DEFIANCE KNITTING INDUSTREIS P. LTD, AMBERNATH V. DCIT CIR 1 KALYAN, THANE

ITA 2053/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3785 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 28-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH RAJAHANS DR
• Assessee Lawyers: RAJESH CHAMARIA
• Keywords: Depreciation; Principle of natural justice; Unabsorbed depreciation
• Section: 143(3); 68; 263

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI ! . '# , % &'( & BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM & ./I.T.A. NO.2053/M/2012 ( ) * +* / ASSESSMENT YEAR :2008-2009) DEFIANCE KNITTING INDUSTRIES PVT. LTD., PLOT NO.K-6, ADDL. AMBARNATH INDUSTRIAL AREA, ANAND NAGAR, AMBARNATH 421506. / VS. COMMISSIONER OF INCOME TAX-II, 9 TH FLOOR, VARDAAN WAGALE ESTATE, THANE-400 604. (, % & ./PAN :AAACD 2225 R ( ,- /APPELLANT) .. ( ./,- / RESPONDENT) ,- 0 1 & / APPELLANT BY : SHRI RAJESH CHAMARIA ./,- 0 1 & / RESPONDENT BY : SHRI ASHUTOSH RAJAHANS , DR & 0 2% /DATE OF HEARING :9.4.2013 3+ 0 2% /DATE OF PRONOUNCEMENT :15.5.2013 '4 '4 '4 '4 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 28.3.2012 IS AGAINST THE ORDER OF CIT-II, THANE DATED 4.1.2012 FOR THE ASSESSMENT YEAR 2008-2 009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. THE LD CIT ERRED IN LAW AND FACTS IN PASSING ORDER U/S 263 OF THE ACT DIRECTING THE AO NOT TO ALLOW SET OFF OF UNABSORBED DEPRECIATION LOSS OF AY 2000-2001 & 2001-2002 WITHOUT APPRECIATING THE FACT THAT THE AO HAS PASSED THE ORDER AFTER DUE APPLICATION OF MIND AND TAKEN A POSSIBLE VIEW IN TH E MATTER HENCE THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERES T OF THE REVENUE. THE ORDER UNDER SECTION 263 REQUIRED TO BE QUASHED. 2. WITHOUT PREJUDICE TO ABOVE, THE AO HAS DULY VERI FIED THE FACTS AND RECORDS AND ALLOWED THE SETOFF OF UNABSORBED DEPRECIATION LOSS PERTAINING TO AY 2000-2001 AND 2001-2002 AGAINST INCOME FOR THE YEAR BY TAKING A POSSIBLE VIEW IN THE MATTER HENCE THE ORDER OF CIT IS MISPLACED, WRONG AND REQU IRED TO BE QUASHED. 3. THE DIRECTION OF THE LD CIT TO DISALLOW SET OFF OF UNABSORBED DEPRECIATION OF AY 2000-2001 & 2001-2002 IS MISPLACED, WRONG AND AGAIN ST THE PRINCIPLES OF NATURAL JUSTICE AS IT IS INTERFERING OR VITIATING THE INDEP ENDENT DECISION OF THE AO. THE LD CIT 2 OUGHT TO HAVE DIRECTED THE AO TO CONSIDER AND ALLOW SET OFF OF UNABSORBED DEPRECIATION AS PER THE PROVISIONS OF ACT. 4. THE LD CIT ERRED IN LAW AND FACTS IN DIRECTING T O SET OFF UNABSORBED DEPRECIATION OF AY 2002-03 TO 2005-06 AGAINST INCOM E FROM OTHER SOURCES AND NOT TO ALLOW CARRY FORWARD OF UNABSORBED DEPRECIATION AS T HERE REMAINS NOTHING. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF KITTING AND PROCESSING OF COTTON YA RN, FABRICS, MANUFACTURING OF GARMENTS AND EXPORTS OF THE SAME. ASSESSEE FILED TH E RETURN OF INCOME DECLARING TOTAL INCOME OF RS. NIL AFTER SET OFF OF UNABSORBED BUSINESS LOSS OF RS.5,92,77,952/-. AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT B Y MAKING CERTAIN ADDITIONS AND DENYING THE CLAIM OF SET OFF OF DEPRECIATION OF LOS SES AS CLAIMED IN THE RETURN. DURING THE ASSESSMENT PROCEEDINGS, AFTER EXAMINING THE SH ARE APPLICATION MONEY CLAIMS, AO ADDED AN AMOUNT OF RS. 16.20 CR TO THE TOTAL INC OME OF THE ASSESSEE U/S 68 OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 22,31,43,691/-. ACCORDINGLY , CIT-11, THANE ISSUED NOTICE U/S 263 PROPOSING RE-VERIFICATION OF SET OFF OF UNABSOR BED DEPRECIATION OF LOSSES AGAINST INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER S OURCES ON THE GROUND THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD CIT PASSED ORDER U/S 263 HOLDING THAT THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, WAS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRE CTED THE AO TO RE-COMPUTE THE TAXABLE INCOME OF THE ASSESSEE WITHOUT ALLOWING SET OFF OF UNABSORBED DEPRECIATION LOSS PERTAINING TO AY 2000-01 AND 2001-02 AGAINST INCOME FROM OTHER SOURCES AND SET OFF THE LOSS AND UNABSORBED DEPRECIATION OF AY 2002-03 & 2005-06, HENCE NO LOSS OR UNABSORBED DEPRECIATION LOSS OF AY 2002-03 TO 2005-06 REMAINS TO BE CARRIED FORWARDED. AGGRIEVED WITH THE ABOVE DECISION OF TH E CIT U/S 263 OF THE ACT, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING T HE GROUNDS MENTIONED ABOVE. 4. AT THE OUTSET, SHRI RAJESH CHAMARIA, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE CIT INVOKED THE PROVISIONS ON FINDING THAT THE UNABSORBED DEPRECIATION PERTAINING TO THE AY 2000-01 AND 2001-02 IS GIVEN S ET OFF AGAINST THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE SAME IS NOT ALLOWABLE FOR THE SAID ASSESSMENT YEARS, THEREFORE, IT IS A CASE OF ERRONE OUS ASSUMPTION OF LAW. 3 ACCORDINGLY, CIT HELD THAT THE ORDER PASSED BY THE AO IS ERRONEOUS WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THI S REGARD, AT THE OUTSET, LD COUNSEL MENTIONED THAT THE INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES DOES NOT EXIST, IN THIS CASE, CONSIDERING THE FACT THAT THE ADDITION MADE BY THE AO U/S 68 IS DELETED BY THE CIT AND IS LIKELY TO BE CONFIRMED BY THE TRIBUNAL AND HIGHER JUDICIARY. THEREFORE, THIS EXERCISE IS UNWARRANTED AND UNCALLE D FOR. TO THAT EXTENT, THE REVIEW ORDER IS INVALID. FURTHER, MENTIONING ABOUT THE ADD ITION MADE U/S 68 OF THE ACT, LD COUNSEL STATED THAT THE ASSESSEE RECEIVED SHARE APP LICATION MONEY AMOUNTING TO RS. 16.21 CRS IN THE EARLIER YEARS AND THE ADDITION IF ANY HAS TO BE MADE, IT SHOULD BE MADE IN THE YEAR OF RECEIPT OF THE SAID SHARE APPLI CATION MONEY AND NOT IN THE YEAR UNDER CONSIDERATION. THEREFORE, SUCH ADDITIONS SHO ULD NOT SURVIVE IN VIEW OF THE PLETHORA OF JUDGMENTS OF VARIOUS COURTS. FURTHER, L D COUNSEL MENTIONED THAT THE CIT MIGHT HAVE ASSUMED JURISDICTION VALIDLY CONSIDERING THE ERRONEOUS ASSUMPTION OF LAW BY THE AO. FURTHER, HE ALSO MENTIONED THAT THE APP LE MAY BE DISPOSED OF GIVING THE DIRECTION TO THE AO TO NOT TO MAKE ADJUSTMENTS. 5. ON CONSIDERING THE ABOVE SUBMISSIONS, WE FIND FO RCE IN THE SUBMISSIONS OF THE ASSESSEE. THIS IS THE CASE OF THE ASSESSEE THAT THE ADDITION MADE U/S 68 OF THE ACT UNDER THE HEAD OF INCOME INCOME FROM OTHER SOURCES DOES NOT LEGALLY SURVIVE CONSIDERING THE YEAR OF RECEIPT OF THE SAID APPLICA TION MONEY. CONSEQUENTLY, THE CLAIM RELATING TO SET OFF OF THE LOSSES AGAINST SUC H INCOME FROM OTHER SOURCES BECOMES ACADEMIC EXERCISE. WE ALSO FIND THAT IT IS SETTLED ISSUES APPLICATION MONEY RELATED ADDITIONS ARE MADE U/S 68 OF THE ACT IN THE YEAR OF RECEIPT OF SUCH MONEY AND THE OPENING BALANCES ARE NOT ADDED AS THE INCOM E OF THE YEAR UNDER CONSIDERATION. THE RECORDS SUGGEST THAT THE IMPUGNE D ADDITIONS ARE MERELY OPENING BALANCES UNDER SHARE APPLICATION MONEY ACCOUNT. O F COURSE, IT IS ALSO A SETTLED ISSUE THAT THE DEPRECIATION LOSS CANNOT BE SET OFF AGAINS T THE INCOME FROM OTHER SOURCES . BUT IN THE INSTANT CASE, THERE IS NO SUCH VALID OTH ER INCOME, IF THE VALID ADDITION ARE MADE BY THE AO. THE SAID ARGUMENTS WERE NOT TAKEN U P BEFORE THE CIT DURING THE REVIEW PROCEEDINGS. THEREFORE, IN OUR OPINION, ON T HE FACTS SPECIFIC TO THIS CASE, THERE IS NO LOSS OF REVENUE PREJUDICIAL TO THE INTE REST OF REVENUE. HENCE IN OUR 4 OPINION, THE CIT WRONGLY ASSUMED JURISDICTION. THER EFORE, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013. '4 0 3+ % 5'6 15.5.2013 0 7 SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) /VICE PRESIDENT % &'( / ACCOUNTANT MEMBER MUMBAI; 5' DATED 15/5/2013 . ) . & ./ OKK , SR. PS '4 0 .)289 :9+2 /COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. 9 <7 .)2) , , / DR, ITAT, MUMBAI 6. 7!* = / GUARD FILE. &/92 .)2 //TRUE COPY// '4 & '4 & '4 & '4 & / BY ORDER, / & & & & > > > > (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI