The Commissioner Of Income Tax Central I, Chennai v. M/S. Jumbo Bag Ltd., 58 Halls Road Kilpauk Chennai 600 010

Dated : 30.04.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal)Nos.6 and 8 of 2009 The Commissioner of Income TaxCentral I, Chennai ... Appellant Vs. M/s. Jumbo Bag Ltd.,58 Halls RoadKilpaukChennai 600 010. ... Respondent Tax Case Appeals filed under section 260A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal, Madras 'B' Bench, Chennai, dated 4.07.2008 passed in ITANo.354and 355 /Mds/2008 relating to the assessment year 2001-2002 and 2002-2003. For appellant :Mr.J.Narayanasamy JUDGMENT(Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.) The revenue is on appeal against the order of the Income Tax Appellate Tribunal, dated 4.07.2008passed in ITA Nos.354 and 355 /Mds/2008 relating to the assessment years 2001-02 and 2002-03. 2. The assessment in the case of the assessee for the assessment year 2001-02 was completed undersection 143(3) r.w.147 of the I.T. Act on 31.1.2005 on the basis of computation book profit underSection 115JB Rs.77,57,105. The original assessment for the assessment year 2002-03 wascompleted under Section 143(3) on 31.1.2005 determining the book profit under Section 115JB atRs.81,23,508/- While completing the assessment the Assessing Officer had allowed deductions underSection 80HHC of Rs.9,19,200/- on the book profit under Section 115JB for the assessment year2001-02 and Rs.18,71,525/- on the book profit under Section 115JB for the assessment year 2002-03.On perusal of the records relating to the above assessment years, the Commissioner of Income Taxfound that when the taxable income was nil after setting off depreciation for the respectiveassessment years, no deduction under Section 80 HHC was allowable. Hence, a notice under Section263 was issued calling upon the assessee to submit its explanation as to why the claim of deduction under Section 80HHC should not be withdrawn. The assessee submitted its reply stating that whentwo views are possible and the assessing officer had followed one view the Commissioner of IncomeTax could not hold that the assessment was erroneous and prejudicial to the interests of the revenueand take action under Section 263 of the Act. The assessee placed reliance on the decision of theGujarat High court in the case of Commissioner of Income Tax Vs.Arvind Jewellers (259 ITR 502).The Commissioner of Income Tax did not accept the assessee's contention that the assessing officerhad consciously followed a particular view. The Commissioner of Income Tax has recorded a findingthat the assessment order clearly showed that the assessing officer had not applied his mind to thisissue at all. The Commissioner of Income Tax also rejected the assessee's objection that when twoviews are possible the Commissioner of Income Tax could not invoke the jurisdiction under Section263. Thus, the Commissioner of Income Tax set aside the assessments made by the assessing officerfor the assessment years 2001-02 and 2002-03 with a direction to redo the assessment afterwithdrawing the deduction under section 80 HHC wrongly allowed while computing book profitunder section 115JB. Aggrieved by the order of the Commissioner of Income-tax , the assessee filedappeals before the Income-tax Appellate Tribunal and the Tribunal allowed the appeals in favour ofthe assessee by following the decision of the Special Bench of Mumbai Tribunal in the case of DCITVS. SYNCOME FORMULATIONS (I) LTD (2007)(106 ITD 193) and the decision of the Supreme courtin the case of MALABAR INDUSTRIES CO. LTD VS. COMMISSIONER OF INCOME TAX (243 ITR83). Aggrieved by the same, the revenue has filed this appeal by formulating the following questionof law: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal wasright in cancelling the order of the Commissioner of Income Tax under section 263 on the groundthat deduction under section 80HHC was allowable on the basis of book profits and not on the basisof eligible profits under Section 80HHC as per computation under the normal provisions of theIncome Tax Act, while computing the books profits under Section 115JB ? 3. We have heard the argument of the learned counsel for the revenue and perused the materials available on record. 4. The issue involved in the present appeals is squarely covered by the decision of a Division Benchof this Court in which one of us (K.Raviraja Pandian,J) was a party in the case of Commissioner ofIncome Tax vs. Rajanikant Schnelder and Associates P. Ltd., reported in 302 ITR 22), wherein it hasbeen observed as follows:- "4. We are not able to subscribe our view to the grounds taken in the appeal that the deductionunder Section 80 HHC is allowable only on the profits and gains arrived at under Sections 28 to 44Bof the Income Tax Act. In the case on hand, it is the stand of the assessee that the relief undersection 80HHC should be based on the profit ascertained under Section 115JA only but not onincome computed under Sections 28 to 44 of the Act. The Tribunal after considering the Judgmentsof the Supreme Court in the case of Surana Steels P. Ltd., vs. Deputy CIT (1999) 237 ITR 777 and inthe case of Apollo Tyres Ltd., vs. CIT (2002) 255 ITR 273 (SC) and analyzing the order impugnedfound that the provisions of Section 115J are similar to the provisions of Section 115JA of the Act. Inorder to come to the conclusion the Tribunal has also taken note of sub-section (4) of section 115JAand referred to the dictum laid down by the Supreme Court in the case of Apollo Tyres Ltd., vs. CIT(2002) 255 ITR 273 wherein it was held that the Assessing Officer while computing the book profitsof a company under Section 115J of the Income Tax Act, 1961, has only the power to examinewhether such books of account are certified by the authorities under the Companies Act as havingbeen properly maintained in accordance with the Companies Act. The Assessing Officer thereafterhas the limited power of making increases and reductions as provided for in the Explanation Section115J. The Assessing Officer does not have the jurisdiction to go behind the net profits shown in theprofit and loss account except to the extent provided in the Explanation. The use of the words "inaccordance with the provisions of Parts II and III of Schedule VI to the Companies Act" in Section 115J was made for the limited purpose of empowering the Assessing Officer to rely upon theauthentic statement of accounts of the company. While so looking into the accounts of the company,the Assessing Officer has to accept the authenticity of the accounts with reference to the provisionsof the Companies Act, which obligate the company to maintain its accounts in a manner provided bythat Act and the same to be scrutinized and certified by the statutory auditors and approved by thecompany in the general meeting and thereafter to be filed before the Registrar of Companies, whohas a statutory obligation also to examine and be satisfied that the accounts of the company aremaintained in accordance with the requirements of the Companies Act. Sub-section (1A) of section115H does not empower the Assessing Officer to embark upon a fresh enquiry in regard to theentries made in the books of account of the company. 5. The Assessing Officer is not entitled to touch the profit and loss account prepared by the assesseeas per the provisions contained in the Companies Act, while arriving at the book profit under Section115J and the book profit so arrived at should be the basis for taxation and therefore, thecomputation under Section 80HHC should be limited to the case of profits of eligible category only.The Tribunal has also come to the conclusion that in view of the non obstante clause available inSection 115JA it was clear that the provisions is a self-contained one and no other provision wouldhave effect on it and thereby it was to be implemented as contained in the said provision. TheTribunal has also further given a reason to the effect that section 80HHC is clear about this aspectthat profit only is to be taken into account but not income and sub-section (3) of Section 115JA itselftook care of the provisions relating to the adjustment of loss or depreciation and carry forward of theincome. The finding arrived at by the Tribunal is correct and followed the decision of the SupremeCourt. We are of the view that the conclusion arrived at by the Tribunal cannot be complained of". 5. Hence, following the same, the question of law is answered against the revenue and the appealsare dismissed. krr/ To The Income Tax Appellate Tribunal,Chennai 'B' Bench,Chennai