2019 (6) TMI 741

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....ufacture, purchase and sale of hydraulic excavators, loaders, mechanical shovels, cranes, dumpers and spare parts thereof. The original asst. u/s 143(3) r.w.s 144C of the Act was completed by the AO on 17/4/2015. The ld CIT, upon examination of the record, took the view that order passed by the AO in not adding "Provision for doubtful debts" debited to the profit and loss account to the Net profit while computing book profit u/s 115JB of the Act is erroneous and prejudicial to the interests of revenue. The provision for doubtful debts debited to profit and loss account was Rs. 832.23 lakhs. The ld CIT took the view that the provision for doubtful debts should have been added to the net profit as required under clause (i) of Explanation 1 to....

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.... the case of Yokogaa India Ltd., was in the context of item (c) of the Explanation (i) to sec. 115JB. Accordingly the ld CIT(A) rejected the contentions of the assessee and held that the asst. order passed without adding back the provision for doubtful debts of 832.27 lakhs to the net profit while computing book profit u/s 115JB is erroneous. Accordingly the ld CIT set aside the asst. order and remitted the same to the file of the AO for examining the above said issue afresh after giving due opportunity of being heard to the assessee. 4. Aggrieved, the assesse has filed this appeal before us. 5. The ld AR submitted that the assessee had also claimed the impugned amount of Provision for doubtful debts as deduction under normal provisions o....

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....ollowed the decision rendered by Hon'ble jurisdictional high court in the case of Yokogawa India Ltd., (Supra) and the decision rendered by Hon'ble Supreme Court in the case of Vijaya Bank (Supra). The ld AR further submitted that the Hon'ble Karnataka High Court has held in the case of CIT vs. Kirloskar Systems Ltd (2013)(40 Taxmann.com 124) that the provision for doubtful debts need not be added to the net profit under clause (i) of Explanation (1) to sec. 115JB of eh Act. Accordingly the ld AR submitted that the view taken by the AO gets support from the decision rendered by Hon'ble jurisdictional high court in the case of Kirloskar Systems Ltd (Supra) and hence the asst. order cannot be termed as erroneous and prejudicial to the interes....

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....d directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the or....