Tribunal partially allows appeal, upholds compliance with Companies Act & SC direction. Audited book profit valid.

The Tribunal allowed the appeal partly, setting aside the CIT(A)'s order. It concluded that the assessee's accounts complied with the Companies Act and the Supreme Court's direction. The provision for prior period expenses/liabilities was deemed correct, and lower authorities were unjustified in rejecting the audited book profit. The decision was announced on 18.06.2021.

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Issues Involved:
1. Confirmation of addition under Section 115JB for non-compliance with Schedule VI of the Companies Act.
2. Non-adjudication on the decision of the Supreme Court in the case of Apollo Tyres Ltd. vs. CIT.
3. Direction to follow the earlier decision on the generation of scrap.

Issue-wise Detailed Analysis:

1. Confirmation of Addition under Section 115JB:
The primary issue revolves around the confirmation of an addition of Rs. 1,03,42,904 under Section 115JB, where the CIT(A) held that the profit and loss account was not prepared in accordance with Part II and Part III of Schedule VI of the Companies Act. The addition was related to administrative charges on the transfer of molasses from the sugar mill to the distillery. The assessee argued that the administrative charges were declared invalid by the Allahabad High Court and that provisions were made in compliance with the Supreme Court's direction. The AO increased the book profit by Rs. 1,03,42,904 under Section 115JB, stating that the P&L account was not prepared according to Schedule VI of the Companies Act.

2. Non-adjudication on the Decision of the Supreme Court in Apollo Tyres Ltd. vs. CIT:
The assessee contended that the CIT(A) did not consider the Supreme Court's decision in Apollo Tyres Ltd. vs. CIT, which mandates that the AO must accept the authenticity of the amount certified by the statutory auditor. The assessee argued that the accounts were audited under the Companies Act, 1956, and complied with the accounting standards, giving a true and fair view of the book profit. The CIT(A) upheld the AO's computation of book profit, stating that the appellant did not maintain its books of accounts for various financial years in accordance with the Companies Act.

3. Direction to Follow the Earlier Decision on the Generation of Scrap:
The assessee did not press this ground of appeal, and it was dismissed as 'not pressed.'

Detailed Analysis:

1. Confirmation of Addition under Section 115JB:
The assessee, a company engaged in manufacturing sugar, alcohol, and power, filed its return of income declaring a gross total income of Rs. 2,07,36,601 and book profit of Rs. 3,30,05,823 after providing for liability of excise department and administrative charges on molasses. The AO questioned the provision made for administrative charges, which the assessee justified based on the Supreme Court's order. The CIT(A) observed that the Allahabad High Court had quashed the imposition of administrative charges, and the appellant did not maintain its books of accounts for prior financial years in accordance with the Companies Act. The Tribunal found merit in the assessee's argument that the provision was made following the Supreme Court's direction and that the accounts were audited and complied with the accounting standards.

2. Non-adjudication on the Decision of the Supreme Court in Apollo Tyres Ltd. vs. CIT:
The Tribunal noted that the Supreme Court in Apollo Tyres Ltd. vs. CIT held that the AO's jurisdiction is limited to examining whether the books of account are certified by the authorities under the Companies Act. The AO cannot recompute the book profit once the accounts are certified. The Tribunal found that the prior period expenses/liabilities were provided based on the Supreme Court's direction, and the accounts were prepared as per Schedule VI of the Companies Act. The Tribunal referred to several decisions, including CIT vs. J.K. Synthetics Ltd., where it was held that the provision for payment of excise duty was allowable despite the High Court's decision, as the matter was pending before the Supreme Court.

Conclusion:
The Tribunal concluded that the assessee's accounts were prepared in compliance with the Companies Act and the Supreme Court's direction. The prior period expenses/liabilities were correctly provided, and the lower authorities were not justified in rejecting the book profit as per the audited accounts. The order of the CIT(A) was set aside, and the grounds raised by the assessee were allowed.

Decision:
The appeal filed by the assessee was partly allowed. The decision was pronounced in the open court on 18.06.2021.

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