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Income Tax Appellate Tribunal, PUNE BENCH, ‘A’ PUNE – VIRTUAL COURT
Before: SHRI R.S. SYAL & SHRI S.S.VISWANETHRA RAVI
PER R.S. SYAL, VP :
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
2 ITA No.663/PUN/2018 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,
3 ITA No.663/PUN/2018 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
4 ITA No.663/PUN/2018 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
5 ITA No.663/PUN/2018 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.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 06th May, 2021 सतीश
ITA No.663/PUN/2018 SPN Roads Infrastructure Pvt. Ltd.,
आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The Respondent; 2. 3. The PCIT-2, Aurangabad 4. DR, ITAT, ‘A’ Bench, Pune गाड� फाईल / Guard file. 5.
आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
Date 1. Draft dictated on 06-05-2021 Sr.PS 2. Draft placed before author 06-05-2021 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.
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