M/s Alufluoride Limited, Visakhapatnam V. THE JCIT(OSD) Circle-3(1), Visakhapatnam

ITA 134/VIZ/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5923 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Business income; Depreciation; Rectification of order; Tangible material; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J.SUDHAKAR REDDY, AM AND SHRI SAKTIJIT DEY, JM ITA NO.134/VIZAG/2013 : ASST.YEAR 2007-2008 M/S.ALUFLUORIDE LIMITED 1, VICTORY COURT, NOWROJI ROAD VISAKHAPATNAM. PAN : AABCA4793Q. VS. THE JOINT COMMISSIONER OF INCOME - TAX (OSD), CIRCLE 3(1) VISAKHAPATNAM. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.V.N.HARI RESPONDENT BY : SHRI K.V.N.CHARYA, CIT DATE OF HEARING : 03.03 .2014 DATE OF PRONOUNCEMENT : 05 .0 3 .2014 O R D E R PER J.SUDHAKAR REDDY (AM) : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), VISAKHAPATNAM , DATED 08.02.2013. 2. THE FACTS OF THE CASE ARE BOUGHT AT PARA 2 TO 4 OF THE LEARNED CIT(A)S ORDER, WHICH ARE EXTRACTED FOR READY REFERENCE. 2. THE FACTS ARE THAT THE APPELLANT HAD FILED RETU RN OF INCOME FOR A.Y.2007-08 DECLARING A TAXABLE INCOME OF RS.3, 75,17,340/- ON 29.10.2007. ITS TOTAL INCOME ACTUALLY WAS RS.4,2 7,99,748/- AND FOR THE PURPOSE OF SECTION 115J OF THE IT.ACT., IT WAS RS.3,75,17,340/-. THE RETURN OF INCOME WAS PROCESSE D U/S 143(1) AND TAX DEMAND OF RS.1,00,58,628/- WAS RAISED. THE APPELLANT FILED A RECTIFICATION APPLICATION UNDER SECTION 154 CONTENDING THAT CARRY FORWARD LOSS TO THE TUNE OF RS.4,22,99,748/- AVAILABLE TO THE APPELLANT WAS NOT MENTIONED BY MISTAKE WHILE UPLOAD ING RETURN. THE CASE WAS PICKED UP FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED. THE AO DISPOSED THE APPLICATION MADE U/S 15 4 ON 9.11.2009 ALLOWING SET OFF OF CARRY FORWARD OF UNAB SORBED DEPRECIATION RELATING TO A.Y.1997-98 TO 2005-06. TH E AO PASSED ORDER U/S 143(3) ON 09.12.2009 DISALLOWING EXPENSES TO THE TUNE OF RS.1,80,639/- (25% OF 2,22,557). THIS ASSESSMENT WAS ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 2 SUBSEQUENTLY REOPENED BY ISSUE OF NOTICE UNDER SEC. 148 ON 07.02.2011. 3. THE AO NOTED THAT THE APPELLANT HAD CLAIMED BRO UGHT FORWARD UNABSORBED DEPRECIATION LOSS OF RS.4,43,88, 186/- AND SET OFF TO THE EXTENT OF RS.4,27,99,748/- AGAINST I NCOME FOR A.Y.2007-08. THE DETAILS OF BROUGHT FORWARD UNABSOR BED DEPRECIATION WAS FOLLOWS:- ASSESSMENT YEARS TOTAL IN RUPEES 1997 - 98 1,60,09,245 1998 - 99 1,33,70,497 1999 - 2000 12,32,953 2000 - 2001 69,40,858 2002 - 2003 63,90,858 2005 - 2006 4,43,775 TOTAL 4,43,88,186 4. IN THE ASSESSMENT, THE A.O. DID NOT ALLOW SET O FF OF THE CARRY FORWARD UNABSORBED DEPRECIATION RELATING TO A Y 1997-98 AND 1998-99 FOR THE REASON THAT IT COULD HAVE BEEN CARRIED FORWARD ONLY FOR 8 YEARS I.E., UPTO ASSESSMENT YEAR 2005-06 AND 2006-07 RESPECTIVELY AND WAS NOT ELIGIBLE TO BE CAR RIED FORWARD AND SET OFF AGAINST THE INCOME FOR AY 2007-08, IN V IEW OF THE LEGISLATIVE PROVISION CONTAINED IN SEC.32(2) OF IT. ACT., AMENDED BY THE FINANCE ACT, 1996, ACCORDING TO WHICH THE UN ABSORBED DEPRECIATION COULD BE CARRIED FORWARD UPTO A MAXIMU M PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTE D. HE DID NOT ACCEPT THE APPELLANTS CONTENTION THAT BY VIRTUE OF THE AMENDMENT TO SECTION 32(2) OF THE IT.ACT, BY THE FINANCE ACT, 2001, THE UNABSORBED DEPRECIATION COULD BE CARRIED FORWARD AN D SET OFF AGAINST THE PROFITS AND GAINS FOR SUBSEQUENT YEARS WITHOUT ANY LIMIT WHATSOEVER. AS A RESULT THE A.O. WITHDREW THE SET OFF OF UNABSORBED DEPRECIATION RELATING TO AY 1997-98 AND AY 1998-99 AND DETERMINED THE TOTAL TAXABLE INCOME UNDER NORMA L PROVISIONS AT RS.1,50,08,140/-. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL CHALLE NGING BOTH THE REOPENING OF THE ASSESSMENT AS WELL AS THE DISALLOWANCE OF THE C LAIM WITH RESPECT TO THE CARRIED FORWARD OF UNABSORBED DEPRECIATION. THE LEARNED FIR ST APPELLATE AUTHORITY REJECTED ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 3 BOTH THE GROUNDS. ON THE ISSUE OF CARRIED FORWARD O F UNABSORBED DEPRECIATION RELATING TO ASSESSMENT YEARS 1997-98 TO 2005-2006, THE FIRST APPELLATE AUTHORITY PREFERRED TO APPLY THE DECISION OF THE HYDERABAD `A BENCH DECISION IN ITA NO.145/HYD/2012 IN THE CASE OF M/S.DHARTI DREDGING & INFRASTRUCTURE LTD. V. ACIT, JUDGMENT DATED 16.11.2012, WHEREIN THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. V. DCIT [257 CTR 123] WAS CONSIDERED AS WELL AS THE DECISION OF THE SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. M/S.TIMES GUARANTY LIMITED [4 ITR (TRIB. ) 210 (MUM.) (SB)]. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL ON THE FOLL OWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM IS CONTRARY TO LAW AND FAC TS OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) VISAKHAPATNAM IS NOT JUSTIFIED IN UPHOLDING THE PRO CEEDINGS INITIATED U/S 147 OF THE I.T.ACT AS VALID, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE SUBMISSI ONS MADE BY THE APPELLANT COMPANY ON THE ISSUE. HENCE, THE APPE LLANT PRAYS THE HONBLE BENCH TO KINDLY CANCEL THE ASSESSMENT O RDER PASSED BY THE ASSESSING AUTHORITY, AS THE SAID ORDER WAS B ASED ON INVALID PROCEEDINGS. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) VISAKHAPATNAM, ERRED IN RELYING ON THE DECISION OF THE HONBLE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD, IN THE CA SE OF M/S.DHARTHI DREDGING V. ADDL.CIT, HYDERABAD WITHOUT PUTTING IT TO THE APPELLANT AND ALSO WITHOUT GIVING EVEN CITATION OF THE SAID CASE. LEARNED COMMISSIONER OF INCOME-TAX IS ALSO NO T JUSTIFIED IN NOT EXPLAINING IN HIS ORDER AS TO HOW THE DECISION OF HONBLE INCOME TAX APPELLATE TRIBUNAL IS APPLICABLE IN THE FACTS OF THE APPELLANTS CASE IN PRECEDENCE OVER THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT. HENCE ORDER PASSED BY THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) VISAKHAPATNAM, IS AB INITIO VOID AND DESERVES CANCELLATION. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) VISAKHAPATNAM, IS ALSO NOT JUSTIFIED IN FOLLOWING T HE DECISION OF THE ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 4 HONBLE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD, W HEN THERE IS A DECISION OF A HIGHER FORUM I.E., THE DECISION OF THE HONBLE GUJARAT HIGH COURT, WHICH IS APPLICABLE ON ALL FOUR S IN THE FACTS AND SHOULD THEREFORE PREVAIL OVER THE ORDER OF THE HONBLE INCOME TAX APPELLATE TRIBUNAL. HENCE, THE DECISION OF THE LEARNED CIT(APPEALS) VISAKHAPATNAM IS NOT IN ACCORDANCE WIT H LAW. THE APPELLANT, THEREFORE, PRAYS THAT THE APPELLANT COMP ANY SHOULD BE GIVEN THE BENEFIT OF SET OFF OF UNABSORBED DEPRECIA TION OF THE ASST. YEAR 1997-98 AND 1998-99. HENCE, THE APPELLANT PRAY S THE HONBLE BENCH TO KINDLY GRANT RELIEF ACCORDINGLY. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, THE APPELLANT COMPANY PRAYS THE HONBLE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, FOR RELIEF . 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SRI G.V.N. HARI, ARGUED THAT (A) REOPENING IS BAD IN LAW, AND (B) THE DISALLOWANCE O F CARRIED FORWARD UNABSORBED DEPRECIATION IS COVERED IN ITS FAVOUR BY THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. V. DCIT (SUPRA). 5.1 ON THE ISSUE OF REOPENING, HE SUBMITTED THAT OR IGINALLY THE RETURN WAS PROCESSED U/S 143(1) AND AS THE SET OFF IN UNABSORB ED DEPRECIATION WAS NOT GRANTED, THE ASSESSEE FILED AN APPLICATION FOR RECT IFICATION U/S 154 AND THE ASSESSING OFFICER HAD CONSIDERED THE SAME AND PASSE D A RECTIFICATION ORDER ON 09.11.2009 AND THAT THIS ORDER WAS SPECIFICALLY REF ERRED TO AN ORDER PASSED U/S 143(3) ON 09.12.2009 AND THUS, THE ASSESSMENT ORDER PASSED ON 09.12.2009 U/S 143(3) WAS WITH APPLICATION OF MIND AND HENCE THE R EOPENING ON THE VERY SAME FACT IS DUE TO CHANGE IN OPINION. HE FURTHER ARGUED THAT NO NEW TANGIBLE MATERIAL HAS COME INTO THE POSSESSION OF THE ASSESSING OFFICER A ND THAT THE REOPENING WAS BASED ONLY ON THE VERY SAME RECORDS THAT WERE EXAMI NED U/S 143(3) EARLIER AND HENCE THE REOPENING IS BAD IN LAW. HE RELIED ON CER TAIN CASE LAWS INCLUDING THE ONE IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. [(2 010) 228 CTR (SC) 488] AND ARGUED THAT THE REOPENING BASED ON CHANGE IN OPINIO N IS BAD IN LAW. HE RELIED ON GENERAL MOTORS INDIA PVT. LTD. (SUPRA) AND ARGUED T HAT THE REOPENING WITHOUT FRESH MATERIAL IS BAD IN LAW. ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 5 5.2 ON THE ISSUE OF CARRIED FORWARD UNABSORBED DEPR ECIATION FROM ASSESSMENT YEAR 1997-98 TO 2005-2006, THE LEARNED COUNSEL SUBM ITTED THAT THE HONBLE GUJARAT HIGH COURT HAS CONSIDERED AN IDENTICAL ISSU E IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. V. DCIT (SUPRA) AND ADJUDICA TED THE MATTER IN ITS FAVOUR. HE RELIED ON THE FOLLOWING DECISIONS AND ARGUED THAT W HEN A DECISION OF A HIGH COURT ON THE POINT OF LAW IS AVAILABLE, THEN THAT INTERPR ETATION HAS TO BE FOLLOWED IN PREFERENCE TO A DECISION OF THE TRIBUNAL, EVEN IF I T IS A SPECIAL BENCH DECISION OF THE TRIBUNAL. (I) ITA NOS.2414 AND 2415/MUM/2012 ORDER DATED 09.1 0.2013 IN M/S.ARCH FINE CHEMICALS (P) LTD. (II) ITA NO.352/VIZAG/2008 ORDER DATED 13.04.2012 IN RAJAMAHENDRI SHIPPING & OIL FIELD SERVICES LTD. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, DREW THE ATTENTION TO THE ORDER OF THE ASSESSING OFFICER U/S 154 AND POINTED OUT THAT AN ERROR THAT OCCURRED WHILE FILING THE RETURN ELECTRONICALL Y ON THE ISSUE OF CARRIED FORWARD LOSSES, WAS RECTIFIED AND IT IS NOT A CASE WHERE A CONSCIOUS DECISION WAS TAKEN KEEPING IN VIEW OF THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF DCIT V. M/S.TIMES GUARANTY LIMITED (SUPRA). THUS, H E SUBMITTED THAT THERE IS NO CHANGE IN THE OPINION AS TRIED TO BE CANVASSED BY T HE LEARNED COUNSEL FOR THE ASSESSEE. ON THE ISSUE OF CARRIED FORWARD UNABSORBE D DEPRECIATION, HE SUBMITTED THAT THE HYDERABAD BENCH OF THE TRIBUNAL HAS CONSID ERED ALL THE DECISIONS IN THE CASE OF M/S.DHARTI DREDGING & INFRASTRUCTURE LTD. ( SUPRA). HE SUBMITTED THAT THE LEARNED CIT(A) BY FOLLOWING HIS DECISION HAS COMMIT TED AN ERROR. HE FURTHER POINTED OUT THAT THE TRIBUNAL HAD CONSIDERED THE JUDGMENTS OF THE MADRAS HIGH COURT IN THE CASE OF CIT V. PIONEER ASIA PACKING (P) LTD. [(2009 ) 310 ITR 198 (MAD.)] AND THE DECISION IN THE CASE OF CIT V. S & S POWER SWITCHGE AR LTD. [(2009) 318 ITR 187 ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 6 (MAD.)] AND HAS COME TO A CONCLUSION. HE SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) BE UPHELD. 7. JOINING THE ISSUE, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF PIONEER ASIA PACKING (P) LTD. (SUPRA) IS NOT ON THE ISSUE AND IN FACT A CLOS E READING OF THE SAME DEMONSTRATES THAT THIS DECISION IS IN FAVOUR OF THE ASSESSEE. SIMILARLY REFERRING THE DECISION IN THE CASE OF S & S POWER SWITCHGEAR LIMI TED (SUPRA), THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE WHETHER THE DEPREC IATION WHICH IS UNABSORBED BETWEEN ASSESSMENT YEARS 1997-98 TO 2005-2006 IS TO BE ALLOWED AFTER BEING CARRIED FORWARD, WAS NOT BEFORE THE MADRAS HIGH COU RT AND THAT THE HYDERABAD BENCH OF THE TRIBUNAL PREFERRED TO FOLLOW THIS DECI SION IN PREFERENCE TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA PVT. LTD. (SUPRA), WHICH IS EXACTLY ON THE ISSUE. 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLL OWS. 8.1 ON THE ISSUE OF REOPENING, IT IS TRUE THAT THE ASSESSING OFFICER IN HIS ORDER U/S 154 DATED 09.11.2009, WAS CONCERNED WITH THE PR OCESSING OF RETURN U/S 143(1). THE REQUEST OF THE ASSESSEE WAS, AS EXTRACTED IN OR DER U/S 154 WAS AS FOLLOWS : IN REPLY TO THE ABOVE DEMAND NOTICE THE ASSESSEE FILED A PETITION U/S 154 STATING THAT WHILE FILING THE RETURN ELECTRONICALLY AN ERROR HAS CREPT IN UPLOADING E-RETURN IN AS MUCH CARRY FORWARD LOSS TO THE TUNE OF RS.4,27,99,7 48/- WHICH IS AVAILABLE HAS ERRONEOUSLY NOT MENTIONED IN THE SCHEDULES AND ACCO RDINGLY THE RETURN WAS PROCESSED BY NOT TAKING IN TO ACCOUNT OF BROUGHT FO RWARD OF LOSSES OF PREVIOUS YEARS AND REQUESTED TO RECTIFY THE MISTAKE. THIS DEMONSTRATES THAT THE ISSUE WAS NOT SUBJECT MATTER OF RECTIFICATION U/S 154. ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 7 8.2 BE THAT AS IT MAY, THE ORDER PASSED U/S 143(3) ON 09.12.2009, THE A.O. REFERRED TO THIS RECTIFICATION U/S 154 AT PARA 2.1. HE OBSERVED AS FOLLOWS : SINCE THE CLAIM OF THE ASSESSEE-COMPANY WAS IN ORDER AS VERIF IED FROM THE RECORDS AN ORDER U/S 154 OF THE ACT WAS PASSED ON 09.11.2009 WHEREIN THE INCOME WAS DETERMINED AT NIL AFTER SETTING-OFF BROUGHT FORWARD LOSSES. IT APPEARS, THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE LEGAL ASPECT OF THIS I SSUE. AS NO EXPRESS OPINION HAS BEEN STATED ON THIS ISSUE AND WE HOLD THAT THE ASSE SSING OFFICER HAS NOT FORMED AN OPINION IN THE ORIGINAL ORDER PASSED U/S 143(3). WH EN THE ASSESSING OFFICER HAS NOT FORMED AN OPINION DURING THE COURSE OF ORIGINAL ASS ESSMENT PROCEEDINGS, REOPENING CANNOT BE SAID TO BE A CHANGE OF OPINION. 8.3 THE SECOND ISSUE THAT WAS ARGUED ON THE ISSUE O F REOPENING WAS ABSENCE OF TANGIBLE MATERIAL. IT IS WELL SETTLED THAT IN TH E ABSENCE OF TANGIBLE MATERIAL, REOPENING CANNOT BE DONE. IN THIS CASE BASED ON THE VERY SAME RECORDS AND MATERIAL THE ASSESSING OFFICER REOPENED THE CASE. T HIS FACT IS NOT IN DISPUTE. 8.4 IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. ( SUPRA), ON THE ISSUE OF REOPENING, IT WAS HELD AS FOLLOWS:- HELD : FROM THE FACTS IT IS CLEAR THAT THERE WAS N O OMISSION OR FAILURE ON THE PART ;OF THE ASSESSEE TO MAKE A RETU RN UNDER S.139. THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE YEAR. NOR SUBS EQUENTLY, THE AO HAD ANY TANGIBLE MATERIAL ON RECORD, ON THE BASI S OF WHICH HE COULD HAVE FORMED HIS OPINION OR COULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T. THE AO HAS THE POWER TO REOPEN THE ASSESSMENT PROCEEDINGS IF SOME TANGIBLE MATERIAL HAD COME TO HIS KNOWLEDGE. HOWEVE R, HE CANNOT REOPEN THE ASSESSMENT MERELY BECAUSE ON THE SAME DO CUMENTS CONSIDERED EARLIER BY HIM, ANOTHER INFERENCE WAS PO SSIBLE. THE REASSESSMENT CAN ONLY TAKE PLACE IF THE CONDITIONS LAID DOWN UNDER S. 147 ARE FULFILLED OTHERWISE UNDER THE GARB OF CHANGE OF OPINION, THE AO MAY REVIEW HIS EARLIER ASSESSMENT O RDER. THE AO WHILE FORMING HIS OPINION AND RECORDING REASONS UND ER S.147 IN THE INSTANT CASE, WAS AWARE THAT AT THE TIME OF ORI GINAL ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 8 ASSESSMENT, THE AO HAD CONSIDERED THE MATERIAL ON R ECORD AND TOOK A CONSCIOUS DECISION IN SCRUTINY ASSESSMENT AN D ALLOWED THE UNABSORBED DEPRECIATION PERTAINING TO ASST. YR. 199 7-98 OF RS.43,60,21,158 TO BE SET OFF AGAINST THE INCOME OF ASST. YR. 2006- 07. NO TANGIBLE MATERIAL WAS AVAILABLE WITH THE AO WHILE FORMING OPINION UNDER S.147. REOPENING OF ORIGINAL ASSESSME NT ORDER ON THE GROUND THAT UNABSORBED DEPRECIATION WAS ALLOWED TO BE SET OFF WRONGLY, AGAINST THE PROVISIONS OF AMENDED S. 32(2) WOULD AMOUNT TO REVIEWING THE ORIGINAL ASSESSMENT ORDER W HICH IS NOT PERMISSIBLE. IF ON THE FACTS DISCLOSED BY THE ASSES SEE, A WRONG LEGAL INFERENCE IS TAKEN BY THE AO AT THE TIME OF O RIGINAL ASSESSMENT THEN IT WOULD NOT CONFER ANY POWER ON HI M UNDER S.147 TO COMMENCE REASSESSMENT PROCEEDINGS. THE AO CANNOT TAKE BENEFIT OF HIS OWN WRONG AND REOPENING THE ASS ESSMENT PROCEEDINGS UNDER S.147. IT WOULD BE A CASE OF SECO ND THOUGHT ON THE SAME MATERIAL AND THE OMISSION TO DRAW THE CORR ECT LEGAL PRESUMPTION DURING THE ORIGINAL ASSESSMENT PROCEEDI NGS DID NOT WARRANT INITIATION OF PROCEEDINGS UNDER S.147. WHET HER THE LEGAL INFERENCE HAS BEEN RIGHTLY DRAWN OR NOT IS NONE OF THE CONCERN OF THE SUBSEQUENT AO AND THE ASSESSEE CANNOT BE HELD R ESPONSIBLE FOR THE REMISSNESS ON THE PART OF AO IN NOT APPLYIN G THE CORRECT LAW. THE MISTAKE OF LAW CLAIMED TO HAVE BEEN COMMIT TED BY THE AO IN ALLOWING UNABSORBED DEPRECIATION OF ASST. YR. 1997-98 TO BE SET OFF AGAINST THE INCOME OF ASST. YR. 2006-07 WAS NOT DUE TO ASSESSEES OMISSION OR FAILURE TO DISCLOSE FULLY AN D TRULY ALL MATERIAL FACTS. THE MISTAKE, IF ANY, COMMITTED BY T HE AO AT THE TIME OF ASSESSMENT COULD NOT FURNISH A GROUND TO TH E AO TO REOPEN THE ORIGINAL ASSESSMENT ORDER AS IT WOULD AM OUNT TO CHANGE OF OPINION. MERELY BECAUSE THE AO DID NOT GI VE REASONS FOR ALLOWING THE CLAIM OF UNABSORBED DEPRECIATION I N THE ORIGINAL ASSESSMENT ORDER WOULD NOT MAKE THE ASSESSMENT ORDE R ILLEGAL. THE AO, IN LAW, MUST BE DEEMED TO HAVE FORMED AN OP INION THAT THE ASSESSEES CLAIM DESERVES TO BE ACCEPTED. THUS, IN SUCH A SITUATION, THE ORIGINAL ASSESSMENT ORDER CANNOT BE REOPENED AS IT WOULD AMOUNT TO CHANGE OF OPINION BY THE AO AND THE REASSESSMENT ORDER IS LIABLE TO BE SET ASIDE. CIT VS. KELVINATOR OF INDIA LTD. (2010) 228 CTR (SC) 448 : (2010) 34 D TR (SC) 49 : (2010) 320 ITR 561 (SC) AND GUJARAT POWER CORPORATI ON LTD. VS. ASSTT. CIT (2012) 77 DTR (GUJ) 89 RELIED ON. CONCLUSION : AO HAS THE POWER TO REOPEN THE ASSESS MENT PROCEEDINGS IF SOME TANGIBLE MATERIAL HAD COME TO H IS KNOWLEDGE BUT HE CANNOT REOPEN THE ASSESSMENT MERELY BECAUSE ON THE SAME DOCUMENTS CONSIDERED EARLIER BY HIM, ANOTHER I NFERENCE ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 9 WAS POSSIBLE; AO CANNOT TAKE BENEFIT OF HIS OWN WRO NG AND REOPEN THE ASSESSMENT PROCEEDINGS UNDER S. 147; IT WOULD BE A CASE OF SECOND THOUGHT ON THE SAME MATERIAL AND THE OMISSION TO DRAW THE CORRECT LEGAL PRESUMPTION DURING THE ORIGI NAL ASSESSMENT PROCEEDINGS DID NOT WARRANT INITIATION OF PROCEEDIN GS UNDER S. 147. 8.5 HENCE WE UPHOLD THE CONTENTION OF THE ASSESSEE ON THE ISSUE OF REOPENING ON THE GROUND THAT THE SAME WAS MADE WITHOUT ANY TA NGIBLE MATERIAL. THIS GROUND IS ALLOWED. 8.6 COMING TO THE CARRY FORWARD AND SET OFF OF UNAB SORBED DEPRECIATION RELATING TO ASSESSMENT YEARS 1997-98 TO 2005-2006, THE HON BLE GUJARAT HIGH COURT HAS HELD AS FOLLOWS:- HELD : THE CBDT CIRCULAR NO.14 OF 2001 CLARIFIES T HE INTENT OF THE AMENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO C ONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 Y EARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM ASST. YR. 2002-03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSORBED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1 ST APRIL, 2002 (ASST. YR. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF S. 32(2) AS AMEND ED BY FINANCE ACT, 2001 AND NOT BY THE PROVISIONS OF S.32 (2) AS IT STOOD BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN ASST. YR. 1997-98 ONLY FOR EIGHT SUBSEQUENT ASSE SSMENT YEARS EVEN AFTER THE AMENDMENT OF S. 32(2) BY FINANCE ACT , 2001 IT WOULD HAVE INCORPORATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF S. 32(2), A PURPOSIVE AND H ARMONIOUS INTERPRETATION HAS TO BE TAKEN. CIRCULAR NO1.4 OF 2 001 HAD CLARIFIED THAT UNDER S. 32(2), IN COMPUTING THE PROFITS AND G AINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF D EPRECIATION UNDER S.32 SHALL BE MANDATORY. THEREFORE, THE PROVI SIONS OF S.32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE AVAILABLE IN THE ASST. YRS. 1997-98, 1999-2000, 2000-01 AND 2001-02 TO BE CARRI ED FORWARD TO THE SUCCEEDING YEARS, AND IF ANY UNABSORBED DEPR ECIATION OR PART THEREOF COULD NOT BE SET OFF TILL THE ASST. YR . 2002-03 THEN IT ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 10 WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OF F AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS. ANY UNABSORBED DEPRE CIATION AVAILABLE TO AN ASSESSEE ON 1 ST APRIL, 2002 (ASST. YR. 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF S. 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION HAD BEEN DISPENS ED WITH, THE UNABSORBED DEPRECIATION FROM ASST. YR. 1997-98 UPTO THE ASST. YR. 2001-02 GOT CARRIED FORWARD TO THE ASST. YR. 2002-0 3 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISI ONS OF S. 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WAS AVAILABLE F OR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS O F SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. CONCLUSION : AMENDMENT OF S. 32(2) BY FINANCE ACT, 2001 IS APPLICABLE FROM ASST. YR. 2002-03 AND SUBSEQUENT YE ARS AND THEREFORE UNABSORBED DEPRECIATION FROM ASST. YR.199 7-98 UPTO THE ASST. YR. 2001-02 GOT CARRIED FORWARD TO THE ASST. YR. 2002-03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF S. 32(2) AS AMENDED BY FINANCE ACT, 2001 AND WAS AV AILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND G AINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. 8.7 THE RELIANCE WAS PLACED BY THE LEARNED DEPARTME NTAL REPRESENTATIVE ON THE DECISION OF THE HYDERABAD `A BENCH OF THE TRIBUNAL IN THE CASE OF M/S.DHARTI DREDGING & INFRASTRUCTURE LTD. (SUPRA). IN THIS DEC ISION, THE BENCH REFERRED THE JUDGMENTS OF THE MADRAS HIGH COURT IN THE CASE OF P IONEER ASIA PACKING (P) LTD. AND IN THE CASE OF S & S POWER SWITCHGEAR LTD. (SUP RA). 8.8 WE HAVE GONE THROUGH THESE DECISIONS. IN BOTH T HESE DECISIONS THE ISSUE THAT WAS CONSIDERED, WAS DIFFERENT FROM THE ISSUE U NDER CONSIDERATION BEFORE US. IN THE CASE OF S & S POWER SWITCHGEAR LTD., THE HONBL E COURT WAS CONSIDERING AN ISSUE WHERE THE SET OFF OF UNABSORBED DEPRECIATION BROUGHT FORWARD AS ON 1 ST APRIL, 1997 WAS CLAIMED AND IT WAS HELD THAT SUCH OPENING BALANCE OF UNABSORBED DEPRECIATION AS ON 01.04.1997 COULD BE SET OFF AGAI NST THE BUSINESS INCOME OR INCOME UNDER ANY OTHER HEADS FOR THE ASSESSMENT YEA R 1997-98 AND SUBSEQUENT YEARS. SIMILARLY, IN THE CASE OF PIONEER ASIA PACKI NG (P) LTD., THE HONBLE MADRAS HIGH COURT WAS UPHELD THE ORDER OF THE TRIBUNAL, WH EREIN THE MATTER WAS REMANDED ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 11 TO THE AO TO VERIFY AS MUCH DEPRECIATION WAS AVAILA BLE UP TO 1 ST APRIL, 1997. IN BOTH THESE JUDGMENTS THE ISSUE WAS NOT THE ALLOWABILITY OF UNABSORBED DEPRECIATION BETWEEN 1997-98 AND 2005-2006. THUS, BOTH THESE DEC ISIONS ARE NOT APPLICABLE TO THE ISSUE ON HAND. ON THE CONTRARY, THE ISSUE BEFOR E THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD.(SUPRA ) IS ON ALL FOURS TO THE ISSUE BEFORE US. 8.9 THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF RAJAMAHENDRI SHIPPING & OIL FIELD SERVICES LTD. (SUPRA) RELIED U PON THE DECISION OF A THIRD MEMBER IN THE CASE OF KANEL OIL & EXPORT INDS. LTD. (121 ITD 596) AND HELD THAT WHEN THERE IS ONLY ONE JUDGMENT OF A HIGH COURT, TH OUGH NOT JURISDICTIONAL HIGH COURT, AND WHEN NO CONTRARY HIGH COURT DECISION IS AVAILABLE ON THE ISSUE, THEN THE HIGH COURT DECISION HAS TO BE FOLLOWED IN PREFERENC E TO THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL. 8.10 IN THE CASE OF M/S.ARCH FINE CHEMICALS (P) LTD . (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL FOLLOWED THE DECISION OF THE HONBL E GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. (SUPRA) AND ADJUD ICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. 8.11 IN VIEW OF THE ABOVE DISCUSSION, AS THERE IS S OLE HIGH COURT DECISION ON THIS MATTER, WE RESPECTFULLY FOLLOW THE SAME AND ALLOW T HE CLAIM OF THE ASSESSEE. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS 5 TH DAY OF MARCH, 2014. SD/- SD/- ( SAKTIJIT DEY ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM; DATED : 5 TH MARCH, 2014. DEVDAS* ITA NO.134/VIZAG/2013. M/S.ALUFLUORIDE LIMITED. 12 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT, VISAKHAPATNAM. 4. CIT(A) VISAKHAPATNAM. 5. DR, ITAT, VISAKHAPATNAM. 6. GUARD FILE. BY ORDER, //TRUE COPY// (SENIOR PRIVATE SECRETARY) ITAT, VISAKHAPATNAM