2021 (4) TMI 633 - AT - Income Tax

Tribunal rules CIT(A) lacked authority to enhance total income under Section 115JB.

The United Provinces Sugar Company Ltd. Versus Income Tax Officer, Ward-12 (2) Kolkata

The Tribunal ruled in favor of the assessee, holding that the CIT(A) lacked the authority to enhance the total income under Section 115JB as the Assessing ... Power of CIT(A) enhancing the income of the assessee u/s. 251(1)(a) r.w.s. 251(2) - CIT-A enhanced the assessment by computing book profits U/s. 115JB - HELD THAT:- CIT(A) cannot touch or delve on any issue which does not arise from the order of assessment and which was outside the scope of or an issue which is not a subject matter the order of the assessment. In the case on hand, the issue of computation of book profits U/s. 115JB of the Act was not an issue that was a subject matter during the course of assessment proceedings. This issue of computation of book profits U/s. 115JB of the Act, does not arise from the order of the assessment. Section 115JB of the Act, is a 'self contained code' as per the CBDT Circular No. 13/2001, dt. 09/11/2001 and was outside the scope of the order of assessment passed by the Assessing Officer U/s. 143(3) of the Act on 21/12/2015. The Ld. CIT(A), in our view, is not empowered to enhance the assessment by computing book profits U/s. 115JB of the Act, as it is a separate code. Thus, we uphold this contention of the assessee and adjudicate this issue on powers of enhancement of the CIT(A), on the facts and circumstances of the case, in favour of the assessee. Thus, we quash the enhancement made by the Ld. CIT(A). MAT computation applicability - Section 115JB applicability to assessee company - admittedly, the gross taxable income and the total income as well as the tax payable are Nil - HELD THAT:- This issue whether book profits can be computed U/s. 115JB of the Act, when the GTI and TI of the assessee are Nil and no taxes payable, is adjudicated in favour of the assessee, by respectfully following the decision of the Hon'ble Jurisdiction High Court own case on this issue. No other arguments are raised before us. - Decided in favour of assessee. Issues Involved:1. Whether the CIT(A) has the power to enhance the total income of the assessee.2. Whether Section 115JB of the Income Tax Act applies to the assessee company when the gross taxable income (GTI) and total income (TI) are Nil.Issue-Wise Detailed Analysis:1. Power of CIT(A) to Enhance Total Income:The primary contention was whether the CIT(A) had the authority to enhance the total income of the assessee by invoking Section 251(1)(a) r.w.s. 251(2) of the Act. The assessee argued that the Assessing Officer (AO) did not consider the computation of income under Section 115JB during the assessment process, and thus, the CIT(A) should not have the power to enhance the income on this basis. The assessee relied on various case laws, including CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC), which discussed the scope of the CIT(A)'s powers.The Tribunal examined the legal precedents and concluded that the CIT(A) cannot touch or delve into any issue that does not arise from the assessment order and was outside the scope of the assessment proceedings. Since the AO did not consider the computation of book profits under Section 115JB, the CIT(A) was not empowered to enhance the assessment by introducing this separate code. The Tribunal upheld the assessee's contention and quashed the enhancement made by the CIT(A).2. Applicability of Section 115JB:On the merits, the issue was whether Section 115JB of the Act, which deals with Minimum Alternate Tax (MAT), applies to the assessee when the GTI and TI are Nil. The CIT(A) had held that the provisions of Section 115JB were applicable, despite the assessee's reliance on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Vishnu Sugar Mills Ltd., which stated that MAT provisions do not apply when the taxable income is Nil under the normal provisions of the Act.The Tribunal noted that the ITAT 'D' Bench had previously upheld the CIT(A)'s order for the Assessment Year 2004-05, which was in favor of the assessee, and the Hon'ble Calcutta High Court had dismissed the revenue's appeal, confirming that no substantial question of law was involved. The Tribunal emphasized that the binding decision of the Hon'ble Jurisdictional High Court should be followed, and the CIT(A) was in error by not adhering to this precedent.The Tribunal concluded that the CIT(A) was wrong in holding that the decisions of the Tribunal were sub-silentio and in following the decision of the Lucknow Bench of the ITAT. It was reiterated that the issue of whether book profits can be computed under Section 115JB when the GTI and TI are Nil and no taxes are payable was already decided in favor of the assessee by the Hon'ble Jurisdictional High Court. Therefore, the Tribunal adjudicated this issue in favor of the assessee, following the binding decision.Conclusion:The appeal of the assessee was allowed, quashing the enhancement made by the CIT(A) and confirming that Section 115JB does not apply when the GTI and TI are Nil. The Tribunal emphasized the importance of adhering to binding judicial precedents and the limitations on the powers of the CIT(A) to enhance assessments.