DCIT, CIRCLE-1, PATNA vs. M/S ALKEM LABORATORIES LTD, PATNA

The revenue has raised the following grounds of appeal for the AY 2010-11:-

Brief facts of the case as culled out from records are that the assessee is engaged in the business of manufacturing and trading of pharmaceutical formulations. Income at Rs. 50,14,38,439/- declared in the e- return filed on 14-10-2010 pertaining to AY 2010-11. Case selected for scrutiny and assessment u/s. 143(3) of the Act was completed assessment u/s.143(3) of the Act on 11/3/2013 assessing income at Rs. 2. ITA No.219/Pat/18 AY 2010-11 M/s. Alkem Laboratories Ltd.

Thereafter, the ld. AO carried out proceedings u/s.154 of the Act for rectifying the mistakes apparent on record/made while completing the assessment for A.Y 2010-11 u/s. 143(3) of the Act on 11-03-2013. During the course of proceedings u/s. 154 of the Act the assessee filed written submissions and also stated that the mistakes pointed out by the ld. AO are not apparent on record and in light of the ratio laid down by the Hon’ble Apex Court in the case of T.S. Balram Vs. Volkhart Brothers & Others reported in 82 ITR 50 no adjustments needs to be made. However, the ld. AO was not satisfied and completed the proceedings u/s. 154 of the Act by making addition(s) for provision for doubtful debts/advance at Rs.6,42,61,460/- and security transaction tax at Rs. 6,59,591/- and computed book profit u/s. 115JB of the Act at Rs. 266,95,55,331/-.

Aggrieved, the assessee preferred appeal before the ld. CIT(A) and succeeded.

Aggrieved, now the revenue is in appeal before this Tribunal raising the aforementioned grounds.

The Ld. Departmental Representative vehemently argued supporting the order of the ld. AO.

Per contra, Ld. Counsel for the assessee submitted that ground no.3 raised by the revenue is fructuous as no such disallowance u/s. 14A of the Act has been made. As far as the remaining ground, it was stated that adjustment u/s. 154 of the Act made by the ld. AO cannot stand for since these are not mistakes apparent on record and rightly deleted.

We have heard the rival contentions and perused the material placed on record before us. We find that the revenue has raised three grounds of appeal against the order of the ld.CIT(A) deleting the adjustment of additions made by the ld. AO in the order u/s. 154 of the Act.

We find that the Revenue’s ground no. 3 is with regard to the disallowance made u/s. 14A of the Act. However, on perusal of order passed u/s. 154 of the Act, we find that no such addition/disallowance made u/s.14A of the Act. The ld. Departmental Representative was fair enough to accept that this ground has been raised wrongly. We, therefore, dismiss ground no. 3 raised by the revenue as infructuous.

Ground no. 2 is regarding the addition of Rs. 6,59,591/- for securities transaction tax. The Ld. Departmental 4. ITA No.219/Pat/18 AY 2010-11 M/s. Alkem Laboratories Ltd.

Coming to ground no. 1 of this revenue’s appeal, we find that the revenue has challenged the finding of the ld. CIT(A) in granting relief to the assessee on account of adjustment made by the ld. AO in the book profit on account of provisions for doubtful debts. We observe that in the order passed u/s. 154 of the Act the addition of Rs 6,42,61,460/- has been made for provisions for doubtful debts. The ld. AO observed that the adjustment has been made in view of Explanation 1 to the sub-section (2) of section 115JB of the Act. When the matter came up in appeal before the ld. CIT(A), he granted relief on two counts i.e. firstly the said adjustment/mistake was not apparent on record and secondly, the said adjustment is legally not tenable.

Now the adjustment is made by the ld. AO as per Explanation 1(2) of section 115JB of the Act. Provisions for meeting ascertained liabilities need not be added back to the book profit. Before making such adjustment, one needs to examine that whether the provisions made is for ascertained liability or not. For carrying on such exercise there is a long drawn process and details on the said issue needs to be considered and examined.

First question is before whether the alleged adjustment is a mistake apparent from record, which can be 5. ITA No.219/Pat/18 AY 2010-11 M/s. Alkem Laboratories Ltd.

Now examining the facts and circumstances of the instant case in the light of the decision of the Hon’ble Supreme Court in the case of T.S. Balram Vs. Volkhart Brothers & Others supra, we find that the assessee’s income was assessed u/s. 143(3) of the Act on 11-03-2013. Financial statements and relevant audit report including those for computing the book profits were examined by the ld.AO. Thereafter, again all these details were made available before the ld. AO in the re- assessment proceedings completed on 30.12.2016. It was only during the proceedings u/s. 154 of the Act that the ld. AO made such adjustment.

Now a mistake which is claimed to have been apparent on record could have been easily taken note by the ld. AO while completing the assessment proceedings and if not then in the re-assessment proceedings but the same was not revealed by the ld. AO. Further said adjustment of adding provisions for doubtful debts could have been made only if