ACIT, Bhubaneswar V. Indian Metals & Ferro Alloya Ltd, Bhubaneswar

ITA 433/CTK/2010

• Counselvise Citation: 43322114 RSA 2010
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 02-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2010
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY
• Assessee Lawyers: VIBHU BAKHREE
• Keywords: Depreciation; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 433/CTK/2010 (ASSESSMENT YEAR 2006 - 07) ASST.COMMISSIONER OF INCOME - TAX , CIRCLE 2(1), BHUBANESSAR. VERSUS INDIAN METALS & F ERRO ALLOYS LTD., IMFA BUILDING, BOMIKHAL, RASULGARH, BHUBANESWAR PAN: AAACI 4818 F. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SMT. PARAMITA TRIPATHY, DR FOR THE RESPONDENT SHRI VIBHU BAKHREE, AR DATE OF HEARING : 02.12.2011 DATE OF PRONOUNCEMENT : 16.12.2011 ORDER SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING THE UNABSORBED DEPRECIATION PERTAINING TO ASSTT. Y EARS 1990 - 91 TO 1992 - 92 AGGREGATING TO 18274.22 LAKH FOR THE PURPOSE OF CARRY FORWARD WHICH WAS DISALLOWED BY THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE DISALLOWED THE ENTIRE UNABSORBED DEPRECIATION PERTAINING TO ASSTT. YEARS 1990 - 91 TO 1997 - 98 AGGREGATING TO 42578.02 LAKHS FOR THE PURPOSE OF CARRY FORWARD IN VIEW OF THE PROVISIONS OF SEC.32(2) OF THE I.T.ACT WHICH WERE EFFECTIVE FROM 01.04.97 TO 31.03.02 BEFORE THE SAME WERE AMENDED BY FINANCE ACT, 2001 W.E.F. 1.4.02 AND TO THAT EXTENT THE LD. CIT(A) SHOULD HAVE RECTIFIED THE ORDER OF THE A.O. BY ENHANCING THE DISALLOWANCE MADE BY THE A.O. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS NOT CORRECTLY APPRECIATED THE IMPORT OF THE PROVISIONS OF SEC.32(2) AS THEY EXI STED FROM 01.04.97 TO 31.03.02 AND HAS ALSO IGNORED THE DECISION OF THE HONBLE ITAT, SPL. BENCH , MUMBAI IN THE CASE OF DCIT VS. TIMES GUARANTEE LTD, REPORTED IN 2010 - TOIL - 340 - ITAT - MUM - SB. 2. AT THE OUTSET THE LEARNED DR POINTED OUT THAT IN VIEW OF THE DECISION OF ITAT, MUMBAI SPECIAL BENCH IN THE CASE OF DCIT V. M/S.TIMES GUARANTY LIMITED IN ITA NOS.4917 AND 4918/MUM/2008 DT.30.6.2010 (COPY FURNISHED), THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS U/S.147/148 WHICH ITA NO.433/CTK/2010 2 ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER ON 15.4.2011 (COPY FURNISHED). THE CRUX OF THE ISSUE THEREFORE TRICK LE S DOWN TO THE FACT THAT THE LEARNED CIT(A) IN THE IMPUGNED APPEAL HAD CONSIDERED THE ISSUE APPEALED BEFORE HIM BY THE ASSESSEE ON THE ASSESSING OFFICER CONS IDERING THE BROUGHT FORWARD LOSSES/DEPRECIATION IN THE LIGHT OF THE INTERPRETATION OF THE PROVISIONS OF SECTION 32(2) OF THE INCOME - TAX ACT,1961, WHICH FACTS AND FIGURES HAVE TO BE RECONSIDERED INSOFAR AS THE LEARNED CIT(A) HAD CONSIDERED THE ISSUE AS PER THE SUBMISSIONS OF THE APPELLANT - ASSESSEE BEFORE HIM ALONG WITH CALLING FOR A REMAND REPORT FROM THE ASSESSING OFFICER WHEN HE VERIFIED THE CLAIM OF DEPRECIA TION FROM ASSESSMENT YEAR 1990 - 9 1 TILL THE DATE OF AMALGAMATION WHEN THE UNABSORBED DEPRECIATION A S EXPLAINED BY THE CBDT IN CIRCULAR NO.762 DT.18.2.1998 WAS TO BRING OUT DISTINCTION BETWEEN THE UN - AMENDED PROVISIONS PRIOR TO 1.4.1997 AND THE PROVISIONS THEREAFTER. THE DEPRECIATION COULD NOT BE CARRIED FORWARD BEYOND EIGHT YEARS WAS THE THUMB RULE WHIC H WAS PROCEEDED AGAINST AND THE AMALGAMATION TOOK PLACE ON 1.4.2005 UNDER THE AEGIS OF HONBLE HIGH COURT. SHE POINTED OUT THAT THE LEARNED CIT(A) HELD THAT THE AMENDMENT ACT IN 1996 BROUGHT A GUILLOTINE IN THE TIME LIMIT. THIS AMENDMENT BROUGHT THE TREATM ENT OF DEPRECIATION IN LINE WITH THE TREATMENT OF UNABSORBED BUSINESS LOSSES WHICH CREATED THE CONTROVERSY INSOFAR AS HE HELD THE SAME PREVAILING UP TO ASSESSMENT YEAR 2000 - 01 ONLY TAKING COGNIZANCE OF HONBLE FINANCE MINISTERS SPEECH ON THE FINANCE BILL 1996 WHEN A TIME LIMIT WAS PRESCRIBED FOR CLAIMING THE CARRY FORWARD UNABSORBED DEPRECIATION. HE OPINED THEREFORE THE PROPOSITION CHANGE WAS ONLY EFFECTIVE FOR EIGHT YEARS AND THERE WAS NO CAUSE FOR IMMEDIATE CONCERN ON THE INDUSTRY AS A WHOLE. HE CONCLUDE D THAT THE CUMULAT IVE UNABSORBED DEPRECIATION UPT O THE ASSESSMENT YEAR 1996 - 97 WOULD BECOME CARRIED FORWARD DEPRECIATION FOR THE ASSESSMENT YEAR 1997 - 98 AND EVEN IF EIGHT YEARS TIME LIMIT IS APPLIED, ITA NO.433/CTK/2010 3 SUCH DEPRECIATION WOULD HAVE LAPSED BY ONLY IN ASSESSMEN T YEAR 2004 - 05. BUT BEFORE THAT THE OLD PROVISION WAS INTRODUCED BY FINANCE ACT W.E.F. 1.4.2001 WHICH HE HELD WAS NOT CONSISTENT ON THE DECISION MADE BY THE ASSESSING OFFICER. 3. SHE POINTED OUT THAT THE SPECIAL BENCH OF ITAT, MUMBAI BENCH IN THE CASE OF DCIT V. M/S.TIMES GUARANTY LIMITED (SUPRA) I S DIRECTLY ON THE ISSUE WHICH WAS CONSIDERED BY THE ASSESSING OFFICE R FOR PROCEEDINGS U/S.143(3)/147 . THE QUESTION POSED BEFORE THE SPECIAL BENCH WAS ANSWERED IN FAVOUR OF THE REVENUE BY HOLDING THAT THE UNABSOR BED DEPRECIATION RELATING TO THE ASSESSMENT YEAR 1997 - 98 TO 1999 - 2000 WAS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS APPLICABLE FOR THE ASSESSMENT YEAR 1997 - 98 TO 1999 - 2000. SHE PRAYED THAT THE ORDER OF THE ASSESSING OFFICER, IN THAT VIEW OF THE MATTER, BE CONSIDERED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE - RESPONDENT SUBMITTED THAT THE LEARNED CIT(A) HAD APPRECIATED THE INTENTION OF THE CBDT INSTRUCTION AS WELL AS THE CASE LAWS CITED BEFORE HIM TO ADOPT THE CONCEPTUAL ASPECT OF THE IMPACT OF CARRY FORWARD OF UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 1997 - 98 ONWARDS. THE EVER LOSS MAKING ICCL WAS AMALGAMATED WITH THE ASSESSEE - COMPANY ON 1 ST APRIL, 2005 UNDER THE DIRECTIONS OF THE HONBLE HIGH COURT THEREFORE HAD CLAIMED THE ADJUSTMENT AGAINST PROFITS UP TO THE ASSESSMENT YEAR 2004 - 05 DID NOT REQUIRE ANY FURTHER DELIBERATION ESPECIALLY IN VIEW OF THE FACT THAT THE INTERVENING AYS BEING 1997 - 98 AND 1998 - 99 WERE CONSIDERED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT. AS POINTED OUT BY THE LEARNED DR THE REASSESSMENT PROCEEDINGS HAVE BEEN APPEALED AGAINST BEFORE THE LEARNED CIT(A) WAS ALSO ON THE GROUND OF CHANGE OF OPINION BY THE ASSESSING OFFICER WHICH WAS NOT PERMISSIBLE UNDER THE PROVISIONS OF SECTION 147. VARIOUS OTHE R CLAIMS WERE MADE BEFORE THE LEARNED ITA NO.433/CTK/2010 4 CIT(A) WHEN THE ASSESSING OFFICER HAD DISALLOWED CERTAIN LEGITIMATE CLAIM WAS CONSIDERED IN FAVOUR OF THE ASSESSEE RESPONDENT. THEREFORE, THE LEARNED CIT(A) HAD RIGHTLY NOTED THE CLAIM IN ACCORDANCE WITH THE AMENDED PR OVISIONS OF SECTION 32(2) OF THE INCOME - TAX ACT,1961, WHEN HE RELIED ON THE HONBLE FINANCE MINISTERS SPEECH ALONG WITH CBDT INSTRUCTION FOR SUCH ADJUSTMENT. INSOFAR AS FOR CLARITY REGARDING THE ASSETS AMALGAMATED WITH THE ASSESSEE BELONGING TO THE ICCL H E FURNISHED A CHART SHOWING W.D.V. OF ASSETS AS PER THE I.T.ACT OF ICCL BEFORE AND AFTER AMALGAMATION WITH THE ASSESSEE WHICH WAS EFFECTIVE FROM 1.4.2005. THIS WOULD INDICATE THE DISTINCTION BETWEEN THE DEPRECIABLE ASSETS WHICH WERE ADDED BY THE ASSESSEE D URING THE FINANCIAL YEAR 2005 - 06 OTHER THAN THE ASSETS TAKEN OVER FROM ICCL GIVING NO ROOM FOR CAPITALI ZATION AS CONSIDERED DISALLOWABLE BY THE ASSESSING OFFICER BEING UNABSORBED DEPRECIATION RELATING TO THE ICCL OF 319 CRORES BEING SET OFF TO THE EXTENT OF INCOME AVAILABLE UP TO 67.5 CRORES ONLY. THE UNABSORBED DEPRECIATION RELATING TO THE ICCL WAS TO BE CARRIED FORWARD AMOUNTING TO 251.8 CRORES WAS DEALT WITH BY THE LEARNED CIT(A). ON THE PRAYER OF THE LEARNED DR FOR RESTORATION TO THE LEARNED CIT(A) , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GROUND FOR CHANGE OF OPINION BY THE ASSESSIN G OFFICER BEFORE THE LEARNED CIT(A) MAY KINDLY BE ALLOWED TO BE CONTESTED INSOFAR AS THE FACTS AND FIGURES HAVE BEEN DEALT WITH BY BOTH THE AUTHORITIES IN ITS ENTIRETY. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD . ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD A VIEW THAT THE DECISION ON THE GROUNDS RAISED BY THE DEPARTMENT BEFORE US HAVE BEEN FURTHER SUBJECTED TO REASSESSMENT ON THE BASIS OF THE ASSESSING OFFICER RELYIN G ON THE DECISION OF THE SPECIAL BENCH, ITAT, MUMBAI BENCH ES IN THE CASE OF DCIT V. M/S.TIMES ITA NO.433/CTK/2010 5 GUARANTY LIMITED (SUPRA) WHICH COPY HAS BEEN FURNISHED BY THE LEARNED DR. THE DECISION WAS IN FAVOUR OF THE REVENUE TO THE EXTENT THAT THE UNABSORBED DEPRECIATION RELATING TO THE ASSESSMENT YEARS 1997 - 98 AND 1999 - 2000 WAS TO BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS APPLICABLE FOR ASSESSMENT YEARS 1997 - 98 TO 1999 - 2000 WAS TAKEN COGNIZANCE OF BY THE ASSESSING OFFICER WHEN THE ASSESSING OFF ICER IN HIS REASSESSMENT PROCEEDINGS HAS RECOMPUTED THE UNABSORBED DEPRECIATION RELATING TO ICCL OF 259 CRORES BEING SET OFF TO THE EXTENT OF INCOME AVAILABLE INDICATED DEPRECIATION RELATING TO THE ASSESSMENT YEARS 1993 - 94 TO 1997 - 98 THAT HAD LAPSED BEFO RE THE ASSESSMENT YEAR 1996 - 97 . IN OTHER WORDS, HE ALLOWED DEPRECIATION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND TAKING COGNIZANCE OF DECISION OF SPECIAL BENCH, ITAT, MUMBAI BENCH IN THE CASE OF DCIT V. M/S.TIMES GUARANTY LIMITED (SUPRA) ENHANCED T HE INCOME TO BE ADJUSTED CONCLUDING THAT UNABSORBED DEPRECIATION RELATING TO ICCL WAS TO BE CARRIED FORWARD AMOUNTING TO 185.5 CRORES. WE ARE OF THE CONSIDERED VIEW THAT THIS MATTER REQUIRES CONSIDERATION BY THE LEARNED CIT(A) IN THE LIGHT O F THE FINDING S OF THE ASSESSING OFFICER IN THE REASSESSMENT ORDER WHICH HAVE TO BE TAKEN NOTE OF WHEN HE RECORDED THE REASON FOR REASSESSMENT PROCEEDINGS VIS - A - VIS THE COMPUTATION EARLIER CONSIDERED BY HIM AND ADJUDICATED UPON BY THE LEARNED CIT(A) RESULTED IN ESCAPEM ENT OF INCOME FOR WHICH HE HAD REASON TO BELIEVE. WE FIND THE APPREHENSION IN THE MIND OF THE ASSESSEE THAT IT WAS A CHANGE OF OPINION THEREFORE REMAINS INTACT TO BE ARGUED BEFORE THE LEARNED CIT(A) INSOFAR AS THE FACTS AND FIGURES HAVE REMAINED THE SAME W HICH WOULD ALLOW THE ASSESSEE TO BE AT LIBERTY FOR PROCEEDINGS BEFORE THE LEARNED CIT(A). WE RESTORE THE ISSUE OF THE IMPUGNED APPEAL TO THE FILE OF THE LEARNED CIT(A) FOR CONSIDERING IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH, ITAT, MUMBAI BENCH IN THE CASE OF DCIT V. M/S.TIMES GUARANTY LIMITED (SUPRA) WITHOUT ITA NO.433/CTK/2010 6 DELIBERATING ON THE MERITS AS OF NOW . NEEDLESS TO SAY THAT THE ASSESSEE - RESPONDENT IS FREE TO PUT FORTH ITS CONTENTIONS BEFORE THE LEARNED CIT(A) IN THE APPEAL FILED AGAINST REASSESSMENT PROCE EDINGS AND IN THE LIGHT OF THE ASSESSING OFFICER BRINGING ON RECORD THE REASONS TO BELIEVE JUSTIFYING THE REASSESSMENT WHICH LEGAL ISSUE AS AGITATED BY THE ASSESSEE IS A CHANGE OF OPINION. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATIST ICAL PURPOSES. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 16.12.2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ASST.COMMISSI ONER OF INCOME - TAX , CIRCLE 2(1), BHUBANESSAR. 2. THE RESPONDENT: INDIAN METALS & FERRO ALLOYS LTD., IMFA BUILDING, BOMIKHAL, RASULGARH, BHUBANESWAR 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.