Commissioner of Income Tax-II, Kanpur v. M/s J.K.Synthetics Ltd. Kamla Tower
[Citation -2015-LL-1001-4]

Citation 2015-LL-1001-4
Appellant Name Commissioner of Income Tax-II, Kanpur
Respondent Name M/s J.K.Synthetics Ltd. Kamla Tower
Court HIGH COURT OF ALLAHABAD
Relevant Act Income-tax
Date of Order 01/10/2015
Assessment Year 1988-89
Judgment View Judgment
Keyword Tags depreciation after reevaluation of fixed assets • jurisdiction of ao • calculation of book profit
Bot Summary: The Assessing Officer found that as per Section 115J of the Act, net profit shown in the profit loss account was in accordance with the provisions of part II and III of Schedule VI to the Companies Act, 1956. The Department has proposed that a question of law arises for consideration, namely, that since the profit loss account was not prepared in accordance with the provisions of part II and III of Schedule-VI to the Companies Act, the Assessing Officer was justified in revising the net profit under Section 115J of the Act. The Supreme Court in Apollo Tyres considered the question as to whether the Assessing Officer while assessing a Company for income-tax under Section 115J of the Income Tax Act could question the correctness of the profit and loss account prepared by the assessee-company 4 and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act. The Supreme Court held that the Assessing Officer was bound to rely upon the authentic statement of accounts of the company and had to accept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act. The Supreme Court held that the Assessing Officer while computing the income under Section 115J had only the power of examining whether the books of account were certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. In the light of the aforesaid, we find from a 6 perusal of the assessment order that the net profit shown in the profit and loss account of the company was prepared in accordance with Parts II and III of Schedule VI to the Companies Act. In the instant case, as we have observed above, once net profit shown in the profit and loss account of the Company has been prepared in accordance with the provisions of part II and III of Schedule VI to the Companies Act, it was not open to the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company.


AFR Court No.37 Income Tax Appeal No. 451 of 2009 Commissioner of Income Tax-II, Kanpur..........Appellant Vs. M/s J.K.Synthetics Ltd. Kamla Tower ...... Respondent Kanpur Hon'ble Tarun Agarwala, J. Hon'ble Surya Prakash Keserwani, J. (Per: Tarun Agarwala, J.) We have heard Sri Shubham Agrawal, learned counsel for appellant and Sri Rupesh Jain along with Sri R.S. Agrawal for assessee. assessee is public limited company engaged in manufacture of synthetic yarn and cement. For assessment year 1988-89, assessee filed return declaring loss. return was not accepted and Assessing Officer passed assessment order under 2 Section 143(3) of Income Tax Act,1961 (hereinafter referred to as Act) after making certain additions and disallowances under various heads. Being aggrieved, assessee filed appeal, which was partly allowed. matter was taken to Tribunal. Tribunal allowed appeal against which Department has filed present appeal. assessee claimed depreciation after reevaluating its fixed assets. Assessing Officer found that as per Section 115J of Act, net profit shown in profit & loss account was in accordance with provisions of part II and III of Schedule VI to Companies Act, 1956. Assessing Officer however, was of opinioin that method of computation of profit & loss was not in consonence with provisions of Section 350 of Companies Act, and, consequently, disallowed excess depreciation and added that amount in profit & loss account. assessee's appeal against this part was rejected by appellate authority but was accepted by first Tribunal relying upon decision of Supreme Court in case of Apollo Tyres Ltd. Vs. Commissioner of 3 Income-Tax, (2002) 255 ITR 273 (SC). Tribunal held as under: We have considered rival submissioin and decisions relied upon by ld. A.R. Since Revenue has not brought to our notice any other decision contrary to decisions relied upon by led. Counsel, we decide this issue in assessee's favour as covered by decisioin of Hon'ble Supreme Court in case of Apollo Tyres Ltd. (supra). This ground of assessee is allowed. Before this Court, Department has proposed that question of law arises for consideration, namely, that since profit & loss account was not prepared in accordance with provisions of part II and III of Schedule-VI to Companies Act, Assessing Officer was justified in revising net profit under Section 115J of Act. Supreme Court in Apollo Tyres (Supra) considered question as to whether Assessing Officer while assessing Company for income-tax under Section 115J of Income Tax Act could question correctness of profit and loss account prepared by assessee-company 4 and certified by statutory auditors of company as having been prepared in accordance with requirements of Parts II and III of Schedule VI to Companies Act. Supreme Court held that Assessing Officer was bound to rely upon authentic statement of accounts of company and had to accept authenticity of accounts with reference to provisions of Companies Act which obligates company to maintain its account in manner provided by Companies Act. Supreme Court held that Assessing Officer while computing income under Section 115J had only power of examining whether books of account were certified by authorities under Companies Act as having been properly maintained in accordance with Companies Act. Assessing Officer thereafter had limited power of making increases or reductions as provided for in Explanation to said Section. Supreme Court, consequently, held that Assessing officer did not have jurisdiction to go behind net profit shown in profit and loss account except to extent provided in Explanation to Section 115J. 5 said decision was reiterated by Supreme Court in Malayala Manorama Co. Ltd. Vs. Commissioner of Income-tax, (2008) 300 ITR 251 (SC) and again by Division Bench of this Court in Commissiioner of Income-Tax Vs. Amrit Banaspati Co.Ltd., (2010) 320 ITR 399 (All), wherein Court held: Tribunal while deciding issue has given convincing, cogent and satisfactory reasons upon appreciation of evidence and material available in record. We cannot substitute our opinion for that of Tribunal unless it is found that conclusion drawn by Tribunal is based on incorrect facts or irrelevant or impermissible by law. It is not disputed that books of account are duly certified by authorities under Companies Act and profit and loss account has been properly maintained in accordance with Parts II and III of Schedule VI to Companies Act, 1956. Depreciation was claimed on revaluation amount and such depreciation in opinion of directors was not excessive or unreasonable. We do not find any illegality or infirmity in order of Tribunal. In light of aforesaid, we find from 6 perusal of assessment order that net profit shown in profit and loss account of company was prepared in accordance with Parts II and III of Schedule VI to Companies Act. Once this finding has been given, Assessing Officer could not go behind net profit shown in profit and loss account except to extent provided in Explanation to Section 115J of Act. We are of opinion that provision of Section 115J does not empower Assessing Officer to embark upon fresh inquiry in regard to entries made in books of account of company. Supreme Court has categorically held in Apollo Tyres (Supra) that there cannot be two incomes, one for purpose of Companies Act and another for purpose of income-tax. Learned counsel for appellant contended that Tribuhal had allowed appeal of appellant merely by referring to decision of Supreme Court in case of Apollo Tyres (Supra) and such disposal of appeal was not proper way to deal with appeal. learned counsel submitted that Tribunal, being last fact finding authority, should have 7 examined matter and should have passed reasoned and speaking order. It was submitted that since Tribunal did not do so, order of Tribunal should be set aside and matter should be remitted again to Tribunal for fresh decision. In support of his submission learned counsel has placed reliance upon decision of Supreme Court in Commissioner of Central Excise, Bangalore Vs. Srikumar Agencies, 2008(232) E.L.T. 577 (S.C.). There is no quarrel with aforesaid proposition, namely, Tribunal should not place reliance on decisions without discussing as to how factual situation fits in with fact situation of decision on which reference is placed. However, in instant case, as we have observed above, once net profit shown in profit and loss account of Company has been prepared in accordance with provisions of part II and III of Schedule VI to Companies Act, it was not open to Assessing Officer to embark upon fresh inquiry in regard to entries made in books of account of company. Therefore, question of remitting matter to Tribunal does not arise. 8 In our view controversy involved in present appeal is squarely covered by decision of Supreme Court in case of Apollo Tyres (Supra). No substantial question of law arises for consideration. appeal is dismissed. Dt. 01.10.2015 MAA/- (Surya Prakash Kesarwani,J.) (Tarun Agarwala,J.) Commissioner of Income Tax-II, Kanpur v. M/s J.K.Synthetics Ltd. Kamla Tower
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