Bombay H.C : Rejecting the books of account and making additions on account of estimated profits at 10 per cent. from the total fees received by the assessee-company in various years covering the block period

High Court Of Bombay

CIT vs. Templeton Asset Management (India) P. Ltd.

Section : 158BB

J.P. Devadhar And A.A. Sayed, JJ.

ITA No. 113 Of 2010

August  5, 2011

JUDGMENT
 
1. Five questions are raised by the Revenue in this appeal, which read thus :

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) in not sustaining the order of the Assessing Officer in rejecting the books of account and making additions on account of estimated profits at 10 per cent. from the total fees received by the assessee-company in various years covering the block period ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 77,39,530 made on account of accrued interest on debentures of M/s. Viral Filaments Ltd. in spite of the fact that the trial balance, based on which the additions made was found at the time of survey action which lead to the search action under section 132 ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of the Commissioner of Income-tax (Appeals) in directing the Assessing Officer to delete the addition of Rs. 11,36,44,400 ignoring the provisions of the Explanation to section 158BB which stipulate that the undisclosed income of each assessment year for the purpose of aggregation has to be computed without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under section 32(2) of the Income-tax Act, 1961 ?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of the Commissioner of Income-tax (Appeals) in directing the Assessing Officer to delete the addition of Rs. 11,36,44,400 when the provisions of section 158BB(4) provide that brought forward losses and unabsorbed depreciation under section 32(2) of the Income-tax Act, 1961, are not to be allowed to “set off” from undisclosed income arrived at after aggregation ?

(5) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not confirming the addition of Rs.38,99,860 being accrued interest on debentures of M/s. Precision Fasteners Ltd. sustained by the Commissioner of Income-tax (Appeals) on account of the assessee’s failure to prove that the same had been disclosed in the audited accounts ?”

2. As regards question No. 1 is concerned, the finding of fact recorded by the Income-tax Appellate Tribunal in para. 3.1.1 of its order is that, the Assessing Officer had estimated profits from the fees received by the assessee without there being any evidence or material found during the search. It is neither the case of the Revenue that the assessee had not accounted any part of the fees received nor is it the case of the Revenue that the assessee had inflated the claim. The Tribunal has deleted the additions made in the block assessment on the ground that such additions were not based on evidence found during the course of search. The discrepancies noticed by the Assessing Officer from the trial balance found during the course of search has been explained by the assessee and in fact no additions were made on the basis of the discrepancies found in the trial balance. In these circumstances, the decision of the Income-tax Appellate Tribunal in deleting the addition made on account of estimated profits from the total fees received by the assessee cannot be faulted.

3. As regards questions Nos. 2 and 5 relating to the deletion of accrued interest are concerned, the finding of fact recorded by the Income-tax Appellate Tribunal is that the assessee had purchased the debentures in question in the year 1999 and the same were reflected in the books of account maintained by the assessee. Therefore, whether interest on those debentures were includible in the total income on accrual basis or not was a question to be considered in the regular assessment and not in the block assessment. Therefore, no fault can be found with the decision of the Tribunal in deleting the interest on accrual basis in the block assessment order. Accordingly, questions Nos. 2 and 5 cannot be entertained.

4. Questions Nos. 3 and 4 relate to the deletion of addition made by the Assessing Officer on account of depreciation and disallowance of business loss in the regular assessment. The Tribunal has recorded a finding that the depreciation allowed in the regular assessment was current depreciation and there is no material to suggest that current depreciation was not admissible to the assessee and that there is no provision to consider current depreciation as undisclosed income of the assessee. In any event, these additions could not be made in the block assessment in the absence of any material found during the course of search. Therefore, questions Nos. 3 and 4 cannot be entertained.

5. Accordingly, we see no merit in the appeal and the same is hereby dismissed with no order as to costs.

[Citation : 337 ITR 541]

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