Voluntary liquidation company's book profit calculation u/s115JB MAT, and s.263 revision upheld for non-compliance dismissal

The dominant issue was whether MAT under s.115JB applied to a company in voluntary liquidation and whether failure to compute book profit justified revision under s.263. The ITAT held that any company falling within s.115JB must compute book profit unless specifically excluded within the provision; no statutory exception covers voluntary liquidation, so MAT applied and the Pr. CIT's revision on this point was upheld, resulting in dismissal of the challenge. On the plea of inability to compute book profit due to the Companies Act framework, the ITAT found the assessee's own disclosures showed profits and losses could be determined and a profit and loss statement prepared for MAT computation; this contention was rejected, and the appeal was dismissed.

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Issues Involved:
1. Initiation of proceedings under Section 263 of the Income Tax Act, 1961.
2. Applicability of Minimum Alternate Tax (MAT) provisions under Section 115JB of the Income Tax Act, 1961 to a company under voluntary liquidation.
3. Validity of the Principal Commissioner of Income Tax's (Pr. CIT) direction to the Assessing Officer (AO) to pass a fresh assessment order.

Detailed Analysis:

1. Initiation of Proceedings under Section 263 of the Income Tax Act, 1961:
The Pr. CIT initiated proceedings under Section 263 of the Income Tax Act, 1961, on the grounds that the assessee had not computed income under the provisions of MAT and had not computed book profit. The Pr. CIT held that the AO did not conduct any enquiry on this issue and assessed the case based on the returned income, which was prejudicial to the interests of the Revenue. The Pr. CIT directed the AO to pass a fresh assessment order.

2. Applicability of Minimum Alternate Tax (MAT) Provisions under Section 115JB of the Income Tax Act, 1961 to a Company Under Voluntary Liquidation:
The appellant, a wholly-owned government company under voluntary liquidation, argued that they are not preparing accounts from which any "book profit" can be worked out due to the statutory provisions governing voluntary winding up. The appellant contended that the provisions of Section 115JB of the Act cannot be fulfilled because it is not possible to prepare a "statement of profit and loss," which is essential for complying with this provision. The appellant also pointed out that the CBDT prescribed ITR-6 for companies in liquidation, which exempts them from filing a balance sheet and profit and loss account if not drawn.

The Revenue argued that the provisions of Section 115JB of the Act do not carve out any exception for companies under voluntary liquidation. The accounts submitted by the assessee showed a surplus, and there is no specific provision in the Companies Act, 1956 or Companies Act, 2013, that would override the Income Tax Act to enable the appellant company to avoid paying taxes as legally required.

The Tribunal held that the provisions of Section 115JB of the Act are applicable to the appellant, even if it is under voluntary liquidation. The Tribunal noted that the terminology of Section 115JB has been updated to align with the Companies Act, 2013, and there is no indication that companies under voluntary liquidation are exempt from MAT provisions. The Tribunal also observed that the appellant had disclosed taxable income for subsequent assessment years, indicating that it is possible to determine profits and losses.

3. Validity of the Principal Commissioner of Income Tax's (Pr. CIT) Direction to the Assessing Officer (AO) to Pass a Fresh Assessment Order:
The Tribunal examined whether the Pr. CIT validly assumed jurisdiction under Section 263 of the Act. The Tribunal referred to Circular No. 19/2015 and the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, which outline the principles governing the revisionary powers under Section 263. The Tribunal found that the AO did not conduct any enquiry regarding the applicability of Section 115JB of the Act, leading to an incorrect assumption of facts and incorrect application of law. The Tribunal concluded that the Pr. CIT validly assumed jurisdiction under Section 263 of the Act and directed the AO to pass a fresh assessment order.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee and upheld the action of the Pr. CIT in initiating proceedings under Section 263 and directing the AO to pass a fresh assessment order. The Tribunal held that the provisions of Section 115JB of the Act are applicable to the appellant, even if it is under voluntary liquidation. The Tribunal also noted that the appellant's inability to prepare a "statement of profit and loss" does not exempt it from the MAT provisions.

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