Beekaylon Synthetics P.Ltd, Mumbai vs Assessee

M/s. Beekaylon Synthetics Pvt. Asstt. Commissioner of Income Ltd., Tax, 10, Jasville, 2nd Floor, Circle - 1(1), Vs. 9, New Marine Lines, Mumbai Opp. Liberty Cinema, Mumbai - 400 020 PAN: AAACB 2976M (Appellant) (Respondent)

Present for: Assessee by : Shri Rakesh Joshi, A.R. Revenue by : Shri Pavan Kumar Beerla, D.R.

Date of Hearing : 27.05.2015 Date of Pronouncement : 31.07.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 18.11.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09. The assessee has agitated the action of the Ld. CIT(A) in upholding the order of the Assessing Officer (hereinafter referred to as the AO) passed under section 154 of the Income Tax Act.

2. The brief facts of the case are that the assessee had e-filed its return of income on 20.09.08 which was selected for scrutiny and the assessment under section 143(3) of the Act was completed by the AO on 27.09.10 assessing the total income of the assessee at Rs. Nil and book profits at Rs.3,89,88,943/-.

2 ITA No.7558/M/2013 M/s. Beekaylon Synthetics Pvt. Ltd.

Thereafter, the AO observed on verification of the record that the disallowance under section 14A amounting to Rs.18,07,031/- as well as Rs.48,93,866/- on account of diminution in value of current investment and Rs.3,00,542/- on account of provision for doubtful debts had remained to be added to the net profit for computation of book profit under section 115JB. He accordingly issued notice under section 154/155 of the Act to the assessee. After considering the reply of the assessee, he accepted the contention of the assessee in relation to disallowance on account of diminution in value of current investment. However, he rejected the contention of the assessee in relation to the proposed addition under section 14A of the Act as well as on account of provision for doubtful debts and accordingly added the above stated amounts into the book profits under section 115JB and assessed the income of the assessee accordingly.

Against the action of the AO in making addition into the book profits under section 115JB by way of invoking the provisions of section 154, the assessee preferred appeal before the CIT(A).

3. The Ld. CIT(A), however, vide impugned order upheld the order of the AO. The assessee has, thus, come in appeal before us.

4. We have heard the rival contentions and have also gone through the records. So far as the issue relating to the addition on account of disallowance under section 14A read with Rule 8D computed at Rs.18,07,031/- into the book profits under section 115JB is concerned, the Ld. A.R. of the assessee has submitted that the issue is quite debatable. The AO had got no jurisdiction to make such an addition while invoking section 154 of the Act as the scope of said section is very limited. He has further contended that even the issue of addition of provision of doubtful debts into the book profits under section 115JB was also a quite debatable issue. He, has further has relied upon the 3 ITA No.7558/M/2013 M/s. Beekaylon Synthetics Pvt. Ltd.

decision of the Hon'ble Supreme Court in the case of "CIT vs. HLL Comnet systems and services ltd." [2008] 174 Taxman 118 (SC), where in the above issue of provision of doubtful bad debts whether to be added while computing book profits under section 115JB has been decide in favour of the assessee. The Ld. A.R. has also contested the charging of interest under section 220(2) of the Act.

The Ld. D.R. on the other hand, has relied upon the findings of the lower authorities.

5. We have considered the rival contentions of the Ld. Representatives of the parties. The Ld. D.R. has relied upon the decision of the Tribunal in the case of "Ferani Hotels Pvt. Ltd." in ITA No.857/M/2013 order dated 17.11.2014 wherein the Tribunal has held that the disallowance computed under section 14A read with Rule 8D is to be added while computing book profits under section 115JB.

On the other hand, the Ld. A.R. has relied upon the decision of the Tribunal in the case of "Quippo Telecom Infrastructure vs. ACIT" in ITA No.4931/Del/2010 order dated 29.07.11 and further in the case of "JSW Energy Ltd. vs. ACIT" in ITA No.244/Bang./2010 order dated 22.02.13 wherein the other benches of the Tribunal have held that the disallowance made under section 14A read with Rule 8D is not to be added while computing the book profits under section 115JB. It has been held that the only actual expenditure debited to do the P & L account is to be taken into consideration while computing the book profit under section 115JB.

6. The above decisions cited by both the sides show that the issue is quite debatable which has yet to be settled by the High Courts/Supreme Court. There are contrary decisions of the Tribunal in favour of both the parties. Under such circumstances, in our view, it was beyond the powers of the AO 4 ITA No.7558/M/2013 M/s. Beekaylon Synthetics Pvt. Ltd.

exercisable under section 154 to make an addition on a debatable issue, the original assessment in this case had been completed under section 143(3) of the Act. Merely because, the other view is possible that itself cannot be a ground to rectify the order under section 154 of the Act as the same cannot be said to be a mistake apparent on record. Similarly, the addition made on account of provision for doubtful debts whether to be added while computing book profits under section 115JB has been a quite debatable issue. Under such circumstances, the invoking of provisions of section 154 by the AO on debatable issue was beyond his jurisdiction.. In our view, it is not a case of any mistake apparent on the record. The AO passed the assessment order u/s 143(3) of the Act on the basis of material available before him. It has been time and again held by the higher courts that if the alleged mistakes require investigation into facts or determination of law or discussion of debatable points are involved or two opinions are possible on the issue then such pointed mistakes cannot be said to be mistakes apparent on record which can be rectified under section 154 of the Income Tax Act. Hence, the order passed by the AO under section 154 is not sustainable in the eyes of law and the same is accordingly set aside.

7. In the result, the appeal of the assessee is hereby allowed.

Order pronounced in the open court on 31.07.2015.

Sd/- Sd/- (G.S. Pannu) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 31.07.2015. * Kishore, Sr. P.S. 5 ITA No.7558/M/2013 M/s. Beekaylon Synthetics Pvt. Ltd.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.