A.O. completely lost sight of provisions of section 115JB(2)(k)(iii). Therefore, the mistake is apparent from the record and the A.O. has correctly rectified the mistake u/s 154 of the I.T. Act, there is no debate on the issue that brought forward loss or unabsorbed depreciation, whichever is less, is to be taken for computation u/s 115JB of the Act.
5.1 From perusal of the section it is crystal that mistake was apparent from the record. The issue is not debatable at all and A.O. has correctly given deduction for depreciation which is less than brought forward losses. If at all, assessee can have any grievance regarding quantum of carry forward depreciation or loss, the same could have been pointed out to the A.O. u/s 154”.