M/s Central Electronics Ltd., New Delhi V. ITO, New Delhi

CO 46/DEL/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3705 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY KR JIWANI
• Assessee Lawyers: SSH R S SINGHVI SATYAJEET GOEL; JITENDRA NATH CAS
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 32; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NOS. 4501 & 4502/DEL/2016 ASSESSMENT YEARS: 2007-08 & 2008-09 ITO, WARD 5(4), VS. M/S CENTRAL ELECTRONICS LTD. ROOM NO. 229B, 781, DESH BANDHU GUPTA ROAD, C.R. BUILDING, KAROL BAGH, NEW DELHI 5 NEW DELHI (PAN: AAACC1261G) (APPELLANT) (RESPONDENT) AND CROSS OBJECTION NOS. 45 & 46/DEL/2018 (IN ITA NOS. 4501 & 4502/DEL/2016) ASSESSMENT YEARS: 2007-08 & 2008-09 M/S CENTRAL ELECTRONICS LTD., VS. ITO, WARD 5(4), 781, DESH BANDHU GUPTA ROAD, NEW DELHI KAROL BAGH, NEW DELHI 5 (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. VIJAY KR. JIWANI, SR. DR ASSESSEE BY : S/SH. R.S. SINGHVI, SATYAJEET GOEL & JITENDRA NATH, CAS ORDER PER H.S. SIDHU, JM THE DEPARTMENT HAS FILED THESE APPEALS AND ASSESSE E HAS FILED THESE CROSS OBJECTIONS WHICH ARE EMANATE FROM THE RESPECTIVE O RDERS BOTH DATED 30.6.2016OF LD. CIT(A)-14, NEW DELHI PERTAINING TO ASSESSMENT YEAR S 2007-08 & 2008-09. SINCE THE ISSUES INVOLVED IN THE REVENUES APPEALS AS WELL AS ASSESSEES CROSS OBJECTION ARE IDENTICAL, HENCE, THE SAME ARE BEING CONSOLIDATED WITH THIS COMMON ORDER FOR THE SAKE OF 2 CONVENIENCE, BY DEALING WITH REVENUES APPEAL & ASS ESSEES CROSS OBJECTION FOR AY 2007-08. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL FOR A SSESSMENT YEAR 2007-08 READ AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION AMOUNTING TO RS. 2,44,90,263/- ON ACCOUNT OF UNABSORBED DEPRECIA TION CLAIMED FOR AY 1997-98. 2. THE APPELLANT CRAVES LEAVES FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. THE GROUNDS RAISED IN THE REVENUES APPEAL FOR A SSESSMENT YEAR 2008-09 READ AS UNDER:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION A MOUNTING TO RS. 89,22,395/- ON ACCOUNT OF UNABSORBED DEPRECIATION C LAIMED FOR AY 1997-98. 2. THE APPELLANT CRAVES LEAVES FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 4. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJEC TION FOR ASSESSMENT YEAR 2007-08 READ AS UNDER:- 3 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING REASSESSMENT U/S. 148 EVEN THOUGH SAME WAS NOT BASED ON RECORDING OF PROPER SATISFACTION OR RE QUISITE APPROVAL. 2. THAT THE REASSESSMENT IS MERELY BASED ON CHANGE OF OPINION AND SAME BEING AFTER EXPIRY OF FOUR YEARS, THERE IS NO JUSTIFICATION FOR ASSUMING JURISDICTION IN THE ABSENCE OF ANY OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF REQUISITE INFORMATION IN THE CONTEXT OF PROVISO TO SEC. 147. 5. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJEC TION FOR ASSESSMENT YEAR 2008-09 READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING REASSESSMENT U/S. 148 EVEN THOUGH SAME WAS NOT BASED ON RECORDING OF PROPER SATISFACTION OR RE QUISITE APPROVAL. 2. THAT THE REASSESSMENT IS MERELY BASED ON CHANGE OF OPINION AND SAME BEING AFTER EXPIRY OF FOUR YEARS, THERE IS NO JUSTIFICATION FOR ASSUMING JURISDICTION IN THE ABSENCE OF ANY OMISSIO N OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF REQUISITE INFORMATION IN THE CONTEXT OF PROVISO TO SEC. 147. REVENUES APPEAL (AY 2007-08) 6. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE F ILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 31.10.2007. IN THE COMPUTATION OF INCOME THE COMPANY HAS SET OFF TOTAL INCOME OF RS. 2,18,51,939/- AGAINST THE UNABSORBED DEPRECIATION OF EARLIER YEARS. THE ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PAS SED ON 24.12.2009 AT AN ADDITIONAL INCOME OF RS. 26,3.8,324/- WHICH WAS ALSO SET OFF AGAINST THE BROUGHT FORWARD LOSSES OF 4 THE EARLIER YEARS. ON PERUSAL OF RECORDS, IT HAS BE EN NOTICED THAT THE ASSESSEE COMPANY HAS CLAIMED UNABSORBED DEPRECIATION OF RS. 3,23,32,157/ -. IT HAS BEEN FURTHER REVEALED THAT OUT OF THE ABOVE UNABSORBED DEPRECIATION OF. RS. 3, 23,32,157/-, AN AMOUNT OF RS.2,44,90,263/- HAS BEEN SET OFF PERTAINING TO ASS ESSMENT YEAR 1997-98. AO FURTHER OBSERVED THAT AS PER THE AMENDMENT BY THE FINANCE ( NO.2) ACT, 1996 W.E.F. A.Y. 1997- 1998, THE UNABSORBED DEPRECIATION FOR AY. 1997-98 C OULD BE CARRY FORWARD UPTO A MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED AND THIS PERIOD EXPIRED IN 2005-06 AND CANNOT BE ALLOWED IN AY. 200 6-07 ONWARDS. THEREFORE, INCOME CHARGEABLE TO TAX AMOUNTING TO RS. 2,44,90,263/- HA S ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS. OF SECTION 147 OF THE INCOME TAX ACT. ACCORDINGLY, NOTICE U/S 148 OF THE INCOME TAX ACT WAS ISSUED ON 12.03.2013 AFTER DULY RECORDING THE REASONS LEADING TO THE BELIEF THAT INCOME HAD ESCAPED ASSES SMENT. IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE LT. ACT, 1961, SENIOR MANAGER (FINANCE) OF THE COMPANY SH. K.K.AGGARWAL VIDE HIS LETTER DATED 24.10.2013 FILED OBJECTIONS A GAINST THE REOPENING OF ASSESSMENT U/S 147 OF THE I.T. ACT,1961. THE OBJECTIONS WERE DISPO SED OFF THROUGH VIDE ORDER F.NO.ITO- WARD- 3(3)/2013-14/75 DATED 09.01.2014. THE COMPANY VIDE LETTER DATED 20.03.2013 SUBMITTED THAT RETURN OF INCOME FILED ON 31.10.2007 MAY BE TREATED AS RETURN FILED IN PURSUANCE TO THE NOTICE ISSUED U/S 148 OF THE ACT. NOTICE U/S. 143(2) OF THE ACT WAS ALSO ISSUED ON 22.3.2013. THE SENIOR MANAGER (FINANCE) O F THE COMPANY ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND MADE T HE SUBMISSIONS. THE SUBMISSION MADE BY THE ASSESSEE HAS BEEN CONSIDERED ON FACTS A ND MERITS OF THE CASE. THE AO OBSERVED THAT THE UNABSORBED DEPRECIATION FOR AY 19 97-98 COULD BE CARRY FORWARD UPTO A MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED AND THIS PERIOD EXPIRED IN 2005-06 AND HENCE, CANNOT BE ALLOWED IN AY 2006-07 ONWARDS. THEREFORE, 5 THE SETTING OFF UNABSORBED DEPRECIATION OF RS. 2,4 4,90,263/- WAS WITHDRAWN AND ACCORDINGLY, THE INCOME OF THE ASSESSEE WAS ASSESSE D AT RS. 1,47,50,530/- VIDE ORDER DATED 143(3)/147/250 OF THE INCOME TAX ACT, 1961. AGAINST THE ASSESSMENT ORDER DATED 30.01.2014, ASSESSEE APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 30.6.2016 HAS DIRECTED THE AO TO ALLOW THE SET OFF OF B/F DEPRECIATION U/S. 32 OF THE ACT AGAINST ASSESSED INCOME AND PARTLY ALLOWED THE APPE AL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL. 7. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. HE FURTHER STATED THAT AS PER T HE AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 W.E.F. A.Y. 1997-1998, THE UNABSORBED DEP RECIATION FOR AY. 1997-98 COULD BE CARRY FORWARD UPTO A MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED AND THIS PERIOD EXPIRED IN 2005-06 AND CAN NOT BE ALLOWED IN AY. 2006-07 ONWARDS. THEREFORE, INCOME CHARGEABLE TO TAX AMOUNT ING TO RS. 2,44,90,263/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT. THEREFORE, THE SETTING OFF UNABSORBED DEPREC IATION OF RS. 2,44,90,263/- WAS WITHDRAWN AND ACCORDINGLY, THE INCOME OF THE ASSES SEE WAS ASSESSED AT RS. 1,47,50,530/-. 8. ON THE CONTRARY, LD. AR OF THE ASSESSEE RELIED U PON THE ORDERS OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSED A WELL REASON ED ORDER WHICH DOES NOT NEED ANY INTERFERENCE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER. WE NOTE THAT AO IGNORED THE FACT THAT UNABSO RBED DEPRECIATION OF YEAR PRIOR TO AY 1997-98 IS ALLOWED U/S. 32 OF THE I.T. ACT TO BE C/ F FOR INDEFINITE PERIOD AS JUDICIALLY PRONOUNCED BY THE HONBLE GUJARAT HIGH COURT IN TH E CASE OF M/S GENERAL MOTORS INDIA 6 PVT. LTD. VS. DCIT(2012) 25 TAXMANN.COM 364/ 354 IT R 244 (GUJ) WHEREIN, THE COURT HAS HELD THAT ANY UNABSORBED DEPRECIATION AVAILABL E TO AN ASSESSEE ON THE 1 ST DAY OF APRIL, 2002 (THE ASSESSMENT YEAR 2002-03), WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINAN CE ACT, 2001. AND ONCE CIRCULAR NO. 14 OF 2001 OF CBDT CLARIFIED THAT THE RESTRICTION O F EIGHT YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENSE WITH, THE UNABSORBED DEPRECIATION FROM THE ASSESSMENT YEAR 1997-98 UPTO THE ASSESSMEN T YEAR 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002-03 AND BECAME PART THER EOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY THE FINAN CE ACT, 2001, AND WERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. THIS VIEW HAS BEEN ADOPTED BY THE HONBLE DELHI HIGH COURT IN THE CASES OF MOTOR & GENERAL FINANCE LTD. VS. ITO (393 ITR 60 (DELHI) AND PR. CIT VS. BRITISH MOTOR CAR CO. (1934) LTD. 400 ITR 569 (DELH I). WE FURTHER NOTE THAT LD. CIT(A)- 14, NEW DELHI IN THE IMPUGNED ORDER DATED 30.6.20 16, BY FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S GENE RAL MOTORS INDIA PVT. LTD. VS. DCIT (SUPRA) AND ORDER DATED 23.3.2014 PASSED IN APPEAL NO. 396/14-15 BY THE CIT(A)-2, NEW DELHI FOR AY 2006-07, HAS RIGHTLY DECIDED THE SIMILAR AND IDENTICAL ISSUE OF DISALLOWANCE OF B/F DEPRECIATION IN FAVOUR OF THE A SSESSEE IN ASSESSEES OWN CASE AND DIRECTED THE AO TO ALLOW THE SET OFF OF B/F DEPREC IATION U/S. 32 OF THE INCOME TAX ACT, 1961 AGAINST ASSESSED INCOME, WHICH DOES NOT NEED A NY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND REJECT THE GROUND RAISED BY THE REVENUE AND ACCORDINGLY, THE REVENUE S APPEAL STANDS DISMISSED. 7 ASSESSEES CROSS OBJECTION (AY 2007-08) 10. AS FAR AS ASSESSEES CROSS OBJECTION IS CONCERN ED, SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE AS AFORESAID ON THE MERIT OF THE CASE, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED A S SUCH AND ACCORDINGLY, THE CROSS OBJECTION OF THE ASSESSEE ALSO STANDS DISMISSED. 11. IN THE RESULT, BOTH THE REVENUES APPEALS AS WE LL AS ASSESSEES CROSS OBJECTIONS STAND DISMISSED. ORDER PRONOUNCED ON 10/04/2018. SD/- SD/- [L.P. SAHU] [H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10/04/2018 *SR BHATNAGAR* COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR