M/s. Overseas Synthetics Limited, Baroda V. The Income Tax Officer Ward 1(4), Surat

ITA 2042/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0038 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANTHONY PARIATH
• Assessee Lawyers: BHAVIN J MARFATIA
• Keywords: Depreciation; Rectification of order; Speculation loss; Unabsorbed depreciation
• Section: 143(3); 32; 54; 154

Judgement Text

I.T.A. NO . 2042 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] I.T.A. NO. 2042 /A HD/ 20 1 3 ASSESSMENT Y EAR : 20 0 8 - 09 OVERSEAS SYNTHETICS LIMITED , ..... ...... . ... . APPELLANT BLOCK NO.355, MANJUSAR KUMPAD RO A D, VILLAGE MANJUSAR, TALUKA SAVLI, DISTRICT VADODARA 391 775 [ PAN: AA A C O 2755 P ] VS. INCOME TAX OFFICER , WARD 1 ( 4 ), SURAT . ............... . RESPONDENT APPEARANCES BY: BHAVIN J. MARFATIA FOR THE APPELLANT ANTHONY PARIATH FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 11.11. 2016 DATE OF PRONOUNCING THE ORDER : 11. 1 1 .2016 DICTATED ORDER 1. BY WAY OF THIS APPEAL , THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 22.05.2013, P ASSED BY THE LEARNED CIT(A) , IN THE MATTER OF RECTIFICATION OF MISTAKE UNDER SECTION 154 R.W.S. 143(3) OF THE I NCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008 - 09. 2. GRIEVANCE RAISED BY THE ASSESSEE APPELLANT ARE AS FOLLOWS : - 1. T HE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN REJECTING THE CONDONATION APPLICATION FILED BY THE APPELLANT. 2. T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN PASSING THE ORDER U/S 1 54 OF THE ACT. I.T.A. NO . 2042 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 2 OF 6 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN NOT ALLOWING CARRY FORWARD OF UNABSORBED DEPRECIATION AMOUNTING TO RS.2,38,88,963 / - . 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN HOLDING THAT THE QUANTUM OF C/F DEPRECIATION AND LOSSES CAN BE DECIDED ONL Y IN THE YEAR IN WHICH THE SET - OFF IS CLAIMED. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND IN LAW IN APPLYING THE PRO VISIONS OF SECTION 251(L)(C) DESPITE THE FACT THAT PROCEEDINGS U/S 154 ARE PART OF ASSESSMENT PROCEEDINGS ONLY. 3. TO ADJUDICATE ON THIS APPAL ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS AND W H ILE FINALISING THE RESULTANT ASSESSMENT ORDER UNDER SECTION 143(3) ON 30 TH NOVEMBER 2010, THE ASSESSING OFFICER INTER ALIA NOTED THAT THE ASSESSEE IS ALLOWED TO CA RRY FORWARD THE FOLLOWING DEPRECIATION/LOSS: A.Y. UNABSORBED DEPRECIATION (RS.) UNABSORBED B USINESS LOSS (RS.) SPECULATION LOSS (RS.) 1996 - 97 71,13,242/ - ------ ------ 1997 - 98 39,02,556/ - ------ ------ 1998 - 99 29,49,915/ - ------ ------ 2000 - 01 2,84,40,059/ - ------ ------ 2001 - 02 2,84,40,059/ - ------ ------ 2002 - 03 71,65,079/ - 2,50, 96, 345/ - ------ 2003 - 04 25,49,144/ - 1,39,21,112/ - ------ 2004 - 05 22,82,238/ - 30,95,432/ - ------ 2007 - 08 19,17,657/ - 19,17,657/ - ------ 2008 - 09 ------ ------ 1,87,564/ - I.T.A. NO . 2042 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 3 OF 6 4. ON 28.06.2012, HOWEVER, THE ASSESSING OFFICER PASSED REIFICATION ORDER WHICH INTER ALIA HOLD S THAT BY MISTAKE IN THE ASSE SSMENT ORDER UNDER SECTION 143(3) DATED 30.11.2010 THE ASSESSEE WAS ALLOWED TO C A RRY FORWARD THE UNABSORBED DEPRECATION OF A.Y. 1997 - 98 (RS.39,02,556), 1998 - 99 (RS.29,49,915) AND 2000 - 01 (RS.1,70,36,492) WHEREAS THE UNA BSORBED DEPRECATION RELEVANT TO ASSESSMENT YEAR S 1997 - 98, 1998 - 99 & 2 000 - 2001 IS ALLOWABLE TO BE C ARRIED FORWARD FOR FUTURE ADJUSTMENT UPTO ASSESSMENT Y EAR 2008 - 09. I T WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER CONCLUDE D THAT THE IRREGULAR A LLOWANC E OF UNABSORBED DEPRECIATION OF RS.2,38,88,963/ - A S DISCUSSED A BOVE IS REQUIRED TO BE DISALLOWED AS PER SUB - SECTION 2(III)(B) OF SE CTION 32 AS AMENDED BY THE FINANCE (NO.2) ACT, 1996 W.E.F. 01.04.1997 . 5. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE T HE L EARNED CIT ( A ) . THE APPEAL , HOWEVER , WAS REJECTED BY THE LEARNED CIT(A) FOR MORE REA SONS THAN ONE. LEARNED CIT(A) WAS OF THE VIEW THAT THE DELAY OF 56 DAYS IN FILING OF THE APPEAL WHICH WAS SA ID TO BE ATTRIBUTED TO THE FACT THAT THE ASSESSEE S BUSINESS WAS CLOSED, DOES NOT DESERVE TO BE CONDONED. IN HIS OPINION, THE EXPLANATION GIVEN BY THE ASSESSEE WAS OF GENERAL IN NATURE AND DO E S NOT AMOUNT TO SUFFICIENT CAUS E . HE DID NOT STOP AT THAT AND PROCEEDED TO DECIDE T HE MA TTER ON MERITS AS W E LL . L EARNED C IT ( A ) WAS OF THE VIEW THAT THE ACTION OF THE ASSESSING OFFICER IN ALLOWING THE CARRY FORWARD OF UNABSORBED DEPRECATION VIDE ASSESSMENT ORDER DATED 30.11.2010, AS ALSO THE ACTION OF THE AS SESSING O FFICER IN DECLINING THE SAID CARRY FORWARD VIDE RECTIFICATION ORDER DATED 28.06.2012, IS WHOLLY ACADEMIC INASMUCH AS THE CALL AS TO WHETHER UNABSORBED DEPRECATION OR LOSS IS ENTITLED TO BE SET OFF CAN ONLY BE TAKEN IN THE I.T.A. NO . 2042 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 4 OF 6 YEAR IN WHICH THE SET - OFF IS CLAIM ED. IT WAS IN THIS BACKGROUND THAT HE DISMISSED THE GRIEVANCE RAISED BEFORE HIM ON MERITS. WHILE DOING SO, HE OBSERVED AS FOLLOWS: - 7.6 THEREFORE, THE MANDATE OF THE ASSESSING OFFICER, WHILE PASSING THE ASSESSMENT ORDER FOR ASSTT Y EAR 2008 - 09 DID NOT IN CLUDE DECISION REGARDING THE QUANTUM OF CARRIED FORWARD DEPRECIATION/LOSSES FROM ASSESSMENT YEA R S 1997 - 98 TO 2007 - 08. THIS DECISION CAN ONLY BE TAKEN IN THE ORDERS FOR ASSESSMENT YEARS TO WHICH THESE LOSSES/DEPRECIATION PERTAIN TO OR THE ASSESSMENT YEARS , IN WHICH, THEIR SET - OFF IS CLAIMED. THEREFORE, THIS APPELLATE ORDER OF NOT ADMITTING THE APPEAL AGAINST ORDER UNDER SECTION 154, ON ACCOUNT OF DELAY IN FILING OF APPEAL, SHOULD NO T BE TAKEN AS FINDING ON THE QUANTUM OF UNABSORBED DEPRECIATION /BUSINESS LO SSES ALLOWED TO BE CARRIED FORWARD OR NOT ALLOWED TO BE CARRIED FORWARD A S FAR AS ASSESSMENT YEA R S OTHER THA N ASSESSMENT YEAR 2008 - 09 ARE CONCE RNED . 7.7 IT SHALL THEREFORE, BE OPEN FOR THE ASSESSING OFFICER TO EXAMINE THIS CLAIM IN THE Y E AR, IN WHICH THE S ET OFF OF SUCH LOSSES /UNABSORBED DEPRECIATION IS CLAIMED. 6. THE ASSESSEE IS AGGRIEVED A N D IS IN APPEAL BEFORE ME. 7 . LEARNED COUNSEL S SUBMISSION IS THAT CLOSURE OF THE BUSINESS IS A SERIOUS ISSUE AND THE FACT THAT THE ASSESSEE VIRTUALLY CLOSED DOWN HIS BUSINESS AT THE RELEVANT POINT OF TIME, WAS CERTAINLY A GOOD AND SUFFICIENT CAUSE FOR EXPLAINING THE DELAY IN FILING THE APPEAL. HE SUBMITS THAT THE LEARNED CIT(A) WAS COMPLETELY IN ERROR IN NOT ADMITTING THE APPEAL. HE ALSO POINTS OUT THAT THE APPEA L BEING NOT ADMITTED BY THE LEARNED CIT(A) HAS BEEN CONSTRUED BY THE ASSESSING OFFICER AS RESULTING IN A LEGAL POSITION THAT THE OBSERVATION MADE BY THE ASSESSING OFFICER IN THE RECTIFICATION ORDER STAND S GOOD IN LAW. IN THESE CIRCUMSTANCES, THE OBSERVATI ONS MADE BY THE LEARNED CIT(A) TO THE EFFECT THAT THE INDEPENDENT CALL IS TO BE TAKEN BY THE ASSESSING OFFICER IN THE YEAR OF SET - OFF CEASES TO HAVE ANY LEGAL BASIS. HE THUS URGES ME (A) T O H OLD THAT THE LEARNED CIT(A) OUGHT TO HAVE DECIDED THE MA T TER ON MERITS RATHER THAN SUMMARILY DISMISSING IN LIMINE (B) T O HOLD THAT IN ALL FAIRNESS INDEPENDENT CALL IS TO BE TAKEN BY THE ASSESSING OFFICER IN THE YEAR IN WHICH SET - OFF IS CLAIMED. I.T.A. NO . 2042 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 5 OF 6 8 . WITHOUT PREJUDICE TO THIS STAND, HE POINTS OUT THAT AS HELD BY THE H ON BLE JURISDICTIONAL H IGH C OURT IN THE CASE OF GENERAL MOTORS INDIA (P.) . LTD . VS. DCIT (2012) 25 T XMA N N.COM 364 ( GUJ) , THE ASSESSEE DESERVE S TO SUCCEED ON MERITS INASMUCH A S THE UNABSORBED DEPRECIATION HA S BEEN HELD TO BE ELIGIBLE FOR CARRY FORWARD FOR UNLI MITED PERIOD. 9 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIES UPON THE S T AND OF THE AUTHORITIES BELOW. HIS CONTENTION IS THAT THE ORDER OF THE LEARNED CIT(A) , WHICH IS VERY ELABORATE AND WELL REASONED, DESERVES TO BE SUSTAINED. HE ALSO POINTS OUT THAT LEGAL POSITIONS IS UNAMBIGUOUS INASMUCH AS, AS EXPLAINED BY THE ASSESSING OFFICER IN THE RECTIFICATION ORDER , THE UNABSORBED DEPRECIATION CANNOT BE CARRIED FORWARD INDEFINITELY. HE THUS U RGED ME TO UPHOLD THE STAND OF THE AUTHORITIES BELOW AND DECLINE TO INTERFERE IN THE MATTER. 10. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 1 1 . I FIND MYSELF IN CONSIDERED AGREEMENT WITH THE STAND OF THE L EANED COUNSEL THAT CLOSURE OF BUSINESS IN THE PRESENT CASE SHOULD INDEED HAVE BEEN CONSTRUED AS SUFFICIENT CAUSE FOR DELAY IN FILING THE APPEAL AND THAT THE LEARNED CIT(A) OUGHT T O HAVE CONDONED THE DELAY. I HOLD SO . H AVING HELD SO, HOWEVER, I FIND, AS RIGHTLY POINTED BY THE L EARNED CI T(A) THAT OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3), AS ALSO OBSERVATIONS MADE BY THE ASSESSING OFFICER IN SUBSEQUENT RECTIFICATION ORDER , ARE WHOLLY ACADEMIC INASMUCH A S THE CALL ON ELIGIBILITY OF SET - OFF OF UNABSORBED DEPRECIATION OR FOR THAT PURPOSE UNABSORBED LOSSES CARRIED FORWARD FROM EARLIER YEARS IS TO BE TAKEN BY THE ASSESSING OFFICER , SEIZED OF ASSESSMENT IN WHICH THE SET - OFF IS CLAIMED. THAT IS WHAT H ON BLE S U PREME COURT HAS HELD THOUGH IN THE CONTEXT OF I.T.A. NO . 2042 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 6 OF 6 LOSSES CARRIED FORWARD, IN THE CASE OF CIT VS. MANMOHAN D AS , 59 ITR 699. THE ENTIRE EXERCISE CARRIED OUT , SO FAR AS THE IMPUGNED CARRY FORWARD OF UNABSORBED DEPRECIATION PERTAINING TO PRIOR YEARS, IS CONCERNED IS WHOLLY ACADEMIC. IN THIS VIEW OF THE MAT T ER, I VACATE THE RECTIFICATION ORDER DATED 28.06.2012 AS ACADEMIC AND INFRUCTUOUS AND MAKE IT CLEAR THAT THE CALL REGARDING ELIGIBILITY OF THE SAID UNABSORBED DEPRECATION IN QUESTION WILL BE TAKEN, ON MERITS, A ND IN ACCORDANCE WITH LAW, IN THE YEAR IN WHICH THE SET - OF IS CLAIMED. 1 2 . IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICAT E D ABOVE. PRONOUNCED AND DICTATED IN THE OPEN COURT TODAY ON 1 1 TH DAY OF NOVEMBER, 2016. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 11 TH DAY OF NOVEMBER , 2016. PBN/* COPIES TO: (1) THE APPELLANT ( 2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD