M/s. Ashley Holdings Limited, CHENNAI V. ACIT, CHENNAI

ITA 744/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4694 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Capital asset; Retrospective amendment; Scheme of amalgamation
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.744/MDS/2009 ASSESSMENT YEAR : 2004-05 M/S ASHLEY HOLDINGS LTD NO.1, SARDAR PATEL ROAD, 8 TH FLOOR GUINDY, CHENNAI - 32 VS THE ACIT COMPANY CIRCLE I(1) CHENNAI [PAN AAACA9326J] (APPELLANT) (RESPONDENT) I.T.A NO.745/MDS/2009 ASSESSMENT YEAR : 2004-05 M/S ASHLEY INVESTMENT LTD NO.1, SARDAR PATEL ROAD, 8 TH FLOOR GUINDY, CHENNAI - 32 VS THE ACIT COMPANY CIRCLE I(1) CHENNAI [PAN AAACA9311K] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.VIJAYARAGHAVAN, ADVOCATE RESPONDENT BY : SHRI K.E.B RENGARAJAN, JR. STANDING COUNSEL O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: WE PROCEED TO DECIDE THE ABOVE CAPTIONED APPEAL S, FILED BY TWO SEPARATE ASSESSEES, BUT FOR ASSESSMENT YEAR 200 4-05, IN WHICH ITA 744&745/09 :- 2 -: ALMOST IDENTICAL ISSUES ARE INVOLVED, BY A COMMON O RDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. BRIEFLY STATED, THE FACTS OF THE CASE, COMMON IN BOTH APPEALS, ARE THAT THE COMPANY M/S ASHLEY HOLDINGS LTD., WAS HOLDING 7,20,000 SHARES COSTING ` 2,05,02,000/- IN M/S ASHOK LEYLAND INVESTMENT SERVICES LTD., AS PART OF THE MEMBERS VOLUNTARY LI QUIDATION PROCEEDINGS, THE HON'BLE MADRAS HIGH COURT ORDERED THE COMPANY TO BE DISSOLVED WITH EFFECT FROM 21.8.2003. THE ASSES SMENT FOR ASSESSMENT YEAR 2004-05 WAS COMPLETED ON 28.6.2006 U/S 143(3) ACCEPTING THE DECLARED LOSS OF ` 7,22,601/-. HOWEVER, AFTER CALLING FOR THE RECORDS OF THIS ASSESSMENT, THE LD. CIT FOUND I T TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, TH EREFORE, HE ISSUED A NOTICE U/S 263 TO THE ASSESSEE ON 27.1.2009. THE REASONS, CONVEYED TO THE ASSESSEE, FOR ISSUE OF NOTICE U/S 263, ARE AS UNDER: I) THE ASSESSEE COMPANY WAS HOLDING 7,20,000 SHARES COSTING ` 2,05,02,000 IN M/S ASHOK LEYLAND INVESTMENT SERVICES LTD., AS PART OF THE MEMBERS VOLUNTARY LIQUIDATION PROCEEDINGS, THE HIGH COURT ORDERED THE COMPANY TO BE DISSOLVED WITH EFFECT FRO M 21.8.2003. THE ASSESSEE COMPANY DID NOT RECEIVE ANY CONSIDERATION ON THE LIQUIDATION OF M/S ASHOK LEYLAND INVESTMENT SERVICES LTD., HOWEVER, IN ITS RETURN OF INCOME, THE ASSESSEE COMPANY HAS COMPUTED CAPITAL LOSS BY APPLYING INDEXATION ON THE ORIGINAL INVESTMENT COST OF ` 2,05,02,000. THE PROVISIONS OF SECTION 46(2) WHICH DEAL WITH DISTRIB UTION OF ASSETS BY COMPANIES IN LIQUIDATION WOULD BE APPLICABLE ONLY WHEN THE ASSESSEE RECEIVES ANY MONEY OR OTHER ASSETS. WHEN THE ASSESSEE HAS NOT RECEIVED ANY MONEY/ASSETS THE PROVISIONS OF THIS SU B- ITA 744&745/09 :- 3 -: SECTION WOULD NOT BE APPLICABLE. THE RAJASTHAN HIGH COURT'S DECISION IN THE CASE OF RUBY TRADING COMPANY PVT LTD 259 ITR 54 SUPPORTS THE VIEW THAT THE LEGAL FICTION CREATED IN SECTION 46(2) IS TO AS SESS THE SURPLUS ONLY. IN THE CASE OF ANASUYA DEVI BUDHI A 204 ITR 355 THE SUPREME COURT HAS HELD THAT ONLY DEDUCTION PROVIDED EXPRESSLY IN THE SECTION IS THE AMOUNT ASSESSED AS DIVIDEND WITHIN THE MEANING OF SUB-CLAUSE (I) OF CLAUSE(22) OF SECTION 2. THUS ONL Y WHEN THERE IS A SURPLUS ON LIQUIDATION SUCH SURPLUS IS TAXABLE AS CAPITAL GAINS AND THE QUESTION OF LOSS O N LIQUIDATION DOES NOT ARISE. II) THE A.O. ALSO FAILED TO COMPUTE THE BOOK PROFIT IN TERMS OF SECTION 115JB AND EXPLANATION THERETO AND OUGHT TO HAVE CONSIDERED WHETHER THE PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS IS AN ASCERTAINE D LIABILITY AND SHOULD ALSO HAVE CONSIDERED THE FACT THE THERE IS ONLY REDUCTION IN PROVISION FOR DIMINUTION IN VALUE OF ASSETS FROM ` 474 LAKHS AS ON 31.3.2003 TO ` 333.98 LAKHS AS ON 31.3.2004. III) THE ASSESSEE WAS ENTITLED TO 10,69,144 EQUITY SHARES OF ` 10 EACH IN INDUSIND BANK LTD IN LIEU OF 4,75,175 SHARES HELD IN ASHOK LEYLAND LTD PURSUANT TO A 'SCHEME OF ARRANGEMENT' EFFECTIVE FROM 1.4.200 3. THE A.O. HAS NOT EXAMINED WHETHER THE GAINS TO THE ASSESSEE IS EXEMPT UNDER SECTION 47(VII) AND THE CONDITIONS THERETO ARE FULFILLED. 3. THE ASSESSEE RESPONDED TO THE ABOVE THE SHOW CAUSE NOTICE BY SENDING REPLY ISSUEWISE ON 9.2.2009, WHICH IS AS UNDER: ON THE ISSUE OF COMPUTATION OF CAPITAL LOSS CONSEQUENT TO LIQUIDATION OF M/S ASHOK LEYLAND INVESTMENT SERVICES LTD., THE ASSESSEE STATED THAT IT HELD 7,20,000 SHARES OF ` 10 EACH IN ASHOK LEYLAND INVESTMENT SERVICES LIMITED AMOUNTING TO ` 72,00,000. THE ASSESSEE DID NOT RECEIVE ANY CONSIDERATION ON THE SHARES HELD ON LIQUIDATION OF THE ABOVE COMPANY. THE ASSESSEE COMPUTED LOSS ON THE INVESTMENTS APPLYING THE INDEXATION ON THE ORIGINAL INVESTMENT OF ` 72 LAKHS AND DETERMINED THE LOSS AT ` 2,44,02,123. AS PER SEC,46(2) OF THE ACT, ON LIQUIDATION OF A COMPANY, THE EXISTENCE OF ITA 744&745/09 :- 4 -: SHAREHOLDERS' RIGHT TO RECEIVE SURPLUS, IF ANY, IS TO BE TREATED AS CAPITAL ASSET AND ITS EXTINGUISHMENT AS TRANSFER OF SUCH CAPITAL ASSET. THE SUM SO ARRIVED AT, BE DEEMED TO BE THE 'FULL VALUE OF CONSIDERATION' FOR THE PURPOSE OF SEC,48. WHERE A SHAREHOLDER, ON LIQUIDATION OF A COMPANY GETS NOTHING ON DISTRIBUTI ON OF MONEY OR OTHER ASSETS OF THE COMPANY, AND SUFFERS A LOSS, CAN TREAT IT AS A CAPITAL LOSS BY V IRTUE OF THE I PROVISIONS OF SEC,46(2). WITH REGARD TO CASE LAWS CITED IN THE SHOW CAUSE NOTICE U/S 263, VIZ., 259 ITR 54 (RAJ) AND 204 ITR 355 (SC), THE ASSESSEE STATED THAT THOSE CASES NEVER DEALT WITH A SITUAT ION WHERE THE ASSESSEE RECEIVED NOTHING ON LIQUIDATION OF A COMPANY. ON THE OTHER HAND, THE ASSESSEE CITED THE DECISION OF THE GUJARAT HIGH COURT IN 231 ITR 108, WHEREIN IT AS HELD THAT WHERE THE ASSESSEE SHAREHOLDER RECEIVES NOTHING IN THE LIQUIDATION PROCEEDINGS OF A COMPANY IN WHICH HE HOLDS SHARES, THE LOSS CAN BE TREATED AS A CAPITAL LOSS WHICH CAN BE SET OFF OR CARRIED FORWARD AND SET OFF IN SUBSEQUENT YEARS. REGARDING ADDING BACK THE PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS IN THE COMPUTATION OF BOOK PROFIT U/S 115JB, THE ASSESSEE STATED THAT THERE IS NO BOOK PROFIT IN ITS CASE AND THE ADJUSTMENTS PRESCRI BED U/S 115JB CAN BE MADE ONLY WHERE THERE IS PROFIT AS PER P&L ACCOUNT. THE ASSESSEE ALSO RELIED ON THE DECISIONS OF THE SUPREME COURT IN THE CASE OF APOLL O TYRES LTD 255 ITR 272 AND HCL COMNET SYSTEMS INDIA LTD 305 ITR 409 IN SUPPORT OF ITS CONTENTIONS THAT THE ASSESSING OFFICER IS NOT EMPOWERED TO MAKE ADJUSTMENTS TO THE BOOK PROFIT OTHER THAN THOSE SPECIFIED IN THE EXPLANATION TO SECTION 115JB. ACCORDING TO THE ASSESSEE, PROVISION FOR DIMINUTION IN VALUE OF ASSETS IS NOT ONE OF THE ADJUSTMENTS WHIC H COULD BE MADE UNDER SECTION 115JB. ON THE ISSUE OF CLAIMING EXEMPTION U/S 47(VII) OF T HE ACT, THE ASSESSEE STATED THAT IN A SCHEME OF AMALGAMATION OF COMPANIES, THE SHAREHOLDER OF 1 AMALGAMATING COMPANY GETTING ALLOTTED SHARES IN COMPANY IN WHICH IT IS AMALGAMATED, NO EXTINGUISHMENT OF RIGHTS IN TRANSFEROR COMPANY AND HENCE NO TRANSFER FOR PURPOSES OF COMPUTING CAPITA L GAINS. EVEN IF IT WERE HELD TO BE TRANSFER, CAPITA L GAINS FROM IT WOULD BE EXEMPT FROM TAX U/S 47(VII) OF THE ACT. ITA 744&745/09 :- 5 -: 4. AFTER CONSIDERING THE ABOVE SUBMISSION, THE LD. CIT HAS FINALLY FOUND THAT THE ASSESSMENT IS NOT ONLY ERRONEOUS BU T ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, HE HAS SE T ASIDE THE ASSESSMENT ORDER TO BE FRAMED AFRESH. THE ASSESSEE IS AGGRIEVED AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, PASSED BY THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN.) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. LOSS RESULTING FROM SHARES ON LIQUIDATION 2.1 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN .) HAS ERRED IN CONCLUDING THAT THE PURPOSE OF ENACTING SE CTION 46(2) WAS ONLY TO TAX SURPLUS EMBEDDED IN THE RECEI PTS. 2.2 THE HON'BLE COMMISSIONER OF INCO ME TAX (ADMN.) HAS FAILED TO NOTE THAT A SHAREHOLDER, WHO ON LIQUIDATI ON OF A COMPANY GETS NOTHING ON DISTRIBUTION OF MONEY OR OT HER ASSETS OF THE COMPANY, AND SUFFERS A LOSS, CAN TREA T IT AS A CAPITAL LOSS BY VIRTUE OF THE PROVISIONS OF SE CTION 46(2). 2.3 THE HON'BLE COMMISSIONER OF INCOM E TAX (ADMN.) HAS ERRONEOUSLY RELIED ON THE RAJASTHAN HIGH COURT DECISION (259 ITR 54) AND THE SUPREME COURT DECISIO N (204 ITR 355) AS THE TWO DECISIONS CITED ABOVE DEAL S WITH A SITUATION WHERE THE SHARE HOLDER RECEIVED TH E VALUE OF ASSETS IN LIQUIDATION PROCEEDINGS WHICH IS PROPERLY BROUGHT TO CAPITAL GAINS TAX. 2.4 THE APPELLANT SUBMITS THAT THE DE CISIONS CITED BY THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN.) NEVER DEALS WITH A SITUATION WHERE THE ASSESSEE SHAREHOLD ER RECEIVES NOTHING IN THE LIQUIDATION PROCEEDINGS. 2.5 THE HON'BLE COMMISSIONER OF INCO ME TAX (ADMN.) HAS FAILED TO APPRECIATE THE DECISION OF THE GUJARAT HI GH COURT (231 ITR 018) DEALING WITH THE APPLICABILITY OF SECTION 46(2) IN THE CIRCUMSTANCES WHERE THE ASSESS EE ITA 744&745/09 :- 6 -: SHAREHOLDERS RECEIVED NOTHING IN THE LIQUIDATION PROCEEDINGS. 2.6 THE APPELLANT SUBMITS THE DECISION OF THE GUJA RAT HIGH COURT IS MORE FITTING TO THE SITUATION OF CLAIMING CAPITAL LOSS BY THE APPELLANT UNDER THE PROVISIONS OF SECTI ON 46(2). 3. PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT 3.1 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN.) HAS ERRONEOUSLY SET ASIDE THE ISSUE OF NOT ADDING BACK THE PROVISION OF DIMINUTION IN VALUE OF INVESTMENTS TO THE BOOK PROFIT COMPUTED UNDER SECTION 115JB OF THE INCOME TAX ACT. 3.2 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN. ) HAS FAILED TO APPRECIATE THAT THE EXPLANATION TO SECTIO N 115JB IS TO BE RESORTED TO ONLY WHERE THERE IS A PR OFIT AS PER PROFIT AND LOSS ACCOUNT. 3.3 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN .) HAS FAILED TO FOLLOW THE DECISION OF THE SUPREME COURT OF INDIA IN THE CASE OF APPOLLO TYRES LTD., (255 ITR 2 72) (2002) AND THE DECISION OF THE SUPREME COURT IN THE CASE OF HCL COM NET SYSTEMS INDIA LIMITED (305 ITR 409). 3.4 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN .) HAS SET ASIDE THE ORDER OF THE ASSESSING OFFICER ON THE ISSUE OF NOT ADDING BACK THE PROVISION FOR DIMINUTI ON IN VALUE OF INVESTMENTS TO THE BOO~ PROFIT ON THE GROU ND THAT THE ASSESSEE HAS NOT FURNISHED A REPORT OF THE ACCOUNTANT IN FORM NO.29B READ WITH RULE 40B OF THE INCOME TAX RULES, CERTIFYING THAT THE BOOK PROFIT H AS BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT AND FILED THE SAME ALONG WITH THE RETURN OF INCOME UNDER SECTION 139(1) OF THE INCOME TAX ACT. 4. TRANSACTIONS NOT REGARDED AS TRANSFER SECTION 47( VII) 4.1 THE HON'BLE COMMISSIONER OF INCO ME TAX (ADMN.) HAS FAILED TO NOTE THE FACTS FURNISHED IN THE REPLY TO THE SHOW CAUSE NOTICE (SCN) UNDER SECTION 263 OF THE INCOME TAX ACT. ITA 744&745/09 :- 7 -: 4.2 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN.) HAS ERRED IN CONCLUDING THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE EXEMPTION GRANTED UNDER SECTION 47(VII ) OF THE INCOME TAX ACT. 4.3 THE HON'BLE COMMISSIONER OF INCOME TAX (ADMN .) HAS FAILED TO APPRECIATE THAT IN A SCHEME OF AMALGAMATI ON OF COMPANIES THE SHAREHOLDERS OF AMALGAMATING COMPANY GETTING ALLOTTED SHARES IN THE COMPANY IN WHICH IT IS AMALGAMATED, NO EXTINGUISHMENT OF RIGHT S IN TRANSFEROR COMPANY AND HENCE THERE IS NO TRANSFER F OR THE PURPOSES OF COMPUTING CAPITAL GAINS. EVEN IF IT WERE HELD TO BE TRANSFER, CAPITAL GAINS FROM IT WOULD BE EXEMPT FROM TAX UNDER SECTION 47(VII) OF THE INCOME TAX ACT. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (ADMIN) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE ENTIRE EVIDENCE AVAILABLE ON RECORD. W ITH REGARD TO THE FIRST ISSUE, IT WAS ARGUED BY SHRI R.VIJAYARAGHAVAN , ADVOCATE, THAT THE ASSESSEE DID NOT ACTUALLY RECEIVE ANY CONSIDERATION ON THE LIQUIDATION OF M/S ASHOK LEYLAND INVESTMENT SERVICES LTD. LOSS HAS BEEN RETURNED BY APPLYING INDEXATION ON THE ORIGINAL INV ESTMENT COST OF ` 2,05,02,000/- WITH REFERENCE TO THE PROVISIONS OF S ECTION 46(2) WHICH DEALS WITH DISTRIBUTION OF ASSETS BY COMPANIES IN L IQUIDATION. THE VIEW EXPRESSED BY THE LD.AR IS THAT NOT ONLY SURPLUS CAN BE ASSESSED U/S 46(2), BUT LOSS CAN ALSO BE ASSESSED. IT WAS ARGUE D THAT, AS PER SECTION 46(2), ON LIQUIDATION OF A COMPANY, THE EXI STENCE OF ITA 744&745/09 :- 8 -: SHAREHOLDERS RIGHT TO RECEIVE SURPLUS, IF ANY, IS TO BE TREATED AS CAPITAL ASSET AND ITS EXTINGUISHMENT AS TRANSFER OF SUCH CAPITAL ASSET. THE SUM SO ARRIVED AT, IS DEEMED TO BE THE FULL VALUE O F THE CONSIDERATION FOR THE PURPOSE OF SECTION 48. IN SUPPORT, RELIANC E HAS BEEN PLACED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS JAYKRISHNA HARIVALLABHDAS, 231 ITR 108, THE FACTS O F WHICH ARE STATED TO BE MORE AKIN TO THE FACTS OF THE CASE UNDER CONS IDERATION, INASMUCH AS IN BOTH THE CASES THE ASSESSEE HAS RECEIVED NOTH ING ON LIQUIDATION. ON THE OTHER HAND, THE CASE OF THE LD.DR IS THAT D EDUCTION WHICH IS EXPRESSLY PROVIDED IN THE ACT IS THE AMOUNT ASSESSE D AS DIVIDEND WITHIN THE MEANING OF SUB-CLAUSE(I) OF CLAUSE (22) OF SECTION 2, HENCE, ONLY WHEN THERE IS SURPLUS ON LIQUIDATION SUCH SUR PLUS IS TAXABLE AS CAPITAL GAINS AND THE QUESTION OF LOSS ON LIQUIDAT ION DOES NOT ARISE. HE HAS RELIED ON THE DECISION OF HON'BLE SUPREME CO URT RENDERED IN THE CASE OF ANASUYA DEVI BUDHIA VS CIT, 204 ITR 355 , AND OF HON'BLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT VS RUBY TRADING COMPANY PVT. LTD, 259 ITR 54, IN CONNECTION WITH HI S CONTENTION THAT THE LEGAL FICTION CREATED BY THIS SECTION IS TO ASS ESS THE SURPLUS ONLY. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS SEE N THAT THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE C ASE OF RUBY TRADING COMPANY PVT. LTD, (SUPRA) AND THAT OF HON'BLE SUPRE ME COURT ITA 744&745/09 :- 9 -: RENDERED IN THE CASE VIJAY KUMAR BUDHIA, (SUPRA), W ERE RENDERED ON FACTS WHERE THE SHAREHOLDER HAD RECEIVED THE VALUE OF ASSETS IN LIQUIDATION PROCEEDINGS WHICH WAS PROPERLY SUBJECTE D TO TAX UNDER THE HEAD CAPITAL GAINS. IN THE CASE OF CIT VS JAY KRISHNA HARIVALLABHDAS(SUPRA), THE HON'BLE GUJARAT HIGH CO URT HAS DEALT WITH THE SITUATION WHERE THE ASSESSEE SHAREHOLDER RECEIV ED NOTHING IN THE LIQUIDATION PROCEEDINGS OF A COMPANY IN WHICH HE HE LD SHARES. IT HAS BEEN HELD THAT IN SUCH A CASE LOSS CAN BE TREATED A S A CAPITAL LOSS WHICH CAN BE SET OFF AND CARRIED FORWARD AND CAN BE SET OFF IN THE SUBSEQUENT YEARS. AFTER COGITATING ON THIS ISSUE, WE FEEL THAT THERE BEING CONTRADICTORY DECISIONS ON THIS SUBJECT AND, WHERE BOTH VIEWS ARE POSSIBLE, ASSESSMENT ORDER CANNOT BE REVISED. IN THIS REGARD, DECISION OF HON'BLE SUPREME COURT RENDERED IN THE C ASE OF CIT VS MAX INDIA LTD., 295 ITR 283, IS DIRECTLY APPLICABLE. W HEN THE ASSESSING OFFICER HAS ADOPTED ONE OF THE POSSIBLE VIEWS, HIS ORDER CANNOT BE SAID TO BE ERRONEOUS. HENCE, THE ORDER OF THE LD. CIT O N THIS ISSUE STANDS REVERSED AND THE VIEW TAKEN BY THE ASSESSING OFFICE R IS RESTORED. 7. THE SECOND ISSUE OF THIS APPEAL RELATES TO COMPUTAT ION OF BOOK PROFIT IN TERMS OF SECTION 115JB AND EXPLANATION AP PENDED THERETO. THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE. IN THE OPINION OF THE LD. CIT THE ASSESSEE HAS NOT FILED A CERTIFICATE U/S 115JB ITA 744&745/09 :- 10 - : FOR CERTIFYING THAT THE BOOK PROFIT HAS BEEN COMPUT ED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION. IT WAS FOUND THAT THE HON'BLE SUPREME COURT HAS CLEARLY HELD IN THE CASE OF CIT V S HCL COMNET SYSTEMS & SERVICES LTD, 305 ITR 409, THAT THE ASS ESSING OFFICER HAS TO ACCEPT THE AUTHENTICITY OF ACCOUNTS MAINTAINED I N ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI OF THE COMPANIES AC T, 1956. TO NEUTRALIZE THIS DECISION, AMENDMENT WAS BROUGHT IN THE ACT WITH RETROSPECTIVE EFFECT THROUGH FINANCE ACT, 2009 BUT SUCH RETROSPECTIVE AMENDMENT CANNOT MAKE THE ASSESSMENT ORDER ERRONEO US SO THAT IT CAN BE REVISED BY THE LD. CIT . THE HON'BLE APEX C OURT HAS HELD IN THE CASE OF MAX INDIA LTD(SUPRA) WHEREIN IT HAS ALSO BE EN HELD THAT RETROSPECTIVE AMENDMENT CANNOT MAKE AN ORDER ERRONE OUS. WHEN THE ASSESSMENT ORDER WAS FRAMED THE ASSESSING OFFICER W AS NOT EMPOWERED TO MAKE ADJUSTMENTS TO THE BOOK PROFIT OT HER THAN THOSE SPECIFIED IN THE EXPLANATION TO SECTION 115JB. A P ROVISION FOR DIMINUTION IN VALUE IS ALSO ONE OF SUCH ADJUSTMENTS . THEREFORE, ON THIS COUNT ALSO, WE DO NOT FIND ANY MERIT IN THE REVISIO NAL ORDER ON THIS ISSUE AND THEREFORE, SET ASIDE THE SAME AND REST ORE THE ASSESSMENT ORDER. 8. IN RELATION TO THE LAST ISSUE REGARDING CLAIM OF EX EMPTION U/S 47(VII) OF THE ACT, IT WAS STATED THAT THE ASSESSEE HAS GOT NO GRIEVANCE. ITA 744&745/09 :- 11 - : IT WAS SUBMITTED THAT THE LD. CIT HAS GIVEN CERTAIN DIRECTIONS WHICH HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AND ACC EPTED BY THE ASSESSEE. ACCORDINGLY, WE PARTLY ALLOW THIS APPEA L OF THE ASSESSEE. I.T.A.NO. 745/MDS/2009 9. IN THIS APPEAL, MUTATIS MUTANDIS, SIMILAR ISSUES H AVE BEEN RAISED. WITH THE PARITY OF REASONING GIVEN ABOVE I N I.T.A.NO. 744/MDS/2009, WE PARTLY ALLOW THIS APPEAL ALSO. 10. TO SUMMARIZE THE RESULT, BOTH THE APPEALS ARE PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11. 7.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 11 TH JULY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR