- (1.) This appeal under Section 260A of the Income-tax Act, 1961 ("Act") is at the instance of an assessee and is directed against an order dated 18th November, 2002 passed by the Income-tax Appellate Tribunal, "C" Bench, Kolkata, in ITA No.2180 (Cal) of 1995 and ITA No.1806 (Cal) of 1997 relating to the Assessment Year 1989-90 by which the Tribunal dismissed the appeals preferred by the assessee.
(2.) Being dissatisfied, the assessee has come up with the present appeal. The facts giving rise to filing of this appeal may be summed up thus: a) The assessee is a company incorporated under the Companies Act, 1913 and has been carrying on business of manufacturing and trading in paints, specially chemicals etc. and the method of accounting is mercantile. The assessee duly maintains books of accounts and documents which are duly audited under the Companies Act, 1956 and under Section 44AB of the Act. b) The assessee filed the return of income on 27th December, 1989 for a period of 18 months from 1st October, 1988 to 31st March, 1989 corresponding to the Assessment Year 1989-90 showing a total income of Rs.2,33,05,920/-. The assessment was originally processed under Section 143(1)(a) of the Act by the Deputy Commissioner of Incometax, Special Range-15, Kolkata, the Assessing Officer of the company, on 1st March, 1990. The computation of the aforesaid total income and the return filed by the assessee was accepted by the Assessing Officer. Subsequently, the Assessing Officer issued notice under Section 154 of the Act on 7th February, 1991 alleging that there was an error apparent from record in computation of income-tax under Section 115J of the Act for the Assessment Year 1989-90. c) The assessee filed a reply against the notice under Section 154 of the Act on 15th February, 1991 explaining, inter alia, in details on the points which were sought to be rectified by the said notice under Section 154 of the Act. However, the Assessing officer while proceeding to make regular assessment issued notice under Section 143(2) of the Act and in response to the said notice, the authorised representative of the assessee duly produced all books of accounts and documents and furnished all the information required by the Assessing Officer. d) After full scrutiny, the Assessing Officer made an assessment for the Assessment Year 1989-90 under Section 143(3) of the Act by his assessment order dated 26th February, 1992 by which the Assessing Officer again accepted the computation of profit under Section 115J of the Act as shown in computation of income annexed to the return filed by the assessee company. The Assessing Officer, however, once again issued notice under Section 154 of the Act on 3rd March, 1994 and after discussing the matter with the assessee had recomputed the profit under Section 115J of the Act by adding back the provision for bad and doubtful debts and advances and thereby resulting in a demand of Rs.14,06,160/- vide order dated 31st March, 1994. e) In the said order, the Assessing Officer alleged that the assessee while computing the book profit for the purpose of Section 115J of the Act did not add back the provision for bad and doubtful debts and advances which were required to be done as per Clause (c) to the Explanation to sub-Section 1(A) of Section 115J of the Act. f) Although it was contended on behalf of the assessee that the Clause (c) of Explanation to sub-Section 1(A) of Section 115J of the Act required adding back of the amount provided to meet the liabilities other than ascertained liabilities and the provision for bad and doubtful debts and advances which is for diminution in the value of the assets is not a provision to meet the liabilities which is not an ascertained liability, such contention was not accepted by the Assessing Officer. g) The assessee preferred an appeal before the Commissioner of Incometax (Appeals) against the said order under Section 154 of the Act passed by the Assessing Officer but the Appellate Authority affirmed the order of the Assessing Officer. h) Being dissatisfied, the assessee preferred an appeal before the Tribunal below being I.T.A. No.2189 of 1995. i) In the meantime, in March 1994, the Assessing Officer sent a notice under Section 148 of the Act to the assessee asking it to explain why depreciation provisions made prior to 1st April, 1988 on fixed assets sold have been excluded from the computation of the book profit for the purpose of tax under Section 115J of the Act. The Assessing Officer sought to include this provision for depreciation in the computation of income under Section 115J as income escaping assessment. The assessee in reply to the said notice had given detailed explanation contending that Section 115J(1) clearly prescribed items to be included and/or excluded for the purpose of computation of book profit and the computation given by the assessee was in accordance with the provisions of the Act. j) The Assessing Officer, however, rejected the contention of the assessee and recomputed the income under Section 115J of the Act including depreciation as provided in the books of account prior to 1st April, 1988 in respect of assets sold during the Assessment Year 1989-90 amounting to Rs.11,71,39,380/- and raised additional demand including interest for Rs.3,05,75,846/- vide order dated 31st January, 1996. k) The assessee preferred an appeal against such order before the CIT (Appeals) on twofold grounds. First, the Assessing Officer erred in concluding that depreciation provision prior to 1st April, 1988 written back in the profit and loss account arising out of sale of fixed assets is to be included as part of book profit for the computation of tax under Section 115J of the Act. It was further argued before the Appellate Authority that Section 115J was first inserted in the Act by the Finance Act, 1987 with effect from April1, 1988 with the intention of taxing the companies which disclosed book profits but no positive total income as computed under Section 28 of the Act. It was further pointed out that Part- II of Schedule-VI of the Companies Act laid down the requirement as to the profit and loss account and Section 3 in that part sets out various items relating to income and expenditure of the amount which has to be disclosed in the profit and loss account of which one of the items in Clause (IV) being in respect of an amount provided for depreciation, renewals or diminution in the value of fixed assets and the assessee prepared its account in strict terms of the Schedule-VI of the Companies Act and the explanation provision laid down in Schedule VI would apply and the sum of Rs.11,71,39,380/- should be treated as withdrawn from the provision for depreciation created prior to April 1, 1988 of fixed assets disposed of during the year and the Assessing Officer had no jurisdiction to go beyond the account maintained in accordance with the Companies Act which is also certified by the Auditors. It was further argued on behalf of the appellant that although Section 115J(2) of the Act gave full protection for unabsorbed depreciation, the Assessing Officer had wrongly set off depreciation against income which had already offered tax and thereby defeated the provisions of Section 115J(2) of the Act. l) The Commissioner of Income-tax (Appeals), however, turned down those contentions. m) Being dissatisfied, the assessee preferred an appeal before the Tribunal below being I.T.A No.186 of 1997 and the Tribunal below by a common order dated November 18, 2002 disposed of both the aforesaid appeals preferred by the assessee and thereby decided all the grounds in favour of Revenue and against the assessee. n) The assessee, being dissatisfied, has preferred the present appeal and has paid double the amount of court fees for challenging the common order of the Tribunal disposing of the two appeals. A Division Bench of this Court at the time of admission of this appeal formulated the following questions of law for determination: "(1) Whether the Learned Tribunal on a true and proper interpretation of the provisions of Section 115J of the Act and also the Companies Act was justified in law in disallowing the provision for bad and doubtful debts and advances on the grounds that the said provision is not an amount set aside towards the provisions made for meeting liabilities which are not the ascertained liability. "(2) Whether the Learned Tribunal failed to appreciate that the expression provision in any event is capable of interpretations on which there are two conceivable views and as such the said mistake, if any, is not a mistake apparent from record and cannot be the subject matter of rectification under Section 154 of the Act. "(3) Whether the Learned Tribunal was justified in affirming Assessing Officer s decision that depreciation provision prior to 1.4.1998 written back in the profit and loss account is to be included as part of book profit, as Section 115J of the Act does not empower the Assessing Officer to go beyond the net profit as disclosed in profit and loss account and balance sheet certified by the auditors and allowing the assessing officer to make the additions on the ground of bad and doubtful debt which have been disclosed in the profit and loss account prepared according to the Companies Act and certified by Auditors. "(4) Whether the Learned Tribunal was justified in not appreciating that the amount of depreciation for the period up to 30.9.87 which has been added back to the net profit of the assessee for the current year is to be reduced from the profit as disclosed in the book profit according to the Schedule VI to the Companies Act and the said amount of depreciation which were provided for up to 30.9.87 according to specific provision of the explanation have to be reduced from the book profit prepared according to the Companies Act and as such non-reduction of the said amount was clearly illegal invalid and without any legal basis. "(5) Whether the Learned Tribunal had misinterpreted and misconstrued the provisions of Section 115J of the Act read with Explanation and the proviso thereto and should have considered that the provision for depreciation made up to 30.9.87 is by reason of the expressed provisions of the Act is to be reduced from the books profit and as such the decision of the tribunal is clearly illegal invalid and not sustainable in law. "(6) Whether the purported decision of the Tribunal is clearly erroneous and not tenable in the eye of law when the assessee has prepared its account according to the provisions of Schedule VI to the Companies Act and there is no objection or allegation that the said profit and loss account has not been prepared according to the provisions of the Companies Act and in view of the settled law that the Assessing Officer has no competence, jurisdiction and/or authority to go beyond the said balance sheet and profit and loss account prepared according to Companies Act. "(7) Whether the Learned Tribunal was justified in holding that the amount of Rs.11,71,39,380/- being the depreciation for the year prior to 30.9.87 was not reflected under the head provision as stood on 30.9.87 and was not provided in a year prior to the year relevant to the assessment year commencing on or after 1.4.88. "(8) Whether the aforesaid observations of the Tribunal is patently illegal, perverse and contrary to the facts on records as will appear from the balance sheet as on 31st September, 1987 and 31st March, 1989."
(3.) Dr. Pal, the learned Senior Advocate appearing on behalf of the assessee, however, restricted his submission to only the grounds Nos.1, 2 and 4 indicated above, as according to him, those three questions are the real disputes involved in this appeal and the other points formulated are really the repetition of the selfsame points.;