Saktijit Dey, Member (J) -
(1.) THIS appeal of the assessee is directed against the order dated 17/12/2013 passed by the CIT -I, Hyderabad u/s. 263 of the Act for the AY 2009 -10. Briefly the facts are, assessee a company filed its return of income for the impugned assessment year on 25/09/2009 declaring total income at Rs. NIL under the normal provisions and book profit of Rs. 34,20,315/ - u/s. 115JB of the Act. Initially, the return was processed u/s. 143(1) of the Act. Subsequently, assessee's case was selected for scrutiny, during the scrutiny assessment proceedings, AO called upon the assessee to produce books of account and various other information. In response to the notice issued by the AO, assessee produced books of account as well as other information called for by the AO. AO after verifying the books of account and information furnished before him noticed that out of total expenditure booked under the head rental expenses an amount of Rs. 1,82,000/ - was not subjected to deduction of tax at source, therefore, he disallowed the same u/s. 40(a)(ia) of the Act and added back to the income of the assessee. That apart, the AO noticed that the assessee has debited certain expenditure under the head 'carriage and freight expenses'. Out of the total expenditure claimed an amount of Rs. 6,32,623/ - was not subjected to TDS. Accordingly, the AO by invoking the provisions of section 40(a)(id) disallowed the amount of Rs. 6,32,623/ - and added back to the income of the assessee. As a result, total income was determined at Rs. 8,14,62/ - under the normal provisions and book profit was computed at Rs. 34,20,315/ - u/s. 115JB of the Act.
(2.) THE CIT called for the assessment records of the assessee for the impugned assessment year in exercise of power conferred u/s. 263 of the Act and on examining the same was of the view that the assessee while computing book profit u/s. 115JB of the Act has arrived at the net profit of Rs. 34,20,315/ -after reducing prior period expenditure of Rs. 52,24,589/ -. The CIT was of the view that as the expenditure was not incurred in the previous year relating to AY under dispute the same cannot be considered in accordance with the provisions of section Parts II & III of Schedule and VI to the Companies Act, 1956. According to the CIT, since the AO has accepted the book profit declared by the assessee u/s. 115JB of the Act, assessment order passed u/s. 143(3) is erroneous and prejudicial to the interests of the revenue. Accordingly, he issued a notice asking the assessee to show cause as to why assessment order shall not be revised. In response to the notice issued by the CIT, assessee submitted that as per the provisions of section 115JB of the Act, book profit shall be the net profit as shown in the P&L A/c prepared in accordance with the provisions contained in Parts I & II of Schedule - VI to the Companies Act. It was submitted that as per the P&L A/c for the period ending 31/03/2009, the profit is Rs. 34,20,315/ -, which has been admitted by the assessee as book profit. It was submitted that the amount of prior period adjustment of Rs. 52,24,589/ - was a payment made during the year. Explaining further, it was submitted that the payment relates to services rendered by the foreign agent. As there was dispute with regard to payment of service tax in respect of services rendered by them, the amount was not paid to the foreign agent. However, subsequently, on the basis of a decision of the Hon'ble Supreme Court, the amount of Rs. 52,24,589/ - became payable to the foreign agent. Hence, the said amount was provided during the year under consideration, which is in accordance with para 2 of Schedule - II of the Companies Act, 1956. It was submitted by the assessee that any transaction that took place during the year has to be recorded in the books of account of that year. However, the prior period item should be indicated separately showing that forms part of the P&L A/c. It was submitted that the profit is arrived at in accordance with Companies Act. The AO for the purpose of working out book profit cannot disturb the final account. In support of such contention, assessee relied upon a decision of the Hon'ble Supreme Court in case of Apollo Tyres Ltd. v. CIT :  255 ITR 273 : 122 Taxman 562 and decisions of ITAT Mumbai Bench in case of Duke off -Shore Ltd. v. Dy. CIT :  45 SOT 399 : 9 taxmann.com 214 and in case of Gulf Oil Corpn. Ltd. v. Asstt. CIT :  111 ITD 124 (Hyd.). Accordingly, it was submitted that the AO after examining the details of computation of book profit u/s. 115JB of the Act, having passed the order of assessment which is also a possible view as per the decisions of Apex Court and ITAT, there is no error in the assessment order nor there is any prejudice caused to the revenue. It was, therefore, submitted that the assessment order cannot be revised u/s. 263 of the Act. The CIT after considering the submissions, however, did not accept the same and ultimately passed the impugned order by holding that prior period expenditure cannot be reduced from the profit for arriving at the book profit u/s. 115JB of the Act. Accordingly, he directed the AO to compute book profit u/s. 115JB at Rs. 86,44,904/ -.
(3.) BEING aggrieved of the revision order passed by the CIT, assessee is before us challenging the same both on the ground of exercise of powers u/s. 263 of the Act as well as on merits of the issue.;