AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2016 (7) TMI 837
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under Section 271(l)(c) of the Act by the learned Assessing Officer. 2. The learned CIT(A) erred in holding that the appellant has furnished inaccurate particulars of income in respect of excessive claim of depreciation which was not in accordance with the books of accounts maintained by the appellant as prescribed under Parts II and III of Schedule VI of the Companies Act. 3. The learned CIT(A) further erred stating that the appellant has accepted the decision and no further appeals pending on this matter and hence, it becomes an undisputed matter of furnishing inaccurate particulars of income. 4. The learned CIT(A) erred in observing that the appellant has excessively claimed depreciation knowing fully well that the helipad was never used for its business purposes in the initial year of its claim of depreciation.' 3. We have heard the parties, and perused the material on record. 3.1 The relevant clause of Explanation 1 to section 115JB, where-under only the permitted adjustments to the profit (or loss) as per the profit and loss account, prepared in accordance with Part II and III of Schedule VI to the Companies Act, 1956 could be made, reads as under: 'Special....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; 1,820.97 (9,404.02) Add: Balance in Profit & Loss A/c Brought Forward 25,863.14 35,290.86 Amount Available for Appropriation 27.684.11 25,886.84 Appropriation: Statutory Reserve 48.82 0.00 Proposed Dividend 0.00 0.00 Dividend Tax for Earlier Year 0.00 23.70 General Reserve 0.00 0.00 Balance carried to Balance Sheet 27,635.29 25,863.14 27,684.11 25,886.84 Basic and Diluted Earnings Per Share (Rupees) 0.84 (32.24) (Refer Note 13 of Schedule 15) Significant Accounting Policies 14 Notes to Accounts 15 Schedules forming part of accounts As 31st March, 2006 (Rs. Lacs) As at 31.3.2006 As at 31.3.2005 Schedule 2 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ides that it is the loss as per the balance-sheet which is to be adjusted, which could thus be that as per the profit and loss account, i.e., for the immediately preceding year, which in view of the non-carry of backward of losses, can only be, or equally be, regarded as brought forward. While the profit and loss is stipulated (per s. 115 JB(2)) to be in terms of Parts II and III of Schedule VI to the Companies Act, 1956, there is no such stipulation for the balance-sheet, whose function is to show the source of funds and their application. This may be done in a particular manner which may not necessarily be in the same manner as reflected in the books of account. To be more explicit, Part I of the said Schedule VI provides that the debit balance in the profit and loss account is shown as a deduction from uncommitted reserves. That, however, is only form of presentation and does not mean that the loss (represented by the debit balance in the profit and loss account) is absorbed by past reserves in the books of account. Further, the assessee has already accepted the adjustment to its' returned book profit, i.e., in the quantum proceedings, and it's explanation on merits is only qua ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of this subsection, be deemed to represent the income in respect of which particulars have been concealed.' 3.4 We may next examine the assessee's explanation on the anvil or the touchstone of it's plausibility, i.e., its tenability in law. The reference to either profit and loss account or balance-sheet is only for the purpose of ascertaining the loss, if any, brought forward as per the books of account. This is as the law speaks of one figure (of loss or unabsorbed depreciation) as per the books of account. Could there be, one may ask, two figures (or two set of figures) for the same? Whether, therefore, one may refer to the balance-sheet or the profit and loss account, and irrespective of the manner of it's presentation - of which much is made out, the same would reveal or reflect the same figure, i.e., qua a particular aspect, as for example, the loss brought forward. Why, both are supposed to reflect the position - be it of the working results (for the account period) or the state of affairs (as at the end of the account period), only as per the books of account, implying their being in consistence and in agreement therewith. That is, the two (the P&L A/c and the Balance Sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....implies there is no loss, other than depreciation, so that it is nil, making the provision of clause (iii) of Explanation 1 to s. 115-JB inapplicable. Notably, the provision does not employ the word "losses". In fact, even if it did, it would only imply losses for all the preceding years, taken cumulatively, as reduced by the cumulative profit (for all these years). And, at any rate, may give rise to some doubt only in such a non-existent case. The assessee adverts to there being no concept of carry backward of losses under the in Indian tax laws, which contemplate only carry forward of losses. The argument, though based on a truism, is both invalid and misconceived. To explain, let us take illustrative figures, as of loss for the immediately preceding year at Rs. 20 (say), and of brought forward balance in the profit and loss account at a profit of Rs. 120/-, so that the balance in the profit and loss account, as per the balance-sheet as at the end of the of such year (or at the beginning of the current year) is Rs. 100/-. Going by the assessee's argument, there would be two sets of figures of profit (or loss) brought forward, i.e., profit of Rs. 120/- and a loss of Rs. 20/-, f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to allow adjustment for the loss, if any, brought forward (from the earlier periods) as per the books of account. Once a profit or loss for a particular year merges in the profit and loss account, it looses it's separate identity and, in any case, has no bearing, either on the relevant provision of law (section 115JB) or its rationale. As depreciation is a mandatory charge to the profit and loss account (for a period), it is further clarified (per the provision itself) that the loss to be taken is exclusive of depreciation. The lower of the two, reckoned on an absolute basis, is to be allowed set off/adjusted. It may be recalled that the language of the erstwhile section 115J allowed scope for a controversy as to how the loss/es is to be reckoned, i.e., whether inclusive or exclusive of depreciation, and which stands considered by the Apex Court in Surana Steels (P.) Ltd. v. Dy. CIT [1999] 237 ITR 777 (SC). There is reference to the decision in the case of Peico Electronics & Electricals Ltd. vs. CIT [2011] 339 ITR 506 (Cal) in the assessee's written submissions (to the ld. CIT(A)). Though, in fairness, the said decision was not referred to by the ld. AR while pleading assessee'....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 'The next submission on behalf of the assessee was based on the oft repeated well-known principle of interpretation of fiscal statutes that in the event of any doubt in regard to interpretation, the benefit of doubt should be given to the assessee and the interpretation beneficial to the taxpayer should be accepted. We do not find any merit in this submission because this principle applies only when there is reasonable and genuine doubt in regard to the interpretation of a particular provision. It has no application to a case where the provision is clear and the law is well-settled. This principle cannot be stretched too far. It cannot be used to misinterpret a statutory provision which is otherwise clear and brooks no doubt about its meaning or interpretation just to give benefit to the taxpayer which the statute did not intend to give.' We may finally advert to the decision in the case of CIT vs. NG Technologies Ltd. (in ITA No. 82/2012 dated 01.12.2014), SLP against which stands since dismissed by the Hon'ble Apex Court. The said decision is rendered in the context of penalty u/s. 271(1)(c) to the effect that any claim with regard to a legal stand cannot be admitted where ....