MAT payable on Loan admitted as income by the Assessee

IN THE ITAT AGRA BENCH

Dream Shelters (P.) Ltd.

Versus

Income-tax Officer, Agra

IT Appeal No. 277 (Agra) of 2012

[Assessment year 2008-09]

October 23, 2012

ORDER

A.L. Gehlot, Accountant Member – This is an appeal filed by the assessee against the order dated 01.03.2012 passed by the ld. CIT(A)-II, Agra for the Assessment Year 2008-09.

2. The assessee has raised the following grounds of appeal: –

“1. That the order passed under section 143(3) of the I Act, 1961 by the Ld. Assessing Officer and confirmed by the ld. CIT(A) is wrong, unjust and illegal.

2. That the learned CIT(Appeals) was wrong and unjust in confirming the addition made by the ld. A.O. of Rs. 370000/- to the book profit for the calculation of MAT under section 115JB of the I T Act, 1961 which is wrong as nothing can be added to book profit to calculate MAT except those items which are mentioned in clauses (a) to (g) of explanation (1) of section 115JB of the Income Tax At, 1961.

3. That the appellant craves leave to add or alter one or more ground(s) during the hearing of appeal.”

3. The assessee instead of putting his presence filed written submission. After hearing the ld. Departmental Representative, we proceed to decide the appeal as under :-

4. The brief facts of the case are that during the assessment proceedings the A.O. noticed that the assessee firm is engaged in the business of construction work. During the year under consideration, the assessee taken loan in cash and subsequently the same was repaid in cash and the accounts were squired up. These accounts are 10 in number totaling to Rs. 3,70,000/-. The A.O. vide order sheet entry dated 12.10.2010 asked the assessee to finish details of these loans and advances. The assessee vide letter dated 18.10.2010 submitted as under, which is reproduced from A.O.’s order.

“That the assessee has already submitted addresses of persons from whom business advances were received. Since at present the assessee don’t have any business relationship with those persons and also there is marriage of son of the director, he is quite busy in arrangements of marriage and not in a position to contact these persons and to produce them, the assessee therefore, in order to buy peace of mind and having assurance from your honour not to impose penalty, offer the amount which he has received from those persons aggregating to Rs. 3,70,000/-, same may be treated as our income.”

5.On admission of Rs.3,70,000/- for addition by the assessee, the A.O. computed book profit under section 115JB of the Income Tax Act, 1961 (‘the Act’ hereinafter) as under :-

6. Before the CIT(A) the assessee agitated that while computing book profit under section 115JB, addition of Rs. 3,70,000/- is not correct. CIT(A) rejected the assessee’s contention and held that the A.O. has rightly made addition of Rs.3,70,000/- while calculating the book profit under section 115JB of the Act. In written submission the assessee reiterated what he has submitted before the CIT(A). The contention of the assessee that the A.O. is not authorized to make adjustment in book profit for the purpose of calculation under section 115 JB except adjustment provided in the said section. The assessee relied upon the judgement of Apex Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 and others.

7. The ld. Departmental Representative relied upon the order of CIT(A).

8. The assessee did not make any specific submission in respect of ground no.1, order passed under section 143(3) by the A.O. and confirmed by the CIT(A) is erroneous, unjust and illegal. In absence of specific submission, this ground of appeal is rejected.

9. Ground no.2, i.e. on merit, the issue is to be examined by us are whether under the facts and circumstances, the assessee agreed for addition of Rs. 3,70,000/. Whether this agreed addition is to be added while calculating book profit under section 115JB of the Act. Section 115JB provides that where in the case of an assessee being a Company, the income tax payable on total income as computed under this Act is less than 10% (applicable in the impugned Assessment Year) of its book profit, such book profit shall be deemed to be the total income of the assessee. It is further provided that every assessee, being a Company shall for the purpose of this section, prepare its Profit & Loss account for the relevant previous year in accordance with the provisions of part II & III Schedule VI o the Companies Act, 1956. Thereafter certain adjustment has been provided in the section. The crux of the issue is whether this agreed addition is required to be added for the purpose of calculation of book profit under section 115JB. In such cases net profit as per Profit & Loss account means the net profit including addition agreed by the assessee before the A.O. In the case under consideration, the net profit after making addition comes to Rs. 18,80,627/- (15,10,627 + 3,70,000). This amount of Rs. 18,80,627/- is required to be considered as net profit as per the Profit & Loss account shown by the assessee. The contention of the assessee that only specified adjustment is required to be made. In principle, we agree with the assessee that for the purpose of calculation under section 115JB only specified adjustment is required to be made. But the facts of the case under consideration are different because agreed addition before the A.O. is a part and parcel of net profit as shown by the assessee in Profit & Loss Account and, therefore, this is not a part of adjustment. There is no restriction in calculating correct net profit as per Profit & Loss account which includes agreed addition as discussed above. We notice that when the net profit of the assessee is the net profit shown in the Profit & Loss account plus agreed addition, that will be the net profit as per the assessee and in the light of the fact, we find that the A.O. did not make any extra adjustment. Therefore, the contention of the assessee that the A.O. made addition other than specified in the section is not correct. The AO has made correct net profit accepted by the assessee. Therefore, there is nothing wrong in the action of the A.O. The CIT(A) has rightly confirmed the order of A.O. and, therefore, we do not find any infirmity neither in the order of A.O. nor in the order of CIT(A). Order of the CIT(A) is confirmed.

10. In the result, appeal of the assessee is dismissed.