High Court upholds Assessing Officer's power under Section 115JB of Income Tax Act

The High Court of Bombay dismissed the appeal challenging the Assessing Officer's power to recast profit and loss accounts under Section 115JB of the Income Tax Act. The Court upheld that the Officer's authority is limited to verifying compliance with the Companies Act and making adjustments as per the section's Explanation. The Court rejected the revenue's argument that the decision in Apollo Tyres Ltd. was not applicable to Section 115JB, emphasizing the importance of adhering to settled legal positions to avoid unnecessary delays in proceedings. The appeal was dismissed without costs.

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Issues:
1. Whether the Assessing Officer has the power to recast the profit and loss account under Section 115JB of the Income Tax Act when it is not prepared in accordance with the Companies Act, 1956Rs.

Analysis:
The High Court of Bombay heard an appeal challenging the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2004-05. The main issue raised by the revenue was whether the Assessing Officer could recast the profit and loss account if it did not comply with the Companies Act. The Tribunal had rejected the revenue's contention based on the Supreme Court's decision in Apollo Tyres Ltd. v/s C.I.T. The Supreme Court's ruling emphasized that the Assessing Officer's power under Section 115J of the Income Tax Act was limited to verifying if the accounts were prepared in accordance with the Companies Act and making specific adjustments as provided for in the Explanation to the section. The Court held that the Assessing Officer cannot conduct a fresh inquiry into the entries in the company's accounts if they are prepared as per the Companies Act and certified by statutory auditors.

The revenue argued that the Apollo Tyres Ltd. decision was specific to Section 115J, not Section 115JB, which was the relevant provision in this case. However, the Court found no basis for disregarding the Supreme Court's decision when applying the provisions of Section 115JB, which were similar to Section 115J. The revenue did not raise this distinction before the Tribunal or in the grounds of appeal. The Court also noted that the revenue had conceded in the grounds of appeal that the decision in C.I.T. v/s Adbhut Trading Co. (P) Ltd. would resolve the issue, but later attempted to make distinctions without pointing out relevant court decisions, causing unnecessary delays in the proceedings.

Ultimately, the Court held that the issue had been settled by the decisions of the Supreme Court and the High Court, and the proposed question did not raise any substantial legal issue. Therefore, the appeal was dismissed with no order as to costs. The Court emphasized the importance of counsels being forthcoming about settled legal positions to expedite the resolution of cases.

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