Section 115JB – Where additional revenue was not shown by assessee in books of accounts, the A.O. could not tinker with book profit by adding additional revenue on account of subsequent realisation of export while computing book profit u/s 115JB

Section 115JB – Where additional revenue was not shown by assessee in books of accounts, the A.O. could not tinker with book profit by adding additional revenue on account of subsequent realisation of export while computing book profit u/s 115JB

 

FACTS

The assessee filed a revised return of income by including certain additional revenue in the total income (and claimed deduction u/s 10A in respect of the additional revenue).

But it did not modify the books of accounts, nor did it modify the calculation of book profit u/s 115JB.

However, the A.O. increased the book profit by adding the additional revenue on account of subsequent realisation of export. The CIT(A) sustained the addition made by the A.O. Aggrieved, the assessee preferred an appeal before the ITAT.

 

HELD

The ITAT, following the ratio of the Supreme Court decision in Apollo Tyres Ltd. vs. CIT [2002] 122 Taxman 562/255 ITR 273, allowed the assessee’s appeal.

In the said decision, the Court was concerned with the issue of the power of the A.O. to question the correctness of the profit and loss account prepared by the assessee in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act (in the context of section 115J as then applicable).

In Apollo Tyres (Supra), the Court observed that it was not open to the A.O. to re-scrutinise the accounts and satisfy himself that these accounts had been maintained in accordance with the provisions of the Companies Act. Sub-section (1A) of section 115J did not empower the A.O. to embark upon a fresh inquiry in regard to the entries made in the books of accounts of the company and to probe into the accounts accepted by the authorities under the Companies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of section 115J, then it should be that income which is acceptable to the authorities. If the Legislature intended the A.O. to reassess the company’s income, then it would have stated in section 115J that ‘income of the company as accepted by the A.O. Thus, according to the Apex Court, the A.O. did not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J.’

Thus, applying the ratio of the abovementioned judgment, the ITAT took the view that the A.O. cannot tinker with / re-compute book profit arrived at on the basis of books maintained in accordance with the Companies Act.