The ITO, Ward-1(1), Ahmedabad V. Accura Polytech Pvt. Ltd., Ahmedabad

ITA 425/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9482 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AHD
• Keywords: Reopening of assessment; Depreciation; Wrong claim; Bad and doubtful debts; Difference of opinion; Unabsorbed depreciation; Provision of bad debts; Change of opinion
• Section: 143(3); 115JB; 147; 148; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER SL. NOS. ITA NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 416/AHD/2014 2006-07 ACCURA POLYTECH P.LTD. 8, AJITNATH SOCIETY NR.PALDI POST OFFICE PALDI, AHMEDABAD PAN:AABCA 8655 P (ASSESSEE) THE I.T.O. WARD-1(1) AHMEDABAD (REVENUE) 2. 424/AHD/2014 2006-07 -BY REVENUE- -BY ASSESSEE- 3. 425/AHD/2014 2007-08 -BY REVENUE- -BY ASSESSEE- 4. 426/AHD/2014 2008-09 -BY REVENUE- -BY ASSESSEE- A SSESSEE BY : SHRI K.P. SHAH, AR REVENUE BY : SHRI JAMES KURIAN, SR.DR !'#$ / DATE OF HEARING 27/12/2016 %&'#$ / DATE OF PRONOUNCEMENT 23/01/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE ABOVE CAPTIONED APPEALS INVOLVES ASSESSM ENT YEARS (AYS) 2006-07, 2007-08 & 2008-09 PERTAINING TO SAME ASSES SEE. FOR THE AY 2006-07, THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS-APPEALS AGAINST THE ORDER OF THE CIT(A)-6, AHMEDABAD DATED 05/12/2 013 ARISING OUT OF ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 2 - ASSESSMENT ORDER DATED 03/10/2011. FOR THE AYS 200 7-08 2008-09 THE REVENUE IS IN APPEAL AGAINST THE ORDERS OF THE CIT( A)-6, AHMEDABAD IDENTICALLY DATED 06/12/2013. 2. ALL THE FOUR APPEALS HAVE BEEN HEARD TOGETHER AN D ARE BEING DISPOSED OF BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.416/AHD/2014 FOR AY 2006-07 ASSESSEES APP EAL AND ITA NO.424/AHD/2014 FOR AY 2006-07 REVENUES APPE AL 3. THE ASSESSEE IN ITS APPEAL FOR THE AY 2006-07 HA S CHALLENGED THE JURISDICTION OF THE AO TO REOPEN THE ASSESSMENT UND ER SECTION 147 OF THE ACT AND FOR FRAMING THE RE-ASSESSMENT ORDER BASED B E UNLAWFUL ASSUMPTION OF JURISDICTION. 4. BRIEFLY STATED, THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PVC FOAM PROFILES. FOR THE RELEVA NT AY 2006-07, THE AO ORIGINALLY PASSED ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') ON 20/1 1/2008. IT IS THE CASE OF THE ASSESSEE THAT AS PER THE AFORESAID ORDER, TH E AO PASSED A SPECIFIC ORDER AS REGARDS CARRY FORWARD OF UNABSORBED DEPREC IATION FOR VARIOUS ASSESSMENT YEARS FROM 1998-99 TO 2001-02. THEREAFT ER, A NOTICE UNDER SECTION 148 DATED 21/02/2011 WAS ISSUED FOR THE AY 2006-07 SEEKING TO ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 3 - REOPEN THE ASSESSMENT MADE EARLIER. THE NOTICE UND ER SECTION 148 WAS ISSUED FOR THE FOLLOWING TWO REASONS;- (I) WHY UNABSORBED DEPRECIATION OF RS.58,34,352/- P ERTAINING TO AY 2008-09 CLAIMED TO BE CARRIED FORWARD FROM AY 2006-07 TO AY 2007-08 SHOULD NOT BE DISALLOWED. (II) WHY THE BOOK PROFITS SHOULD NOT BE RECALCULATE D AFTER ADDING BAD DEBT RESERVE OF RS.3,40,855/- TO NET PROFIT. 5. THE REASONS RECORDED UNDER SECTION 148(2) OF THE ACT AS PROVIDED TO THE ASSESSEE ARE REPRODUCED HEREUNDER FOR READY REFERENCE:- IN THIS CASE THE RETURN OF INCOME FOR AY 2006-07 W AS E-FILED BY THE ASSESSEE ON 29.12.2006 SHOWING NIL INCOME AND B OOK PROFIT AT RS.6,82,656/-. THE SAME WAS PROCESSED U/S. 143 (1) ON 11.03.2008. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER U/S.143(3) WAS PASSED CAN 20.11.20 08 WHEREBY THE ASSESSED INCOME WAS ARRIVED AT NIL AFTER SETTLI NG OFF BROUGHT FORWARD LOSSES. ON VERIFICATION OF RECORD IT IS FOUND THAT IN THE S AID ASSESSMENT ORDER U/S.143(3) DATED 20.11.2008: I) THE UNABSORBED DEPRECIATION PERTAINING TO AY 1998-9 9 WHICH WAS RS.58,34,352/- IS ALLOWED TO BE CARRIED FORWARD. THE SECTION GOVERNING THE CARRY FORWARD OF UNABSORB ED DEPRECIATION IS SECTION 32(2) OF THE INCOME TAX ACT 1961 WHICH HAS BEEN AMENDED W.E.F.1.04.2002. THE ERSTWH ILE SECTION 32(2) PERMITTED THE CARRY FORWARD OF UNABSO RBED DEPRECIATION FOR EIGHT AYS ONLY. THESE ERSTWHILE P ROVISIONS WOULD BE APPLICABLE TO THE UNABSORBED DEPRECIATION OF AY 98-99. ACCORDINGLY THE UNABSORBED DEPRECIATION FOR AY 98- ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 4 - 99 SHOULD NOT BE ALLOWED TO BE CARRIED FORWARD BEYO ND AY 2006-07. II) WHILE ARRIVING AT BOOK PROFIT U/S.115JB(2), THE COM PANY HAS NOT ADDED BACK BAD DEBT RESERVE OF RS.3,40,855/- WH ICH WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. AS PER EXPLA NATION 1(C) TO SECTION 115JB SUCH A PROVISION WHICH IS DEB ITED TO THE P&L ACCOUNT OUGHT TO HAVE BEEN ADDED TO THE NET PROFIT FOR THE PURPOSE OF CALCULATING THE BOOK PROFIT. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIEV E THAT INCOME OF RS.61,75,207/- HAS ESCAPED ASSESSMENT DUE TO THE TW IN REASONS OF UNDUE ALLOWANCE OF CARRY FORWARD OF UNABSORBED DEPR ECIATION AND FAULTY CALCULATION OF BOOK PROFIT. THESE ISSUES NE CESSITATE FURTHER VERIFICATION. ACCORDINGLY, THE ASSESSMENT FOR A.Y. 2006-07 IS REQUIRED TO BE REOPENED U/S.147 OF THE INCOME TAX A CT 1961. 6. PURSUANT TO NOTICE UNDER SECTION 148, THE AO PASSED REASSESSMENT ORDER UNDER SECTION 144 R.W.S. 147 OF THE ACT, WHER EIN CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS.58,34,352/- PERTAININ G TO ASSESSMENT YEAR 1998-99 WAS DENIED TO BE CARRIED FORWARD TO THE SU BSEQUENT ASSESSMENT ORDER ON THE GROUND THAT THE SAME IS LAPSED IN VIE W OF PROSPECTIVE AMENDMENT IN SECTION 32(2) OF THE ACT. IN SHORT, THE CLAIM OF THE ASSESSEE TOWARDS CARRY FORWARD OF UNABSORBED DEPRE CIATION FROM THIS TRANSIENT YEAR TO NEXT YEAR WAS DENIED. THE AO ALS O SIMULTANEOUSLY REVISED THE BOOK PROFIT DETERMINED AS PER SECTION 1 15JB(2) OF THE ACT TO RS.10,23,511/- FROM RS.6,82,656/- ON ACCOUNT OF NON -ELIGIBILITY OF BAD DEBTS PROVISION OF RS.3,40,855/- DEBITED IN THE PRO FIT & LOSS ACCOUNT ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 5 - (P&L A/C.) FOR WHICH THE BOOK PROFIT WAS OMITTED TO BE INCREASED EARLIER. THE AO NOTED THAT WITH REGARD TO SECOND OBJECTION I N THE RECORDED REASON, THE ASSESSEE ITSELF HAS AGREED TO THE ADJUS TMENT VIDE LETTER DATED NIL RECEIVED ON 13/06/2011 AND REVISED COMPUTATION OF BOOK PROFIT IN PRESCRIBED FORM NO.29B WAS ENCLOSED WITH THE AFORES AID LETTER. IN THE FIRST APPEAL, THE CIT(A) GRANTED RELIEF TO THE ASSE SSEE WITH REFERENCE TO FIRST OBJECTION ON MERITS AND REVERSED THE DECISION OF THE AO DISALLOWING THE CARRY FORWARD OF UNABSORBED DEPRECIATION PERTA INING TO AY 1998-99 IN REASSESSMENT MADE. FOR THIS PURPOSE, RELIANCE W AS PLACED UPON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P.) LTD. VS. DY.CIT REPORTED AT 25 TAXMANN.C OM 364 (GUJ.). HOWEVER, ADJUSTMENT IN BOOK PROFIT ON ACCOUNT OF BA D DEBTS PROVISION OF RS.3,40,855/- WAS NOT ADJUDICATED IN THE ABSENCE OF GROUND TAKEN IN THIS REGARD BEFORE THE CIT(A). THE CIT(A) ALSO ABSTAINE D FROM DECIDING THE JURISDICTIONAL ISSUE ASSAILING THE ISSUANCE OF NOTI CE UNDER SECTION 148 OF THE ACT R.W.S. 147 ON THE GROUND THAT RELIEF SOUGH T HAS BEEN GRANTED ON MERITS. 7. WHILE THE ASSESSEE IS IN APPEAL AGAINST THE JURI SDICTION USURPED UNDER SECTION 147 OF THE ACT, THE REVENUE IS IN APP EAL FOR ALLOWING CARRY FORWARD OF UNABSORBED DEPRECIATION ALLEGING CONTRAV ENTION OF PROVISION OF SECTION 32(2) OF THE ACT. THE RESPECTIVE APPEAL S ARE DEALT WITH AS UNDER. ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 6 - ASSESSEES APPEAL IN ITA NO.416/AHD/2014 8. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER:- 1. THE ORDER PASSED U/S.250 ON 05/12/2013 FOR A.Y. 2006-07 BY CIT(A)-VI, AHMEDABAD, CONFIRMING THE REOPENING OF T HE ASSESSMENT U/S.147 OF THE I.T.ACT, 1961 BY AO IS WH OLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUST ICE. 2. I. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) ERRED IN NOT DECLARING T HE ORDER U/S.144 R.W.S. 147 OF THE I.T.ACT, 1961 S ILLEGAL I N LAW AND ON FACTS. II. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LA W AND ON FACTS IN CONFIRMING REOPENING OF THE ASSESSMENT U/S .147 OF THE I.T.ACT, 1961 FOR A.Y. 2006-07 BY ASSESSING OFF ICER, ON THE BASIS OF THE CHANGE OF OPINION. III. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN L AW AND ON FACTS IN NOT DECLARING THE ORDER U/S.144 R.W.S. 147 OF THE ACT WITHOUT JURISDICTION AND AN ILLEGAL, EVEN THOUGH TH E WRITTEN SUBMISSIONS OF THE APPELLANT DT. 13/07/2013 WERE CO NSIDERED VIDE PARA 4.1 OF THE ORDER. IV. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LA W AND ON FACTS IN IGNORING THE FACT THAT THERE WAS NO ESCAPE MENT OF INCOME WHICH IS SINE QUA NON FOR REOPENING OF ASSES SMENT. [ASIAN SILOK MILLS V. DCIT (2013) 29 TAXMANN.COM 2 46 (GUJ)] ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 7 - REVENUES APPEAL IN ITA NO.424/AHD/2014 9. THE GROUNDS OF APPEAL RAISED BY THE REVENUE RE AD AS UNDER:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLOWIN G CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS.58.34 LACS PERTAINING TO A.Y. 1998-99 BEYOND 8 ASSESSMENT YEARS IN CONTRA VENTION OF THE PROVISIONS OF SECTION 32(2) APPLICABLE TO A.Y. 1998-99. 2. THE CIT(A) HAS NOT APPRECIATED THE FACT THAT THE PR OVISIONS OF SECTION 3292) HAVE BEEN AMENDED PROSPECTIVELY W.E.F . 01-04- 2002 AND HENCE THE AMENDED PROVISIONS WILL NOT BE A PPLICABLE TO THE UNABSORBED DEPRECIATION OF A.Y. 1998-99. 10. THE LD.AR MR.K.P.SHAH FOR THE ASSESSEE CHALLENG ED THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. HE SUBMITTED AT THE OUTSET THAT THE RELEVANT ASSESSMENT YEAR IS 200 6-07 WHEREIN THE ASSESSMENT ORDER WAS ORIGINALLY PASSED UNDER SECTI ON 143(3) OF THE ACT WHEREBY THE ASSESSED INCOME WAS ARRIVED AT NIL. 10.1. WITH REFERENCE TO THE FIRST ISSUE TOWARDS CA RRY FORWARD OF UNABSORBED DEPRECIATION, THE LD.AR SUBMITTED THAT T HE ASSESSEE HAS NOT CLAIMED ACTUAL SET OFF OF THE AFORESAID UNABSORBED DEPRECIATION FROM ITS TAXABLE INCOME DURING THE RELEVANT ASSESSMENT YEAR. IT HAS MERELY CLAIMED ITS ENTITLEMENT FOR CARRY FORWARD OF THE U NABSORBED DEPRECIATION OF THE EARLIER YEARS TO THE SUBSEQUENT YEAR BY WAY OF DISCLOSURE. THE ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 8 - IMPUGNED ASSESSMENT YEAR IS 2006-07 ONLY SERVES AS A TRANSIT YEAR FOR ROLLING OVER THE UNABSORBED LOSS TO THE NEXT YEAR. THEREFORE, THERE IS NO ESCAPEMENT OF INCOME WHICH IS CHARGEABLE TO TAX DUR ING THE YEAR PER SE IN SO FAR AS AY 2006-07 IS CONCERNED. THUS, SECTION 147 COULD NOT HAVE BEEN INVOKED FOR MERELY DENYING CLAIM OF CARRY FORW ARD OF UNABSORBED DEPRECIATION AROSE IN EARLIER YEAR AND ELIGIBLE FOR CLAIM FOR SET OFF OF IN THE NEXT YEARS. THE TAXABLE INCOME OF THIS YEAR I S NOT IMPACTED WITH THE AFORESAID ROLL OVER OF UNABSORBED DEPRECIATION. TH E LD.AR ON MERITS CONTENDED THAT ASSESSEE IS DULY ELIGIBLE FOR CLAIM OF CARRY FORWARD OF UNABSORBED DEPRECIATION UNDER SECTION 32(2) OF THE ACT IN VIEW OF THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF GENERAL MOTORS INDIA (P.) LTD.(SUPRA). THUS, THERE WAS NO ESCAPEMENT WHATSOEVER EVEN ON MERITS AS INTERPRETED BY THE HON BLE JURISDICTIONAL HIGH COURT. 10.2 WITH REGARD TO SECOND ISSUE TOWARDS ADJUSTME NT IN BOOK PROFIT IN RESPECT OF BAD DEBTS RESERVES, THE LD.AR ADVERTED O UR ATTENTION TO THE REASONS RECORDED AND SUBMITTED THAT THE ACTION OF T HE AO IS FOUNDED UPON EXPLAANTION-1(C) OF SECTION 115JB FOR FORMING REQUI SITE REASON TO BELIEF AS CONTEMPLATED UNDER SECTION 147 OF THE ACT. HE T HEREAFTER ADVERTED OUR ATTENTION TO EXPLANATION-1(C) TO SECTION 115JB AND SUBMITTED THAT AFORESAID CLAUSE SEEKS TO INCREASE THE BOOK PROFIT ON ACCOUNT OF AMOUNT SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIE S OTHER THAN THE ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 9 - ASCERTAINED LIABILITIES. THE LD.AR SUBMITTED THAT THE BAD DEBTS RESERVES SOUGHT TO BE ADJUSTED TO THE BOOK PROFIT IS NOT IN THE NATURE OF PROVISION MADE FOR MEETING LIABILITIES AT ALL. IN CONTRAST, THE PROVISION TOWARDS BAD DEBTS RESERVES IS ON ACCOUNT OF DIMINUTION IN THE V ALUE OF SUNDRY DEBTORS. THUS, THE VERY PREMISE FOR INVOKING THE JURISDICTIO N ITSELF IS WRONG AND UNTENABLE. THE JURISDICTION UNDER SECTION 147 OF T HE ACT THUS COULD NOT HAVE BEEN ASSUMED BASED ON SUCH WRONGFUL APPLICATIO N OF PROVISION OF THE ACT. ON MERITS, THE LD.AR RELIED UPON THE JUDG MENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. HCL COMNET SYSTEM S & SERVICES LTD. REPORTED AT (2008) 174 TAXMAN 118 (SC) RENDERED IN THE CONTEXT OF SECTION 115JA OF THE ACT. 11. THE LD.DR MR.JAMES KURIAN FOR REVENUE RELIED UP ON THE REASONS RECORDED FOR REOPENING THE ASSESSMENT AND SUBMITTED THAT THE REASONS RECORDED UNDER SECTION 148(2) OF THE ACT ARE SPEAKI NG IN NATURE AND JUSTIFIES THE ACTION OF THE AO. THE LD.DR SUBMITTE D THAT THE ASSUMPTION OF JURISDICTION IS IN ACCORDANCE WITH SECTION 147 O F THE ACT AND DOES NOT CALL FOR ANY INTERFERENCE. THE LD.DR IN SUPPORT OF REVENUE APPEAL SUBMITTED THAT THE UNABSORBED DEPRECIATION PERTAINI NG TO AY 1998-99 WAS WRONGLY CARRIED FORWARD BEYOND EIGHT YEARS HAVI NG REGARD TO ERSTWHILE SECTION 32(2) AS IT STOOD AT THE TIME OF GERMINATION OF DEPRECIATION ALLOWANCE REMAINING UNABSORBED. THE S UBSEQUENT AMENDMENT IN SECTION 32(2)(2) WEF 01/04/2002 RELATI NG TO EXTENDED ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 10 - LIMITATION FOR CARRY FORWARD IS TO BE APPLIED WITH PROSPECTIVE EFFECT AND THUS THE RELIEF GRANTED BY THE CIT(A) ON MERITS IS REQUIRED TO BE REVERSED. AS REGARDS, ADJUSTMENT IN THE BOOK PROFIT UNDER SEC TION 115JB, THE LD.DR SUBMITTED THAT THE ASSESSEE ITSELF HAS ADMITT ED THE ADJUSTMENT IN THE COURSE OF REASSESSMENT AND THEREFORE DOES NOT R EQUIRE ANY ELABORATION THEREON. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, THE O RDERS OF THE AUTHORITIES BELOW AND THE CASE-LAWS CITED. 13. WHILE THE ASSESSEE HAS CHALLENGED THE ASSUMPTIO N OF JURISDICTION UNDER SECTION 147 OF THE ACT, THE REVENUE HAS CHALL ENGED THE RELIEF GRANTED BY THE CIT(A) ON MERITS IN THEIR RESPECTIVE APPEALS. 13.1. SINCE THE ASSUMPTION OF JURISDICTION IS IN QU ESTION WHICH GOES TO THE ROOT OF THE MATTER, WE SHALL FIRST ADDRESS THE JURI SDICTIONAL ISSUE. FOR THIS PURPOSE, REASONS RECORDED FOR REOPENING THE AS SESSMENT UNDER SECTION 148(2) OF THE ACT IS REPRODUCED HEREUNDER:- ANNEXURE REASONS FOR REOPENING OF ASSESSMENT IN THE CASE OF ACCURA POLYTECH PVT.LTD. AY 2006-07 ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 11 - IN THIS CASE THE RETURN OF INCOME FOR AY 2006-07 W AS E-FILED BY THE ASSESSEE ON 29.12.2006 SHOWING NIL INCOME AND B OOK PROFIT AT RS.6,82,656/-. THE SAME WAS PROCESSED U/S.143(1) O N 11.03.2008. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER U/S.14393) WAS PASSED ON 20.11.2008 WHEREBY THE ASS ESSED INCOME WAS ARRIVED AT NIL AFTER SETTING OFF BROUGHT FORWARD LO SSES. ON VERIFICATION OF RECORD IT IS FOUND THAT IN THE SAID ASSESSMENT ORDER U/S.14393) DATED 20.11.2008: I) THE UNABSORBED DEPRECIATION PERTAINING TO AY 1998- 99 WHICH WAS RS.58,34,352/- IS ALLOWED TO BE CARRIED FORWARD. THE SECTION GOVERNING THE CARRY FORWARD O F UNABSORBED DEPRECIATION IS SECTION 32(2) OF THE INC OME TAX ACT 1961 WHICH HAS BEEN AMENDED W.E.F. 1.04.200 2. THE ERSTWHILE SECTION 32(2) PERMITTED THE CARRY FOR WARD OF UNABSORBED DEPRECIATION FOR EIGHT AYS ONLY. THESE ERSTWHILE PROVISIONS WOULD BE APPLICABLE TO THE UNABSORBED DEPRECIATION OF AY 98-99. ACCORDINGLY T HE UNABSORBED DEPRECIATION FOR AY 98-99 SHOULD NOT BE ALLOWED TO BE CARRIED FORWARD BEYOND AY 2006-07. II) WHILE ARRIVING AT BOOK PROFIT U/S.115JB(2), THE COM PANY HAS NOT ADDED BACK BAD DEBT RESERVE OF RS.3,40,855/ - WHICH WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. AS PER EXPLANATION 1(C) TO SECTION 115JB SUCH A PROVISION WHICH IS DEBITED TO THE P&L ACCOUNT OUGHT TO HAVE BEEN AD DED TO THE NET PROFIT FOR THE PURPOSE OF CALCULATING TH E BOOK PROFIT. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIE VE THAT INCOME OF RS.61,75,207/- HAS ESCAPED ASSESSMENT DUE TO THE TWIN REASONS OF UNDUE ALLOWANCE OF CARRY FORWARD OF UNABSORBED D EPRECIATION AND FAULTY CALCULATION OF BOOK PROFIT. THESE ISSUE S NECESSITATE FURTHER VERIFICATION. ACCORDINGLY, THE ASSESSMENT FOR A.Y. 2006- 07 IS REQUIRED TO BE REOPENED U/S.147 OF THE INCOME TAX ACT 1961. ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 12 - 13.2. THE AO HAS INVOKED JURISDICTION UNDER SECTI ON 147 ON TWO GROUNDS VIZ. WRONG CLAIM OF CARRY FORWARD OF UNABSO RBED DEPRECIATION AND FAILURE TO INCREASE THE BOOK PROFIT COMPUTED UN DER SECTION 115JB OF THE ACT ON ACCOUNT OF BAD DEBTS RESERVES DEBITED TO P&L ACCOUNT. AS REGARDS ISSUE CONCERNING CARRY FORWARD OF UNABSORBE D DEPRECIATION ALLEGED TO BE WRONGFUL IN VIEW OF ERSTWHILE SECTION 32(2) OF THE ACT, IT IS DIFFICULT TO ACCEPT THE CAUSE/JUSTIFICATION RECORDE D BY THE AO IN THIS REGARD. ADMITTEDLY, THE AY 2006-07 IS MERELY A TRA NSIENT YEAR WHERE THE CARRY FORWARD OF EARLIER YEAR HAS BEEN BROUGHT FORW ARD TO THIS YEAR AND AGAIN CARRIED FORWARD TO NEXT YEAR FOR SET OFF IN T HE APPROPRIATE ASSESSMENT YEAR. AY 2006-07 ONLY SEEKS TO DISCLOSE THE PENDING ENTITLEMENT OF THE ASSESSEE IN RESPECT OF UNABSORBE D DEPRECIATION RIGHTFULLY OR WRONGFULLY. THIS HAS NO IMPACT ON TH E CHARGEABLE INCOME OF THE AY 2006-07 WHICH IS ALLEGED TO HAVE ESCAPED ASSESSMENT. THEREFORE, THE PRECONDITION FOR INVOKING JURISDICTI ON UNDER SECTION 147 IN SO FAR AS THIS REASON IS CONCERNED IS UNTENABLE IN LAW AND CANNOT BE UPHELD. 14. WE SHALL NOW ADVERT TO THE SECOND REASON WHICH FORMED THE BASIS FOR HOLDING BELIEF TOWARDS ESCAPEMENT OF INCOME. I T IS MANIFEST FROM THE RECORDED REASON THAT THE AO HAS TAKEN SHELTER OF CL AUSE (C) OF EXPLANATION-1 TO SECTION 115JB FOR ALLEGING THAT BO OK PROFIT HAS REMAINED UNDER ASSESSED TO THE EXTENT OF BAD DEBTS RESERVES OF RS.3,40,855/-. A ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 13 - BARE READING OF EXPLAANTION-1(C) TO SECTION 115JB W OULD SUGGEST THAT THE AFORESAID CLAUSE IS MEANT TO INCREASE THE BOOK PROF IT IN RESPECT OF PROVISIONS TOWARDS UNASCERTAINED LIABILITIES. IT IS APPARENT THAT BAD DEBTS RESERVES IS NOT ON ACCOUNT OF ANY PROVISION TOWARD S ANY LIABILITY FAR LESS UNASCERTAINED LIABILITIES. THE PROVISION, AS PLEA DED BY THE ASSESSEE, IS IN THE NATURE OF AMOUNTS SET ASIDE FOR DIMINUTION IN T HE VALUE OF SUNDRY DEBTORS WHICH IS AN ASSET RATHER THAN A LIABILITY. THEREFORE, THE ENTIRE BASIS FOR THE FORMATION OF BELIEF TO INVOKE SECTION 147 IS A DAMP SQUIB. AS A COROLLARY, THE REASONS RECORDED ARE NOT IN SYN C WITH SECTION 147 OF THE ACT AND ARE MARRED BY WRONG APPLICATION OF LAW AND THEREFORE CANNOT BE SUSTAINED. CONSEQUENTLY, THE APPEAL OF THE ASSE SSEE IS ALLOWED AND THE REASSESSMENT ORDER IS SET ASIDE AND QUASHED FOR WAN T OF JURISDICTION UNDER SECTION 147 OF THE ACT. 15. AS REASSESSMENT ORDER HAS BEEN QUASHED, THE AP PEAL OF THE REVENUE BASED ON SUCH REASSESSMENT ORDER DOES NOT SURVIVE. CONSEQUENTLY, APPEAL OF THE REVENUE STANDS DISMISSED. 16. IN THE RESULT, ASSESSEES APPEAL FOR AY 2006-07 IS ALLOWED, WHEREAS REVENUES APPEAL FOR AY 2006-07 IS DISMIS SED. ITA NO.425/AHD/2014 FOR AY 2007-08 & ITA NO.426/AHD /2014 FOR AY 2008-09 17. THE GROUND RAISED FOR AY 2007-08 BY THE REVENUE READ AS UNDER:- ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 14 - THE CIT(A) HAS ERRED IN LAW ON FACTS BY ALLOWING S ET OFF/CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS.58.34 LACS PERTAINING TO A.Y. 1998-99 WITHOUT APPRECIATING THE OBSERVATIONS OF THE AO IN THE ORDER U/S.155(4) OF THE ACT. 18. THE GROUND RAISED FOR AY 2008-09 BY THE REVENUE READ AS UNDER:- THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY ALLOWI NG SET OFF/CARRY FORWARD OF UNABSORBED DEPRECIATION OF RS. 58.34 LACS PERTAINING TO A.Y. 1998-99 WITHOUT APPRECIATING THE OBSERVATIONS OF THE AO IN THE ORDER U/S.155(4) OF THE ACT. 19. SINCE GROUNDS RAISED BY THE REVENUE IN BOTH THE YEARS ARE IDENTICAL, BOTH THE APPEALS ARE DISPOSED OF TOGETHE R. 20. THE AO CHALLENGED ACTION OF THE CIT(A) IN REVER SING ITS ORDER PASSED UNDER SECTION 155(4) OF THE ACT. 21. BRIEFLY STATED, ORDER UNDER SECTION 155(4) OF T HE ACT WAS PASSED BY THE AO IN CONSEQUENCE OF ASSESSMENT ORDER DATED 03/ 10/2011 PASSED UNDER SECTION 144 OF THE ACT READ WITH SECTION 147 OF THE ACT FOR AY 2006-07. IN THE SAID ORDER, THE UNABSORBED DEPRECI ATION OF RS.58,34,352/- PERTAINING TO AY 1998-99 WAS NOT ALL OWED TO BE CARRIED FORWARD. THE CIT(A) IN AY 2006-07 GRANTED RELIEF O N MERITS ON THE ISSUE FOLLOWING THE JUDGMENT OF HONBLE GUJARAT HIG H COURT IN THE CASE OF GENERAL MOTORS INDIA (P.) LTD.(SUPRA). ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 15 - 22. ON CONSIDERATION OF RIVAL SUBMISSIONS, WE FIND THAT THE ISSUE IS SQUARELY COVERED ON MERITS IN FAVOUR OF ASSESSEE BY THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GE NERAL MOTORS INDIA (P.)LTD.[SUPRA]. THUS, THE APPEAL OF THE REVENUE C ANNOT BE SUSTAINED. WE ALSO SIMULTANEOUSLY OBSERVE THAT IN VIEW OF THE QUASHING OF REASSESSMENT ORDER UNDER SECTION 147 OF THE ACT PER TAINING TO AY 2006- 07, THE EDIFICE FOR CONSEQUENTIAL ACTION UNDER SECT ION 155(4) OF THE ACT HAS ALSO CRUMBLED. THEREFORE, THE IMPUGNED ORDER U NDER SECTION 155(4) GIVING RISE TO THE CAUSE OF ACTION OF THE PRESENT A PPEALS IS ALSO RENDERED INFRUCTUOUS. THEREFORE, LOOKING FROM ANY ANGLE, BO TH THE APPEALS OF THE REVENUE PERTAINING TO AYS 2007-08 & 2008-09 CANNOT BE SUSTAINED IN LAW. AS A RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 23. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE FOR AY 2006-07 IS ALLOWED AND APPEALS OF THE REVENUE FOR AYS 2006-07, 2007-08 & 2008- 09 ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/ 01/2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 23/ 01 /2017 -..!,.!../ T.C. NAIR, SR. PS ITA NO.416/AHD/2014 (BY ASSESSEE) AND ITA NOS. 424, 425 & 426/AHD/2014 (BY REVENUE) ACCURA POLYTECH PVT.LTD. VS. ITO ASST.YEARS 2006-07, 2006-07, 2007-08 & 2008-09 - 16 - ! / COPY OF THE ORDER FORWARDED TO : 1. ./0 / THE APPELLANT 2. 1/0 / THE RESPONDENT. 3. 234$ 5$ / CONCERNED CIT 4. 5$ ( . ) / THE CIT(A)-6, AHMEDABAD 5. 67$!34 , ..34' , .2 / DR, ITAT, AHMEDABAD 6. 9' / GUARD FILE. / BY ORDER, 16$$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..13.1.17 (DICTATION-PAD 27- P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.1.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.23.1.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.1.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER