GEC Alsthom India Ltd. (Formerly English Electric Co. of India Ltd.), CHENNAI V. DCIT, CHENNAI

ITA 1924/CHNY/1993

• Counselvise Citation: 192421714 RSA 1993
• Duration Of Justice: 19 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-12-2012
• Assessment Year: 1987-1988
• Appeal Filed On: 25-06-1993
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: L V SRINIVASAN
• Keywords: Depreciation; Question of law
• Section: 32; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1924/MDS/1993 (ASSESSMENT YEAR : 1987-88) M/S GEC ALSTHOM INDIA LTD., PALLAVARAM, CHENNAI - 600 043. (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX, SPECIAL RANGE II, CHENNAI - 600 034 . (RESPONDENT) APPELLANT BY : SHRI L.V. SRINIVASAN, CA RESPONDENT BY : SHRI SHAJI P. JACOB, CIT DATE OF HEARING : 12.12.2012 DATE OF PRONOUNCEMENT : 20.12.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THIS IS A MATTER REMITTED BACK TO THIS TRIBUNAL B Y HON'BLE JURISDICTIONAL HIGH COURT. ORIGINALLY, THE APPEAL FILED BY THE ASSESSEE AGAINST AN ORDER DATED 15.3.93 OF COMMISSIONER OF I NCOME TAX (APPEALS)-VII, MADRAS, CONFIRMING A RECTIFICATION UNDER SECTION 154 OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') EFFECTED BY THE ASSESSING OFFICER, FOR THE IMPUGNED ASSESSMENT YEAR, WAS ALLO WED BY THIS TRIBUNAL. THE MATTER WAS CARRIED IN FURTHER APPEAL BY THE REVENUE I.T.A. NO. 1924/MDS/93 2 BEFORE HON'BLE JURISDICTIONAL HIGH COURT AND THEIR LORDSHIPS HELD AS UNDER AT PARA 9 OF THE JUDGMENT IN TCA NO.791 OF 20 04 DATED 13.02.2012:- 9. KEEPING THE ABOVE IN MIND, THE JUDGMENT OF THE T RIBUNAL SHOULD BE CONSIDERED, MORE PARTICULARLY, PARAGRAPH 4 OF THE ORDER OF THE TRIBUNAL WHICH WE HAVE REFERRED TO IN THE EARLIER PORTION OF THE ORDER, WHEREIN EXCEPT REFERRING TO THE OBJECTIONS RAISED BY THE DEPARTMENTAL REPRESENTATIVES IN SUPPO RT OF THE ORDERS OF THE REVENUE AUTHORITIES AND HOLDING THE A SSESSEES CONTENTION THAT IT IS NOT AN ARITHMETIC MISTAKE WHI CH CAN BE RECTIFIED, THERE IS NO OTHER REASON. IN OUR OPINIO N THE APPELLATE TRIBUNAL SHOULD HAVE CONSIDERED THE MATERIALS PLACE D ON EITHER SIDE AND, AFTER INDEPENDENTLY APPLYING ITS MIND, SH OULD HAVE COME TO ITS OWN CONCLUSION AS TO WHETHER ANY MISTAKE HAD CREPT IN THE ORDER OF THE ASSESSING AUTHORITY, WHICH REQUIRES RE CTIFICATION OR IT IS A DEBATABLE QUESTION. IN THE ABSENCE OF SUCH DISCUSSION, THE IMPUGNED ORDER SUFFERS FROM NON APPLICATION OF MIND . ACCORDINGLY, THE ORDER OF THE TRIBUNAL IS SET ASIDE AND THE MATTER IS REMITTED BACK TO THE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THE ISSUE AS EXPEDITIOUSLY AS POSSIBLE AND I N ANY CASE NOT EXCEEDING A PERIOD OF SIX MONTHS. THE TAX CASE APP EAL IS ALLOWED. NO COSTS. ACCORDINGLY, THE MATTER HAS BEEN TAKEN UP AFRESH FO R CONSIDERATION. 2. FACTS APROPOS ARE THAT ASSESSEE HAD IN ITS PROFI T & LOSS ACCOUNT FOR THE IMPUGNED ASSESSMENT YEAR, SHOWN A S UM OF ` 1.51 CRORES AS REFUND DUE FROM CENTRAL EXCISE DEPARTMENT . HOWEVER, IN ITS COMPUTATION OF INCOME FOR TAX PURPOSES, SUCH AM OUNT WAS EXCLUDED FOR A REASON THAT IT WAS NOT RECEIVED, NOR ACCRUED DURING THE RELEVANT PREVIOUS YEAR. ASSESSEE WAS ALSO ENTITLED FOR CLAIMING I.T.A. NO. 1924/MDS/93 3 DEDUCTION UNDER SECTION 32AB OF THE ACT FOR DEPOSIT S MADE BY IT IN INVESTMENT DEPOSIT ACCOUNT MAINTAINED IN ACCORDANCE WITH SUCH SECTION. AS PER SUB-SECTION (3) OF SECTION 32AB, T HE AMOUNT OF DEDUCTION THAT COULD BE CLAIMED WAS EQUAL TO THE AM OUNT OF PROFIT COMPUTED IN ACCORDANCE WITH PARTS II AND III OF SCH EDULE VI TO THE COMPANIES ACT, 1956, AFTER DEDUCTING THE DEPRECIATI ON COMPUTED UNDER SECTION 32(1) OF THE ACT, AND AFTER MAKING TH E ADJUSTMENTS SPECIFIED IN THE SAID SUB-SECTION. THOUGH THE ASSE SSEE HAD EXCLUDED ` 1.51 CRORES FROM ITS INCOME COMPUTED UNDER THE ACT , FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 32AB, I T CONSIDERED THE PROFITS AS PER THE PROFIT & LOSS ACCOUNT, WITHOUT E XCLUDING THE REFUND DUE FROM EXCISE AUTHORITIES. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASS ESSING OFFICER, BY HIS LETTER DATED 24.10.1989, REQUIRED T HE ASSESSEE TO JUSTIFY WHY ` 1.51 CRORES WAS REDUCED FROM ITS TOTAL INCOME. ASSESSEE HAD, ON SUCH NOTICE, REPLIED THAT THE AMOU NT HAD NOT YET ACCRUED TO IT AND THERE WAS NO LEGAL RIGHT TO RECEI VE SUCH REFUND FROM SUCH EXCISE AUTHORITIES. RELIANCE WAS PLACED ON TH E DECISION OF HON'BLE APEX COURT IN THE CASE OF SASOON E.D. & CO. LTD. V. CIT (26 ITR 27) FOR ARGUING THAT UNLESS A RIGHT TO RECEIVE MONEY WAS THERE, I.T.A. NO. 1924/MDS/93 4 INCOME COULD NOT BE CONSIDERED AS EARNED. THE A.O. IT SEEMS ACCEPTED SUCH CONTENTION OF THE ASSESSEE AND COMPLE TED THE ASSESSMENT EXCLUDING THE SUM OF ` 1.55 CRORES FROM THE TOTAL INCOME. NEVERTHELESS, THE ASSESSING OFFICER DID NO T MAKE ANY SIMILAR ADJUSTMENT ON THE BOOK PROFITS WHILE CALCUL ATING THE DEDUCTION AVAILABLE TO THE ASSESSEE UNDER SECTION 32AB. IN O THER WORDS, HE ALLOWED THE CLAIM OF SUCH DEDUCTION UNDER SECTION 3 2AB WITHOUT EXCLUDING THE SUM OF ` 1.51 CRORES, WHICH WAS OTHERWISE EXCLUDED BY THE ASSESSEE FROM ITS TOTAL INCOME. 4. THEREAFTER, ON 26.5.1992, A NOTICE WAS ISSUED BY THE ASSESSING OFFICER PROPOSING A RECTIFICATION OF THE ASSESSMENT . ACCORDING TO HIM, THERE WAS A MISTAKE IN COMPUTATION OF PROFITS FOR T HE PURPOSE OF WORKING OUT THE DEDUCTION UNDER SECTION 32AB OF THE ACT. IN REPLY TO SUCH NOTICE, ASSESSEE SUBMITTED THAT THE ONLY ADJUS TMENT THAT COULD BE CARRIED OUT ON THE PROFITS AS PER PROFIT & LOSS ACCOUNT WERE THOSE WHICH WERE ENUMERATED UNDER SECTION 32AB(3) OF THE ACT. ACCORDING TO ASSESSEE, THESE ITEMS DID NOT INCLUDE ANY ADJUST MENT FOR EXCISE DUTY REFUND DUE AND THEREFORE, NO SUCH ADJUSTMENT C OULD BE CARRIED OUT ON THE BOOK PROFIT. HOWEVER, THE ASSESSING OF FICER WAS NOT IMPRESSED BY ITS REPLY. ACCORDING TO HIM, ASSESSEE ITSELF HAD STATED I.T.A. NO. 1924/MDS/93 5 THAT THE AMOUNT THOUGH SHOWN AS INCOME IN THE PROFI T & LOSS ACCOUNT, WAS NOT AN INCOME SINCE IT HAD NEVER ACCRU ED TO THE ASSESSEE. FURTHER, ACCORDING TO HIM, ASSESSEE ALSO HAD ADMITTED THAT THE SUM OF ` 1.51 CRORES WAS CONSIDERED AS INCOME IN THE PROFIT & LOSS ACCOUNT ERRONEOUSLY. AS PER THE ASSESSING OFFICER, ASSESSEE COULD NOT SAY THAT SUCH AMOUNT SHOULD BE EXCLUDED W HILE CALCULATING THE GROSS TOTAL INCOME, BUT SHOULD BE INCLUDED FOR CALCULATING UNDER SECTION 32AB OF THE ACT. HE WAS OF THE OPINION THA T IT WAS AN APPARENT MISTAKE ON RECORD AMENABLE TO A RECTIFICAT ORY PROCEEDINGS UNDER SECTION 154 OF THE ACT. ACCORDINGLY, THE ASS ESSMENT WAS RECTIFIED AND DEDUCTION UNDER SECTION 32AB WAS RE-W ORKED BY EXCLUDING THE SUM OF ` 1.51 CRORES SHOWN BY THE ASSESSEE AS REFUND DUE FROM EXCISE DEPARTMENT. 5. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS). A RGUMENT OF THE ASSESSEE WAS THAT THERE WAS NO MISTAKE IN THE O RIGINAL ASSESSMENT ORDER. ACCORDING TO ASSESSEE, THE CLAIM OF DEDUCTION UNDER SECTION 32AB WAS IN ACCORDANCE WITH THE SAID SECTION. THIS COULD NOT BE DISTURBED IN A RECTIFICATORY PROCEEDIN GS. HOWEVER, LD. CIT(APPEALS) WAS NOT IMPRESSED. ACCORDING TO LD. C IT(APPEALS), IT WAS AN ADMITTED POSITION THAT ASSESSEE HAD NOT EARN ED ANY REFUND OF I.T.A. NO. 1924/MDS/93 6 EXCISE DUTY AND FURTHER THERE WAS A SPECIFIC ADMISS ION BY THE ASSESSEE IN THAT REGARD. THEREFORE, THERE WAS AN E RROR IN THE PROFIT & LOSS ACCOUNT WHEREBY SUCH AMOUNT WAS SHOWN AS INCOM E. THAT AMOUNT HAD TO BE EXCLUDED FROM THE PROFITS BEFORE C OMPUTING THE DEDUCTION AVAILABLE TO THE ASSESSEE UNDER SECTION 3 2AB OF THE ACT. AS PER LD. CIT(APPEALS), ASSESSING AUTHORITY WAS DU TY BOUND TO CONSIDER TRUE AND FAIR PROFITS AS PER COMPANIES ACT AND ASSESSING OFFICER HAD THE POWER TO VERIFY WHETHER THE PROFIT SHOWN IN THE PROFIT & LOSS ACCOUNT WAS TRUE PROFIT OR OTHERWISE. IN ANY CASE, ACCORDING TO HIM, PRINCIPLE FOR RECOGNITION OF INCOME HAD TO BE UNIFORMLY APPLIED WITH REGARD TO ALL SECTIONS OF THE INCOME-TAX ACT. THEREFORE, LD. CIT(APPEALS) HELD THE ASSESSING OFFICER TO BE JUSTI FIED IN INVOKING SECTION 154 AND EFFECTING THE RECTIFICATION. 6. WHEN THE MATTER REACHED TRIBUNAL, AFTER BRIEFLY ASSIMILATING THE FACTS MENTIONED ABOVE, THIS TRIBUNAL HAD HELD THAT WHAT WAS SOUGHT TO BE RECTIFIED WAS NOT AN ARITHMETICAL MISTAKE BUT , WAS A DEBATABLE QUESTION OF LAW. NEVERTHELESS, THIS TRIBUNAL DID N OT GIVE DETAILS AS TO WHY IT CONSIDERED THE MISTAKE TO BE DEBATABLE. AS ALREADY MENTIONED BY US, HON'BLE JURISDICTIONAL HIGH COURT HAS REMITT ED THE MATTER BACK TO THE TRIBUNAL FOR DECIDING THE ISSUE AFRESH. I.T.A. NO. 1924/MDS/93 7 7. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT SUB-SECTION (3) O F SECTION 32AB ALLOWED FOR ADJUSTMENT ONLY ON CERTAIN ITEMS CHARGE D TO PROFIT & LOSS ACCOUNT, FOR COMPUTING THE AMOUNT ELIGIBLE FOR DEDU CTION UNDER SECTION 32AB(1) OF THE ACT. ACCORDING TO HIM, THE PROFITS COMPUTED IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO COMPANIES ACT, 1956 COULD NOT BE DISTURBED, BUT FOR THOSE ITEMS ME NTIONED THEREIN. EVEN THOUGH THE INCOME SHOWN IN THE PROFIT & LOSS A CCOUNT DID NOT ENSUE TO THE ASSESSEE, ASSESSEE HAD BY ITSELF INCLU DED IT IN THE PROFIT & LOSS ACCOUNT. ONCE, IT WAS SO INCLUDED, DEDUCTIO N UNDER SECTION 32AB HAD TO BE CALCULATED CONSIDERING THE PROFIT OF THE ASSESSEE AFTER SUCH INCLUSION. RELYING ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF APOLLO TYRES LTD. V. CIT (255 ITR 273), LEA RNED A.R. SUBMITTED THAT ADJUSTMENTS THAT COULD BE MADE ON TH E BOOKS PROFITS COULD ONLY BE THOSE WHICH WERE SPECIFIED UNDER SUB- SECTION (3) OF SECTION 32AB AND NOTHING MORE. IN OTHER WORDS, ACC ORDING TO HIM, THERE WAS NO POWER WITH ASSESSING OFFICER TO DISTUR B THE PROFITS COMPUTED IN ACCORDANCE WITH PARTS II AND III OF SCH EDULE VI TO COMPANIES ACT. IN ANY CASE, LEARNED A.R. SUBMITTED THAT IT WAS A DEBATABLE ISSUE NOT AMENABLE TO A RECTIFICATION UND ER SECTION 154 OF THE ACT. I.T.A. NO. 1924/MDS/93 8 8. PER CONTRA, LEARNED D.R. SUPPORTING THE ORDERS O F AUTHORITIES BELOW, SUBMITTED THAT ASSESSEE COULD NOT BE ALLOWED TO BLOW HOT AND BLOW COLD. ASSESSEE ITSELF HAD ADMITTED THAT THE I NCOME HAD NOT ACCRUED TO IT, NOR IT HAD ANY LEGAL RIGHT OVER THE EXCISE DUTY OF ` 1.51 CRORES SHOWN IN ITS PROFIT & LOSS ACCOUNT. WITHOUT ANY ENTITLEMENT FOR RECEIVING SUCH INCOME OR ANY LEGAL RIGHT, ASSES SEE COULD NOT CLAIM THE AMOUNT AS INCOME. IN SUCH A SITUATION, ASSESSE E ITSELF HAD EXCLUDED SUCH AMOUNT FROM ITS TOTAL INCOME FOR THE PURPOSE OF INCOME-TAX ACT. BUT, WHEN IT CAME TO THE CLAIM OF DEDUCTION UNDER SECTION 32AB OF THE ACT, ASSESSEE WANTED TO INCLUDE SUCH AMOUNT, FOR GETTING A HIGHER BENEFIT. THERE WAS A CLEAR MI STAKE IN THE ASSESSMENT ORDER SINCE ASSESSING OFFICER EXCLUDED S UCH AMOUNT AND ACCEPTED THE TOTAL INCOME, BUT DID NOT EXCLUDE SUCH AMOUNT WHILE COMPUTING DEDUCTION UNDER SECTION 32AB OF THE ACT. AS PER THE LEARNED D.R., THIS WAS A MISTAKE APPARENT ON RECORD WHICH WAS AMENABLE IN A RECTIFICATION UNDER SECTION 154 OF TH E ACT. 9. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE HAD SHOWN A SUM O F ` 1.51 CRORES AS REFUND DUE FROM EXCISE AUTHORITIES IN ITS PROFIT & LOSS ACCOUNT. THERE IS ALSO NO DISPUTE THAT WHILE COMPUTING INCOM E FOR TAX I.T.A. NO. 1924/MDS/93 9 PURPOSES, SUCH AMOUNT WAS EXCLUDED BY THE ASSESSEE. IT IS ALSO NOT DISPUTED THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION U NDER SECTION 32AB ON THE INVESTMENT DEPOSITS MADE BY IT. WHILE CLAIMING SUCH DEDUCTION, ASSESSEE HAD CONSIDERED THE PROFITS AS P ER ITS PROFIT & LOSS ACCOUNT. OBVIOUSLY, SUCH PROFITS INCLUDED THE CLAIM OF EXCISE DUTY REFUND OF ` 1.51 CRORES ALSO. IT IS AN ACCEPTED POSITION THAT ASSESSEE HAD ITSELF STATED BEFORE THE ASSESSING OFF ICER THAT THERE WAS NO LEGAL RIGHT TO RECEIVE SUCH AMOUNT NOR HAD I T ACCRUED. RELEVANT PART OF THE LETTER DATED 2 ND DECEMBER, 1989 ADDRESSED TO THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSM ENT PROCEEDING, IS REPRODUCED HEREUNDER:- IN THESE CIRCUMSTANCES, THE ASSESSEE APPEARS TO HAV E TAKEN THE SUM OF ` 1,51,00,000/- IN THE PROFIT AND LOSS ACCOUNT ERRONEOUSLY. REFUNDS HAVE NOT BECOME DUE TO THE AS SESSEE AS A RESULT OF ANY DECISION IN IS OWN CASE. ON THE BASI S OF THE DECISION IN OTHER CASES, THE ASSESSEE HAS PREFERRED THE REFUND CLAIMS. REFUND UNDER THE CENTRAL EXCISE & SALT ACT, 1944 IS COVERE D BY SEC. 118. ACCORDING TO THIS, THE ASSESSEE MAY HAVE TO APPROAC H THE EXCISE AUTHORITIES FOR REFUND AND IF THEY AGREE TO GRANT R EFUND, THE ASSESSEE WOULD HAVE A RIGHT TO RECEIVE THE REFUND. TILL THEN, IT WILL AT BEST BE ONLY TO SHOW THAT THE CLAIM HAS BEEN ADM ITTED BY THE EXCISE AUTHORITIES, THEY COULD ONLY BE IN THE NATUR E OF CLAIMS PURE AND SIMPLE. IN FACT THE ASSESSEE HAS HAD TO FILE W RIT PETITIONS FOR PART OF THE CLAIMS. FOR PURPOSES OF ASSESSMENT, THE MERE FACT THAT AN ITEM HAS BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT WILL NOT BY ITSELF MAKE THE AMOUNT TAXABLE. IT IS NOT DECISIVE OF THE MATTER. IT WILL HAVE TO BE ASCERTAINED ON THE BASIS OF THE FACTS WHETHER AN IN COME HAD I.T.A. NO. 1924/MDS/93 10 ACCRUED APART FROM ENTRIES IN THE ACCOUNTS SEE CA SES OF CIT V. SHOORJI VALABDAS & CO. 46 ITR 144 (SC), CIT V. INDI A DISCOUNT CO. LTD. 75 ITR 191 (SC), CIT V. BEZPUR CO-OPERATIVE SU GAR FACTORY LTD. 172 ITR 321 (SC). WE HAVE NOW CLEARLY INDICAT ED THAT THE ENTRIES AS ABOVE CANNOT BE TREATED AS INCOME. FOR TAKING AN ITEM AS INCOME, IT SHOULD HAVE ACCR UED TO THE ASSESSEE IN THE ACCOUNTING YEAR. IT WOULD MEAN THA T THE ASSESSEE SHOULD HAVE A RIGHT TO RECEIVE THE MONEY IN QUESTIO N. PLEASE SEE DECISION IN THE CASE OF SASSOON ED & CO. LTD. V. CI T 26 ITR 27 (SC). EVEN UNDER A MERCANTILE SYSTEM OF ACCOUNTING, CREDI T CAN BE TAKEN ONLY WHERE THE SUM BECOMES LEGALLY DUE. SEE THE OB SERVATIONS AT P. 142-143 OF STATE BANK OF TRAVANCORE V. CIT 158 ITR 102 (SC). ON THE BASIS OF THE ABOVE SUBMISSION, IT CANNOT B E HELD THAT INCOME HAD ACCRUED TO THE ASSESSEE AND THEREFORE, T HE SUM OF ` 1,51,00,000/- IS NOT LIABLE TO BE BROUGHT TO THE AS SESSMENT. THE ASSESSEE HAD OBVIOUSLY UNDER A MISTAKEN IMPRESSION TREATED THE SUM AS INCOME IN ITS ACCOUNTS AND WE ARE GIVEN TO U NDERSTAND THAT IN FUTURE THEY PROPOSE TO TAKE INTO ACCOUNT SUCH REFUN DS ONLY AS AND WHEN THE CONCERNED AUTHORITIES PASS ORDERS GRANTING REFUND AND/OR ON RECEIPT OF THE AMOUNTS. 10. OBVIOUSLY, ASSESSEE HAD ADMITTED THAT THE SUM O F ` 1.51 CRORES WAS CREDITED TO THE PROFIT & LOSS ACCOUNT ER RONEOUSLY. THE QUESTION THAT REMAINS NOW, IS WHETHER SUCH AMOUNT W AS TO BE EXCLUDED FROM THE PROFITS WHILE COMPUTING DEDUCTION UNDER SECTION 32AB OF THE ACT. THE SAID SUB-SECTION (3) OF SECTI ON 32AB IS REPRODUCED HEREUNDER:- 32AB (3) THE PROFITS OF BUSINESS OR PROFESSION OF A N ASSESSEE FOR THE PURPOSES OF SUB-SECTION (1) SHALL BE AN AMO UNT ARRIVED AT AFTER DEDUCTING AN AMOUNT EQUAL TO THE DEPRECIATION COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1) O F SECTION 32 I.T.A. NO. 1924/MDS/93 11 FROM THE AMOUNTS OF PROFITS COMPUTED IN ACCORDANCE WITH THE REQUIREMENTS OF PARTS II AND III OF THE SCHEDULE VI TO THE COMPANIES ACT, 1956 (1 OF 1956), AS INCREASED BY TH E AGGREGATE OF - (I) THE AMOUNT OF DEPRECIATION; (II) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND PROVISION THEREFOR; (III) THE AMOUNT OF SURTAX PAID OR PAYABLE UNDER THE COMPANIES (PROFITS) SURTAX ACT, 1964 (7 OF 1964) ; (IV) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED; (V) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; (VI) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUBSIDIARY COMPANIES; AND (VII) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAIR OR PROPOSED, IF ANY DEBITED TO THE PROFIT AND LOSS ACCOUNT; AND AS REDUCED BY ANY AMOUNT OR AMOUNTS WITHDRAWN FROM RESERVES OR PR OVISIONS, IF SUCH AMOUNTS ARE CREDITED TO THE PROFIT AND LOSS AC COUNT. 11. THE TERMINOLOGY USED IN SUB-SECTION (3) IS SUCH THAT THE PROFITS, WHICH HAD TO BE CONSIDERED FOR ALLOWING THE DEDUCTI ON, HAS NECESSARILY TO START FROM THE PROFITS COMPUTED IN A CCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO COMPANIES ACT, 1 956. ITEMS (I) TO (VII) MENTIONED UNDER SUB-SECTION (3) DO NOT INCLUD E ANY CREDITS SHOWN FOR EXCISE REFUND DUE. AT THE SAME TIME, THE RE IS AN ADMISSION BY THE ASSESSEE THAT IT WAS NOT AT ALL INCOME. THI S LEADS US TO THE QUESTION WHETHER AN INCOME WHICH IS NOT LEGALLY DUE TO THE ASSESSEE, BUT ACCOUNTED AS INCOME IN ITS BOOKS, HAS TO BE EXC LUDED WHILE I.T.A. NO. 1924/MDS/93 12 COMPUTING DEDUCTION UNDER SECTION 32AB OF THE ACT W HICH IS TO START FROM THE BOOK PROFIT. IN OTHER WORDS, THE QUESTION IS WHETHER ASSESSING OFFICER CAN DISTURB THE BOOKS PROFITS. S UB-SECTION (3) STATES THAT PROFITS WHICH HAD TO BE CONSIDERED ARE THE PROFITS COMPUTED IN ACCORDANCE WITH REQUIREMENT OF PARTS II AND III OF SCHEDULE VI TO COMPANIES ACT. WHEN PROFITS ARE NOT SO COMPUTED, WE CANNOT SAY THAT ASSESSING OFFICER IS HAVING NO P OWER TO LOOK INTO THIS ASPECT. IN OUR OPINION, A.O. HAS THE POWER TO VERIFY WHETHER PROFITS INDEED HAVE BEEN COMPUTED IN ACCORDANCE WIT H PARTS II AND III OF SCHEDULE VI TO COMPANIES ACT. HOWEVER, HON'BLE APEX COURT IN THE CASE OF APOLLO TYRES LTD. (SUPRA), IN RELATION TO THE POWERS OF AN ASSESSING OFFICER WHILE COMPUTING BOOK PROFITS FOR APPLICATION OF SECTION 115J, HAS HELD THAT ASSESSING OFFICER HAS N O POWER TO RE- SCRUTINIZE THE ACCOUNTS AND VERIFY WHETHER ACCOUNTS HAVE BEEN MAINTAINED IN ACCORDANCE WITH THE PROVISIONS OF COM PANIES ACT. THE TERMINOLOGY USED IN SAID SUB-SECTION IS ALSO IN AC CORDANCE WITH PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO CO MPANIES ACT. THEREFORE, WE ARE INCLINED TO ACCEPT THE ARGUMENT O F THE ASSESSEE THAT THE QUESTION WHETHER THE AMOUNT OF ` 1.51 CRORES RECEIVED AS EXCISE DUTY REFUND SHOWN AS A PART OF INCOME IN ITS PROFIT & LOSS ACCOUNT THOUGH IT HAD NOT ACCRUED TO THE ASSESSEE, COULD BE I.T.A. NO. 1924/MDS/93 13 EXCLUDED WHILE COMPUTING DEDUCTION UNDER SECTION 32 AB OF THE ACT, WAS INDEED A DEBATABLE ONE. IT IS TRITE LAW THAT D EBATABLE ISSUES ARE NOT AMENABLE TO A RECTIFICATORY PROCEEDING UNDER SE CTION 154 OF THE ACT. WHAT CAN BE RECTIFIED UNDER SECTION 154 OF TH E ACT IS ONLY A MISTAKE APPARENT FROM RECORD. WE CANNOT SAY THAT T HE ASSESSMENT ORDER SUFFERED FROM ANY SUCH PATENT MISTAKE WHICH W AS APPARENT FROM RECORD, WHICH WAS AMENABLE TO A RECTIFICATORY PROCEEDING UNDER SECTION 154 OF THE ACT. WE ARE, THEREFORE, OF THE OPINION THAT THE ASSESSEE HAS TO SUCCEED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 20 TH OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH DECEMBER, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) (4) CIT (5) D.R. (6) GUARD FILE