G. Santhanam, Accountant Member -
(1.) THIS is an appeal by the assessee which is a widely held public limited company.
(2.) For the year ending on 31-3-1989, the relevant assessment year is 1989-90. In regard to this assessment year the assessee furnished two sets of adjustments along with its return of income as noticed by the Assessing Officer as follows:
'The assessee-company has furnished two sets of adjustments to arrive at the adjusted total income. In the normal course of computation, the total income has been arrived at Rs. 2,55,37,324 and after setting off the unabsorbed income returnable income has been worked out at Rs. 18,45.870.
However, for the computation of book profit under Section 115J, the total income has been arrived at 30 per cent of the book profit of Rs. 89,34,996, Rs. 26,80,439 whereas in the return of income the total income returned shown is of Rs. 30,07,420. As per the revised working given as per letter dated 7th March, 1990, the book profit under Section 115J has been arrived at Rs. 26,80,439 but no revised return is filed.
The Assessing Officer acting under Section 143(1)(a) of the Income-tax Act, 1961, read with the proviso thereto computed the book profit of the company as follows :-
In the above process, the learned Assessing Officer found three items in the profit and loss account of the company as items of prima facie nature requiring adjustments by way of increase to the book profit under the provisions of Section 115J read with the provisions of Section 143(1)(a) and those adjustments are as follows :
It must be stated in this context that the sum of Rs. 75,46,881 is shown as a deduction from the prior period income of the assessee in Schedule 9 to the profit and loss account under the caption "Additional Depreciation consequent to change in basis from straight line method to written down value method" (page 22 of the Annual Accounts). This amount is not shown as a deduction from the income in the computation sheet accompanying the return of income that was filed with the Assessing Officer. However, subsequently the assessee had filed another computation statement without being accompanied by a return of income in which he had added back the sum of Rs. 75,46,881 to the income of the assessee. It is this latter statement that the Assessing Officer had adopted in his computation and it is worthwhile to recall his observation in this context:
In terms of provisions contained in Section 115J the assessee has suo motu added additional depreciation consequent upon" the change in method of depreciation working an amount of Rs. 75,46,881.
As far the addition of countervailing duty refund, the Assessing Officer, had made an addition of Rs. 1,88,01,243 for the following reasons :
It is seen from the regular computation of income filed along with the return that the prior year adjustments countervailing duty refund credited as per schedule 9 of the published accounts the amount credit in the books of accounts disclosed by the assessee is Rs. 1,00,62,986.
Over and above the aforesaid amount further settled refund stated to have been received during this period disclosed by the assessee amounts to Rs. 87,88,257. The refund of Rs. 87,88,257 the assessee-company has identified the year in which the dispute arose and after settlement the amount received whereas in the case of prior year adjustment of CVD refund the assessee has not identified the year in which the refund was due. However, as per published accounts, irrespective of the year the refund has been crystalised and assessee has accounted the revenue receipt this year. Hence the assessee's claim for reducing the book profit by like amount is prima facie inadmissible. Further, it is noticed that the refund of countervailing duty amount to Rs. 87,88,257 does not appear to have been accounted as income/profit for this year because as per the published accounts para 5 of schedule J the auditors have certified receipt of Rs. 1,00,62,986 towards refund of countervailing duty to prior years and treated as income. No certificate whatsoever has been given about the receipt during this year of Rs. 87,88,257. Therefore, for prirna facie adjustments under Section 143(1)(a) the total countervailing duty treated as income for the purpose of computation of 30 per cent of book profit the refund of the sum total of countervailing duty is taken at Rs. 1,88,01,243.
As for the sum of Rs. 5,861 his reasons are as follows :
The assessee-company has not taken into account sales tax refund of Rs. 5,861 for the purpose of computation of income under Section 115J. This is also taken as revenue receipt for the year under consideration. 30 per cent of the book profit is worked out as under.
In addition, the Assessing Officer has adopted the assessee's computation of depreciation under Section 205(2) of the Companies Act in a sum of Rs. 10,89,729, purported to be an adjustment under Section 115J. Thus, he arrived at the book profit in a sum of Rs. 3,78,04,906 and took 30 per cent of the same at Rs. 1,13,41,471. As this was higher than the income computed in accordance with the other provisions of the Income-tax Act, 1961,inasumofRs. 18,45,870, the former figure was adopted for purpose of taxation under Section 143(1)(a) of the I.T. Act. As the returned income was less than the assessed income, in addition to the tax leviable on the income thus computed, the additional tax in a sum of Rs. 9,09,408 and interest under Section 234B and 234C were also levied. The assessee applied for rectification under Section 154 of the I.T. Act and contended that such adjustments as have been made by the Assessing Officer are not to be made either under the provisions of Section 143(1)(a) or under the provisions of Section 115J and, therefore, the levy of additional tax and interest on the tax due were not called for. The learned first appellate authority felt that the inclusion of Rs. 87,97,707 was not called for as that refund pertained to the preceding accountingyears. As far as the inclusion of Rs. 1,00,62,986 being the countervailing duty refund was concerned, as it was refund obtained during the year, its inclusion was justified. He also deleted another addition of Rs. 5,21,328 being the short provision of tax relating to prior years as it did not relate to the year under revenue. He also noticed that the additional depreciation consequent on the change in the method of depreciation from straight line method to written down value method involving a sum of Rs. 75,46,881 related to preceding years and, therefore, it was not to be either added or deducted from the current year's profit. Thus, he computed the book profit as follows :
He also gave suitable directions for modification of interest under Section 234B and 234C of the I.T. Act. In the result, the assessee obtained part relief. Not being satisfied with the same, the assessee is on second appeal.
Sri C.K. Nair, the learned Advocate submitted that the authorities erred in arriving at a different figure of book profit from the one adopted by the assessee in the statement accompanying the return of income. The addition of refund of Rs. 1,00,62,986 or the additional sales-tax refund are not prima facie adjustments either under Section 115J or under Section 143(1)(a). A refund of excess duty might be an income by virtue of the provisions of Section 41(1) of the I.T. Act, but it can never be a profit from the angle of businessman. Income is different from profit and this distinction was not borne in mind by the authorities. The second statement filed by the assessee was unsupported by any revised return and, therefore, it has no legal validity. Further, it was prepared at the oral directions of the Assessing Officer. The adjustments envisaged under the proviso to Section 143(1) are in the realm of deductions, reliefs or allowances and it cannot be in the realm of income. The adjustments envisaged in Section 115J are not adjustments of prima facie nature, whether it is in relation to the provision for taxation or reserve by whatever name called. Therefore, the authorities erred in departing from the figures in the computation statement supporting the return of income filed by the assessee. If the Assessing Officer wanted to make specific additions for the reason stated by him, he has got all the powers but not under Section 143(1)(a) but under an assessment under Section 143(3) only. Hence the levy of additional tax and the consequential interest on the tax payable are all without any legal basis. In support of his contention he relied on the following cases:
1. S.R.F. Charitable Trust v. Union of India  193 ITR 95 (Delhi)
2. Khatau Junkar Ltd. v. K.S. Pathania, Dy. CIT.
(3.) SRI C. Abraham, the learned senior departmental representative submitted that the Assessing Officer has not travelled beyond the statements furnished before him along with the return of income and the annual accounts of the assessee. In the second statement the assessee had sought to deduct the refund of countervailing duty. As the duty refund was taken as profit in Schedule 9 to the profit and loss account in the annual report the same was rightly added back to the income of the assessee. Such an adjustment was prima facie in nature. As for the additional depreciation consequent on the change in the method of depreciation in the second statement, the assessee had suo motu made the addition to its profit. Therefore, the officer was entitled to take note of that and include it in the adjustment statement. So far as the refund of sales-tax is concerned, the assessee in its computation of income in accordance with the other provisions of the Income-tax Act, prior to applying the provisions of Section 115J had suo motu claimed the deduction of this refund which was prima facie not an admissible item and, therefore, the same was added back. Thus, the adjustments made by the Assessing Officer were all prima facie adjustments which he is entitled to make under the proviso to Section 143(1) of the I.T. Act and the assessee cannot have any grievance against such adjustment. Elaborating his submission, SRI Abraham contended that the countervailing duty was paid in the earlier years and as a result of the Supreme Court judgment which was pronounced during the relevant previous year, the assessee was entitled to the refund and has, in fact, obtained such refund in the relevant previous year and had taken it into account as its income in the schedule to the profit and loss account. Therefore, its inclusion by way of adjustment in the intimation sent to the assessee was just and proper and had legal basis. Therefore, it cannot be said that the Assessing Officer has travelled beyond the statement accompanying the return of income in invoking the provisions of Section 143(1) of the Income-tax Act. 1961.;