- (1.) Leave granted.
(2.) In this Civil Appeal filed by the assessee-appellant, we are required to decide the scope of Section 254(2) of the Income Tax Act, 1961 (hereinafter referred to as the said Act).
(3.) The assessee is a company incorporated under the Companies Act, 1956. It carries on the business of manufacture of cotton and man made fiber yarn. For the assessment year 1989-90, assessment under Section 143(3) was framed by the Dy. Commissioner, Madurai, wherein the said authority determined the taxable total income for 21 months ending 31-3-1989, at Rs. 45,92,240. This order was passed on 27-2-1992. The determination of the taxable total income was based on Section 115J of the Act. In the said assessment order the total income of the assessee was computed at Rs. 42,98,019 and on scrutiny of the said computation and the balance sheet along with the return the Dy. Commissioner reworked the computation as indicated at p. 63 of Volume II in this case. Suffice it to state that the total profit was reworked at Rs. 1,53,07,444. Thirty per cent thereof was reworked at Rs. 45,92,239. In the process of reworking the computation under Section 115J, the Dy. Commissioner added to the profit the excess depreciation which was debited in the P&L a/c in view of the difference which arose due to the change in the method of accounting adopted by the assessee for the claim of depreciation on machinery retrospectively from the year ending 30-6-1983. The assessee had changed its method of claiming depreciation from straight line method (SLM) to written down value method and in that connection it was argued by the assessee that the profit stood computed correctly in accordance with the provisions of the Companies Act, 1956, and, therefore, relying on the judgment of this court in the case of Apollo Tyres Ltd. v. CIT, the assessee submitted that the assessing officer had no authority to go beyond the book profits correctly computed by the assessee in accordance with the provisions of the Companies Act, 1956.;