AI Drafter 
TaxTMI 
TaxTMI 
2020 (9) TMI 565
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....0465/2016-17/CIT(A)/5, dated 13/3/2018 U/s 250(6) r.w.s 143(3) & 147 of the Act consequent to the order passed by the Ld. CIT U/s. 263 of the Act dated 10/3/2016. 2. For the sake of convenience, initially we hereby take up for consideration the order passed by the Ld. CIT U/s. 263 of the Act dated 10/03/2016. The assessee has raised six grounds in its appeal against the order passed by the Ld. CIT U/s. 263 of the Act, however, the crux of the issue is that:- "the Ld. CIT has erred in invoking his powers U/s. 263 of the Act on the premises that the Ld. AO has passed order U/s. 143(3) of the Act dated 7/3/2014 as it is erroneous in so far as it is prejudicial to the interest of the Revenue because the order was passed without maki....
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....g the previous year 2010-11 wherein the gratuity eligibility to its employees was enhanced from Rs. 5 lakhs to Rs. 10 lakhs. (ii) Since the assessee company is also covered by the provisions of Companies Act, 1956, the accounting standards issued by the Institute of Chartered Accountants of India is mandatory while drawing the statement of affairs of the assessee company. (iii) The Accounting Standard-15 dealing with provision for gratuity mandates the assessee company to provide for the liability arising out of gratuity based on actuarial valuation in the Balance Sheet as well as the Profit & Loss Account of the Company. (iv) As per the actuarial valuation, the assessee company had determined the liability toward....
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....es Act, 1956 by debiting the balance amount of Rs. 107,19,50,290/- which was omitted. (x) Since, there was no column provided in ITR-VI to reduce the profit before tax for this specific issue, the same was reflected in Item No.5(f) of Schedule-MAT and accordingly the book profit subjected to MAT became negative and there is no MAT liability for the relevant Assessment Year. (xi) Reliance was placed on the decision of the case Malabar Industrial Co. Ltd., vs. CIT reported in 243 ITR 83 (SC) wherein the Hon'ble Apex Court held that the Commissioner has to be satisfied of twin conditions namely (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the Revenue, ....
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....to the book profit of the assessee. (iv) Even in the order sheet notings, no reference to book profit was mentioned. (v) The submission of the Ld. AR that he had offered explanation regarding the above issues does not have merits because those explanations were submitted within 15 days of filing of the return on line and not during the course of assessment proceedings. (vi) The assessee itself had admitted that the provision made for doubtful debts amounting to Rs. 3,31,14,993/- ought to have been added back while computing the book profit. (vii) Further, it was contended in the written submission that the provision for warranty of Rs. 7.56 Crs was ascertained liability and therefore need not be added bac....
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....s. It was therefore argued that there was no error committed by the Ld. AO which is prejudicial to the interests of the Revenue. Hence it was pleaded that the order of the ld. CIT invoking the provisions of section 263 is erroneous and may be quashed. The Ld.DR on the other hand vehemently argued in support of the order of the Ld. CIT and prayed for sustaining the same. 8. We have heard the rival submissions and carefully perused the materials available on record. As pointed out by the Ld. AR it is apparent that the book profit of the assessee company has to be mandatorily drawn as per the provisions of the Companies Act. When the assessee has failed to do so, the Ld. AO has every right to compute the book profit of the assessee company ....
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....mpany based on the qualified audit report of the Statutory Auditors of the assessee company. Since these facts were brought to the notice of the Ld. AO subsequent to the filing of the return of income it appears that the Ld. AO had accepted the same while passing orders U/s. 143(3) of the Act. This action of the Ld. AO has not resulted in any error in so far as it is prejudicial to the interest of the Revenue. Therefore, we do not find any merit in the order of the Ld. CIT for invoking his powers U/s. 263 of the Act. Hence, we hereby quash the orders passed by the Ld. CIT invoking his powers U/s.263 of the Act. 8.1. Since the order passed by the Ld.CIT U/s. 263 is quashed by our order herein above, the consequential order passed by the L....