M/s Foam Mattings (india) Ltd, Alappuzha V. DCIT, Alappuzha

ITA 16/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58239 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S PRAVEEN
• Assessee Lawyers: BIJU NARAYANAN
• Keywords: Revised return
• Section: 115JB

Judgement Text

1 ITA NO.16/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI SANJAY AROR A (AM) I.T.A. NO. 16/COCH/2010 (ASSESSMENT YEAR 2005-06) FOAM MATTINGS (INDIA) LTD VS DY.CIT, CIR.1 BEACH ROAD, ALAPUZHA ALAPUZHA PAN : AAACF4633A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BIJU NARAYANAN RESPONDENT BY : SHRI S. PRAVEEN DATE OF HEARING : 01-02-2012 DATE OF PRONOUNCEMENT : 02-02-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX(A)-IV, KOCHI DATED 23-10-2009 AND PERTAI NS TO ASSESSMENT YEAR 2005-06. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS REJE CTION OF THE AUDITED BALANCE- SHEET AND PROFIT & LOSS ACCOUNT FILED BY THE ASSESS EE IN THE COURSE OF ASSESSMENT PROCEEDINGS. 3. SHRI BIJU NARAYANAN, THE LD.REPRESENTATIVE FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A COMPANY FULLY OWNED BY GOVERNMENT OF KERALA. THE ASSESSEE 2 ITA NO.16/COCH/2010 COMPANY IS IN THE BUSINESS OF MANUFACTURE AND EXPOR T OF COIR PRODUCTS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED THE RETURN OF INCOME ON THE BASIS OF THE UNAUDITED AND UNAPPROVED PROFIT & LOSS ACCOU NT AND DECLARED LOSS OF RS.28,59,951. IN THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE ASSESSEE HAS FILED THE AUDITED BALANCE-SHEET AND PROFIT & LOSS ACCOUNT AS APPROVED BY THE SHAREHOLDERS OF THE COMPANY BEFORE THE ASSESSING OF FICER, SINCE THE TAX WAS COMPUTED U/S 115JB OF THE ACT. ACCORDING TO THE LD .REPRESENTATIVE FOR THE ASSESSEE, FOR THE PURPOSE OF SECTION 115JB, THE BOO K PROFIT MEANS THE PROFIT AS COMPUTED AS PER THE PROFIT & LOSS ACCOUNT PREPARED UNDER THE COMPANIES ACT AND CERTIFIED BY THE AUDITORS WHICH WAS APPROVED BY SHAREHOLDERS. THE ORIGINAL RETURN WAS FILED ON THE BASIS OF THE PROVISIONAL ST ATEMENT WHICH WAS NOT APPROVED BY THE AUDITORS AND SHAREHOLDERS. THEREFO RE, THE PROFIT & LOSS ACCOUNT AS PREPARED BY THE AUDITORS AND CERTIFIED, AS REQUI RED UNDER THE LAW AND APPROVED BY THE SHAREHOLDERS ARE TO BE CONSIDERED B Y THE ASSESSING OFFICER. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING O FFICER REJECTED THE AUDITED BALANCE-SHEET AND PROFIT & LOSS ACCOUNT FILED BEFORE THE ASSESSING OFFICER ON THE BASIS OF THE JUDGMENT OF THE APEX COURT IN GOETZE IN DIA LTD VS COMMISSIONER OF INCOME-TAX 284 ITR 323 (SC). REFERRING TO THE JUDGM ENT OF THE APEX COURT IN GOETZE INDIA LTD (SUPRA), THE LD.REPRESENTATIVE SUBM ITTED THAT THIS JUDGMENT IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN THE CA SE BEFORE THE SUPREME COURT IN GOETZE INDIA LTD (SUPRA), THE ASSESSEE FILED THE RET URN OF INCOME AND THEREAFTER CLAIMED A DEDUCTION BY WAY OF A LETTER BEFORE THE A SSESSING OFFICER. THAT DEDUCTION CLAIMED BY WAY OF LETTER WAS REJECTED BY THE ASSESSING OFFICER WHICH WAS CONFIRMED BY THE APEX COURT. IN THE CASE BEFOR E US, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE IS NOT CLAIMING ANY DEDUCTION BY WAY OF A LETTER. SECTION 115JB REQUIRES THE ASSESSEE TO COMPUTE THE PROFIT ON THE BASIS OF PROVISIONS OF COMPANIES ACT AND THE BOOK PROFIT SHA LL MEAN THE PROFIT AS 3 ITA NO.16/COCH/2010 COMPUTED UNDER THE PROVISIONS OF THE COMPANIES ACT AND CERTIFIED BY THE AUDITORS. THE ORIGINAL RETURN WAS NOT FILED ON THE BASIS OF THE BOOK PROFIT COMPUTED AS REQUIRED UNDER THE PROVISIONS OF SECTIO N 115JB OF THE ACT. THEREFORE, IN FACT, ACCORDING TO THE LD.REPRESENTAT IVE, THE ORIGINAL PROVISIONAL STATEMENT OF ACCOUNTS FILED ALONG WITH THE RETURN O F INCOME HAS TO BE REJECTED AND THE PROFIT & LOSS ACCOUNT AS CERTIFIED BY THE A UDITORS AND APPROVED BY THE SHAREHOLDERS HAS TO BE TAKEN INTO CONSIDERATION FOR COMPUTING THE INCOME U/S 115JB OF THE ACT. REFERRING TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF GOETZE INDIA LTD (SUPRA), THE LD.REPRESENTATIVE SUBM ITTED THAT THE APEX COURT ITSELF HAS CLARIFIED THAT THE ISSUE BEFORE THE APEX COURT WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL U/S 254 OF THE INCOME-TAX ACT. T HEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THIS JUDGMENT IN THE CASE OF GOET ZE INDIA LTD (SUPRA) MAY NOT STAND IN THE WAY OF THIS TRIBUNAL IN COMPUTING THE RIGHT TAXABLE INCOME. 4. ON THE CONTRARY, SHRI S PRAVEEN, THE LD.DR SUBMI TTED THAT THE ASSESSEE FILED THE ORIGINAL RETURN OF INCOME SUBSEQUENTLY AN D FILED THE AUDIT REPORT AND PROFIT & LOSS ACCOUNT IN THE COURSE OF ASSESSMENT P ROCEEDINGS. ACCORDING TO THE LD.DR, THE ASSESSEE MAY CLAIM ANY FURTHER DEDUCTION / ALLOWANCE IN THE COURSE OF ASSESSMENT PROCEEDINGS ONLY BY FILING THE REVISED R ETURN OF INCOME BEFORE THE ASSESSING OFFICER AS HELD BY THE APEX COURT IN THE CASE OF GOETZE INDIA LTD (SUPRA). SINCE THE ASSESSEE HAS NOT FILED ANY REVISED RETURN , THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE PROFIT & LOSS ACCOUNT AND THE BALANCE-SHEET FILED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT PRO FIT WAS COMPUTED U/ 115JB OF THE 4 ITA NO.16/COCH/2010 ACT. IN OTHER WORDS, THE TAX HAS TO BE LEVIED ON T HE BOOK PROFIT. BOOK PROFIT HAS BEEN DEFINED IN SECTION 115JB OF THE ACT. THEREFOR E, WHEN THE TAX WAS COMPUTED U/S 115JB OF THE ACT, THE PROFIT AS COMPUTED UNDER THE PROVISIONS OF THE COMPANIES ACT SHALL BE TREATED AS BOOK PROFIT. THE POWER OF THE ASSESSING OFFICER IS TO VERIFY WHETHER THE BOOK PROFIT AS COMP UTED UNDER THE PROVISIONS OF THE COMPANIES ACT WAS CERTIFIED BY THE AUDITORS AS REQUIRED BY THE STATUTORY PROVISIONS. IN THIS CASE, THE ASSESSEE CLAIMS THAT THE ORIGINAL RETURN WAS FILED ON THE BASIS OF THE PROVISIONAL STATEMENT AND NOT ON T HE BASIS OF THE AUDITED STATEMENT. IF THIS WAS THE AUDITED STATEMENT AS PR EPARED UNDER THE PROVISIONS OF THE COMPANIES ACT AND AS APPROVED BY THE SHAREHOLD ERS, THEN IT HAS TO BE THE BASIS FOR THE PURPOSE OF LEVYING TAX U/S 115JB OF T HE ACT. 6. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF GOETZE INDIA LTD (SUPRA). IN THE CASE B EFORE THE APEX COURT, THE ASSESSEE, IN THE COURSE OF ASSESSMENT PROCEEDINGS C LAIMED DEDUCTION BY WAY OF A LETTER. THIS WAS REJECTED BY THE ASSESSING OFFICER . THE APEX COURT CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE AP EX COURT ALSO MADE IT CLEAR THAT THE ISSUE BEFORE THE APEX COURT WAS LIMITED TO THE POWER OF THE ASSESSING AUTHORITY AND DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLATE TRIBUNAL U/S 254 OF THE ACT. THEREFORE, IT IS OBVI OUS THAT EVEN THOUGH THE ASSESSING AUTHORITY COULD NOT ENTERTAIN ANY FURTHER CLAIM IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE JUDGMENT OF THE APEX CO URT CLEARLY SAYS THAT IT WOULD NOT IMPINGE ON THE POWER OF THIS TRIBUNAL. I T IS NOT IN DISPUTE THAT THE TAX HAS TO BE COMPUTED U/S 115JB OF THE ACT. THEREFORE , THE BOOK PROFIT HAS TO BE NECESSARILY TAKEN AS PROFIT U/S 115JB(2) OF THE ACT. ONCE THE ASSESSEE PREPARED THE PROFIT & LOSS ACCOUNT UNDER PARTS II & III OF S CHEDULE VI OF COMPANIES ACT, THE POWER OF THE ASSESSING OFFICER IS TO VERIFY WHETHE R IT WAS CERTIFIED BY THE AUDITORS 5 ITA NO.16/COCH/2010 OR NOT. THE ASSESSING OFFICERS POWER IS TO MAKE AD JUSTMENT U/S 115JB AND CANNOT EXTEND BEYOND THAT. ONCE THE ASSESSING OFFI CER FOUND THAT THE PROFIT & LOSS ACCOUNT WAS PREPARED AS PER THE PROVISIONS OF THE COMPANIES ACT AND IT WAS CERTIFIED BY THE AUDITORS, THE PROFIT REFLECTED IN THAT ACCOUNT HAS TO BE ADOPTED FOR THE PURPOSE OF COMPUTING THE TAXABLE INCOME U/S 115JB OF THE ACT. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE PROVISIONAL STATEMENT WHICH WAS UNAUDITED AND UNAPPROVED BY THE SHAREHOLDERS CA NNOT BE A BASIS FOR LEVYING TAX U/S 115JB OF THE ACT. THEREFORE, THE JUDGMENT OF THE APEX COURT IN THE CASE OF GOETZE INDIA LTD (SUPRA) MAY NOT BE OF ANY ASSIST ANCE TO THE REVENUE. 7. IN THIS CASE, THE ASSESSING OFFICER HAS NOT EXAM INED WHETHER THE AUDITED BALANCE-SHEET AND PROFIT & LOSS ACCOUNT FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS WERE CERTIFIED BY THE AUDITORS AS REQUI RED UNDER THE PROVISIONS OF THE COMPANIES ACT. THE ASSESSING OFFICER, IN FACT , HAD NO OCCASION SINCE HE REJECTED THE SAME ON THE BASIS OF THE JUDGMENT OF T HE APEX COURT. SINCE THIS TRIBUNAL FOUND THAT THE PROFIT & LOSS ACCOUNT AS PR EPARED UNDER THE PROVISIONS OF THE COMPANIES ACT HAS TO BE VERIFIED AS TO WHETHER IT WAS CERTIFIED BY THE AUDITORS, THE ASSESSING OFFICER HAS TO NECESSARILY VERIFY THE SAME. ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER SHALL VERIFY WHETHER THE AUDITED BALANCE-SHEET AND PROFIT & LOSS ACCOUNT HAVE BEEN CE RTIFIED BY AUDITOR AS REQUIRED U/ 115JB(2) UNDER THE INCOME-TAX ACT OR NOT . IT IS ALSO THE DUTY OF THE ASSESSING OFFICER TO VERIFY THE ADJUSTMENT AS PROVI DED IN SECTION 115JB OF THE ACT AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACCORDANC E WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 6 ITA NO.16/COCH/2010 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF EXPENDITURE CLAIMED TOWARDS DEMO TAX TRADE FAIR. NEITHER THE A SSESSEE NOR THE REVENUE HAS ARGUED THIS ISSUE BEFORE THIS TRIBUNAL. AS SEEN FR OM THE ASSESSMENT ORDER, THE ASSESSEE CLAIMED RS.6,03,600 ON DEMO TAX TRADE FAIR . IT APPEARS THAT THE SANCTION OF THE GOVERNMENT WAS NOT OBTAINED. IN THE REVISED STATEMENT OF INCOME FILED BEFORE THE ASSESSING OFFICER, THE ASSESSEE ITSELF A PPEARED TO HAVE DISALLOWED THE EXPENDITURE. THE COMMISSIONER OF INCOME-TAX(A) FOUN D THAT THE ASSESSEE ITSELF ADMITTED IN THE REVISED STATEMENT THAT THE EXPENDIT URE HAS TO BE DISALLOWED. THEREFORE, HE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. THE FACT REMAINS IS THAT THE ASSESSEE ITSELF DISALLOWED THE SO-CALLED EX PENDITURE FOR DEMO TAX TRADE FAIR IN THE REVISED STATEMENT FILED BEFORE THE ASSE SSING OFFICER. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE IN THE ORIGINAL RETURN. THIS TRIBUNAL DOES NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 ND DAY OF FEBRUARY, 2012. SD/- SD/- (SANJAY ARORA) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 02 ND FEBRUARY, 2012 PK/- COPY TO: 1. FOAM MATTINGS (INDIA) LTD, BEACH ROAD, ALAPUZHA 2. DY.CIT, CIR.1, ALAPUZHA 3. THE COMMISSIONER OF INCOME-TAX(A)-IV, KOCHI 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH