Manyata Promoters Pvt. Ltd Vs JCIT (ODS) (ITAT Bangalore)
ITAT Bangalore held that AO cannot go beyond the profits as per profit and loss account prepared in accordance with the Companies Act except in the manner provided in Explanation 1 to section 115JB. therefore the action of the AO to make the adjustment for the disallowance u/s. 14A to the book profits u/s. 115JB is not tenable.
Facts- In the assessment proceedings the AO made a disallowance u/s. 14A for an amount of Rs. 14,49,60,000 and also made an addition of Rs.58,29,802 towards for the difference in the income as per Form 26AS and financials of the assessee.
The assessee noticed from the assessment order that the AO did not give credit to the extent of Rs.4,02,70,802 towards TDS which is claimed by the assessee in the ROI and therefore the assessee filed rectification petition before the AO on 25.01.2020. Subsequently the AO passed an order u/s. 154 dated 26.7.2021 in which he made an adjustment to the book profits u/s. 1 15JB for the amount disallowed u/s. 14A considering the same as a mistake apparent from the record. In the said rectification order the AO did not consider the issue raised by the assessee with regard to short credit of TDS. The assessee filed appeal before the CIT(Appeals) against the order of the AO u/s. 154 raising grounds pertaining to disallowance made to book profits and also short credit of TDS. The CIT(Appeals) gave relief to the assessee for the adjustment made by the AO to the book profits u/s. 115JB. With regard to short credit of TDS, the CIT(Appeals) held that this issue is not arising out of the order passed u/s. 154 which is in appeal before him and therefore dismissed this ground.
Both assessee and revenue has preferred the present appeal.
Conclusion- We notice that in the order passed u/s. 154 dated 26.7.202, the AO has not considered the issue raised by the assessee in the rectification petition filed on 21.1.2020. We are therefore of the considered view that the CIT(Appeals) has rightly dismissed the ground raised by the assessee for non-consideration of TDS credit on the ground that it is not arising out of the order of the AO. However we remit the issue back to the AO with a direction to pass a rectification order u/s.154 against the petition filed by the assessee on 21.01.2020 with regard to non-consideration of TDS credit in the name of PEPPL.
We are of the considered view that the AO cannot go beyond the profits as per profit and loss account prepared in accordance with the Companies Act except in the manner provided in Explanation 1 to section 115JB of the Act and therefore the action of the AO to make the adjustment for the disallowance u/s. 14A to the book profits u/s. 115JB is not tenable. Further the scope of rectification u/s. 154 is limited to correcting errors of facts or errors of law on the basis of material available on record.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These cross appeals by the assessee and the revenue arise out of the order of the CIT(Appeals)-11, Bengaluru dated 10.5.2022 for the assessment year 2017-18.
2. The assessee is engaged in the business of development and lease of office space and related interiors. The assessee has constructed office buildings in software park in Bangalore. On 07/08/2017, the National Company Law Tribunal approved the scheme of arrangement for amalgamation of Pune Embassy Projects Private Ltd. (PEPPL), with the assessee u/s.232 of the Companies Act 2013. The assessee filed the original return of income for the AY 2017-18 on 3 1.10.2017 and later filed a revised return on 30.03.2018 declaring total income of NIL under normal provisions of the Income Tax Act (the Act) and a book profits of Rs.26,04,02,080 u/s. 115JB of the Act.
3. The case was selected for scrutiny and notice u/s. 143(2) of the Act was served on the assessee. In the assessment proceedings the AO made a disallowance u/s. 14A for an amount of Rs. 14,49,60,000 and also made an addition of Rs.58,29,802 towards for the difference in the income as per Form 26AS and financials of the assessee. The assessee noticed from the assessment order that the AO did not give credit to the extent of Rs.4,02,70,802 towards tax deducted at source (TDS) which is claimed by the assessee in the return of income and therefore the assessee filed rectification petition before the AO on 25.01.2020. Subsequently the AO passed an order u/s. 154 dated 26.7.2021 in which he made an adjustment to the book profits u/s. 1 15JB for the amount disallowed u/s. 14A considering the same as a mistake apparent from the record. In the said rectification order the AO did not consider the issue raised by the assessee with regard to short credit of TDS. The assessee filed appeal before the CIT(Appeals) against the order of the AO u/s. 154 raising grounds pertaining to disallowance made to book profits and also short credit of TDS. The CIT(Appeals) gave relief to the assessee for the adjustment made by the AO to the book profits u/s. 115JB. With regard to short credit of TDS, the CIT(Appeals) held that this issue is not arising out of the order passed u/s. 154 which is in appeal before him and therefore dismissed this ground.
4. The revenue is in appeal (ITA No.573/Bang/2022) against the relief given by the CIT(Appeals) on the adjustment made to book profits u/s. 115JB, and for the short credit of TDS which has not been considered by the CIT(Appeals), the assessee is in appeal (ITA No.548/B/2022) before the Tribunal.
ITA No.548/B/2022
5. The assessee has raised the following grounds:-
“The grounds stated hereunder are independent of and without prejudice to one another. The Appellant submits as under:
