MARCHON TEXTILES INDUSTRIES P. LTD, MUMBAI V. ITO 2(2)(3), MUMBAI

ITA 1400/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8438 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 24-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 19-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R M TIWARI DR PER R K
• Assessee Lawyers: PARAS MEHTA
• Keywords: Depreciation; Difference of opinion; Capital Gains
• Section: 115JB; 11

Judgement Text

1 ITA NO.1440/MUM/2008 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI J BENCH MUMBAI J BENCH MUMBAI J BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT & SHRI R K PAN DA, AM BEFORE SHRI R V EASWAR, PRESIDENT & SHRI R K PAN DA, AM BEFORE SHRI R V EASWAR, PRESIDENT & SHRI R K PAN DA, AM BEFORE SHRI R V EASWAR, PRESIDENT & SHRI R K PAN DA, AM ITA NO 1400/MUM/2010 ITA NO 1400/MUM/2010 ITA NO 1400/MUM/2010 ITA NO 1400/MUM/2010 (ASST YEAR 2003 (ASST YEAR 2003 (ASST YEAR 2003 (ASST YEAR 2003- -- -04) 04) 04) 04) MARCHON TEXTILES INDUSTRIES P LTD EP 145 RAM MANDIR ROAD GURUKUL CHS VILE PARLE (E), MUMBAI 57 VS THE DY COMMR OF INCOME TAX CIRCLE 2(2), MUMBAI (APPELANT) (APPELANT) (APPELANT) (APPELANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO.AABCM9475F PAN NO.AABCM9475F PAN NO.AABCM9475F PAN NO.AABCM9475F ASSESSEE BY SHRI PARAS MEHTA REVENUE BY SHRI R M TIWARI, DR PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 3.12.2008 OF THE CIT(A-5 MUMBAI RELATING TO ASSESSM ENT YEAR 2003-04. 2 THE ONLY EFFECTIVE GROUND TAKEN BY THE ASSESSEE R EADS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 1,70,00,000/- BEING T HE SALE CONSIDERATION OF DEVELOPMENT RIGHTS RECEIVED AND ADJUSTED BY THE APP ELLANT FROM REVALUATION RESERVE ACCOUNT FOR COMPUTATION OF BOOK PROFIT/S 115JB. ADDITION OF RS. 1.70 CRORES TO THE BOOK PROFIT HOLD ING THAT THE APPELLANT HAS NOT PREPARED PROFIT OR LOSS ACCOUNT IN ACCORDANCE W ITH PART II AND III OF SCHEDULE VI OF THE COMPANIES ACT AND THE APPELLANT WAS DUTY BOUND TO TAKE INTO CONSIDERATION CAPITAL GAINS FOR THE PURPO SE OF BOOK PROFIT IS BAD IN LAW AND ADDITION OF RS. 1.70 CRORES NEEDS TO BE DELETED. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AIR TEXTURISNG MACHINES U NDER COLLABORATION WITH DAVIDE FIGLI GUIDICHI OF ITLAY SINCE 1973. IT ALSO CARRIES ON BUSINESS OF DEALING IN 2 ITA NO.1440/MUM/2008 SPARE PARTS RELATING TO THE ABOVE MACHINERIES. ON GOING THROUGH THE RETURN OF INCOME AND COMPUTATION, THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAS SHOWN A LONG TERM CAPITAL GAIN OF ` . 1.70 CRORES ON SALE OF DEVELOPMENT RIGHTS. THE ASSESSING OFFICER NOTED THAT THIS AMOUNT OF RS. 1.70 CRORES HAS NOT BEEN CREDITED IN THE P&L ACCOUNT AND THE TRANSACTION HAS NOT BEEN ROUTED THROUGH THE P&L ACCOUNT. THE ASSESSING OFFICER ASKED THE ASSE SSEE TO EXPLAIN AS TO WHY THE SAME HAS NOT BEEN ROUTED THROUGH THE P&L ACCOUN T. IT WAS EXPLAINED BY THE ASSESSEE THAT THE COMPANY FROM 1978 WAS THE OWNER OF LAND AT MUMBAI ADMEASURING 10219 SQ.FT THE COST OF WHICH WAS RS. 1 ,36,337/-. THE LAND COULD RECEIVE TRANSFERABLE DEVELOPMENT RIGHTS (TDR). IN O RDER TO RECOGNIZE THE VALUE OF TDRS, THE BOARD OF DIRECTORS WHILE SCRUTINIZING THE ACCOUNTS FOR THE YEAR ENDED 31.3.2002 HAD TAKEN THE DECISION TO GET THE PROPERT Y RE-VALUED BY REGISTERED VALUER, WHO, VIDE THEIR REPORT DT 24.4.2002 RE-VALU ED THE LAND AT ` . 2,60,00,000/-. SINCE THE COST OF LAND WAS RS. 1, 36,337/-, THE EXCESS OF RS. 2,58,63,663/- WAS ADDED TOWARDS REVALUATION. THE NE CESSARY ENTRY WAS PASSED ON 25.4.2002 I.E IN THE FY 2002-03(BEFORE THE ACCOU NTING YEAR 31.3.2002 HAD ALREADY ENDED) AS UNDER: LAND ACCOUNT DR 25863663 TO REVALUATION RESERVE A/C RS.25863663 2.2 THE COMPANY SOLD THE DEVELOPMENT RIGHTS TO ANOT HER COMPANY FOR RS. 1,70,00,000/- VIDE AGREEMENT DT 28.2.2003. SINCE TH IS WAS A LTC ASSET, IT WAS DULY OFFERED IN THE COMPUTATION OF INCOME. IT MAY B E NOTED THAT THE COMPANY CONTINUED TO BE OWNER OF LAND. IT HAS SIMPLY SOLD T HE DEVELOPMENT RIGHTS OF LAND. FOR THIS SALE, THE FOLLOWING ENTRY WAS PASSED WHICH IS IN CONFORMITY WITH THE RELEVANT ACCOUNTING STANDARDS FRAMED BY THE INSTITU TE OF CHARTERED ACCOUNTANTS OF INDIA 3 ITA NO.1440/MUM/2008 REVALUATION RESERVE A/S DR RS. 17000000 TO LAND A/C RS. 17000000 2.4 HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND REJECTED THE SAME ON THE GROUND THAT BY ADOPTING THIS METHOD, THE ASSESSEE HAS ADMITTED TO REDUCE THE BOO K PROFIT TO THE EXTENT OF RS. 1.70 CRORES WHICH RESULTED IN THE NON PAYMENT OF TA X AS PER THE PROVISIONS OF MAT U/S 115JB OF THE ACT. ACCORDING TO THE AO, CLA USE 2 OF SEC. 115JB, STIPULATES THE PROCEDURE OF PREPARING THE P&L ACCOUNT IN ACCOR DANCE WITH THE PROVISIONS OF PART II & III OF SCHEDULE VI TO THE COMPANIES ACT 1 956 PROVIDED WHILE PREPARING THE ANNUAL ACCOUNTS INCLUDING P&L ACCOUNT, THE ACCO UNTING POLICIES AND THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING SUCH ACC OUNTS INCLUDING P&L ACCOUNT ARE IN ACCORDANCE WITH THE PROVISIONS OF S EC. 210 OF THE COMPANIES ACT, 1956. SINCE IN THE INSTANT CASE, THE ASSESSEE COMPA NY HAS NOT ACCEPTED THE ACCOUNTING PRINCIPLES AND SINCE THE ASSESSEE COMPAN Y HAS NOT REFLECTED ALL THE RECEIPTS RECEIVED BY THE COMPANY WHETHER RECURRING OR NON RECURRING AND ALSO ANY TRANSACTIONS OF EXCEPTIONAL NATURE THEREFORE, T HE BOOK PROFIT HAS BEEN REDUCED TO THAT EXTENT RESULTING IN NON-PAYMENT OF TAX AS PER THE PROVISION OF MAT. HE DISTINGUISHED VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE BEFORE HIM. REFERRING TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF APOLLO TYRES LTD VS CIT REPORTED IN 255 ITR 273 (SC), HE N OTED THAT THE APEX COURT HAS HELD THAT THE P&L ACCOUNT HAS TO BE PREPARED IN ACC ORDANCE WITH THE PART II & III OF SCHEDULE IV TO THE COMPANIES ACT WHICH HAS TO BE SCRUTINIZED AND CERTIFIED BY STATUTORY AUDITORS AND RELEVANT AUTHORITIES. THE AS SESSEE, IN THE INSTANT CASE HAS NOT FOLLOWED THE PROCEDURE AND THEREFORE, THE ASSES SING OFFICER HAS THE POWER TO REWORK OR REWRITE THE P&L ACCOUNT. 4 ITA NO.1440/MUM/2008 2.5 REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS VEEKAYLAL INVESTMENT CO P LTD REPORTED IN 2 49 ITR 597, HE NOTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD T HAT CAPITAL GAIN HAS TO BE CONSIDERED IN COMPUTATION OF INCOME, IT CANNOT FAIL TO BE RECKONED IN COMPUTATION OF BOOK PROFIT AS WELL. THE ASSESSING OFFICER, ACCORDINGLY ENHANCED THE BOOK PROFIT OF THE ASSESSEE TO THAT AMOUNT AND COMPUTED THE SAME ACCORDINGLY. 3 IN APPEAL, THE CIT(A) UPHELD THE ACTION OF THE AS SESSING OFFICER BY HOLDING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS AN D DO NOT FIND ANY MERIT IN THE CONTENTIONS OF THE APPELLANT. IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAS IN THE COMPU TATION OF INCOME ITSELF DISCLOSED LONG TERM CAPITAL GAINS OF ` . 1.70 CR ON ACCOUNT OF SALE OF TDRS. HOWEVER, THE SAME HAS B EEN EXCLUDED FOR THE PURPOSES OF BOOK PROFIT ON INEXPLI CABLE REASONS. THE ASSESSING OFFICER HAS RIGHTLY OBSERVED THAT ACTION OF THE APPELLANT IS SELF CONTRADICTORY AND A GAINST THE PRINCIPLES OF ACCOUNTING. IT IS RIGHTLY STATED THA T DIFFERENT SETS OF ENTRIES MADE IN THE BOOKS FOR SUITING A SPECIFIC PURPOSES OF TAX AVOIDANCE COULD NOT BE ACCEPTED. CASE OF THE AP PELLANT IS SQUARELY COVERED AGAINST IT BY THE DECISION IN THE CASE OF CIT VS VEEKAYLAL INVESTMENT CO P LTD 249 ITR 597 (BOM) IN WHICH IT WAS SPECIFICALLY HELD THAT WHILE COMPUTING THE T OTAL INCOME UNDER THE I T ACT, THE ASSESSEE IS REQUIRED TO TAKE INTO ACCOUNT INCOME BY WAY OF CAPITAL GAINS. THUS, IN CO MPUTING THE BOOK PROFITS, THE ASSESSEE CANNOT EXCLUDE CAPIT AL GAINS. FURTHER CLAUSE (C) OF PART II OF SCHEDULE VI TO THE COMPANIES AT REQUIRES DISCLOSURE OF CREDITS OR RECEIPTS AND D EBITS OR EXPENSES IN RESPECT OF NON RECURRING TRANSACTIONS O R TRANSACTIONS OF ANY EXCEPTIONAL NATURE. ALSO CLAUSE 3(XII)(B) THEREOF REQUIRES DISCLOSURE OF PROFITS OR LOSSES FROM SUCH TRANSACTIONS. THE CONTENTION OF THE APPELLANT THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE IS NOT FOUND CORRECT. ONLY BECAUSE THE APPELLANT DID NOT CREDIT THE CAPITAL GAINS TO THE PROFIT AND LOSS ACCOUNT AND DIRECTLY T OOK THE SAME TO THE BALANCE SHEET, IT CANNOT ESCAPE THE RAT IO OF THE ABOVE DECISION ACCORDING TO WHICH THE APPELLANT IS DUTY BOUND TO TAKE INTO CONSIDERATION CAPITAL GAINS FOR THE PURPOSES OF BOOK PROFIT, ONCE IT HAS DISCLOSED THE SAME FOR THE PURPOSES OF NORMAL COMPUTATION OF INCOME. MOREO VER, 5 ITA NO.1440/MUM/2008 EVEN IN THE TERMS OF COMPANIES ACT, IT IS BOUND TO DISCLOSURE ALL SUCH RECEIPTS AS WELL. IN VIEW OF SUCH SPECIFIC DECISION, THE APPELLANT CANNOT ADOPT DIFFERENT METHODS AT ITS WHI MS AND FANCIES SUITING ITS OWN PURPOSES. THE RELIANCE PLAC ED ON CIT VS AKSHAY TEXTILES (SUPRA) IS MISPLACED AS IN THE S AID CASE, THERE IS NO DISCUSSION IN RESPECT OF VEEKYALAL INVE STMENT (SUPRA) AND ONLY A PASSING REFERENCE HAS BEEN MADE. 5.1 THE APPELLANT HAS NOT GIVEN ANY SATISFACTORY RE PLY WITH REGARD TO THE FACT THAT SALE OF SIMILAR BUSINESS AS SETS HAS BEEN DULY ACCOUNTED FOR IN THE PROFIT AND LOSS ACCO UNT EXCEPTING SALE OF LAND AND BUILDING WHICH ARE UNDIS PUTEDLY ARE BUSINESS ASSETS AS WELL AND DULY DISCLOSED LIK EWISE IN THE SCHEDULE OF FIXED ASSETS. EVIDENTLY, THERE IS A DEL IBERATE ATTEMPT TO HIDE THE TRUE FACTS AND PRESENT ALL CORR ECT PICTURE OF THE FINANCIAL STATUS OF THE COMPANY WHICH RESULT ED IN REDUCING THE BOOK PROFIT TO THE EXTENT OF ` 1.70 CR AND NON- PAYMENT OF TAX AS PER THE PROVISIONS OF MAT U/S 115 JB. THE ASSESSING OFFICER IS CORRECT IN POINTING OUT THAT T HE APPELLANT HAS NOT PREPARED PROFIT AND LOSS ACCOUNT IN ACCORDA NCE WITH PART II AND III OF SCHEDULE VI OF COMPANIES ACT. TH E PROVISIONS APPLY TO INCOME & EXPENDITURE ACCOUNT, REFERRED TO IN SUB- SECTION (2) OF SEC. 210 OF THE ACT, WHICH SHOULD BE ACCOUNTED IN A SPECIFIC MANNER LAID DOWN IN CLAUSE 2 IN WHICH IT IS SPECIFICALLY STATED THAT THE ACCOUNTS SHOULD BE MAD E OUT SO CLEARLY TO DISCLOSE THE RESULT OF THE WORKING OF TH E COMPANY DURING THE PERIOD COVERED BY THE ACCOUNT AND THE AS SESSEE SHALL DISCLOSE EVERY MATERIAL FEATURE INCLUDING CR EDIT OR RECEIPTS AND DEBITS OR EXPENSES IN RESPECT OF NON RECURRING TRANSACTION OR TRANSACTIONS OF AN EXCEPTIONAL NATUR E. IT MAY BE STATED HERE THAT IN ANOTHER CASE OF GROWTH AVENU E SECURITIES P LTD VS DCIT (2009) 30 DTR 4489DEL.TRIB ), IT WAS HELD THAT CAPITAL GAINS IS PART OF NET PROFIT TO BE PREPARED IN ACCORDANCE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT. 5.2 IT IS WORTH MENTIONING HERE THAT SIMILAR ISUSE HAS COME UP FOR CONSIDERATION BEFORE HONBLE MUMBAI TRIBUNAL IN THE CASE OF KOPRAN PHARMACEUTICALS LTD VS DCIT (2009) 121 TT J 77 (MUM) WHERE ALSO THE ASSESSEE HAD TRANSFERRED SIMIL AR AMOUNT TO CAPITAL RESERVE ACCOUNT WHICH WAS ADDED B Y THE ASSESSING OFFICER TO THE BOOK PROFIT FOR THE PURPOS ES OF SECTION 115JB OF THE ACT. IT WAS HELD THAT IN VIEW OF THE DECISION IN THE CASE OF VEEKAYALAL INVESTMENT (SUPR A) AND THERE BEING NO FUNCTIONAL DIFFERENCE BETWEEN SECTIO NS 115J AND 115JB CAPITAL GAINS ARISING TO THE COMPANY WOUL D FORM PART OF THE BOOK PROFIT. WITH REGARD TO THE APPLICA BILITY OF DECISION IN THE CASE OF APOLLO TYRES LTD VS CIT 255 ITR273(SC), IT WAS OBSERVED THAT ONLY A GENERAL PRO POSITION OF LAW WAS DECLARED BY THE SUPREME COURT WITH REGARD TO ADJUSTMENTS TO BE MADE BY THE ASSESSING OFFICER WHI LE HONBLE BOMBAY HIGH COURT SPECIFICALLY DEALT WITH T HE 6 ITA NO.1440/MUM/2008 QUESTION OF CAPITAL GAINS. ACCORDINGLY, THE ADDITIO N MADE BY THE ASSESSING OFFICER IS UPHELD. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL HERE BEFORE US. 4 AFTER HEARING BOTH THE PARTIES, WE FIND THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE BY THE LATEST DECISION OF THE HYDERAB AD SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RAIN COMMODITIES LTD REPOR TED IN 41 DTR 449. WE FIND THE SPECIAL BENCH OF THE TRIBUNAL IN THE AFOREMENTI ONED DECISION HAS HELD AS UNDER(SHORT NOTES): IT IS SETTLED LAW THAT ASSESSING OFFICER HAS THE P OWER TO ALTER THE NET PROFIT. IN THE FOLLOWING TWO CASES, THE ASSESSI NG OFFICER CAN REWRITE THE P&L A/C I.E. TO SAY THAT ASSESSING OFFI CER SHOULD RECALCULATE THE NET PROFIT AND THEN FOLLOW THE ADJU STMENTS OF MAT AS USUAL: (1) IF IT IS DISCOVERED THAT P&L A/C IS N OT DRAWN UP IN ACCORDANCE WITH PARTS II AND III OF SCH.VI TO THE C OMPANIES ACT. HOWEVER, THE ASSESSING OFFICER CANNOT DISTURB THE N ET PROFIT AS SHOWN BY THE ASSESSEE WHERE THERE ARE NO SUCH ALLEG ATIONS, FRAUD OR MISREPRESENTATION BUT ONLY A DIFFERENCE OF OPINION AS TO WHETHER A PARTICULAR AMOUNT SHOULD BE PROPERLY SHOW N IN THE P&L A/C OR IN THE BALANCE SHEET, (2) IF ACCOUNTING POLI CIES, ACCOUNTING STANDARDS ARENT ADOPTED FOR PREPARING SUCH ACCOUNT S AND METHOD, RATES OF DEPRECATION WHICH HAVE BEEN INCORR ECTLY ADOPTED FOR PREPARATION OF P&L A/C LAID BEFORE THE ANNUAL GENERAL MEETING. EXCEPT FOR THE ABOVE TWO CASES, THE AO HAS NO POWER TO ALTER THE NET PROFIT SHOWN BY THE COMPANIES FOR THE PURPOSE OF COMPUTING THE BOOK PROFIT. THUS, IT IS CLEAR THAT U NDER MAT, THE ASSESSING OFFICER SHOULD TAKE THE NET PROFIT AS COM PUTED BY THE ASSESSEE AND THEN MAKE TH ADJUSTMENTS UNDER SEC. 11 5JB. IT IS COMMON THAT SOME COMPANIES FOLLOW AN ACCOUNTING YEA R UNDER THE COMPANIES ACT 1956 WHICH IS DIFFERENT FROM THE FINANCIAL YEAR UNDER I T ACT. 1961. THESE COMPANIES GENERALLY PREP ARE TWO SETS OF ACCOUNTS ONE FOR COMPANIES ACT AND ANOTHER FOR I T ACT. THE REASON BEING DIFFERENT ACCOUNTING POLICIES, STANDAR DS, DEPRECIATION METHODS AND RATES ARE ADOPTED IN TWO S ETS OF ACCOUNT SO THAT HIGHER PROFIT IS REPORTED TO SHAREH OLDERS AND LOWER PROFIT FOR THE I T AUTHORITIES. T CURB THE A BOVE PRACTICE ONLY THIS RECALCULATION OF NET PROFIT UNDER MAT WAS INCO RPORATED SO THAT THERE SHOULD BE A CONSISTENCY IN ACCOUNTING PO LICIES, STANDARD, METHODS AND RATES OF DEPRECATION WITHIN T HE KNOWLEDGE OF I T AUTHORITIES. THE MOOT QUESTION THA T NEEDS TO BE DECIDED IS WHETHER PARTS II AND III OF SCH. VI TO T HE COMPANIES ACT PERMIT THE EXCLUSION OF THE CAPITAL GAIN FROM THE P &L ACCOUNT OR NOT ? IN OTHER WORDS, CAN A P&L A/;C DRAWN UP WITHO UT CONSIDERING 7 ITA NO.1440/MUM/2008 THE CAPITAL GAIN SAID TO BE IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND II OF SCH. VI TO THE COMPANIES ACT OR NOT ? IT WAS ACCORDINGLY HELD THAT IN THE ABSENCE OF ANY PROVISION FOR EXCLUSION OF EXEMPTED CAPITAL GAIN IN THE COMPUTATION OF BOOK PR OFIT UNDER THE PROVISIONS CONTAINED IN EXPLANATION TO SECTION 115JB OF THE AC T, THE ASSESSEE IS NOT ENTITLED TO THE EXCLUSION THEREOF AS CLAIMED. 4.1 WE FIND IN THE INSTANT CASE, ALTHOUGH THE AMOU NT OF ` 1,70 CRORES RECEIVED BY THE ASSESSEE COMPANY ON ACCOUNT OF SALE OF DEVELOPMENT RIGHTS HAS BEEN CONSIDERED IN THE COMPUTATION OF INCOME, THE SAME HOWEVER HAS BEEN DIRECTLY TAKEN TO THE LAND RESERVE ACCOUNT IN TH E BALANCE SHEET INSTEAD OF ROUTING IT THROUGH THE PROFIT &LOSS ACCOUNT. THEREF ORE, THE ACCOUNTS, IN OUR OPINION ARE NOT PREPARED IN ACCORDANCE WITH THE PRO VISIONS OF PARTS II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956. ACCORDING T O PART II & III OF SCHEDULE VI TO THE COMPANIES ACT, 1956 THE PROFIT & LOSS ACCOUN T SHALL DISCLOSE EVERY MATERIAL FEATURE INCLUDING CREDITS OR RECEIPTS AND DEBITS OR EXPENSES IN RESPECT OF NON-RECURRING TRANSACTIONS OR TRANSACTIONS OF AN EX CEPTIONAL NATURE. FURTHER THE PROFIT AND LOSS ACCOUNT SHALL ALSO DISCLOSE PROFIT OR LOSSES IN RESPECT OF TRANSACTIONS OF A KIND NOT USUALLY UNDERTAKEN BY TH E COMPANY OR UNDERTAKEN IN CIRCUMSTANCE OF AN EXCEPTIONAL OR NON RECURRING NAT URE, IF MATERIAL AMOUNT. THE AMOUNT OF ` 1,70 CRORES IN THE IMPUGNED CASE IS DEFINITELY A M ATERIAL AMOUNT. THEREFORE, IN VIEW OF THE DECISION OF THE SPECIAL B ENCH OF THE TRIBUNAL, CITED SUPRA AND IN VIEW OF THE DETAILED REASONING GIVEN B Y THE CITA), THE ASSESSING OFFICER IS JUSTIFIED IN ENHANCING THE BOOK PROFIT TO THAT EXTENT. WE THEREFORE, 8 ITA NO.1440/MUM/2008 DONT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY UPHELD THE SAME. THE GROUND RAISED BY THE ASSESSEE IS ACCORDI NGLY DISMISSED. 5 IN THE RESULT, THE APPEAL FILED THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH DAY OF FEB 2011. SD/- SD/- ( (( ( R V EASWAR R V EASWAR R V EASWAR R V EASWAR ) )) ) PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 11 TH FEB 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI