M/S APEEJAY PRIVATE LIMITED,KOLKATA vs. D.C.I.T CC - III,KOLKATA, KOLKATA

The assessee in the present case is an investment company. In the assessment originally completed under section 143(3) vide an order dated 26.12.2008, the total income of the assessee under the normal provisions of the Act was determined by the Assessing Officer at Rs.39,87,110/-, while the book profit under section 115JB was computed ./2013 Assessment year: 2006-2007 Page 2 of 4 by him at Rs.1,04,49,157/-. The said assessment made by the Assessing officer was subsequently revised by the ld. CIT vide order dated 17.01.2011 passed under section 263, inter alia, on the ground that there was an error in not including the profit on sale of shares while computing the books profit under section 115JB. As per the direction of the ld. CIT given in the order under section 263, this issue was examined by the Assessing Officer. On such examination, he found that the assessee- company had sold 26,24,000 shares of Apia Finance Group Pvt. Limited on 01.04.2005 but the book profit on such sale amounting to Rs.1,58,15,000/- was not reflected in its final accounts. The assessee claimed this mistake of non-recognition of book profit on sale of shares in the final accounts for financial year 2005-06 as an oversight and submitted that such mistake was rectified by showing the said profit in the final accounts of F.Y. 2006-07 as a prior period item, which was permissible as per Accounting Standard 5. It was also contended by the ld. counsel for the assessee that the relevant profit having been shown in the final accounts of financial year 2006-07 as prior period item, the same could not be included in the book profit of F.Y. 2005-06 relevant to the year under consideration. This contention of the assessee was not found acceptable by the Assessing Officer and in the assessment completed under section 143(3) read with section 263 vide an order dated 09.10.2011, the addition to the book profit was made by him, inter alia, on account of profit on sale of shares amounting to Rs.1,58,15,000/-. On appeal, the ld. CIT(Appeals) confirmed the said addition. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that even though the relevant shares were sold by the assessee as on 01.04.2005, the profit on such sale was not disclosed in its Profit & Loss A/c. for the year under consideration. The said Profit & Loss Account formed part of the final accounts of the assessee for the year under consideration, which was duly ./2013 Assessment year: 2006-2007 Page 3 of 4 audited and submitted to the Registrar of Companies after the approval of the A.G.M. This error of omission stated to be committed by oversight was rectified by the assessee by showing the profit on sale of shares in the final accounts for F.Y. 2006-07 as prior period item, which again were duly audited and filed with the Registrar of Companies after the approval of A.G.M. The legal position in this regard is now well settled, inter alia, by the decision of the Hon’ble Supreme Court in the case of Apollo Tyres reported in 255 ITR 273 that once the final accounts prepared as per the Companies Act are duly audited and filed with the Registrar of Companies after getting the approval of AGM, the profit reflected therein cannot be tinkered with by the Assessing Officer while computing the book profit under section 115JB except to the extent of adjustments permissible as specified in Explanation to Section 115JB. Since the addition made by the Assessing Officer on account of sale of shares is not covered by such permissible adjustment, we find merit in the contention of the ld. counsel for the assessee that no such addition can be made while computing the book profit of the assessee for the year under consideration under section 115JB. This amount of profit on sale of shares is includible in the book profit of the assessee for the financial year 2006-07 as the same was duly reflected in the final accounts of the said year. Even the ld. counsel for the assessee has submitted that the assessee has no objection if the Assessing Officer is directed to include the same in the book profit for A.Y. 2007-08. Accordingly, we delete the addition made to the book profit of the assessee-company for the year under consideration on account of profit on sale of shares amounting to Rs.1,58,15,000/- with a direction to the Assessing Officer to consider the same for A.Y. 2007-08.