The Dy. Commr. Of Income Tax, Morbi Circle, Morbi V. M/s Fact Paper Mills Ltd., Morbi

ITA 508/RJT/2015

AI Insights

The case revolves around an appeal by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) -3, Rajkot, which pertained to a rectification order under section 154 of the Income Tax Act, 1961 for the Assessment Year 2007-08. The primary issue was the deletion of the adjustment made by the Assessing Officer (AO) concerning a deferred tax liability of Rs. 16,67,219 under section 115JB of the Act. The AO had added this amount to the book profit, citing it as a mistake apparent from the record, which was contested by the assessee. The CIT(A) found in favor of the assessee, leading to the revenue's appeal to the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135991 (ITAT-RAJKOT)
• Duration Of Justice: 8 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-10-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 15-10-2015
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIASHISHKUMARPANDEY
• Assessee Lawyers: SHRIMEHULRANPURA; ISSUINGANOTICEUSOF

Judgement Text

आयकरअपीलीयअधिकरण,अहमदाबादनायपीप INTHEINCOMETAXAPPELLATETRIBUNAL, (ConductedthroughE-Court,Rajkot) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And MsMADHUMITAROY,JUDICIALMEMBER आयकरअपीलसं./ITANo.508/Rjt/2015 निर्धररवरध / Asstt.Year:2007-2008 D.C.I.T, MorbiCircle, Morbi. Vs. M/s.FactPaperMillsLtd., SurveyNo.289-290, LilaparRoad, Morbi. PAN:AAACF7140B (Applicant)(Respondent) Revenueby:ShriAshishKumarPandey,Sr.D.R Assesseeby:ShriMehulRanpura,A.R सुिव्ईकीत्रीख/DateofHearing:19/10/2023 घोरर्कीत्रीख/DateofPronouncement:08/11/2023 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheRevenueagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals)-3,Rajkot,(in short“Ld.CIT(A)”)arisinginthematterofrectificationorderpassedunders.154 oftheIncomeTaxAct1961(here-in-afterreferredtoas"theAct")relevanttothe AssessmentYear2007-08. ITAno.508/Rjt/2020 Asstt.Year2007-08 2 2.ThesolitaryissueraisedbytherevenueisthattheLd.CIT(A)erredin deletingtheadjustmentmadebytheAOindeferredtaxliabilityofRs.16,67,219/- undertheprovisionofsection115JBoftheAct. 3.Inthepresentcase,theassessmentwasframedu/s143(3)oftheAct, dated16/08/2019bytheAOafteracceptingtheincomeatRsNil.Subsequently, theAOfoundthattheassesseewhilecalculatingbookprofitu/s115JBoftheAct hasdeducteddeferredtaxliabilityofRs.16,67,219/-thoughthesamewas requiredtobeaddedasperclause(h)ofexplanation1tosection115JBoftheAct. Thus,theAOsoughtexplanationfromtheassesseebyissuinganoticeu/s154of theAct.Buttherewasnoresponsefromthesideoftheassessee.Accordingly,the AOaddedthedeferredtaxliabilityofRs.16,67,219/-tothebookprofitinthe orderdated03/10/2011passedu/s154oftheAct,beingamistakeapparentfrom therecord. 4.OnappealbeforetheLd.CIT(A),theassesseesubmittedthatithasnot debiteddeferredtaxliabilityintheprofitandlossaccountsandthereforethe questionofmakingtheadditionofthesamewhilecalculatingthebookprofit undertheprovisionofsection115JBoftheAct,cannotbeattracted.TheLd. CIT(A),afterconsideringthesubmissionmadebytheassesseedeletedthe adjustmentmadebytheAObyobservingasunder: 6.1Ihavecarefullyconsideredthesubmissionoftheassesseeandtheorder passedbytheA.O.TheorderpassedbyA.O.iswithoutconsideringreplyofthe assesseedt.4/3/2011whereinitwasexplainedthattheplaintextofprovisionis thatthedeferredtaxliabilitycomeintoplaywhenanyamountreferredtoin clauses(a)to(h)isdebitedtoP&Laccountandnosuchamountisdebitedtothe P&Laccountfordeferredtaxoritsprovisions.Thereisnodeferredtax liability/assetsdebitedinP&Laccountandnoincreaseisrequiredtobemade u/s.115JB1(h).Theworkingofdeductionu/s.115JBisdulycertifiedbyC.A.in FormNo.29Biscorrectlyacceptedinscrutinyassessment.A.R'ssubmissionsas reproducedabovefurthersupportsthesubmissionoftheassessee.Theorder passedbytheA.O.u/s.154iswithoutverificationofthefactsonthecomputation sheetandsubmissionoftheassesseeandthereforedeservestobequashed.The groundsofappealareallowed. ITAno.508/Rjt/2020 Asstt.Year2007-08 3 5.BeingaggrievedbytheorderoftheLd.CIT(A),therevenueisinappeal beforeus. 6.TheLd.DRbeforeuscontendedthattheamountofdeferredtaxliability shouldbeaddedtothebookprofitinpursuancetotheprovisionofclause(h)of explanation1tosection115JBoftheAct.TheLd.DRvehementlysupportedthe orderoftheAO. 7.Onthecontrary,theLd.ARbeforeussubmittedthattheamountof deferredtaxliabilitywasshownundertheprofitandlossappropriationaccount, meaningthereby,thedeferredtaxliabilitywasnotdebitedtotheprofitandloss account.AspertheLd.ARtheamountofbookprofitwascalculatedaftertaking intoconsiderationtheprofitshownintheprofitandlossaccountswhichwas preparedunderthecompaniesActandnotaspertheprofitshownunder appropriationaccount.Theld.counseltothiseffecthasalsofiledtheprofitand lossaccountintheyearunderdisputewhichisplacedonrecord.TheLd.AR vehementlysupportedtheorderoftheLd.CIT(A). 8.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethatthe amountofdeferredtaxliabilitywasshownbytheassesseeintheprofitandloss appropriationaccountwhichevidencesthatthedeferredtaxliabilitywasnot debitedintheprofitandlossaccount.Furthermore,theamountofbookprofitwas calculatedtakingtheprofitshownbytheassesseeintheprofitandlossaccount andnotintheprofitandlossappropriationaccount.Thus,weareoftheviewthat ifanyadjustmentismadetothebookprofitcomputedu/s115JBoftheAct,it wouldleadtoadoubleadditionwhichisnotpermissibleundertheprovisionofthe Act,unlessanduntilitisprescribedwithintheAct.Inviewoftheabove,wedo notfindanyinfirmityintheorderoftheLd.CIT(A).Hence,thegroundofappeal oftherevenueisherebydismissed. ITAno.508/Rjt/2020 Asstt.Year2007-08 4 9.Intheresult,theappealfiledbytherevenueisdismissed. OrderpronouncedintheCourton08/11/2023atAhmedabad. Sd/-Sd/- (MADHUMITAROY)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated08/11/2023 Manish