Coromandel Stampings and Stones Ltd., Hyderabad V. Asst. CIT, Circle-1(2), Hyderabad

ITA 215/HYD/2014

• Counselvise Citation: 21522514 RSA 2014
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Revision of order; Assessment record
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 215/HYD/2014 ASSESSMENT YEAR : 2009-10 COROMANDEL STAMPINGS AND STONES LTD., HYDERABAD PAN AAACC7853J ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 1(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI P. SOMA SEKHAR REDDY DATE OF HEARING 21-05-2014 DATE OF PRONOUNCEMENT 18-07-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17/12/2013 PASSED BY THE CIT-I, HYDERABAD U/S 263 O F THE ACT FOR THE AY 2009-10. 2. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 25/09/20 09 DECLARING TOTAL INCOME AT RS. NIL UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS. 34,20,315/- U/S 115JB OF THE ACT. INITIALLY, TH E RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, ASSE SSEES CASE WAS SELECTED FOR SCRUTINY, DURING THE SCRUTINY ASSESSME NT PROCEEDINGS, AO CALLED UPON THE ASSESSEE TO PRODUCE BOOKS OF ACCOUN T AND VARIOUS OTHER INFORMATION. IN RESPONSE TO THE NOTICE ISSUED BY THE AO, ASSESSEE PRODUCED BOOKS OF ACCOUNT AS WELL AS OTHER INFORMATION CALLED FOR BY THE AO. AO AFTER VERIFYING THE BOOKS OF ACCOUNT AND 2 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. INFORMATION FURNISHED BEFORE HIM NOTICED THAT OUT O F TOTAL EXPENDITURE BOOKED UNDER THE HEAD RENTAL EXPENSES AN AMOUNT OF RS. 1,82,000/- WAS NOT SUBJECTED TO DEDUCTION OF TAX AT SOURCE, TH EREFORE, HE DISALLOWED THE SAME U/S 40(A)(IA) OF THE ACT AND AD DED BACK TO THE INCOME OF THE ASSESSEE. THAT APART, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED CERTAIN EXPENDITURE UNDER THE HEAD CAR RIAGE AND FREIGHT EXPENSES. OUT OF THE TOTAL EXPENDITURE CLAIMED AN AMOUNT OF RS. 6,32,623/- WAS NOT SUBJECTED TO TDS. ACCORDINGLY, THE AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) DISALL OWED THE AMOUNT OF RS. 6,32,623/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. AS A RESULT, TOTAL INCOME WAS DETERMINED AT RS. 8,14,62/ - UNDER THE NORMAL PROVISIONS AND BOOK PROFIT WAS COMPUTED AT RS. 34,2 0,315/- U/S 115JB OF THE ACT. 3. THE CIT CALLED FOR THE ASSESSMENT RECORDS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR IN EXERCISE OF POWER C ONFERRED U/S 263 OF THE ACT AND ON EXAMINING THE SAME WAS OF THE VIE W THAT THE ASSESSEE WHILE COMPUTING BOOK PROFIT U/S 115JB OF T HE ACT HAS ARRIVED AT THE NET PROFIT OF RS. 34,20,315/-AFTER R EDUCING PRIOR PERIOD EXPENDITURE OF RS. 52,24,589/-. THE CIT WAS OF THE VIEW THAT AS THE EXPENDITURE WAS NOT INCURRED IN THE PREVIOUS YEAR R ELATING TO AY UNDER DISPUTE THE SAME CANNOT BE CONSIDERED IN ACCORDANCE WITH THE PROVISIONS OF SECTION PART II & III OF SCHEDULE AND VI TO THE COMPANIES ACT, 1956. ACCORDING TO THE CIT, SINCE TH E AO HAS ACCEPTED THE BOOK PROFIT DECLARED BY THE ASSESSEE U /S 115JB OF THE ACT, ASSESSMENT ORDER PASSED U/S 143(3) IS ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, HE I SSUED A NOTICE ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY ASSESSM ENT ORDER SHALL NOT BE REVISED. IN RESPONSE TO THE NOTICE ISSUED BY THE CIT, ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 115 JB OF THE ACT, BOOK PROFIT SHALL BE THE NET PROFIT AS SHOWN IN THE P&L A/C PREPARED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN PART I & II OF SCHEDULE VI TO THE COMPANIES ACT. IT WAS SUBMITTED THAT AS P ER THE P&L A/C FOR 3 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. THE PERIOD ENDING 31/03/2009, THE PROFIT IS RS. 34, 20,315/-, WHICH HAS BEEN ADMITTED BY THE ASSESSEE AS BOOK PROFIT. IT WA S SUBMITTED THAT THE AMOUNT OF PRIOR PERIOD ADJUSTMENT OF RS. 52,24, 589/- WAS A PAYMENT MADE DURING THE YEAR. EXPLAINING FURTHER, I T WAS SUBMITTED THAT THE PAYMENT RELATES TO SERVICES RENDERED BY TH E FOREIGN AGENT. AS THERE WAS DISPUTE WITH REGARD TO PAYMENT OF SERVICE TAX IN RESPECT OF SERVICES RENDERED BY THEM, THE AMOUNT WAS NOT PAID TO THE FOREIGN AGENT. HOWEVER, SUBSEQUENTLY, ON THE BASIS OF A DEC ISION OF THE HONBLE SUPREME COURT, THE AMOUNT OF RS. 52,24,589/ - BECAME PAYABLE TO THE FOREIGN AGENT. HENCE, THE SAID AMOUN T WAS PROVIDED DURING THE YEAR UNDER CONSIDERATION, WHICH IS IN AC CORDANCE WITH PARA 2 OF SCHEDULE II OF THE COMPANIES ACT, 1956. IT W AS SUBMITTED BY THE ASSESSEE THAT ANY TRANSACTION THAT TOOK PLACE D URING THE YEAR HAS TO BE RECORDED IN THE BOOKS OF ACCOUNT OF THAT YEAR . HOWEVER, THE PRIOR PERIOD ITEM SHOULD BE INDICATED SEPARATELY SH OWING THAT FORMS PART OF THE P&L A/C. IT WAS SUBMITTED THAT THE PROF IT IS ARRIVED AT IN ACCORDANCE WITH COMPANIES ACT. THE AO FOR THE PURPO SE OF WORKING OUT BOOK PROFIT CANNOT DISTURB THE FINAL ACCOUNT. IN SUPPORT OF SUCH CONTENTION, ASSESSEE RELIED UPON A DECISION OF THE HONBLE SUPREME COURT IN CASE OF APPOLLO TYRES, 255 ITR 273 AND DEC ISIONS OF ITAT MUMBAI BENCH IN CASE OF DUKE OFF-SHORE LTD.VS. DCIT 45 SOT 399 AND IN CASE OF GULF OIL CORPORATION VS. ACIT, 111 I TD 124. ACCORDINGLY, IT WAS SUBMITTED THAT THE AO AFTER EXA MINING THE DETAILS OF COMPUTATION OF BOOK PROFIT U/S 115JB OF THE ACT, HAVING PASSED THE ORDER OF ASSESSMENT WHICH IS ALSO A POSSIBLE VIEW A S PER THE DECISIONS OF APEX COURT AND ITAT, THERE IS NO ERROR IN THE ASSESSMENT ORDER NOR THERE IS ANY PREJUDICE CAUSED TO THE REVE NUE. IT WAS, THEREFORE, SUBMITTED THAT THE ASSESSMENT ORDER CANN OT BE REVISED U/S 263 OF THE ACT. 4. THE CIT AFTER CONSIDERING THE SUBMISSIONS, HOWEV ER, DID NOT ACCEPT THE SAME AND ULTIMATELY PASSED THE IMPUGNED ORDER BY HOLDING THAT PRIOR PERIOD EXPENDITURE CANNOT BE REDUCED FRO M THE PROFIT FOR 4 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. ARRIVING AT THE BOOK PROFIT U/S 115JB OF THE ACT. A CCORDINGLY, HE DIRECTED THE AO TO COMPUTE BOOK PROFIT U/S 115JB AT RS. 86,44,904/-. 5. BEING AGGRIEVED OF THE REVISION ORDER PASSED BY THE CIT, ASSESSEE IS BEFORE US CHALLENGING THE SAME BOTH ON THE GROUND OF EXERCISE OF POWERS U/S 263 OF THE ACT AS WELL AS ON MERITS OF THE ISSUE. 6. REITERATING THE CONTENTIONS RAISED BEFORE THE CI T IN COURSE OF REVISION PROCEEDING, THE LEARNED AR SUBMITTED BEFOR E US THAT THE ASSESSEE HAS COMPUTED THE BOOK PROFIT OF RS. 34,20, 315/- IN TERMS WITH THE PROVISIONS OF PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, WHICH HAS BEEN CERTIFIED BY THE AUDITOR. ACCOR DINGLY, THE AO UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT, C ANNOT DISTURB THE BOOK PROFIT SO COMPUTED SAVE AND EXCEPT AS PER THE EXPLANATION PROVIDED U/S 115JB OF THE ACT. THEREFORE, THE AO HA VING COMPUTED THE BOOK PROFIT AFTER EXAMINING ALL THE DETAILS IN ACCORDANCE WITH THE STATUTORY PROVISIONS, IT CANNOT BE SAID THAT THE AS SESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE. IT WAS SUBMITTED THAT THE ASSESSEE HAVING ACTUALLY INC URRED PRIOR PERIOD EXPENDITURE DURING THE YEAR, WHICH HAS TO BE SHOWN SEPARATELY IN THE P&L A/C AS PER THE PROVISIONS OF THE COMPANIES ACT AND AS WELL AS ACCOUNTING STANDARD -5, HENCE, THE ASSESSEE HAVING FOLLOWED THE PROCEDURE LAID DOWN IN THE COMPANIES ACT AND AS-5, THE BOOK PROFIT COMPUTED CANNOT BE DISTURBED BY THE AO. IN SUPPORT OF SUCH CONTENTION, HE RELIED ON THE DECISION OF APPOLLO TY RES AND GULF OIL CO. LTD., (SUPRA). IT WAS SUBMITTED THAT THE VIEW T AKEN BY THE AO BEING IN CONSONANCE WITH THE VIEW EXPRESSED IN THE JUDICIAL PRECEDENTS, WHICH IS ONE OF THE POSSIBLE VIEW, THE CIT WAS NOT JUSTIFIED IN INVOKING THE JURISDICTION U/S 263 OF T HE ACT TO REVISE THE ASSESSMENT ORDER. 5 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. 7. THE LEARNED DR, ON THE OTHER HAND, REFERRING TO CLAUSE 4.3 AND CLAUSE 16 OF THE AS-5 SUBMITTED THAT PRIOR PERIOD E XPENSES ARE NOT IN CONFORMITY WITH AS-5. IT WAS SUBMITTED THAT AS THE P&L ACCOUNT IS NOT IN ACCORDANCE WITH PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, COMPUTATION OF BOOK PROFIT IS ERRONEOUS. THE AO HAV ING NOT APPLIED HIS MIND AND EXAMINED THIS ASPECT DURING THE ASSESS MENT PROCEEDING AND HAVING ACCEPTED BOOK PROFIT COMPUTED BY THE ASS ESSEE, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE, HENCE, EXERCISE OF POWER U/S 263 IS JUSTIF IED. 8. IN THE REJOINDER, THE LEARNED AR SUBMITTED THAT AS THE ASSESSEE HAS COMMITTED AN ERROR IN OMITTING THE PRIOR PERIOD ITEM IN THE FINANCIAL STATEMENT FROM THE PRECEDING YEAR, IT COM ES WITHIN THE PURVIEW OF CLAUSE 4.3 AND 16 OF AS-15. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. ON A PERUSAL OF THE P&L A/C, A COPY OF WHICH IS AT PAGE 48 OF THE PAPER BOOK, IT IS CLEAR THAT THE ASSESSEE HAS COMPUTED BOOK PROFIT AT RS. 34,20,315/- AFTER CONSIDERING THE PRI OR PERIOD EXPENSES OF RS. 52,24,542/-. IT IS ALSO NECESSARY TO STATE THAT THERE IS NO DISPUTE TO THE FACT THAT P&L A/C HAS BEEN DRAWN OUT IN ACCO RDANCE WITH PART &II AND III OF SCHEDULE VI OF THE COMPANIES ACT, 19 56 AND HAS BEEN CERTIFIED BY THE AUDITORS. FURTHER A REFERENCE TO C LAUSE 4.3 AND CLAUSE 16 OF AS-5 WOULD SHOW THAT AS PER CLAUSE 4.3, PRIOR PERIOD ITEMS ARE DEFINED AS INCOME OR EXPENSES WHICH ARISES IN THE CURRENT PERIOD AS A RESULT OF ERRORS OR OMISSIONS IN THE PREPARATION OF FINANCIAL STATEMENTS OF ONE OR MORE PERIOD. CLAUSE 15 OF AS-5 PROVIDES THAT THE NATURE AND AMOUNT OF PRIOR PERIOD EXPENSES SHOU LD BE SEPARATELY DISCLOSED IN THE STATEMENT OF P&L IN A MANNER THAT THEIR IMPACT ON THE CURRENT PROFIT OR LOSS CAN BE PERCEIVED. EVEN A S PER THE AS-5 ALSO, THE ASSESSEE HAS SHOWN THE PRIOR PERIOD ITEMS IN TH E P&L ACCOUNT. THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. VS. 6 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. COMMISSIONER OF INCOME TAX (2002) 255 ITR 273 (SC) WHILE EXAMINING PARI-MATERIA PROVISIONS OF SECTION 115J H ELD AS UNDER: THE USE OF THE WORDS 'IN ACCORDANCE WITH THE PROVI SIONS OF PARTS II AND III OF SCH. VI TO THE COMPANIES ACT' W AS MADE FOR THE LIMITED PURPOSE OF EMPOWERING THE ASSESSING AUT HORITY TO RELY UPON THE AUTHENTIC STATEMENT OF ACCOUNTS OF TH E COMPANY. WHILE SO LOOKING INTO THE ACCOUNTS OF THE COMPANY, AN AO UNDER THE IT ACT HAS TO ACCEPT THE AUTHENTICITY OF THE AC COUNTS WITH REFERENCE TO THE PROVISIONS OF THE COMPANIES ACT WH ICH OBLIGATES THE COMPANY TO MAINTAIN ITS ACCOUNT IN A MANNER PROVIDED BY THE COMPANIES ACT AND THE SAME TO BE SC RUTINISED AND CERTIFIED BY STATUTORY AUDITORS AND WILL HAVE T O BE APPROVED BY THE COMPANY IN ITS GENERAL MEETING AND THEREAFTE R TO BE FILED BEFORE THE REGISTRAR OF COMPANIES WHO HAS A STATUTO RY OBLIGATION ALSO TO EXAMINE AND SATISFY THAT THE ACC OUNTS OF THE COMPANY ARE MAINTAINED IN ACCORDANCE WITH THE REQUI REMENTS OF THE COMPANIES ACT. IN SPITE OF ALL THESE PROCEDURES CONTEMPLATED UNDER THE PROVISIONS OF THE COMPANIES ACT, IT IS DIFFICULT TO ACCEPT THE ARGUMENT OF THE REVENUE THA T IT IS STILL OPEN TO THE AO TO RE-SCRUTINISE THIS ACCOUNT AND SA TISFY HIMSELF THAT THESE ACCOUNTS HAVE BEEN MAINTAINED IN ACCORDA NCE WITH THE PROVISIONS OF COMPANIES ACT. RELIANCE PLACED BY THE REVENUE ON SUB-S. (1A) OF S. 115J IN SUPPORT OF THE ABOVE CONTENTION IS MISPLACED. SUB-S. (1A) OF S. 115J DOE S NOT EMPOWER THE AO TO EMBARK UPON A FRESH INQUIRY IN RE GARD TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT OF THE COMPANY . THE SAID SUB-SECTION, AS A MATTER OF FACT, MANDATES THE COMP ANY TO MAINTAIN ITS ACCOUNT IN ACCORDANCE WITH THE REQUIRE MENTS OF THE COMPANIES ACT WHICH MANDATE IS BODILY LIFTED FROM T HE COMPANIES ACT INTO THE IT ACT FOR THE LIMITED PURPO SE OF MAKING THE SAID ACCOUNT SO MAINTAINED AS A BASIS FOR COMPU TING THE COMPANYS INCOME FOR LEVY OF INCOME-TAX. BEYOND THA T, THE SAID SUB-SECTION DOES NOT EMPOWER THE AUTHORITY UNDER TH E IT ACT TO PROBE INTO THE ACCOUNTS ACCEPTED BY THE AUTHORITIES UNDER THE COMPANIES ACT. IF THE STATUTE MANDATES THAT INCOME PREPARED IN ACCORDANCE WITH THE COMPANIES ACT SHALL BE DEEMED I NCOME FOR THE PURPOSE OF S. 115J, THEN IT SHOULD BE THAT INCO ME WHICH IS ACCEPTABLE TO THE AUTHORITIES UNDER THE COMPANIES A CT. THERE CANNOT BE TWO INCOMES ONE FOR THE PURPOSE OF COMPAN IES ACT AND ANOTHER FOR THE PURPOSE OF INCOME-TAX BOTH MAIN TAINED UNDER THE SAME ACT. IF THE LEGISLATURE INTENDED THE AO TO REASSESS THE COMPANYS INCOME, THEN IT WOULD HAVE S TATED IN S. 115J THAT 'INCOME OF THE COMPANY AS ACCEPTED BY THE AO'. IN THE ABSENCE OF THE SAME AND ON THE LANGUAGE OF S. 1 15J, IT WILL HAVE TO HELD THAT VIEW TAKEN BY THE TRIBUNAL IS COR RECT AND THE HIGH COURT HAS ERRED IN REVERSING THE SAID VIEW OF THE TRIBUNAL. THEREFORE, THE AO WHILE COMPUTING THE INCOME UNDER S. 115J HAS ONLY THE POWER OF EXAMINING WHETHER THE BOOKS O F ACCOUNT 7 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIE S ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE COMPANIES ACT. THE AO THEREAFTER HAS THE LIMITED PO WER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFEREN TLY, THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO S. 115J. CONCLUSION WHILE ASSESSING A COMPANY FOR INCOME-TAX UNDER S. 1 15J THE CORRECTNESS OF THE P&L A/C PREPARED BY THE ASSESSEE -COMPANY AND CERTIFIED BY THE STATUTORY AUDITORS OF THE COMPANY AS HAVING BEEN PREPARED IN ACCORDANCE WITH THE REQUIREMENTS OF PAR TS II AND III OF SCH. VI TO THE COMPANIES ACT CANNOT BE EXAMINED BY THE A O; AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT S HOWN IN THE P&L A/C EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO S. 115J. 10. THE ITAT, HYDERABAD BENCH IN CASE OF GULF OIL C ORPORATION LTD. VS. ACIT, [2008] 111 ITD 124 (HYD.) HELD AS UNDER: SUB-S. (2) OF S. 115JB PROVIDES THAT EVERY ASSESSE E COMPANY SHALL PREPARE ITS P&L A/C IN ACCORDANCE WITH THE PROVISIO NS OF PART II AND PART III OF SCH. VI TO THE COMPANIES ACT, 1956. THE SAID SCH. VI DOES NOT MAKE ANY DISTINCTION BETWEEN P&L A/C AND P&L APPROP RIATION ACCOUNT. IN FACT THE SCHEDULE DOES NOT SPEAK OF THE APPROPRIATI ON ACCOUNT AT ALL. IT IS ONLY AS A MATTER OF PRESENTATION THAT MOST OF THE C OMPANIES SEGREGATE TO REFLECT AS TO WHAT HAS BEEN APPROPRIATED OUT OF THE PROFITS EARNED BY THEM. OTHERWISE, SUB-CLS. (A) AND (B) OF CL. (VIII) OF NOTE II IN PARA 3 OF PART II OF SCH. VI SPECIFICALLY PROVIDE THAT THE AG GREGATE AMOUNTS SET ASIDE OR PROPOSED TO BE SET ASIDE TO RESERVES SHOUL D BE DISTINCTLY SHOWN IN THE P&L A/C. SIMILARLY, SUB-CL. (B) AND SUB-CLS. (A) AND (B) OF CLS. (XII) AND (XIII) RESPECTIVELY IN NOTE II OF PART II OF SC H. VI PROVIDE THAT PROFITS OR LOSSES IN RESPECT OF TRANSACTIONS NOT USUALLY UNDER TAKEN OR UNDERTAKEN IN EXCEPTIONAL CIRCUMSTANCES OR WHICH ARE OF NON-RECUR RING NATURE SHOULD BE SHOWN IN THE P&L A/C. THE AGGREGATE AMOUNT OF DI VIDENDS PAID AND PROPOSED IS ALSO TO BE SHOWN IN THE P&L A/C. THE PO INT TO DRIVE HOME IS THAT ALL THE ITEMS WHICH ARE GENERALLY CLASSIFIED I N THE APPROPRIATION ACCOUNT ARE IN FACT TO BE INCLUDED IN THE P&L A/C P REPARED AS PER PARTS II AND III OF SCH. VI. THEREFORE, THE STARTING POINT F OR COMPUTATION OF BOOK PROFITS FOR THE PURPOSES OF S. 115JB SHOULD BE THE AMOUNT WHICH IS THE FINAL BALANCE IN THE P&L A/C CARRIED TO BALANCE SHE ET. IT MAY ALSO BE NOTED THAT EVEN EXTRAORDINARY ITEMS HAVE TO BE DEBI TED TO THE P&L A/C. HAVING ADOPTED SUCH FIGURE AS THE STARTING POINT, T HE SAME HAS TO BE INCREASED BY THE ITEMS SPECIFIED IN CLS. (A) TO (F) AND HAS TO BE REDUCED BY THE ITEMS SPECIFIED IN CLS. (I) TO (VII) GIVEN I N THE EXPLANATION. NO OTHER ADJUSTMENT IS PERMITTED BY LAW. NONE OF THE CLAUSES GIVEN IN THE 8 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. EXPLANATION PROVIDES FOR THE INCREASE OR DECREASE O F THE BOOK PROFITS BY EXTRAORDINARY ITEMS. THE REFERENCE TO AS 5 BY THE D EPARTMENTAL REPRESENTATIVE DOES NOT IN ANY MANNER ADVANCE THE C ASE OF THE REVENUE. IT MERELY SAYS THAT PRIOR PERIOD AND EXTRA ORDINARY ITEMS SHOULD BE SEPARATELY DISCLOSED ALONG WITH THEIR NATURE SO THAT THEIR IMPACT ON THE OPERATING RESULTS CAN BE PERCEIVED. IT DOES NOT SAY THAT THEY ARE NOT PART OF THE P&L A/C. SIMILARLY, THE GUIDANCE NOTE I SSUED BY THE ICAI ALSO DOES NOT HELP THE REVENUE AS IT MERELY SAYS THAT SO METIMES, APPROPRIATION ACCOUNT IS INCLUDED AS A SEPARATE SEC TION OF THE P&L A/C. BUT PARTS II AND III OF SCH. VI TO THE COMPANIES AC T DO NOT SPEAK OF APPROPRIATION ACCOUNT AT ALL. IT WAS IN ACCORDANCE WITH LAW FOR THE ASSESSEE TO HAVE TAKEN RS. 978.55 LAKHS AS THE BASE FIGURE TO COMPUTE THE BOOK PROFITS FOR THE PURPOSES OF S. 115JB. CONCLUSION : STARTING POINT FOR COMPUTATION OF BOOK PROFITS FOR PURPOSES OF S. 115JB SHOULD BE THE AMOUNT WHICH IS THE FINAL BALANCE IN THE P&L A/C CARRIED TO BALANCE SHEET AND IN DOING SO EVEN THE EXTRAORDINAR Y ITEMS HAVE TO BE DEBITED TO THE P&L A/C. 11. IF WE EXAMINE THE PROVISIONS OF SECTION 115JB O F THE ACT IN THE CONTEXT OF THE VIEW EXPRESSED IN THE DECISIONS REFE RRED TO HEREINABOVE, IT BECOMES CLEAR THAT WHEN THE P&L A/C OF THE ASSESSEE IS DRAWN UP IN ACCORDANCE WITH THE PROVISIONS OF PA RT II OF SCHEDULE 6 TO THE COMPANIES ACT, 1956 AND IS CERTIFIED BY AUDI TOR, THEN, THE AO CANNOT MAKE ANY OTHER MODIFICATION TO THE BOOK PROF IT COMPUTED IN THE P&L A/C EXCEPT AS PROVIDED UNDER EXPLANATION 1 OF S ECTION 115JB. FURTHER, IT IS EVIDENT THAT THE AO AFTER EXAMINING THE DETAILS HAS COMPUTED THE BOOK PROFIT IN THE ASSESSMENT ORDER. T HEREFORE, THERE CANNOT BE NON-APPLICATION OF MIND BY THE AO. THE VI EW TAKEN BY THE AO IN COMPUTING BOOK PROFIT U/S 115JB BEING AN ACCE PTABLE VIEW, THE ASSESSMENT ORDER PASSED CANNOT BE CONSIDERED TO BE ERRONEOUS. THEREFORE, ONE OF THE CONDITIONS FOR INVOKING JURIS DICTION U/S 263 OF THE ACT IS NOT SATISFIED. IN THE AFORESAID VIEW OF THE MATTER, EXERCISE OF POWER U/S 263 OF THE ACT, IN THE PRESENT CASE, I S NOT JUSTIFIED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT. 9 ITA NO. 215/H/14 COROMANDEL STAMPINGS AND STONES LTD. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS CONSID ERED TO BE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18/07/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 18 TH JULY, 2014 KV COPY TO:- 1) COROMANDEL STAMPINGS AND STONES LTD., C/O S. RAM A RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, ROAD NO. 9, HIMAYATNAGAR, HYDERABAD 500 029. 2) ACIT, CIRCLE 1(2), HYDERABAD. 3) CIT-I, HYDERABAD. 4) THE ADDL CIT-I, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.