Appeal Details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 3138 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
22-08-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
E
Next Hearing Date
16-06-2022
Assessment Year
2015-2016
Appeal Filed On
05-05-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, HON'BLE JUDICIAL MEMBER MA.No. 101/MUM/2022 [ARISING OUT OF ITA No. 4500/MUM/2019 (A.Y: 2015-16)] Tata Industries Ltd., Bombay House, 24 Homi Modi Street Fort, Mumbai – 400001 PAN: AAACT4058L v. ACIT -2(3)(1) Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee by : Shri Aarti Vissanji Department by : Shri Manish Ajudiya Date of Hearing : 17.06.2022 Date of Pronouncement : 23.08.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application revenue is seeking for rectification of certain mistakes crept in the passed by the Tribunal in ITA.No. 4500/Mum/2019 dated 14.12.2021. 2 MA.No. 101/MUM/2022 Tata Industries Ltd., 2. Assessee has filed Miscellaneous Application with the following submissions: - “1. The above mentioned appeal for the Assessment Year 2015- 16 ('the said appeal') was heard on 31.05.2021 (original date of hearing) along with the Department appeal, ITA No. 4444/Mum/2019, re-fixed for clarification on 17.9.2021 and disposed by the Hon'ble ITAT by its order dated 14.12.2021 (the said order"). 2. In Ground No.2 of the said appeal ('said Ground of Appeal') the Applicant had challenged the addition of Rs.39,70,12,410 to the book profit under section. 115JB of the Income Tax Act, 1961 (the Act). The said amount represented the value of its investment in Tata Industrial Services Ltd. ('TISL) that the Applicant wrote off to the Profit & Loss Account in view of the discontinuation of business activity of rendering customized and focused solutions in areas of Contractual Project Management, Supply Chain Solutions and Offset Solutions due to the huge accumulated losses of TISL. 3. The limited issue before the Hon'ble ITAT in Ground No.2 was whether addition of Rs.39,70,12,410 to the book profit under Explanation 1 to sec. 115JB(2), being the value of the investment written off, was justified. 3A. CIT(A) The findings / conclusions recorded by the CIT(A) with respect to the said Ground of Appeal are: (a) there was no actual write off of shares of TISL [Para 8.1, pg.15] (b) Liability continued to exist in TISL and disposal had not taken place to treat the same as write off [Para 8.1, pg.15] (c) the underlying shares in their entirety are still held by the assessee, and there is no buy-back or cancellation of shares by TISL [Para 8.3 pg.23]. 3 MA.No. 101/MUM/2022 Tata Industries Ltd., This conclusion of the CIT(A) has been disputed by the Company in appeal. 3B. Hon' ITAT The findings/conclusions recorded by the Hon' ITAT with respect to the said Ground of Appeal are: (i) The entries in Assessee's books and as reflected in the profit and loss account, of course, show the amount as having been written off [Para 20, pg.10.] (ii) The Applicant continued to hold the shares of TISL. [para 20, pg 10 and submission of the D.R. para 17, pg.9] 4. The Hon' ITAT has considered and disposed of the said Ground of Appeal No.2 in paragraphs 14 to 21 of the said order. The conclusion is in paragraphs 18-21. The Applicant respectfully submits that the following errors apparent on the face of the record have occurred in paragraph 20 of the said order: a) After accepting that the entries in the Applicant's books and as reflected in the profit and loss account show the amount as having been written off, the Hon' ITAT has observed "However, it is a fairly well settled principle that accounting entries are not conclusive." The fact that the accounts of the Applicant have been prepared in accordance with Schedule III of the Companies Act has not been disputed [CIT(A)'s order pgs. 18-19, para 5(a) & 5(b)]. Hence the said observation of the Hon' ITAT is contrary to the well settled principle laid down by the Apex Court in Apollo Tyres Ltd. 255 ITR 273, 280 (G) (enclosed at s.no. 11 of the case law paper book) and a mistake apparent on the face of the record. b) The Hon' ITAT has directed that "the corresponding entries in the books of the subsidiary as regards write off of the investment has to be examined by the departmental authorities." The applicant had, pursuant to the direction of the Hon' Bench, submitted the financials of TISL (subsidiary) on 4th June, 2021 under a covering letter. The Applicant submits that the relevant portion of the order of the CIT(A) including the facts at pgs.15 and conclusion at page no. 23 referred to in paragraph 3 above, were referred to by the authorized representative of the Applicant during the hearing. While 4 MA.No. 101/MUM/2022 Tata Industries Ltd., issuing the above direction, the Hon' ITAT has overlooked the fact that the shares were neither bought back nor cancelled by TISL as recorded by the CIT(A) and to which fact attention of the Hon' Bench was also drawn by the applicant's authorized representative in rebuttal to the contention of the Ld. DR, that the accounting treatment in the books of TISL (subsidiary) needs to be verified. In view of the above, the direction by the Hon' ITAT for examination of the entries in the books of the subsidiary is academic and an error apparent. 5. In the circumstances the Applicant prays that it is in the interest of justice that the abovementioned mistakes being apparent on the face of the record may be deleted/modified as this Hon' ITAT deems fit.” 3. At the time of hearing, Ld AR reiterated the issues raised in the Miscellaneous Application memo and further brought to our notice the Para No. 20 of the ITAT order wherein the bench has given a clear finding that the assessee has actually written off the investment in their books and it is not a provision as perceived by the revenue authorities. However, the bench has further observed that it is a well settled principle that accounting entries are not conclusive. She submitted that the above observation is contrary to the decision of Hon’ble Supreme Court decision in Appollo Tyres (supra). By relying on the decision of Hon’ble Gujarat High Court decision, it agreed that value in investment is actually written off, it cannot be added back to book profit u/s 115JB. Even then it proceeded to remit the issue to Assessing Officer to verify the factual aspect to the Assessing Officer and assessee also submitted before the 5 MA.No. 101/MUM/2022 Tata Industries Ltd., bench the financial record of the subsidiary company and rebutted the finding of CIT(A). She prayed that this mistake apparent on record may be rectified. 4. On the other hand, Ld.DR submitted that there is no mistake apparent on record and objected to the submissions of the Ld.AR by submitting that the matter was remitted to Assessing Officer for verification of factual aspect of the transaction and there is no prejudice caused to the assessee. 5. Considered the rival submissions and material placed on record. We observe that the assessee is aggrieved with the observation of bench on the accounting entries that they are not conclusive. Ld.AR submitted that this observation is contrary to the decision of Apollo Tyres (supra), therefore there is mistake apparent on record. We considered their submissions and not in agreement with the same. The Hon’ble Supreme Court observed in their decision as under: - “9. Therefore, we are of the opinion, the assessing officer while computing the income under Section 115-J has only the power of examining whether the books of account are certifies by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the assessing officer does not have the jurisdiction 6 MA.No. 101/MUM/2022 Tata Industries Ltd., to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115-J.” 6. From the above, it is clear that Assessing Officer has only power the examine the books certified by the authorities and whether it has been maintained in accordance with the Companies Act. It further observed that Assessing Officer has limited power of making adjustment as provided in the explanation to section 115J of the Act. Therefore, Assessing Officer does not have right to tinker the results declared and prepared as per the provisions of the Companies Act except the mandate given in the provisions of Section 115JB however, Assessing Officer can certainly verify the claims made by the assessee in their books of account, it can be done only by making proper verification. The bench has made the observation that mere accounting entries are not conclusive, it meant to say that it should be proved with proper documentation. Even though it accepted the submissions of the assessee based on the decision of Hon’ble Gujarat High Court in the case of Torrent Private Ltd (supra) and it directed the Assessing Officer to verify the factual aspects of the transaction. The assessee has to submit relevant information before Assessing Officer to justify the written off value of the investment. It is clear from the record submitted by the assessee that the fair market value of the shares in the subsidiary company is negative, however, the 7 MA.No. 101/MUM/2022 Tata Industries Ltd., assessee has continue to hold the shares of the subsidiary company to the extent of face value of the shares. The assessee has to submit before the Assessing Officer the relevant accounting entries passed by the assessee justifying the value of investment written off by them in their books of account. They already demonstrated before us the reasons for reduction of the value of investment by bringing before the bench the financial statement of the subsidiary company and it is enough to demonstrate the accounting entry for the above written off value before the Assessing Officer and it is only the Assessing Officer has to verify the factual aspect of the transaction. In our view, there is no prejudice caused to the assessee. Therefore, there is no need to modify the decision in the Para No.20 of the order, any other direction may lead to review of our own order, which is not legally permitted. 7. In the result, Miscellaneous Application filed by the assessee is dismissed. Order pronounced in the open court on 23 rd August, 2022. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 23/08/2022 Giridhar, Sr.PS 8 MA.No. 101/MUM/2022 Tata Industries Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum
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