HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A No. 234 OF 2003 15-10-2014 BETWEEN The Commissioner of Income Tax, Andhra Pradesh – II, Hyderabad …Appellant And M/s. Sirpur Paper Mills Ltd., 5-9-22/1, Adarsh Nagar, Hyderabad …..Respondent HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A Nos. 234 OF 2003
JUDGMENT: (per the Hon'ble Sri Justice L. Narasimha Reddy)
The respondent is a company undertaking the activity of manufacture of paper and allied products. For the assessment year 1990-91, it has maintained profit and loss account as required under the Indian Companies Act, 1956 and submitted returns under the Income Tax Act, 1961 (for short, ‘the Act’). The assessing officer took into account, Section 115J of the Act and proposed to levy income tax on 30% of the income reflected in the books of accounts. However in the process, he sought to add a sum of Rs.13,26,000/- which is earmarked as adhoc provision and passed an order of assessment on 26-02-1993. The respondent carried the matter in appeal to the Commissioner of Income Tax (Appeals)-I, Hyderabad. Through his order dated 10-10-1995, the Commissioner took the view that though no exception can be taken to the addition of Rs.13,26,000/- to the books of accounts under Section 115J, the claim of the respondent that a sum of Rs.4,00,000/- was shown under the same account in the earlier assessment year, but was disallowed; was taken into account and the assessing officer was directed to verify the same. He made it clear that if the amount was mentioned in the returns for the year 1989-90 and was disallowed, the said amount shall not be added for the assessment year 1990-91. The department carried the matter in appeal to the Hyderabad Bench ‘A’ of the Income Tax Appellate Tribunal (for short, ‘the Tribunal’) by filing I.T.A No. 159/Hyd/96. Through its order dated 23-08-2000, the Tribunal dismissed the appeal. Hence, this further appeal under Section 260A of the Act.
Heard Sri J.V. Prasad, learned counsel for the appellant and Sri Vijay Ashrit, learned counsel for the respondent.
It is not in dispute that the case of the respondent is covered by Section 115J of the Act. The purport thereof is that in case discrepancy of income reflected in the returns filed for a particular assessment under the Act is less than 30% of what is reflected in the profit and loss account maintained as part of obligation under the Companies Act, the tax shall be levied on 30% of the one reflected in the profit and loss account. By and large, the profit and loss account is taken on its face value and the assessing officer does not touch it. However, if one takes into account the explanation to Section 115J of the Act, it becomes clear that the assessing officer can verify the details of the profit and loss account and may add or delete certain items mentioned in the explanation.
In the instant case, the assessing officer intended to add Rs.13,26,000/- to the figures reflected in the profit and loss account referable to Section 115J. The respondent did not seriously object to it. However, it pleaded that out of Rs.13,26,000/-, a sum of Rs.4,00,000/- has already been reflected in the previous assessment year but the same was disallowed. If that is true, it would mean that the amount of Rs.4,00,000/- was subjected to tax and a sum upon which tax has been paid cannot be subjected to taxation once again. The Commissioner did not say any final word on this aspect. The matter was left for verification by the assessing officer. The only thing he clarified was that in case the amount of Rs.4,00,000/- was shown in the returns for the assessment year 1989-90 and it was disallowed, the same shall not be added for the subsequent assessment year. Learned counsel for the appellant is not able to say as to how such a direction runs contrary to law. The Tribunal upheld the order of the Commissioner and we do not find any basis to interfere with the same.
The appeal is accordingly dismissed. There shall be no order as to costs.
L. NARASIMHA REDDY, J CHALLA KODANDA RAM, J 15-10-2014 ks