Case Law Details
SETCO Automotive Ltd. Vs ACIT (ITAT Ahmedabad)
Held that the non-inclusion of surrendered income in the Book Profits of the assessee as per section 115JB of the Act, was not a patent error amenable to rectification u/s 154 of the Income Tax Act.
Facts- The rectification made by the AO in the impugned case was in relation to adjustment made to the book profits of the assessee by adding thereto amount of income surrendered by the assessee during survey of Rs.17 crores.
The AO had noted that while the assessee had included the surrendered income for the purpose of computing its income for taxation as per the normal provision of the Act, but had not done so for the purpose of paying tax under MAT regime on the book profits of the assessee as per the section 115JB of the Act. It was noted that the assessee, while so including surrendered income of Rs.17 crores in its income computed as per the normal provisions ,had claimed benefit of MAT credit against the taxes leviable on the income computed as per the normal provision on account of having paid taxes on the book profits in the preceding years. The AO noted that the assessee had paid taxes as per the normal provision of the Act, reflecting the taxes paid as per the book profits to be lesser and while doing so had not taken into consideration income surrendered during the survey. He noted that if this income surrendered during survey was included in the book profits, the taxes payable as per MAT would have exceeded taxes payable as per the normal provision and the assessee therefore would have been liable to pay taxes as per MAT.
Conclusion- In the absence of any incriminating material found, substantiating the surrender made, the same cannot invariably be said to represent the profit of the assessee for disclosure to its shareholders. If the surrender was corroborated with some undisclosed asset or incriminating document found, revealing the nature and manner of earning the income surrendered, it necessarily represented profits which needed to be disclosed in the profit and loss account also for the benefit of shareholders of the company. But without any incriminating material and without any clue about the nature of the disclosure also, the same could not be said to invariably represent undisclosed income/profits of the assessee to be included in its profit and loss account. The assessee at its discretion may include the surrender in its income for paying taxes thereon, but this fact ipsodixit will not mandate inclusion of the surrender in its Book Profits also.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
