TaxTMI 
TaxTMI 
2023 (1) TMI 45
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....pondent. 2. This is an appeal under Section 260A of the Income Tax Act, 1961 (briefly, "the Act" hereinafter) filed by the assessee as the appellant against the order dated 23.12.2005 passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad (Tribunal) in I.T.A.No.441/Hyd/2000 for the assessment year 1990-91. 3. From the docket proceedings we find that on 26.06.2006 the appeal was admitted for hearing, but no substantial question of law was framed. 4. However, in the memo of appeal the appellant has proposed the following questions as substantial questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in confirming the addition of prior period adjustm....
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.... (Appeals) IV, Hyderabad (briefly, "the CIT(A)"), the first appellate authority took the view that action of the assessing officer was supported by a decision in CIT v. Krishna Oil Extraction Limited (1998) 150 CTR (MP) 131 which had given a clear finding that prior period adjustments are to be excluded for working out book profit for the purpose of Section 115J of the Act. 8. On further appeal before the Tribunal it was held as follows: 3. We have heard both the parties and perused the record. As has been noted at page-2 of the CIT(A)'s order, the appellant in its annual account has worked out net profit at a figure of Rs.3,42,726. From this, it has claimed a prior period adjustment of Rs.3,09,504. This being the treatment give....
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....ter the 1st day of April, 1988 but before the 1st day of April, 1991 (hereinafter in this section referred to as the relevant previous year), is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956). Explanation- For the purposes of this section, 'book profit' means the net profits as shown in the profit and loss account fo....
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....pecified in Section 80HHD) or provisions, if any such amount is credited to the [profit and loss account : Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (i) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or ....
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....ct of any previous year relevant to the assessment year commencing on or after the first day of April, 1988 but before the first day of April, 1991, was less than 30% of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30% of such book profit. Sub-section (1A) clarifies that the profit and loss account to be prepared by the assessee for the aforesaid previous years should be in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. Explanation below sub-section (1A) defines 'book profit' to mean, the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A)....
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....e company. While so looking into the accounts of the company, an assessing officer under the Act has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, 1956, which obligates the company to maintain its account in a manner provided by the Companies Act, 1956. Therefore, an assessing officer while computing the income under Section 115J has only the power to examine whether the books of accounts are certified by the authorities under the Companies Act, 1956, as having been properly maintained in accordance with the Companies Act, 1956. Assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said Section. Putting it differentl....