Commissioner of Income Tax-I vs Vijayashree Finance and Investment Co. Pvt. Ltd.

K. Raviraja Pandian, J.—By framing the following two substantial questions of law, the revenue has filed the present appeal:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the profit on sale of land carried to capital reserve

cannot be added to book profit u/s 115J?

Whether in the facts and in circumstances of the case, the Tribunal was right in holding that since notes form part of the accounts, even where

profits of a non recurring nature have not been made part of the book profits, although the schedule VI stipulates the same, the assessing officer

cannot add the same to re-work the book profit?

The facts culminating in filing of the appeal are as follows:

The assessee is a company in which public are not substantially interested. As provided u/s 115J of the Act, the assessing officer found that the

assessee has transferred the amount of Rs.10,17,207/- realised from the sale of the land to ''capital reserve'' and did not form part of the book

profit. The assessing officer added the profits from the sale of the land to the book profits while making computation u/s 115J of the Income Tax

Act.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who by upholding the order of the

assessing officer dismissed the appeal. The assessee carried the matter on appeal before the Income Tax Appellate Tribunal. By reason of the

impugned order, the Tribunal allowed the appeal. The correctness of the same is now canvassed before this Court by the revenue.

Learned Counsel on either side submit that the issue is covered in favour of the assessee, in the light of the decision in the case of Apollo Tyres

Ltd. Vs. Commissioner of Income Tax, Kochi, , which has also been followed by a Division Bench of this Court in T.C. (A) No.1104 of 2007

decided on 06.08.2007 in the case of CIT v. Kovai Maruthi Paper & Board P. Ltd.

The apex Court in the above cited decision has held that the assessing officer, while computing the income u/s 115J of the Act has only the

power of examining whether the books of account are certified 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 the extent provided for in the explanation to Section 115J of the Act.

In the light of the exposition of law in respect of the jurisdiction of the assessing officer, which has been over-reached in this case, we are of the

view that the order of the assessing officer is hit by the ratio laid down in the case of Apollo Tyres cited supra and the Tribunal has rightly reversed

it. We do not find any ground to interfere with the order of the Tribunal. The appeal is dismissed. No costs.