48. Manyata Promoters Pvt. Ltd. vs. JCIT ITA No. 548/Bang/2022 (Bang.-Trib.) A.Y.: 2017-18 Date of order: 6th September, 2022 Sections:14A, 154
Enhancing the assessed book profit for the amount disallowed u/s 14A is not a mistake apparent on record, which can be rectified by passing an order u/s 154.
The assessee, engaged in the business of development and lease of office space and related interiors, filed its return of income for the assessment year under consideration on 31st October, 2017. On 7th August, 2017, the National Company Law Tribunal approved the scheme of amalgamation of Pune Embassy Projects Pvt. Ltd. with the assessee company. The return of income filed by the assessee was revised on 30th March, 2018. In the revised return of income, the assessee declared a total income of RNil under the normal provisions and a book profit of Rs. 26,04,02,080 u/s 115JB of the Act.
In the course of assessment proceedings, the AO disallowed a sum of Rs. 14,49,60,000 u/s 14A and added Rs. 58,29,802 towards the difference in income as per Form No. 26AS and the financials of the assessee. The AO also denied credit of TDS of Rs. 4,02,70,802, which the assessee claimed in its return of income.
The assessee filed a rectification application requesting that credit of TDS as claimed in the return of income be granted.
In an order passed u/s 154 of the Act, pursuant to the rectification application filed by the assessee, the AO made an adjustment to book profits u/s 115JB for the amount disallowed u/s 14A of the Act. He considered this to be a mistake apparent on the record. The AO did not grant a credit for TDS as claimed by the assessee.
Aggrieved, the assessee preferred an appeal to CIT(A), who granted relief to the assessee for adjustment made by the AO to the book profits u/s 115JB. With regards to short credit of TDS, the CIT(A) held that this did not arise out of the order passed u/s 154, which is in appeal before him and therefore dismissed the same.
Aggrieved, Revenue preferred an appeal against the action of the CIT(A) in granting relief in respect of adjustment made by the AO to the book profits u/s 115JB.
The Tribunal noted that CIT(A), while deciding the issue in favour of the assessee, has considered the issue both, from the point of view that whether an adjustment of book profits for disallowance u/s 14A is a mistake apparent on record, and also on merits by relying on the decision of the jurisdictional High Court in the case of CIT vs. Gokaldas Images Pvt. Ltd. [(2020) 122 taxmann.com 160 (Kar. HC)].
The Tribunal held that the AO cannot go beyond the profits as per the profit and loss account prepared in accordance with the Companies Act except in the manner provided in Explanation 1 to section 115JB of the Act, and therefore the action of the A.O. to make adjustment for disallowance u/s 14A to t