Appeal Details
Counselvise Citation
[2022] 106 COUNSELVISE.COM (IT) 4339 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-09-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Assessment Year
2015-2016
Appeal Filed On
20-07-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “C” BENCH, BENGALURU Before Shri George George K., Judicial Member and Ms. Padmavathy S., Accountant Member ITA Nos575& 694/Bang/2022 (Assessment Years:2015-16& 2016-17) DCIT, Central Circle - 2(3) Central Revenue Building Queen's Road Bengaluru 560001 vs.M/s. Gopalan Enterprises No. 5, Richmond Road Richmond Town Bengaluru 560025 PAN – AABFG0682M (Appellant) (Respondent) Assessee by:Shri B. Chhatraj, Advocate Revenue by:Smt. Priyadarshini Baseganni, Addl. CIT - DR Date of hearing: 21/09/2022 Date of pronouncement: 22/09/2022 O R D E R Per: Padmavathy, A.M. These appeals of the Revenue are against the orders of the Commissioner of Income Tax (Apeals) – 11, Bangalore dated 06.05.2022 for assessment years 2015-16 and 2016-17.Since common issue is involved in both the appeals, they are head together and disposed off by a common order for the sake of convenience and brevity. 2.The assessee filed the return of income for 2015-16 on 29.09.2015 declaring Nil taxable income and book profit of Rs.57,36,04,830/-. For ay 2016-17 the filed return of income on 10.10.2016 declaring Nil income and book profit of Rs.22,06,11,166/-. There was a search under Section 132 of the ITA Nos. 575& 694/Bang/2022 M/s. Gopalan Enterprises 2 Income Tax Act, 1961 (the Act) in assessee’s case on 23.12.2016. The AO based on the return filed by the assessee and the statement recorded during the course of search made certain additions and completed the assessment for both the years under Section 143(3) r.w.s. 153A of the Act for these assessment years vide orders dated 31.12.2018.The AO accepted the computation of book profits u/s.115JC of the Act for these assessment years while completing the assessment u/s.143(3) r.w.s. 153A. 3.In AY 2015-16 and AY 2016-17 the AO made an addition of Rs.90,00,000 and Rs.16,45,00,000 respectively towards the additional income offered by the Shri Gopalan, during survey proceedings towards expenses to be disallowed. The AO issued rectification order u/s.154 dated 19.02.2021 for both the assessment years wherein he had stated that the above disallowance/addition was omitted to be added to the book profits for the purpose of computing Alternate Minimum Tax (AMT)u/s.115JC and that the mistake is to be corrected through the rectification order. The assessee made submissions before the AO the additional income was agreed to be offered during survey proceedings in order to buy peace and that the same cannot be adjusted for the purpose of section 115JC. However the AO proceeded to pass the order under Section 154 of the Act by adding the additions made under Section 143(3) r.w.s. 153A of the Act to the book profit u/s.115JC of the assessee. 4.Aggrieved, assessee filed appeal before the CIT(A) who deleted the adjustment of disallowance to the book profit for the purpose of Section 115JC of the Act and allowed the appeal in favour of the assessee. Aggrieved, Revenue is in appeal before the Tribunal for both the assessment years. ITA Nos. 575& 694/Bang/2022 M/s. Gopalan Enterprises 3 5.The only issue contended by the Revenue through the grounds raised is whether the CIT(A) is right in holding that it was not apparent from assessment order that the AO intended to enhance the adjusted total income of the assessee for the purpose of section 115JC and that based on the material available on record it cannot be said that there was a mistake apparent on record warranting rectification under Section 154 of the Act. 6.The learned A.R. submitted that the AO should not have added the disallowance made during the assessment proceedings to the book profits as it is not a mistake apparent on record. The learned A.R. also submitted that there is no authority to re-compute the book profits for the purpose of section 115JC and in this regard the learned A.R. relied on the decision of the Hon'ble Supreme Court in the case of Appollo Tyres vs. PCIT (2002) 255 ITR 273 (SC). The learned AR also relied on the decision of the Jaipur Bench of the Tribunal in the case of Gie Jewels vs ITO (2017) 88 taxmann.com 290 (Jaipur – Trib) held that “though provisions of section 115JC though applicable to a different set of persons however the scheme and objective of the said provision is akin and pari material to the provisions of 115JB”. Therefore the learned AR argued that the principle laid down by the Supreme Court in the case of Appllo Tyres (supra) should hold good for 115JC also and therefore no adjustment could be made to the book profits. The learned A.R. further submitted that for the purpose of Section 115JC of the Act Form 29C as certified by Chartered Accountant should be filed along with the return of income based on the adjusted profit prepared and certified by Chartered Accountant. Given this it is contended by the learned A.R. that the AO cannot make any addition to the book profits as declared by the assessee u/s.115JC based on the additions made to the total income under normal provisions of the Act. The learned A.R. submitted that in any case the issue of whether ITA Nos. 575& 694/Bang/2022 M/s. Gopalan Enterprises 4 additions or disallowance done to the total income under normal provisions are to be considered for the purpose of book profits u/s.115JC is a debatable issue and therefore cannot be a subject matter of rectification u/s.154. The reliance in this regard is place on the decision of the jurisdictional High Court in the case of PCIT vs. J.J. Glastronics Pvt Ltd (2022) 139 taxmann.com 375 (Kar). 7.The learned D.R. submitted that the addition made under Section 143(3) r.w.s. 153A of the Act is a material available on record and it is a fact that the said addition is not adjusted in the book profits u/s.115JC while completing the assessment. Therefore the AO has rectified this mistake by passing the order of rectification under Section 154 of the Act. It was also submitted by the learned D.R. that as per the provisions of sub-section (6) of Section 115JD of the Act it is provided that if the amount of regular income-tax or the alternate minimum tax is reduced or increased as a result of any order passed under this Act, the amount of tax credit allowed under this section shall also be varied accordingly. Therefore the learned DR submitted that modification to alternate minimum tax which is tax on book profits u/s.115JC can be varied as a result of any order passed under the Act. The learned DR thus supported the order of the AO passed u/s.154 of the Act. 8.We have heard the rival contentions and perused the material on record. During the course of hearing the learned AR presented arguments on merits stating that the impugned additions made based on the admissions made during the course of survey are not tenable. The learned AR also argued on the legal issue whether the additions to book profits can be done by an order of rectification u/s154. For the purpose of adjudication we will only consider the legal issue of whether the adjustment made by the AO falls within the scope of Section 154 of the Act or not. It is a settled decision position that the scope of ITA Nos. 575& 694/Bang/2022 M/s. Gopalan Enterprises 5 rectification is limited to correcting error of facts or error of law on the basis of material available on record. 9.The Hon'ble Supreme Court in the case of Appollo Tyres (supra) has laid down the principle that the AO does not have the jurisdiction to go beyond the net profit shown in the Profit & Loss Account except to the extent provided in Explanation to Section 115JB of the Act. The argument of the learned AR by placing reliance on the decision of the Hon’ble Jaipur Bench of the Tribunal Gie Jewels (supra) that Sections 115JB and 115JC of the Act are pari materia, also needs consideration. It is also to be noted there is an arguments presented by the learned A.R. that the adjusted total income for the purpose of section 115JC is flowing from the financial statement certified by the Chartered Accountant and that AO has no jurisdiction to make corrections to the profit declared as per the Profit & Loss Account. If we are to consider the above decisions and the argument of the learned AR it is clear that the issue of making adjustments to the book profits u/s.115JC based on the additions/disallowances made to income assessed under normal provisions of the ACT is a debatable issue. 10.We notice that the Hon'ble Karnataka High Court in the case of PCIT vs. Mphasis Software and Services (India) Pvt Ltd [IT Appeal No. 244 of 2021, dated 25-10-2021] which considered in the case of J.J. Glastronics P. Ltd (supra) held that invoking section 154 would be untenable when the matter requires adjudication upon the issue which is debatable issue. In view of these discussions and considering the decisions of the jurisdictional High Court we hold that the AO is not correct in enhancing the book profits u/s.115JC by passing an order under Section 154 of the Act. We therefore see no reason to interfere with the order of the CIT(A) for both the assessment years. ITA Nos. 575& 694/Bang/2022 M/s. Gopalan Enterprises 6 11.In the result, the appeals filed by the Revenue for both the assessment years are dismissed. Dictated and pronounced in the open Court on 22 nd September, 2022. Sd/- Sd/- (George George K.) (Padmavathy S) Judicial Member Accountant Member Bengaluru, Dated: 22 nd September, 2022 Copy to: 1.The Appellant 2.The Respondent 3.The CIT(A) -11, Bengaluru 4.The CIT - (Central) Bengaluru 5.The DR, ITAT, Bengaluru 6.Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.
