TaxTMI 
TaxTMI 
2009 (10) TMI 63
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.... under Section 80-IA was allowed at Rs.2427.79 lacs as against admissible deduction of Rs.1962.55 lacs, i.e. to the extent of gross total income calculated under the normal provisions of the Act, meaning thereby, excess deduction to the extent of Rs.465.24 lacs. The mistake resulted into over assessment of loss to the extent of Rs.465.24 lacs. (b) The provision for doubtful debts at Rs.818.03 lacs debited in the Profit and Loss account was not added back for calculating the book profit under Section 115JB. The mistake resulted into underassessment of income to the extent of Rs.818.03 lacs. After considering the reply of the assessee, he passed orders dated 22.3.2007, thereby cancelling the assessment order passed under Section 143(3) of the Act with directions to frame the assessment order afresh. Few days before this order of the CIT (A), the Assessing Officer (AO) had passed the order under Section 154 of the Act on 13.2.2007. By this order, the purported mistake in regard to deduction under Section 80-IA of the Act had been corrected by the AO and in this rectification order, deduction under the said provision was restricted to Rs.1962.55 lacs, i.e. to the extent of gross ....
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....on 80-IA was Rs.1962.55 lacs as against Rs.2427.79 lacs originally granted by the AO in the assessment order. However, before the CIT could point out this error, the same was corrected by the AO himself in the rectification order. Therefore, even if on this aspect revisional order is treated as correct, on the basis of which the CIT directed the AO to pass fresh orders, that exercise had already been done by the AO. 5We may point out at this stage that while holding that the CIT lacked jurisdiction under Section 263 of the Act to modify the assessment order after the rectification thereof under Section 154 of the Act by the AO, the Tribunal has limited the discussion relating to deduction under Section 80-IA alone. In taking this opinion, the Tribunal has held that it was because of the reason that original assessment order was no longer in existence as it got merged with the order under Section 154 of the Act passed by the AO and for this purpose the Tribunal relied upon the judgment of the Madhya Pradesh High Court in the case of CIT v. Ralson Industries Ltd., 276 ITR 368, and particulars the following observations contained therein :- "5. We have heard Mr. Rohit Arya, learned....
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....3.1982, if otherwise not forbidden under the law." 6. Prima facie, this approach of the Tribunal seems to be correct. In any case, in the facts of the present appeal, it is not even necessary to into this question inasmuch as even as per the revisional order passed by the CIT under Section 263 of the Act, the benefit under Section 80-IA should have been restricted to Rs.1962.55 lacs, which had been done by the AO by passing rectification order under Section 154 of the Act. In the facts of this case, therefore, the question of law No. (2) does not arise for consideration. 7. The second ground for passing revisional order by the CIT under Section 263 of the Act relates to the provision for doubtful debts. As per the CIT, the provision for doubtful debts at Rs.818.03 lacs debited in the Profit and Loss account was not added back for calculating book profit under Section 115JB of the Act, which resulted into underassessment of income to that extent. In forming this opinion, the CIT has governed itself by the judgment of the Madras High Court in the case of Deputy Commissioner of Income Tax v. Beardsell Ltd., 244 ITR 256, wherein the Madras High Court held that where there is a....
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....or calculating book profits under Section 115JB of the Act. It was also submitted before the CIT that the AO had decided not to add back this provision made for bad debts for calculating book profit under Section 115JB of the Act after due application of mind and after taking note of the decision of the Supreme Court in the case of Apollo Tyres Ltd. v. Commissioner of Income Tax, Kochi, 255 ITR 273 and, therefore, when such an opinion of the AO was plausible, merely because the CIT was of different opinion could not be a ground to pass an order under Section 263 of the Act. This contention of the assessee was brushed aside by the CIT in the following manner :- "It has been argued that no doubt there are divergent opinions of the High Courts on this issue. In the decision of the Madras High Court reported in 244 ITR 256, it was held that the provision made for liabilities other than ascertained liabilities is to be included in the book profit for calculating the tax liability u/s 155JB whereas there are several decisions holding otherwise. It is further argued that the decision of the Hon'ble Supreme Court in the Apollo Tyres case, supra, the position is now clear that the profit....
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....(AT) 64, holding that the provision for bad and doubtful debts is made when the assessee is of the opinion that its entire debt may not be realized and part of the debt may become irrecoverable. Therefore, the question whether it is an ascertained or unascertained liability does not arise as clause (c) of explanation to Section 115JA would not be applicable. The Tribunal also relied upon the judgment of this Court in the case of CIT v. El Dupont India Ltd. (ITA No. 599/2007), holding that the issue relating to provision made for doubtful debts while computing the book profits under Section 115JA are not required to be added back as per clause (c) of explanation to Section 115JA. Thus, according to the Tribunal, view taken by the AO could not be called erroneous in view of the aforesaid decisions and, therefore, the order under Section 263 of the Act could not be passed by the Commissioner, as is clear from the following :- "19. From the decision (supra) it is clear that the order of the AO while deciding the issue is supported by the decisions (supra) therefore the view taken by the AO cannot be called erroneous even if contrary view has been taken by the CIT. It has al....
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.... law or of fact on the face of it but also because it is a stereo typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case." He submitted that the view taken in the aforesaid judgment was reaffirmed by this Court in Duggal & Co. v. CIT, 220 ITR 456. 13. Mr. Ajay Vohra, learned counsel appearing for the respondent, on the other hand, submitted that Section 115JB of the Act was pari materia with Section 115JA and insofar as calculation of book profits under both these provisions are concerned., he submitted that clause (c) appended to explanation to Section 115JB(2) was identical to clause(c) of explanation to Section 115JA(2). He further pointed out that vide Finance Act, 2009, there was an amendment in the explanation. One more explanation was added as explanation No.(2) and existing explanation was re-numbered as explanation No. (1). Clause (i) is added thereof, which is in the following terms - "the amount or amounts set aside as provision for diminution in the value of any asset". Justifying the order of the Tribunal, he submitted that the legal position as appearing before....
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....f the debt cannot be said to be a provision for liability. Therefore, in our view Item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the AO was not justified in adding back the provision for doubtful debts of Rs. 92,15,187/- under Clause (c) of the Explanation to Section 115JA of the 1961 Act." 14. He further submitted that the AO was to only examine whether books of accounts are certified by the authorities under the Companies Act. He reinforced the submission that where two views are possible, the order of the AO could not be treated as erroneous, giving power to the CIT to pass orders under Section 263 of the Act, as held in Malabar Industrial Co. v. CIT, 243 ITR 83, Max India Ltd. v. CIT, 295 ITR 282 and Commissioner of Income Tax v. Vimgi Investment (P) Ltd., 290 ITR 505. 15. After considering the respective submissions, we are of the opinion that the order of the Tribunal does not call for any interference. 16. It is clear that the explanations to Section 115JB is identically worded as explanation to Section 115JA. Both these explanations relate to calculation of book profits, i.e. they give power to the AO to increas....
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....re possible on the issue." 18. Further, even if two views were possible, and the view taken by the AO was plausible one, it by the CIT, that would not provide sufficient ground for the CIT to assume jurisdiction under Section 263 of the Act merely because he had a different view in Malabar Industrial Co. (supra), the Supreme Court gave the following interpretation to this provision :- "A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income Tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. 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 interests of the revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the assessing officer,....