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Income Tax Appellate Tribunal, PUNE BENCH, ‘A’ PUNE – VIRTUAL COURT
Before: SHRI R.S. SYAL & SHRI S.S.VISWANETHRA RAVI
This appeal by the assessee arises out of the order dated 26-03-2018 passed by the Principal Commissioner of Income- tax-2, Aurangabad u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2013-14.
Briefly stated, the facts of the case are that the assessee filed its return of income declaring Nil income after adjustment of brought forward losses of earlier years. The assessment was completed u/s.143(3) on 14-03-2016 determining total income at Rs.54,42,770/- by making disallowance u/s.40(a)(ia) and also not allowing deduction u/s.80IA(4). The assessee preferred appeal before the ld. CIT(A), who, vide his order dated 23-12-2016 deleted
SPN Roads Infrastructure Pvt. Ltd., the disallowance u/s.40(a)(ia) and also held the assessee eligible for benefit of section 80IA(4), thereby again computing the total income at Nil. The ld. PCIT, exercising power u/s.263 of the Act, came to hold the assessment order to be erroneous and prejudicial to the interest of Revenue on the ground that the Assessing Officer (AO) failed to apply section 115JB which was applicable in this case because of the assessee being a private limited company. The assessee’s contentions were considered and dismissed, which has brought the assessee in appeal before the Tribunal.
We have heard the ld. DR through virtual court and gone through the relevant material on record. The assessee has filed an application dated 19-11-2020 urging the Tribunal to dispose of the appeal on merits after taking into consideration the written submission filed on 23-12-2019. We have meticulously gone through the written submission filed on behalf of the assessee.
Admittedly, the assessee is a private limited company and the provisions of section 115JB are applicable in this case. In framing the assessment, the AO did not apply such provisions. Rather, there is no whisper in the assessment order on section 115JB. Given the fact that such provisions were required to be applied for computing the total income of a company in addition to the regular provisions,
SPN Roads Infrastructure Pvt. Ltd., the AO erred in correctly applying the law to the facts of the case, which rendered the assessment order erroneous and prejudicial to the interest of Revenue.
The assessee has submitted through written submissions that there was brought forward loss which was also to be deducted in computing the book profit u/s.115JB of the Act and if such loss is considered, there won’t be any difference in the computation of income under the regular provisions and u/s.115JB of the Act.
However, no such computation showing Nil difference in income under both the scenarios has been placed on record.
The case of the assessee is that the amount of brought forward business loss would reduce `book profit’ under section 115JB as under the normal computation of income. In this regard, we find that computation of ‘book profit’ has been dealt with in Explanation 1 to section 115JB. Clause (iii) of Explanation 1 specifically provides : “that the amount of loss brought forward or unabsorbed depreciation whichever is less as per the books of accounts shall be reduced from the amount of profit as per the profit and loss account in the computation of book profit”. The ld. PCIT has noted in the impugned order that the amount of unabsorbed depreciation in this case is Nil and by applying the provisions of clause (iii) of SPN Roads Infrastructure Pvt. Ltd., Explanation 1, there will be Nil deduction on this count. Nothing has been said in the written submission to counter this position.
Secondly, the amount of deduction u/s 80IA(4) computed in the normal computation of income would also not go to reduce the `book profit’ u/s 115JB.
The next contention taken up by the assessee is that the assessment order was subject matter of appeal before the ld. CIT(A) and hence power of revision was ousted. In this regard, we find that Explanation 1(c) to section 263 provides that: “where an order passed by the AO has been the subject matter of appeal, the powers of CIT under the section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.” Assimilating the facts of the instant case, we find that the issue of section 115JB was not at all touched upon by the AO nor has the ld. CIT(A) dealt with it. In that view of the matter, this part of the assessment order cannot be said to have merged with the order of the ld. CIT(A) so as to bar revision u/s.263 of the Act.
It is clear from the afore noted facts that the AO did not apply section 115JB which ought to have been applied. This brings us to a situation where the AO failed to apply the provisions of the Act in SPN Roads Infrastructure Pvt. Ltd., terms of section 115JB of the Act. The assessee in its written submission has relied on the judgment of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). This judgment has approved the validity of the application of section 263, inter alia, in a case of incorrect application of law and the assessment order has been passed without application of mind. It is axiomatic that incorrect application of law also envelopes within its scope a case of non-application of the relevant provisions of law.
We have been confronted with a situation in which the AO incorrectly applied the law because section 115JB was omitted to be applied, which ought to have been applied. In the hue of this factual scenario, it is clear that the assessment order passed by the AO can be clearly described as erroneous and also prejudicial to the interest of the revenue, warranting the invocation of section 263 of the Act.
In the result, the appeal is dismissed. Order pronounced in the Open Court on 06th May, 2021.