Hindustan Antibiotics Ltd, Pune V. Commissioner of Income Tax - V, Pune

ITA 1044/PUN/2012

• Counselvise Citation: 104424514 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK KOTHARI
• Keywords: Depreciation; Opportunity of being heard; Unabsorbed depreciation
• Section: 32; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1044/PN/2012 (ASSESSMENT YEAR : 2007-08) HINDUSTAN ANTIBIOTICS LTD., PIMPRI, PUNE-411018 PAN NO.AAACH5155L .. APPELLANT VS. CIT-V, PUNE .. RESPONDENT ASSESSEE BY : SHRI ASHOK KOTHARI REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 13-01-2015 DATE OF PRONOUNCEMENT : 29-01-2015 ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29-03-2012 PASSED U/S.263 BY THE CIT-V, PUNE RELATING TO A.Y. 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS MENT IN THIS CASE WAS COMPLETED U/S.143(3) ON 23-12-2009 DETERMINING THE TOTAL INCOME AT RS.86,61,76,060/- AS AGAINST RETURNED LOS S OF RS.33,66,81,931/- FILED BY THE ASSESSEE. SUBSEQUEN TLY, THE LD.CIT EXAMINED THE RECORDS AND NOTED THAT THE ORDER FRAME D U/S.143(3) WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE WITHIN THE MEANING OF SECTION 263 OF THE I.T. ACT FOR THE FOLLOWING REASON : I. ON PERUSAL OF THE CASE RECORDS, IT IS OBSERVED THAT THE AO HAS ALLOWED EXCESS SET OFF OF UNABSORBED DEPRECIATION TO T HE EXTENT OF RS.87,08,64,394/- FOR A.Y. 2007-08 AS THE UNABSORBED D EPRECIATION PERTAINING TO A.Y. 1974-75 TO A.Y. 1996-97 AMOUNTIN G TO 2 RS.87,08,64,394/- CANNOT BE CARRIED FORWARD MORE THA N 8 ASSESSMENT YEARS, I.E. BEYOND A.Y. 2004-05 IN THIS CASE. HE THEREFORE ISSUED A NOTICE ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE ORDER PASSED U/S.143(3) SHOULD NOT BE SET-A SIDE. IT WAS EXPLAINED THAT WHETHER THE UNABSORBED DEPRECIATION OF RS.87,08,64,394/- RELATING TO A.Y. 1974-75 TO 1996- 97 IS ALLOWABLE BEYOND 8 YEARS OR NOT IS A DEBATABLE/DISPUTED ISSUE AND THEREFORE CANNOT BE THE CRITERIA FOR REVISION OF ASSESSMENT F RAMED U/S.143(3) OF THE I.T. ACT. 2.1 HOWEVER, THE LD.CIT WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE HELD THAT THE AO WITHOUT ANY APPLICATION OF MIND HAS ALLOWED EXCESS SET OFF OF DEPRECIATION AMOUNTING TO RS.87,08,64,394/-. THEREFORE, THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE, THEREFORE, SET- ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECT ION TO PASS THE ORDER AFRESH AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE RELEVANT OBSERVATION OF THE LD. CIT AT PARAS 4.1 TO 4.4 OF THE ORDER READ AS UNDER : 4.1 I HAVE GONE THROUGH THE FACTS OF THE CASE. IT IS TRITE LAW, AS PROPOUNDED BY THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO.LTD. REPORTED IN 243 ITR 83, THAT WHERE THE ASSESSIN G OFFICER HAS TAKEN A 'POSSIBLE VIEW' WHICH IS NOT UNSUSTAINABLE IN LAW OR ASSUMED INCORRECT FACTS OR LAW, THE CIT WOULD NOT HAVE JURISDICTION U/S 263 TO SUBSTITUTE HIS VIEW WHICH IS DIFF ERENT FROM THAT OF THE ASSESSING OFFICER. HOWEVER, WHERE THERE IS N O APPLICATION OF MIND BY THE ASSESSING OFFICER, THE COMMI SSIONER OF INCOME TAX CAN ASSUME JURISDICTION U/S 263, IF ON THE B ASIS OF RECORDS AVAILABLE, THE COMMISSIONER OF INCOME TAX COM ES TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER IS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 4.2 THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED, ASSESSING TOTAL LOSS AT RS. 86,61,76,064/-, AFT ER SET OFF OF BROUGHT FORWARD DEPRECIATION OF RS.8,40,46,913/- AND BUSINESS LOSS OF RS. 1,77,29,151/-. ON PERUSAL OF THE RECORDS, IT IS SEEN THAT 3 THE BROUGHT FORWARD DEPRECIATION PERTAINING TO A.Y. 1974-75 TO AY 1996-97 AMOUNTING TO RS. 87,08,64,394/- WAS ALSO INCLU DED IN THE TOTAL BROUGHT FORWARD DEPRECIATION OF RS. 1,18,40,46 ,913/-. AS PER SECTION 32 OF THE INCOME TAX ACT, BROUGHT FORWARD UN ABSORBED DEPRECIATION ALLOWANCE FOR AND UPTO A.Y. 1996-97, W HICH COULD NOT BE SET OFF UPTO A.Y. 1996-97 SHALL BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER ANY HEAD FOR A MAXIMUM PERIOD O F EIGHT ASSESSMENT YEARS STARING FROM A.Y. 1997-98 I.E. UP A.Y. 2 004-05 ONLY. IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT APPL IED HIS MIND AND HAS ALLOWED THE SET OFF OF UNABSORBED DEPRECIATION AMOUNTING TO RS. 87,08,64,394/- PERTAINING TO A.Y. 1974-75 TO A.Y. 1996-97 IN THE ASSESSMENT ORDER PASSED FOR THE YEAR UNDER CONSIDERATI ON. THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ON THIS ISSUE IS CLEARLY ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE FOR NON APPLICATION OF MIND. 4.3 IT IS ESTABLISHED LAW THAT REVISIONAL JURISDICTION U /S 263 CAN BE EXERCISED FOR LACK OF INQUIRY WHERE INQUIRY IS PRI MA FACIE ARRANTED. THIS LAW WAS FOLLOWED BY SPECIAL BENCH OF T HE TRIBUNAL BY SPECIAL BENCH OF THE TRIBUNAL IN RAJALAXMI MILLS LT D. VS. ITO 313 ITR (80), 182(CHENNAI) AS REGARDS THE PROVISION OF RS.8 LAC S FOR GRATUITY IN BALANCE SHEET WHICH WOULD HAVE ORDINARILY REQUIRE D INQUIRY AS TO WHETHER IT IS HIT BY S.36(1)(V), S.43(2) AND S.40A(7) O F THE IT ACT AND THE RULINGS PRECEDENTS ON THE SUBJECT. THE TRIBUNA L HELD THAT THE JURISDICTION U/S 263 WAS JUSTIFIED. THE ALLAHABAD H IGH COURT IN THE CASE OF CIT VS SHRI BHAGWANDAS 272 ITR 367 FOLLOW ING MALABAR INDUSTRIAL COMPANY LTD. (SC) HELD THAT GRANT OF EXEM PTION WITHOUT APPLICATION OF MIND IN RESPECT OF CLAIMS OF EXEMPTION FOR CERTAIN RECEIPTS AS AGRICULTURAL INCOME AND INCOME FROM POULT RY FARM WOULD CONSTITUTE ERROR AND PREJUDICE TO THE REVENUE, AND THEREFORE, THE REVISION BY THE CIT U/S 263 WAS UPHELD. RELIANCE I S ALSO PLACED ON THE FOLLOWING JUDGMENTS WHEREIN IT WAS HELD THAT F AILURE OF THE AO TO EXAMINE THE ISSUE AMOUNTS TO AN ERROR PREJUDICIA L TO REVENUE AND THE CIT COULD ASSUME JURISDICTION, SUBJECT TO THE C ONDITION THAT THERE WAS ERROR AND PREJUDICE TO THE REVENUE : (I) GEE VEE ENTERPRISES VS ADDL. CIT 99 ITR 37 5(DEL.) (II) CIT VS EMERY STONE MFG CO. 213 ITR 843(R AJ.) (III) DUGGAL & CO. VS CIT 220 ITR 456(DEL.) (IV) THERMAL SYSTEM(HYD.) PVT. LTD. VS. ACIT INCO ME TAX ACT 270(H) 2006 DTD.15.2.2008. AS REGARDS THE ASSESSEE'S CONTENTION THAT THE ISSUE IS DEBAT ABLE, IT IS PERTINENT TO MENTION THAT THERE IS NO DEBATE ON THIS LEGAL POSITION, AS THE SAME IS AS PER THE PROVISIONS OF INCOME JAX ACT. RELIANCE IS ALSO PLACED ON THE DECISION OF HIGH COURT OF GUJARAT IN THE CASE OF CIT VS MM KHAMBHATWALA, REPORTED IN 198 ITR 144(GUJ) , WHERE IT IS HELD BY THE GUJARAT HIGH COURT THAT, THE CIT IS EN TITLED TO REVISE THE ERRONEOUS AND PREJUDICIAL ORDER PASSED BY ITO EVEN IN A CASE WHERE ISSUE WAS DEBATABLE. 4.4 THE ASSESSING OFFICER HAS THUS WITHOUT ANY APPLICATI ON OF MIND ALLOWED EXCESS SET OFF OF DEPRECIATION AMOUNTING TO RS.87,08,64,394/-. THE ASSESSMENT ORDER FRAMED IS CLEARLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS ISSUE AND IT IS THUS SET ASIDE. SUBJECT TO THE ABOVE DISCUSSION, THE ASSESSMENT ORDER PASSED BY THE A.O IS SET ASIDE TO BE PASSED AFRESH, AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE OF BEING HE ARD. 4 3. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSE E IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN : 1. INVOKING THE PROVISIONS OF SEC. 263 OF THE INCOME TAX ACT, 1961 AND DIRECTING THE AO TO RECOMPUTED THE INCOME IN ACCORDANCE THE HIS ORDER. IT IS PRAYED THAT THE ORDER OF THE CIT BE SET ASIDE. 2. IN HOLDING THAT THE BROUGHT FORWARD DEPRECIAT ION AMOUNTING TO RS.87,08,64,394/-ALLOWED BY THE AO WAS IN EXCESS OF ALLOWABLE DEPRECIATION U/S.32. IT IS PRAYED THAT THE DEPRECIATI ON ALLOWED BY THE AO BE HELD AS CORRECT AND THE ORDER OF THE CIT U /S. 263 BE SET ASIDE. 3. THE APPELLATE NAMED ABOVE CRAVES LEAVE TO ADD, TO ALTER OR TO MODIFY THE GROUNDS OF APPEAL IF, AS AND WHEN REQUIRED . 4. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT ASSUMING JURISDICTION U/S.263. HE SUBMITTED THAT THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND HAS FILED ITS RETURN OF INCOME ON 31-10-2007 WHICH WAS SUBSEQUENTLY REVISED ON 17-03- 2009 DECLARING TOTAL LOSS OF RS.33,66,81,931/-. HE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE HAS FURNISHED ALL THE DETAILS THAT WERE CALLED FOR BY T HE AO. REFERRING TO PAGE 4 OF THE ASSESSMENT ORDER DATED 23-12-2009 HE SUBMITTED THAT THE AO IN THE SAID ORDER HAS GIVEN SET OFF TO THE BROUGHT FORWARD LOSS OF EARLIER YEARS TO THE TUNE OF RS.120 ,17,43,049/-. REFERRING TO PAGE 26 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE ORDER DATED 30-12-2008 PASSED U/S.143( 3) FOR THE A.Y. 2006-07 AND DREW THE ATTENTION OF THE BENCH TO THE CARRIED FORWARD LOSSES AS DETERMINED BY THE AO WHICH IS AS UNDER : 5 A.Y. BUSINESS LOSS DEPRECIATION LOSS TOTAL 1974-75 TO 1999-00 -- 103,40,20,296 103,40,20,296 2005-2006 -- 8,77,94,554 8,77,94,554 2006-2007 5,07,23,877 4,64,07,974 9,71,31,851 HE SUBMITTED THAT THE AO BASED ON THE ORDER PASSED U/S.143(3) FOR THE PRECEDING ASSESSMENT YEAR HAS GIVEN THE SET OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEAR. THEREFORE, MISTAKE , IF ANY HAS OCCURRED IN THE ORDER OF THE PRECEDING ASSESSMENT Y EAR AND NOT IN THIS YEAR. HE SUBMITTED THAT ALTHOUGH NO SPECIFIC QUESTION WAS RAISED BY THE AO ON THIS ISSUE, HOWEVER, THE FACT R EMAINS THAT AN ORDER IN THE PRECEDING ASSESSMENT YEAR HAS BEEN PAS SED DETERMINING THE AMOUNT TO BE CARRIED FORWARD TOWARDS BUSINESS L OSS AND DEPRECIATION LOSS. HE ACCORDINGLY SUBMITTED THAT T HE ORDER PASSED BY THE CIT U/S.263 HAS TO BE QUASHED. FURTHER, REF ERRING TO THE ORDER OF THE CIT(A) DATED 18-12-2014 FOR THE A.Y. 2 007-08 HE SUBMITTED THAT WHEN THE AO PASSED THE ORDER U/S.143 (3)/263 DISALLOWING DEPRECIATION OF RS.87,08,64,394/- THE L D.CIT(A) FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VIDE SPECIAL CIVIL A PPLICATION NO.1773/2012 DATED 23-08-2012 HAS GIVEN RELIEF TO T HE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE ORDER PASSED U/S. 263 SHOULD BE QUASHED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE LD.CIT INVOKING JURISDI CTION U/S.263 SUBMITTED THAT SINCE THE AO HAS PASSED THE ORDER U/ S.143(3)/263 DISALLOWING THE DEPRECIATION AS PER THE ORDER OF TH E CIT PASSED 6 U/S.263 AND SINCE THE LD.CIT(A) HAS ALREADY DELETED THE SAID DISALLOWANCE, THEREFORE, THIS APPEAL FILED BY THE A SSESSEE BECOMES INFRUCTUOUS. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE LD.CIT INVOKED JURISDICTION U/S.263 ON THE GROUND THAT THE AO IN THE ORDER PASSED U/S.143(3) HAS ALLOWED EXCESS SET OFF OF UNA BSORBED DEPRECIATION TO THE EXTENT OF RS.87,08,64,394/- FOR A.Y. 2007-08. ACCORDING TO LD. CIT, THE UNABSORBED DEPRECIATION P ERTAINING TO THE A.YRS. 1974-75 TO 1996-97 CANNOT BE CARRIED FORWARD MORE THAN 8 YEARS, I.E. BEYOND A.Y. 2004-05 IN THIS CASE. WE F IND THE ORDER U/S.143(3) HAS BEEN PASSED FOR A.Y. 2006-07 DETERMI NING THE UNABSORBED DEPRECIATION AND BUSINESS LOSS THAT HAS TO BE CARRIED FORWARD THE DETAILS OF WHICH ARE ALREADY GIVEN AT P ARA 4 OF THE IMPUGNED ORDER. THEREFORE, THE MISTAKE, IF ANY, HA S CREPT IN THE ORDER FOR A.Y. 2006-07 AND CERTAINLY NOT IN THE ORD ER FOR A.Y. 2007- 08. THE AO HAS SIMPLY FOLLOWED THE ORDER OF HIS PR EDECESSOR GIVING EFFECT TO THE QUANTUM OF BROUGHT FORWARD LOS S TO BE SET OFF FROM THE INCOME OF THE CURRENT YEAR. THEREFORE, TH E ORDER FOR THE IMPUGNED ASSESSMENT YEAR CANNOT BE SAID TO BE ERRON EOUS ALTHOUGH IT MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENU E. IT HAS BEEN HELD IN VARIOUS JUDICIAL DECISIONS THAT FOR ASSUMING JUR ISDICTION U/S.263 BY THE LD.CIT, THE TWIN CONDITIONS, I.E. (A) ORDER IS ERRONEOUS AND (B) ORDER IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE MUST BE 7 SATISFIED. IN THE INSTANT CASE, SINCE THE UNABSORB ED BUSINESS LOSS AND UNABSORBED DEPRECIATION LOSS WHICH HAS TO BE CARRIE D FORWARD FOR SUBSEQUENT YEARS HAS BEEN QUANTIFIED IN THE ORDER P ASSED U/S.143(3) DATED 31-12-2008 FOR A.Y. 2006-07 AND SINCE THE AO HAS SIMPLY FOLLOWED THAT ORDER WHILE GIVING SET OFF OF UNABSOR BED DEPRECIATION LOSS FOR THE A.Y. 2007-08, THEREFORE, THE ORDER IN OUR OPINION CANNOT BE SAID TO BE ERRONEOUS. THEREFORE, THE TWIN CONDI TIONS ARE NOT SATISFIED. UNDER THESE CIRCUMSTANCES, WE ARE OF TH E CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR ASSUMING JURI SDICTION U/S.263 OF THE I.T. ACT. WE ACCORDINGLY CANCEL THE ORDER PASS ED U/S.263. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLO WED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29-01-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED: 29 TH JANUARY, 2015 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT-V, PUNE 4. THE D.R, A PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE