TaxTMI 
TaxTMI 
2024 (9) TMI 1054
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....a-2 (hereinafter referred to Ld. 'Pr. CIT') initiated proceedings u/s 263 of the Income Tax Act, 1961 (in short the 'Act') mainly on the ground that the assessee had not computed income under the provisions of Minimum Alternate Tax (in short 'MAT') and had not computed book profit on the basis of claim that provisions of MAT were not applicable on him. A detailed show cause notice u/s 263 of the Act was issued on 08.02.2023 regarding the action of the appellant in not computing tax as per the provisions of MAT. The assessee is seen to have given a detailed reply to the said notice and the same is duly reproduced in the body of the impugned order. We will have occasion to deal with the facts peculiar to this case and hence, the contents of the response to the ld. Pr. CIT's notice u/s 263 of the Act are not discussed in detail here. Suffice it to say that the appellant claimed that they are a company undergoing voluntary liquidation and hence, are not preparing accounts from which any "book profit" can be worked out. This argument is not elaborated upon at this stage since there will be occasion to discuss it later in detail. Thereafter, ld. Pr. CIT proceeded to hold ....
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....er the Companies (Court) Rules, 1959. It has been informed to this Bench that the said quarterly receipts and payments accounts are being audited by internal auditors and thereafter by the statutory auditors. Following the statutory audit, the said audited accounts are placed before the shareholders at the quarterly EGM for adoption u/s 314 of the Companies Act, 2013 (Section 512 of the Companies Act, 1956). It has been informed that after placement of such accounts in the EGM the same are filed with the Registrar of Companies (in short 'RoC') and eventually forwarded to the Ministry of Finance, Govt. of India for placement before both the Houses of Parliament u/s 394 of the Companies Act, 2013 (Section 619A of the Companies Act, 1956). C) It has been claimed that since only a receipts and payments account is being prepared, there is, as claimed, no scope to prepare a profit and loss account and balance sheet in accordance with Schedule 3 of the Companies Act, 2013 (Schedule 6 of the Companies Act, 1956). D) It is a matter of record that the winding up is continuing up to the year under consideration and even beyond. 1.2. Aggrieved with the action of ld. Pr. CIT, the appel....
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....a receipts and payments account. Also, it has been claimed that there cannot be any annual general meeting in which such accounts can be presented because the company is under voluntary winding up. Through this reasoning, it has been argued that the provisions of Section 115JB of the Act cannot be fulfilled because it is not possible to prepare a "statement of profit and loss" which is sine qua non for complying with this provision. In support of this line of argument it has been pointed out that the CBDT prescribed ITR-6 as a specific schedule for companies in liquidation and in the instructions for filling up this form, it has been mentioned that this particular portion needs to be filled up by the official liquidator in respect of company under liquidation. It is also mentioned in the instructions that in respect of such companies, filing of balance sheet and profit and loss account is not mandatory if the same has not been drawn. The language of this part of the instructions for filling up of ITR-6 has been used to argue that even the CBDT is aware that in cases of winding up of companies it may not be possible to prepare balance sheet and profit and loss account. Building furt....
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....he assessment u/s 143(3) on 22/02/2021 the then Assessing Officer had not committed nay mistake by not computing any MAT liability u/s 115JB and therefore the said Assessment Order should not be considered as any allegedly erroneous and allegedly prejudicial to the interest of revenue. Accordingly, on behalf of the appellant it is submitted that the Order of Revision passed u/s 263 on 27/03/2023 for the Assessment Year 2018-19, may kindly be held to be unsustainable and consequently the said Order may kindly be quashed." 2.1. The ld. D/R has also submitted several written submissions to support the view that the provisions of Section 115JB of the Act do not carve out any exception for companies under voluntary liquidation and thus, the appellant is bound to have his book profits computed for the purposes of Section 115JB of the Act. It would be in the fitness of things to mention the arguments advanced on behalf of the Revenue: (A) It has been averred that the accounts submitted by the assessee as per the CASS system of accounting, shows a gross receipt of Rs. 27,85,57,514/- and gross disbursement of Rs. 1,35,72,561/-, thereby arriving at a surplus of Rs. 26,49,82,953/-....
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....ception carved out for a company under voluntary liquidation for the purposes of taxation u/s 115JB of the Act. 3. We have carefully considered the written submissions and arguments from both sides, written submissions filed by both the Revenue and by the Ld. AR, the impugned order and have carefully gone through the various provisions of Companies Act, 1956, with their corresponding provisions in Companies Act, 2013. Right at the outset, it is felt necessary to adjudicate on ground no. 1 which challenges the impugned order in holding that ld. AO's order dated 22.02.2021 passed u/s 143(3) of the Act was neither erroneous nor prejudicial to the interests of the Revenue and thus, its setting aside is erroneous. Admittedly, the ld. AO has not discussed about any enquiry or verification regarding the applicability of provisions of Section 115JB of the Act and neither have any documents been brought to our notice whereby such an enquiry was conducted at all at the stage of the AO or not. In fact, in para 2.1 of the impugned order it is mentioned that during the course of assessment proceedings this issue was not taken into account while framing the assessment order by the ld. AO. At ....
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....x, while exercising his power under section 263 of the Act is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not fee stratified with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 of the Act must have material on record to arrive at a satisfaction and (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. These observations were extracted in full with approval in the following cases- the relevant para ....
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....t of the facts and circumstances of the case and considering the various authorities, it is clear from a bare reading of Section 263 of the Act that the ld. Pr. CIT has to be satisfied of twin conditions namely: (i) The order of the ld. AO sought to be revised is erroneous; and (ii) It is prejudicial to the interests of the Revenue. Both the conditions need to exist for attracting the rigours of Section 263 of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the ld. AO. It is only when there is an incorrect assumption of facts or an incorrect application of law that this Section will apply. In this case, it is seen that neither did the ld. AO conduct any enquiry nor did he attempt to apply the provisions of Section 115JB of the Act and hence, there is no hesitation in holding that the provisions of Section 263 of the Act have been correctly applied in the present case. However, apart from the factum of assumption of jurisdiction by the ld. Pr. CIT, which has been shown to have been validly done, this issue needs to be examined from another angle also, whether the provisions of Section 115JB of the....
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...., 2013 (18 of 2013)]: Provided further that where the company has adopted or adopts the financial year under the [Companies Act, 2013 (18 of 2013)], which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including [statement of profit and loss]; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including [statement of profit and loss] for such financial year or part of such financial year falling within the relevant previous year. Explanation [1].-For the purposes of this section, "book profit" means the [profit] as shown in the [statement of profit and] for the relevant previous year prepared under sub-section (2), as increased by- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called [, other than a reserve specified under section 33A....
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....s of the Government company.]" 3.4. It is seen that in a number of places consequential amendments have been affected in this provision in line with words and phrases adopted in the Companies Act, 2013, when there was changeover from the earlier Companies Act, 1956. The noteworthy point here is that in Section 115JB(2)(a) of the Act the phrase "profit and loss account" has been changed to the phrase "statement of profit and loss" by the Finance Act, 2017. Several other changes are visible in this Section which purportedly bring the provisions in harmony with the Companies Act, 2013. At this stage, even at the expense of over-emphasis, it needs to be mentioned that the commentary on the Finance Act, 2017 clearly mentions that the terminology of Section 115JB of the Act has been brought in line with the changes in Companies Act, 2013 over whatever was there in the Companies Act, 1956. This fact has some bearing on the outcome of this case and hence some portions from the said commentary need to be extracted: "10.2 Companies Act, 2013 and MAT [Section 115JB] The section provides for the levy of minimum alternate tax based on "book profit". Book profit needs to be ....
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....oss account" "Statement of profit and loss" "Part II and Part III of Schedule VI to the Companies Act, 1956" "Schedule III to the Companies Act, 2013" This narration illustrates the fact the section under consideration has kept pace with any changes in the Companies Act and more importantly, has given due weightage to any aspect contained therein which needs to have a bearing on the computation of Book Profit u/s 115JB of the Act. Extrapolating this reasoning further it needs to be assumed that in case any aspect of the Companies Act, 2013/1956 would have an overriding effect on the MAT provision of Income Tax Act then that should also have been specifically mentioned in the language of section 115JB of the Act. 3.5. Furthermore, in the Finance Bill, 2017, "notes on clauses" explains the rationale behind the amendments effected in the provisions under consideration as under: "Clause 47 of the Bill seeks to amend section 115JB of the Income-tax Act relating to special provision for payment of tax by certain companies. The said section provides for levy of tax on certain companies on the basis of book profit which is determined after making ....
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....s and the overriding provisions of any other Act have been duly recognised in various places within the Income Tax Act. To come to the issue at hand, it is clear that there is no indication whatsoever in Section 115JB of the Act that a company under voluntary liquidation would be exempt from any of the provisions of the Income Tax Act, including Section 115JB of the Act. Importantly, the provisions governing preparation of accounts as per the Companies Act, 2013/1956 are nowhere taken cognizance of with any view towards granting exemption from the provisions of Section 115JB of the Act. 3.7. It is also necessary to advert to another line of argument advanced by the Ld. AR through which it has been averred that since there is a specific column in ITR-6 (Schedule OL) which recognises corporate entities undergoing liquidation and exempts them from filling in the schedule for Balance Sheet and Profit & Loss account. It has been argued that because of this fact also there is no way in which book Profit u/s 115JB (2) of the Act can be computed. A perusal of the said schedule of ITR-6 reveals that indeed there is a factual affirmation of the averment made by the Ld. AR, however, to dra....