Section 115-J does not empower the assessing officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the IT Act for the limited purpose of making the said account so maintained as a basis for computing the company’s income for levy of income-tax. Beyond that, we do not think that the said sub-section empowers the authority under the Income-tax Act to probe into the accounts accepted by the authorities under the Companies Act. If the statute mandates that income prepared in accordance with the Companies Act shall be deemed income for the purpose of Section 115-J of the Act, then it should be that income which is acceptable to the authorities under the Companies Act. There can not be two incomes one for the purpose of Companies Act and another for the purpose of income tax both maintained under the same Act. If the legislature intended the assessing officer to reassess the company’s income, then it would have stated in Section 115-J that “income of the company as accepted by the assessing officer”.
Assessing officer while computing the income under Section 115-J has only the power of examining whether the books of account are certifies by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The assessing officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the assessing officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to Section 115-J.
Text of the Bombay High Court Judgment is as follows:-
1. The¬†present¬†Appeal¬†pertains¬†to¬†Assessment¬†year¬†2004¬≠-05.¬†¬†The¬†learned¬†counsel for¬†the¬†Appellant submits¬†that¬†Tribunal was not justified in not accepting the re¬≠working of the book profits¬†by¬†the Assessing Officer¬†as¬†per¬†the¬†provisions¬†of¬†Section 115JB¬†of¬†the¬†Income¬†Tax¬†Act. The¬†Assessee¬†had directly credited the¬†profit¬†of¬†Rs.2,84,84,000/¬≠¬†arising¬†from¬†sale¬†of¬†land¬†to¬†Capital Reserve Account in the balance sheet rather than routing it through¬†Profit¬†and¬†Loss Account¬†in¬†the¬†manner provided as per Part-II¬†and¬†Part¬≠III¬†of¬†Schedule¬†VI¬†to¬†the¬†Companies¬†Act,¬†1956.
2. The¬†learned¬†counsel¬†for¬†the¬†Respondent¬†supports¬†the Order.
3. Tribunal¬†while¬†passing¬†the¬†impugned¬†Order¬†observed that¬†while¬†computing the¬†book¬†profit under Section 115JB¬†of¬†the Income¬≠ Tax Act, the Assessing Officer added the sum of Rs.2,84,84,000/¬≠¬†in¬†the¬†book¬†profit. The¬†Commissioner¬†of¬†Income Tax (Appeals)¬†deleted¬†the¬†addition. The¬†Tribunal referring¬†to¬†the Judgment¬†of¬†the¬†Apex¬†Court¬†in¬†a¬†case¬†of ¬†Apollo¬†Tyres¬†Ltd.¬†v. C.I.T.¬†reported¬†in 255¬†ITR¬†273 and¬†Judgment¬†of¬†this¬†Court¬†in¬†case of¬† Akshay¬†Textiles Trading¬†and Agencies¬†Pvt. Ltd., reported¬†in 304¬†ITR¬†401¬†has¬†observed¬†as¬†under¬†:
‚ÄúRespectfully following the decision of Hon’ble Bombay¬†High¬†Court¬†in¬†the¬†case of¬†Abdhut¬†Trading Co. Pvt.¬†Ltd.¬†(supra)¬†and¬†in¬†the¬†case¬†of¬†Akshay¬†Textiles Trading¬†and¬†Agencies Pvt.¬†Ltd.¬†(supra), we¬†do¬†not find any¬†infirmity¬†in¬†the¬†order¬†of¬†ld.¬†CIT(A)¬†for¬†deleting¬†the addition¬†under Section 115JB.‚ÄĚ
4. In¬†light¬†of¬†above,¬†the¬†Tribunal¬†has¬†not¬†committed¬†any error.¬†¬†The¬†Appeal¬†as such¬†is¬†dismissed. No costs.