INCOME TAX OFFICER-13(3)(3), MUMBAI V. VIJAY VISION PRIVATE LIMITED, MUMBAI

ITA 4813/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1452 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHARAT K PATEL
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Depreciation; Question of law; Accommodation entries; Reason to believe; Unabsorbed depreciation; Reassessment proceedings; Set aside
• Section: 143(3); 133(6); 143(1); 250; 32; 148

Judgement Text

SH - 2 F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.4813/ MUM/2017 ( / ASSESSMENT YEAR : 2010 - 11) ITO - 13(3)(3) ROOM NO. 227 2 ND FLOOR AAYAKAR BHAWAN M K ROAD MUMBAI - 400020 / V. M/S. VIJAY VISION PRIVATE LTD, SPE C HOUSE, RAMCHANDRA LANE EXTENS ION, KACHPADA, MALAD (W), MUMBAI - 400064 ./ PAN : AAACV2144B ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: MISS. DEEPIKA ARORA (DR) ASSESSEE BY: SHRI. BHARAT K PATEL / DATE OF HEARING : 08.01.2019 / DATE OF PRONOUNCEMENT : 22 .0 3 .2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY REVENUE , BEING ITA NO. 4813/MUM/2017, IS DIRECTED AGAINST APPELLATE ORDER DATED 24.04.2017 IN APPEAL NO. CIT(A) - 21/ITO - 13(3)(3)/IT - 107/2016 - 17, PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 21, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEA R 2010 - 11 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 17.03.2016 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S . 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE AC T) FOR AY 2010 - 11 . I.T.A. NO.4813/MUM/2017 2 2. T HE GROUNDS OF APPEAL RAISED BY R EVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - I. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DIRECTING THE AO TO ALLOW SET - OFF OF CARRIED FORWARD DEPRECIATION OF AY - 1997 - 98, 1998 - 99, 1999 - 2000 AND 2000 - 01 FROM THE INCOME OF AY 2007 - 08, 2008 - 09 AND 2009 - 10, RELYING UPON THE DECISION OF CONFIDENCE PET ROLEUM INDIA LTD., WHEN THE APPEAL OF THE REVENUE IN THE CASE OF CONFIDENCE PETROLEUM INDIA LTD., IS PENDING WITH THE HON'BLE BOMBAY HIGH COURT.? II. 'WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) IS RIGHT IN RELYING ON THE CIRCULAR NO 14 OF 2001, WHEREIN IT IS MENTIONED THAT 'THE ACT HAS DISPENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION', 'THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1ST APRIL, 2002, AND WILL, ACC ORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2002 - 2003 AND SUBSEQUENT YEARS'? III. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DIRECTING THE AO TO ALLOW SET - OFF OF CARRIED FORWARD DEPRECIAT ION AS PER THE EXPLANATORY MEMORANDUM TO THE FINANCE (NO. 2) BILL, 1996 WHICH STATES THAT 'IN CASE OF SUCCESSION IN BUSINESS AND AMALGAMATION OF COMPANIES, THE PREDECESSOR AND THE SUCCESSOR OR AMALGAMATING COMPANY AND AMALGAMATED COMPANY, AS THE CASE MAY B E ARE ENTITLED TO DEPRECIATION ALLOWANCE ON THE SAME ASSETS WHICH IN AGGREGATE EXCEEDS THE DEPRECIATION ALLOWANCE ADMISSIBLE FOR A PREVIOUS YEAR AND THE PRESCRIBED RATES. THE AMENDMENT, IT APPEARS, IS BROUGHT ABOUT SO AS TO RESTRICT THIS DOUBLE ALLOWANCE.' IV. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN NOT APPLYING THE RATIO OF NK PROTEIN (SLP CC NO.769 OF 2 017)(SC), THEREBY ENHANCING THE ADDITION TO 100% OF THE PURCHASES INSTEAD OF 25% MADE BY T HE ASSESSING OFFICER, PARTICULARLY WHERE THE AO DID NOT HAVE THE BENEFITS OF SAID RATIO AT THE TIME OF PASSING OF THE ASSESSMENT ORDER. V. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED.' I.T.A. NO.4813/MUM/2017 3 VI. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SPECTACLE LENS ES . THE ASSESSEE FILED ITS RETURN OF INCO ME ON 5 TH OCTOBER 2010 DECLARING TAXABLE INCOME OF RS. NIL. THE RETURN OF INCOME WAS PROCE SSED U/S 143(1) OF THE 1961 ACT . THE ASSESSMENT OF THE ASSESSEE WAS R EOPENED BY THE AO U/S. 147 OF THE ACT VIDE I SSUANCE OF NOTICE DATED 24.03.2015 U/S 148 OF THE 1961 ACT . IT IS PERTINENT TO MENTION THAT REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE BY REVENUE BY INVOCATION OF PROVISIONS OF SECTION 147 OF THE 1961 ACT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND ORIGINALLY NO SCRUTINY ASSESSMENT WAS FRAMED BY THE REVENUE U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT . THERE IS NO CHALLENGE TO REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 BY THE ASSESSEE AS NEITHER AN APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IT NOR ANY CROSS OBJECTIONS ARE FILED BY ASSESSEE AND HENCE IT HAS ATTAINED FINALITY. THE REASONS AS WERE RECORDED BY THE REVENUE STIPULATED THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM PERSONS INDULGING IN ISSUANCE OF BOGUS PURCHASE AN D SALE BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALES TAX DEPARTMENT HAS STATED THAT PURCHASES TO THE TUNE OF RS. 14,61,825/ - MADE BY THE ASSESSEE ARE BOGUS PURCHASES. THIS IS THE BACKGROUND WHICH LED TO RECORDING OF REASONS FOR REOPENING OF THE CONCLUD ED ASSESSMENT BY AO U/S 147 AND CONSEQUENTLY ISSUANCE OF NOTICE U/S 148 DATED 24.03.2015 BY THE AO TO THE ASSESSEE , WHICH REASONS WERE FURN I S HED TO THE ASSESSEE BY THE AO VIDE LETTER DATED 18.08.2015 , WHICH ARE REPRODUCED HERE UNDER: - ' THE ASSESSEE HAS E - FILED THE RETURN OF INCOME ON 02.04.2015 DECLARING INCOME O F RS. NIL/ - . A). THE DETAILS AND INFORMATION AVAILABLE ON RECORD SHOWS THE ASSESSEE ENTERED INTO PURCHASE TRANSACTIONS WITH THE FOLLOWING PERSONS DURING THE YEAR WHO ARE INVOLVED IN THE PROVIDING ACCOMMODATION ENTRIES: I.T.A. NO.4813/MUM/2017 4 SR. NO NAME OF THE PARTY FROM WHOM ASSES S EE SHOWN PURCHASES AMOUNTS (RS.) 1. LAHREE IMPEX 14,60,369/ - 2. SIDDHIVINAYAK CORPORATION 1,456/ - TOTAL 14,61,825/ - B). THE NAME(S) OF THE ABOVE PERSON(S) WAS ALSO APPEARING IN THE LIST OF HAWALA DEALERS WHO PROVI DED THE BILLS WITHOUT DELIVERY O F ACTUAL GOODS, MADE AVAILABLE IN THE PUBLIC DOMAIN IN THE OFFICIAL WEBSITE OF THE MAHARASTHTRA SALES TAX DEPARTMENT. BEFORE THE SALES TAX AUTHORITIES THE PROPRIETOR/ PARTNER/DIRECTOR OF THE SUPPLIER CONCERNS HAVE STATED ON OATH THAT THEY HAVE NOT PHYSICALLY PURCHASED OR SOLD ANY GOODS AND THEY HAVE MERELY ISSUED BOGUS BILLS OF PURCHASE/SALE. IN VIEW OF THE ABOVE FACTS, I HAVE A REASON TO BELIEVE THAT THE INCOME TO THE TUNE OF RS. 14,61,825/ - HAS ESCAPED ASSESSMENT'. 3.2 . THE AO DURING COURSE OF REASSESSMENT PROCEEDINGS U/S 147 OF THE 1961 ACT, OBSERVED THAT THE ASSESSEE HAD AVAILED ACCOMMODATION ENTRIES FROM THE PERSONS INDULGING IN ISSUING BOGUS PURCHASES AND SALES BIL LS W ITHOUT ACTUAL DELIVERY OF GOODS . THE AO ALSO OBSERVED THAT THE SALES TAX DEPARTMENT HAS FURTHER STATED THAT THE PURCHASES MADE BY THE ASSESSEE FROM VARIOUS HAWALA DEALERS AMOUNTING TO RS. 14,61,825/ - WERE BOGUS PURCHASES. THE AO ALSO OBSERVED THAT THESE HAWALA DEALERS HAVE CONFIRMED BEFORE MAHARASHTRA SALES TAX DEPARTMENT VIDE AFFIDAVITS FILED /STATEMENTS RECORDED THEREIN THAT THEY WERE INVOLVED IN ISSUING INVOICES FOR BOGUS PURCHASES AND SALES WITHOUT SUPPLYING/DELIVERING ANY GOODS. THE AO WAS OF THE VIEW THAT PARTIES TO THESE TRANSACTIONS HAD ONLY PROVIDED ACCOMMODATION ENTRIES AND ISSUED BOGUS BILLS WITHOUT SUPPLYING/DELIVERING GOODS. THE PAYMENTS WERE MADE BY THE PARTIES WHO OBTAINED BOGUS BILLS WITHOUT DELIVERY OF MATER IAL, TO THESE HAWALA DEALERS THROUGH BANKING CHANNEL TO ROUTE THE FUNDS AND SHOW THAT TRANSACTIONS AS GENUINE. IT WAS OBSERVED THAT MERELY PAYMENTS BEING MADE FROM ACCOUNT PAYEE I.T.A. NO.4813/MUM/2017 5 CHEQUE AND BILLS FOR THESE GOODS BEING RECEIVED DOES NOT AUTHENTICATE THE TRA NSACTIONS. THE AO WAS OF THE VIEW THAT THE ASSESSEE PROCURED THE GOODS FROM SOMEONE ELSE WHOSE PARTICULARS , MODE AND SOURCES OF PAYMENTS, THE ASSESSEE DOES NOT WISH TO DISCLOSE TO REVENUE. THE ASSESSEE WAS CONFRONTED WITH THIS INCRIMINATING INFORMATION BY THE AO DURING REASSESSMENT PROCEEDINGS . T HE ASSESSEE DURING THE COURSE OF REASSESSMENT PROCEEDINGS WAS ASKED BY THE AO TO PROVE GENUINENESS OF THESE PURCHASES MADE FROM ALLEGED HAWALA DEALERS. 3.3 THE ASSESSEE SUBMITTED BEFORE THE AO DURING REASSESSMEN T PROCEEDINGS THAT PURCHASES FROM M/S LAHREE IMPEX TO THE TUNE OF RS. 14,60,369/ - WERE DEBITED TO MACHINERY MAINTENANCE MATERIAL A/C WHEREIN MATERIAL PROCURED WERE USED FOR MACHINERY MAINTENANCE. IT WAS SUBMITTED THAT ALL THE PAYMENTS TO M/S LAHREE IMPEX W ERE MADE THROUGH ACCOUNT PAYEE CHEQUES. IT WAS SUBMITTED THAT PURCHASES FROM M/S SIDDHIVINAYAK CORPORATION WERE DEBITED TO REPAIR AND MAINTENANCE GENERAL ACCOUNT WHEREIN ACRYLIC SHEETS WERE PURCHASED WHICH WERE USED FOR GENERAL REPAIRS. THE ASSESSEE CLAIME D THAT PAYMENTS WERE MADE IN CASH TO M/S SIDDHIVINAYAK CORPORATION FROM PETTY CASH ACCOUNT. IT WAS CLAIMED THAT THE PURCHASES MADE FROM BOTH THESE PARTIES WERE GENUINE PURCHASES. THE ASSESSEE FURNISHED BEFORE THE AO COPIES OF BILLS ISSUED BY THESE PARTIES WHICH ALSO CARRIED THEIR VAT/CST/TIN DETAILS W . R . T . THEIR REGISTRATIONS WITH SALES TAX/VAT DEPARTMENT. THE EXTRACT OF LEDGER ACCOUNTS OF THESE PARTIES AS WERE APPEARING IN ASSESSEES BOOKS OF ACCOUNTS WERE ALSO SUBMITTED. THE COPIES OF BANK STATEMENT EVID ENCING PAYMENT BY CHEQUES TO M/S LAHREE IMPEX WERE ENCLOSED . SIMILARLY COPIES OF PETTY CASH BOOK EX TRACTS WHEREIN PAYMENT TO SIDDHIVINAYAK C ORPORATION WAS REFLECTED WAS ENCLOSED. THE ASSESSEE ALSO SUBMITTED NOTE ON UTILISATION OF THE MATERIAL RECEIVED FROM THESE PARTIES FOR ITS BUSINESS. THE ASSESSEE ALSO CLAIMED THAT AUDITORS OF THE ASSESSSEE HAS NOT GIVEN ANY ADVERSE REMARKS WHILE CERTIFYING ITS ACCOUNTS. THE PRAYERS WERE MADE THAT THESE ARE GENUINE PURCHASES AND HENCE NO DISALLOWANCE BE MADE. THE I.T.A. NO.4813/MUM/2017 6 ASSESSEE ALSO RELIED UPON CASE LAWS WHICH FOUND MENTIONED IN ASSESSMENT ORDER TO CONTEND THAT NO ADDITIONS ARE WARRANTED ON THE FACTUAL MATRIX OF T HE CASE . 3.4 THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE WAS OF THE VIEW THAT THESE PARTIES ARE LISTED ON WEB SITE OF MAHARASHTRA VAT DEPARTMENT AS HAWALA DEALERS WHO ARE ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THESE PARTIES HAV E FILED AFFIDAVITS OR GIVEN STATEMENTS BEFORE THE MAHARASHTRA VAT AUTHORITIES AVERRING THAT THEY WERE INDULGING IN BOGUS/HAWALA ACTIVITIES OF ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THESE PARTIES HAVE ALSO AVERRED BEFORE MAHARASHTRA VAT AUTHORI TIES THAT THEY USED TO WITHDRAW CASH FROM BANK AND GIVE CASH BACK TO THE PARTIES FROM WHOM CHEQUES WERE RECEIVED AGAINST PAPER/HAWALA BILLS ISSUED BY THEM WITHOUT SUPPLYING/DELIVERING ANY MATERIAL, AFTER DEDUCTING THEIR COMMISSION . THE AO ALSO OBSERVED THAT IN SEARCHES CONDUCTED BY MAHARASHTRA VAT AUTHORITIES, THERE WERE SEIZURE OF HUGE CASH FROM THESE ALLEGED HAWALA DEALERS WHICH WERE WITHDRAWN BY THESE HAWALA DEALERS FROM THEIR BANK ACCOUNTS TO RETURN THE SAME BACK AFTER DEDUCTING THEIR COMMISSION TO T HE PARTIES FROM WHOM CHEQUES WERE RECEIVED AGAINST BOGUS BILLS. THE AO OBSERVED THAT THE ASSESSEE HAD FAILED TO DISCHARGE ONUS CAST ON IT TO PROVE THAT PURCHASES MADE BY IT WERE GENUINE. THE ASSESSEE COULD NOT PRODUCE THESE PARTIES BEFORE THE AO. THE AO I SSUED NOTICES U/S. 133(6) OF THE 1961 ACT AND IT WAS FOUND BY THE AO THAT MOST OF THESE PARTIES WERE NOT TRACEABLE OR DID NOT RESPONDED TO NOTICES ISSUED U/S 133(6) OF THE 1961 ACT. THE AO OBSERVED THAT THE ONUS LIES ON THE ASSESSEE TO PROVE GENUINENESS OF THESE PURCHASES AND TO PROVE THAT THESE SUPPLIERS ARE GENUINE SUPPLIERS OF THE MATERIAL. THE ASSESSEE ALSO DID NOT SUBMITTED EVIDENCES OF PURCHASES LIKE DELIVERY CHALLANS, TRAN SPORT BILLS ETC. . THE AO WAS OF THE VIEW THAT PURCHASES HAVE BEEN MADE BY TH E ASSESSEE FROM UNDISCLOSED PARTIES IN THE OPEN MARKET IN CASH AT MUCH LOWER PRICES , AND THE ASSESSEE OBTAINED INVOICES FROM THESE HAWALA DEALERS. THE AO OBSERVED THAT THESE I.T.A. NO.4813/MUM/2017 7 HAWALA DEALERS DID NOT PAY VAT/SALES TAX AND /OR INCOME TAX ON SALE OF THE UNACC OUNTED GOODS WHICH RESULT ED IN LOWER PURCHASE PRICE FOR THE ASSESSEE. THE PAYMENT WERE MADE BY THE ASSESSEE TO THESE HAWALA DEALERS BY CHEQUE AND CASH HAS BEEN RECEIVED BACK FROM THESE HAWALA DEALERS BY THE ASSESSEE , AFTER DEDUCTING THEIR COMMISS I ON . THE AO ALSO OBSERVED THAT PAYMENTS HAVE BEEN MADE AFTER SUBSTANTIAL DELAYS WHICH ALSO SHOWS THAT BACK DATED BILLS WERE ARRANGED FROM THESE HAWALA DEALERS WITHOUT GETTING ANY DELIVERY OF MATERIAL. T HE AO CONFIRM ED THE ADDITION S TO THE INCOME OF THE ASSESS EE TO THE TUNE OF 25% OF THESE ALLEGED BOGUS PURCHASES WHICH WERE ADDED TO THE INCOME DECLARED BY THE ASSESSEE , BY SUMMARISING HIS FINDINGS BY HOLDING AS UNDER , VIDE RE ASSESSMENT ORDER DATED 17.03.2016 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT : A). THE PRIMARY ONUS IS NO (SIC. ON) THE ASSESSEE TO ESTABLISH THE GENUINE NE SS OF THE PURCHASES CLAIMED BY IT. AS PER SECTION 101,102 AND 106 OF EVIDENCE ACT, THE ONUS LIES UPON THE ASSESSEE TO PROVE ALL THE CLAIMS INCLU DING PURCHASES TO SATISFACTION O F THE AO. WHICH WAS NOT DISCHARGED BY THE ASS ESSEE AS IT FAILED TO PRODUCE THE PAR TIES FROM WHOM PURCHASES WERE MADE. SINCE THE PRIMARY FACTS ARE IN KNOWLEDGE OF THE ASSESSEE, IT IS ITS DUTY TO PROVID E THE CORRECT ADDRESS OR CONTACT MODES O F' THE ALLEGED SUPPLIERS. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE RAJ HIGH COURT OF INDIA (2002) 178 CTR (RAJ) 42 0 MP HIGH COURT IN THE CASE OF VIS P (P) VS. CIT INDORE(2004) 186 CTR 218 (MP). B). MERE FILING OF COPIES OF PURCHASE BILLS WITHOUT A NY DOCUMENTARY EVIDENCE IN SUPPORT OF PURCHASES AND PAYMENT THROUGH ACCOUNT PAYEE CHEQUE CANNOT BE CONCLUSIVE IN A CASE WHERE GENUINENESS OF TRANSACTION IS IN QUESTION. C). THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRASHANT (P) ( 1994) 121 CTR (CAL) 20 , HAS HELD THAT EVEN PAYMENT O F ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT AND IS NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASES. D). IN THE CASE OF CIT VS. GOLCHA PROPERTIES PV T LTD. ( IN LIQUIDATION ) (1 99 6 ) 136 CTR 222 ( RAJ) , IS (SIC. IT) WAS HELD THAT THE GENUINENESS OF THE TRANSACTION COULD B E DECIDED I.T.A. NO.4813/MUM/2017 8 ON THE BASIS OF PRIMARY FARTS ON RECORDS AND THE REVENUE IS NOT REQUIRED TO LEAD A CLINCHING EVIDENCE TO PROVE THAT PURCHASE ARE BOGUS. E). IN THIS CASE, THE RE IS UNCONTROVERTED EVIDENCE FROM AN IMPECCABLE SOURCES WHICH HAS THE PRIMARY DUTY OF TAXING A PURCHASE - SALE TRANSACTION IN THE FORM OF ADMISSION OF THE SO - CALLED SELLER ABOUT ISSUING BOGUS BILLS OF PURCHASES. F). THE HON'BLE I.T.A.T, JAIPUR IN THE CASE OF M/S. KANCHWALA GEMS. VS. JCIT NO. 134/JP/202 DT 10.12.2003 AFFIRMED BY THE SUPREME COURT IN THE CASE OF M/S. KANCHWALA GEMS VS. JCIT (2006) 206 CTR (SC)585, 288 ITR 10(SC) HAS HELD THAT EVEN PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SUFFICIENT TO ESTABLISH T HE GENUINE NE SS OF PURCHASE S . G). IT IS WELL - SETTLED LAW THAT STRICT RULES OF EVIDENCE DO NOT APPLY TO I.T.A CT AND THE REAL TEST WITH REGARD TO GENUINENESS OF THE TRANSACTION IS PREPONDERANCE OF PROBABILITIES' AND NOT 'BEYOND REASONABLE DOUBT'. RELIANCE IS PLACED ON C. VASANTLAL & CO. VS.CIT (1 9 62) (SC) AND SUMTI DAYAL VS. CIT(1995) 214 ITR 801 (SC). ONE HAS TO CONSIDER THE TOTALITY OF FACTS, SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITY FOR ARRIVING AT A CONCLUSION AS HELD IN CIT VS DURGA PRASAD 82 ITR 540 (SC) AND SUMATI DAYAL VS. CIT 214 ITR 801 (SC). H). THE PURCHASES FROM HAWALA OPERATOR FALLS WITHIN TIE AMBIT OF THE TERM 'COLORABLE DEVICES AND THE SUPREME COURT OBSERVED IN THE CASE OF MC DOWELL AND CO. LTD VS. CTO 154 ITR 148 THAT 'TAX PLANNING MAY BE LEGITIMATE PROVIDE IT IS WITHIN THE FR AMEWORK OF L AW. COLORABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE O R ENTERTAIN THE BELIEF THAT IT IS HONONBLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO D UBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES'. I). SINCE THE INFORMATION AVAILABLE ON MAHARASHTRA SALES TAX DEPARTMENT'S WEBSITE LEADS TO DOUBT REGARDING GENUINE NE SS OF THE PURCHASES, IT IS INCUMBENT ON THE ASSESSEE TO PRODUCE THESE PARTIES ALONG WITH THEIR NECESSARY DOCUMENTS TO ESTABLISH THE GENUINE NE SS OF THE TRANSACTION AS THESE PARTIES WERE NOT FOUND AT THE GIVEN ADDRESS. IT IS REALLY SURPRISING THAT ALL THE PARTIES WERE NOT FOUND IN EXISTENCE ON THE GIVEN ADDRESSEE NOR WAS IT PRODUCED BY THE ASSESSEE BEFOR E THE UNDERSIGNED TO GET THE CLAI M OF PURCHASES VERIFIED. I.T.A. NO.4813/MUM/2017 9 J), THERE IS A SPECIFIC FINDING OF MAHARASHTRA SALES TAX DEPARTMENT THAT THESE PARTIES HAD ISSUED FALSE BILLS WITHO UT DELIVERY OF GOODS. SUCH FINDINGS CANNOT BE OVERLOOKED. K). THUS, UNDISPUT ED F ACT IS THAT THE PURCHASES CLAIMED TO HA VE BEEN MADE FOR THESE PARTIES REMAINED U N VERIFIED. L ). RELIANCE IS ALSO PLA CED ON THE FOLLOWING JUDGMENTS IN F AVOUR OF REVENU E A). CIT VS. LA MEDICO, 1 77 TAXMAN 628 (2001) (DELHI) B). SUMATI DAYAL VS.C IT 214 ITR 801 (SC)(1995) C). CIT VS. DURGA PRASAD MORE 1973 CTR (SC) 500: (1 971) 821 ITR 540 (SC). M) . FURTHER, IN THE CASE OF M/S . VIJAY PROTEINS LTD VS. ACIT 58 ITD 428 (1996) /55 TTJ 76 (AHD), THE HON'BLE I.T.A.T, MUMBAI HAVE STATED AS UNDER: ' IT IS WELL KNOW THAT PURCHASES ARE MADE FROM OPEN MARKET WITHOUT INSISTING FOR THE GENUINE BILLS, THE SUPPLIE R S MAY BE WILLING TO SELL THOSE PRODUCTS AT A MUCH LOWER RATE AS C OMPARED TO THE RATE WHICH THEY MAY CHARGE IN CAS E THE DEALER HAS TO GIVE A GENUINE SAL E INVOICE IN RESPECT OF THAT SAL E AN D SUPPLY THE GOODS. THERE MAY BE VARIOUS FACTORS DUE TO WHIC H THERE IS BOUND TO BE A SUBSTANTIAL DIFFERENCE BETW EEN THE PURCHASE OF ACCOUNTED FO R GOODS. THERE MAY BE A SAVING ON ACCOUNT OF SALES - TAX AND OTHER TAXES AND DU TIES WH ICH MAY BE LEVIABLE IN RESPECT O F MANUFACTURE OR SALE OF GOODS IN QUESTION . TH E SUPPLIERS OR THE MANUFACTURER M AK E A SUBSTANTIAL SAVING IN THE INCOME TAX IN RESPECT OF INCOME FROM SALE OF UNACCOUNTED GOODS PRODUCED AND SOLD BY THEM. THIS MAY ALSO BE ONE ON THE FACTORS DUE TO WHICH THE SELLER MAY BE WILLING TO CHARGE LOWER RATES FOR UNACCOUNTED GOODS AS COMPARED TO AC COUN TED FOR GOODS. KEEPING ALL THESE FACTORS IN MIND AND ALSO KEEPING IN VIEW OF THE DECISION OF THE HON'BLE I.T.A.T, MUMBAI IN THE CASE OF SANJAY OIL CAKE INDUSTRIES (SUPRA) WE HOLD THAT 25% THE PURCHASE PRICE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS THROUGH SUCH FICTITIOUS INVOICES IN THE NAME OF 33 BOGUS PARTIES SHOULD BE DISALLOWED OUT OF THE AMOUNT OF PURCHASES SHOWN TO HAVE BEEN MADE FROM THOSE 33 B OGUS SUPPLIERS. WE DIRECT THE ASSESSING OFFICER TO DISALLOW 25% OF THE AFORESAID AMOUNT ON ACCOUNT OF INFLATION OF PURCHASE PRICES. I.T.A. NO.4813/MUM/2017 10 11. AFTER CAREFULL Y GOING THROUGH THE LEGAL INSTANC ES AVAILABLE ON THIS ISSUE THE ONUS LAY UPON THE ASSESSEE TO PROVE THE G ENUINE NESS OF THE TRANSACTION WHEN IT CLAIMED THAT THE PURCHASES ARE GENUINE. FROM THE ABOVE CASE LAWS AND THE DISCUSSION ON INVESTIGATION, IT IS CRYSTAL CLEAR THAT - I) THE PRIMARY ONUS IS ON THE ASSESSEE TO ESTABLISH THE GENUINE NE SS OF THE PURCHASE CLAIME D BY IT, II). SINCE THE PRIMARY FACTS ARE IN THE KNOWLEDGE OF THE ASSESSEE IT IS HIS DUTY TO PROVIDE THE CORRECT ADDRESS OR CONTACT MODES OF THE ALLEGED SUPPLIERS, III). IF THE INVESTIGATION DONE BY THE DEPARTMENT LEADS TO DOUBT REGARDING THE GENUINE NE SS OF THE PURCHA SES IT IS INCUMBENT ON THE ASSE SSEE TO PRODUCE THE PARTIES ALONGWITH THE NECESSARY DOCUMENTS TO ESTABLISH THE GENUINE NE SS OF THE TRANSACTION, IV). PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT. V). NO PROOF B Y WAY OF CHALLAN/DOCUMENTARY EVIDENCE FOR PAYMENT OF VAT IS FILED, VI). THOUGH IT IS TRUE THAT SALES, CANNOT BE AFFECTED WITHOUT CORRESPONDING PURCHASES, IN THE ABSENCE OF STOCK REGISTER, BOOKS OF ACCOUNTS IT IS NOT POSSIBLE TO VERIFY WHICH GOODS WE RE SOLD TO THE PARTIES WHOSE SALES CONFIRMATION WAS SUBMITTED BY THE ASSESSEE. ASSESSEE IS ALSO UNA BLE TO CORRELATE THE SAM E . VII). IN FACT, SELF - INTEREST TALKS IN A LL SORTS OF TONGUES AND PLAYS ALL SORTS OF ROLES. THE INDIFFERENCE OF NOT PRODUCING TH E PARTY WHICH IS SUED THE BILL IS INDICATIVE OF THE TRUTH. THE REVENUE IS NOT DOUBTING ALL THE PURCHASES BUT DOUBTING ONLY THOSE PURCHASES FOR WHICH THE GENUINE NE SS COULD NOT BE PROVED . ONE CANN OT LOSE SIGHT OF THE FACT THAT DARK DEEDS ARE PERFORMED UNDER THE COVER OF DARKNESS AND DIRECT EVIDENCE CAN NEVER BE AVAILABLE SOMETIMES THE FACTS SPEAK LOUD AND CLEAR. 12. THE AMO UNT SHOWN AS PAID TO THE BOGUS PA RTIES COMES BACK TO THE ASSESSEE AS NO PUR CHASES ARE MADE FROM THEM. THE CASH SO RECEIVED BACK IS AVAILABLE FOR FINAN CING SUBSEQUENT PURCHASES FROM UN DISCLOSED PARTIES IN CASH. IT IS APPARENT FROM THE FACTS THAT THE ASSESSEE HAS EMPLOYED THE ABOVE MENTIONED MODUS OPERANDI . THEREFORE, 25% OF PURCHA SES STANDING I N THE NAME OF THE BOGUS/ HAWALA PARTY IS TO BE ADDED AS UNEXPLAINED EXPENDITURE U /S.69C OF THE I.T.ACT, WHICH ARE OF RS1 4,61,82S/ - (I.E.25% OF RS.14,61,825/ - AR E RS.3,65,456). ACCORDINGLY, THE AMOUNT OF RS.3,65,456/ - IS TREATED AS UNEXP LAINED EXPENDITURE ADDED TO T H E TOTAL INCOME U/S.69C OF THE I.T ACT 1961. I.T.A. NO.4813/MUM/2017 11 4 . THE MATTER REACHED LD. CIT(A) AT THE BEHEST OF THE ASSESSEE WHEREIN ASSESSEE FILED FIRST APPEAL CHALLENGING ADDITIONS TO THE INCOME MADE BY THE AO VIDE REASSESSMENT ORDER DATED 17.03.2 016 PASSED BY THE AO U/S . 143(3) READ WITH SECTION 147 OF THE 1961 ACT THE LD.CIT(A) WAS PLEASED TO CONFIRM /SUSTAIN ADDITION S TO THE INCOME OF THE ASSESSEE TO THE TUNE OF 12.5% VIDE APPELLATE ORDER DATED 24.04.2017 PASSED BY LEARNED CIT(A) , BY HOLDING AS U NDER: - 4.3. I HAVE CONSIDERED THE SUBMISSIONS CAREFULLY. WHEN THE PARTIES ARE UNTRACEABLE, IT IS NOT CLEAR WHAT INVESTIGATION IS EXPECTED FROM THE ASSESSING OFFICER. IT IS FOR TH E ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES CLAIMED. THUS DISALLOW ANCE IS WARRANTED IN THIS CASE. NO PARTICULAR REAS ON HAS BEEN GIVEN BY ASSESSING OFFICER FOR COMPUTING THE DISALLOWANCE AT 25% OF THE IMPUGNED PURCHASES. IN AY 2009 - 10 AND AY 2011 - 12 , ON SIMILAR FACTS, THE DISALLOWANCE WAS RESTRICTED TO 12.5% OF THE PURCH ASES IN THE APPELLATE ORDER. IN KEEPING WITH THE CONSISTENCE, THE DISALLOWANCE IS RESTRICTED TO 12.5% OF THE PURCHASES. THUS DISALLOWANCE IS RESTRICTED TO RS. 1,82,730/ - THE GROUND OF APPEAL NO. 1 IS PARTLY ALLOWED. 5 . NOW THE MATTER IS BEFORE TRIBUNAL AT THE BEHEST OF R EVENUE WHO IS AGGRIEVED BY PART RELIEF GRANTED BY LD.CIT(A) WHEREIN ADDITIONS TO THE INCOME ON ACCOUNT OF BOGUS PURCHASES WERE MADE BY THE AO TO THE TUNE OF 25% OF ALLEGED BOGUS PURCHASES , WHICH ADDITIONS TO THE INCOME WERE RE STRICTED BY LEARNED CIT(A) TO 12.5% OF THE SAID BOGUS PURCHASES . THE LD. DR SUBMITTED THAT BOGUS PURCHASES WERE MADE BY THE ASSESSEE WHEREIN THE AO MADE ADDITIONS TO THE INCOME OF THE ASSESSEE TO THE TUNE OF 25% OF THE SAID ALLEGED BOGUS PURCHASES , WHICH WAS REDUCED TO 12.5% OF THE SAID ALLEGED BOGUS PURCHASES BY LD. CIT(A) . I T WAS SUBMITTED BY LEARNED DR THAT ASSESSEE IS ENGAGED IN MANUFACTURE AND TRADING IN SPECTACLE LENS ES. IT WAS SUBMITTED THAT THIS MATERIAL WAS CLAIMED TO BE ALLEGEDLY USED FOR MACH INERY MAINTENANCE AND GENERAL REPAIRS. I T WAS SUBMITTED THAT UNDER FACTUAL MATRIX OF THE CASE, THE ADDITIONS SHOULD HAVE BEEN MADE TO THE TUN E OF 100% OF THE ALLEGED BOGUS PURCHASES INSTEAD OF 25/12.5% OF THE I.T.A. NO.4813/MUM/2017 12 ALLEGED BOGUS PURCHASES AS WERE MADE BY LEARNED AO /CIT(A) . THE LEARNED DR WOULD RELY ON DECISION OF HONBLE SUPREME COURT IN THE CASE OF N K PROTIENS LIMITED V. DCIT REPORTED IN (2017) 250 TAXMAN 22(SC) TO CONTEND THAT ADDITIONS BE ENHANCED TO 100% AS WH EN THE SAID AO FRAMED ASSESSMENT,HE WAS NOT HAVING BENEFIT OF THE AFORESAID JUDGMENT OF HONBLE APEX COURT . IT WAS SUBMITTED BY LEARNED DR THAT NOTICES ISSUED U/S 133(6) OF THE 1961 ACT RETURNED UN - SERVED AND THESE PARTIES ARE UNTRACEAB LE. IT WAS SUBMITTED BY LEARNED DR THAT EVEN THE ASSESSEE COULD NOT PRODUCE THESE PARTIES BEFORE THE AUTHORITIES BELOW FOR VERIFICATION. 5.2 THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS THROUGH ITS COUNSEL WHICH ARE PLACED IN FILE. IT IS CLAIMED THAT THE ASSESSEE HAD ACCEPTED ADDITIONS TO THE INCOME OF THE ASSESSEE TO THE TUNE OF 12.5% OF ALLEGED BOGUS PURCHASES AS WAS CONFIRMED BY LD. CIT(A) AND NO APPEAL IS FILED BY THE ASSESSEE WITH TRIBUNAL AGAINST THE APPELLATE ORDER DATED 24.04.2017 PASSED BY LEARNED CIT(A). I T IS ALSO CLAIMED THAT LD. CIT(A) FOR EARLIER YEAR AY 2009 - 10 HAS ALSO CONFIRMED ADDITIONS TO THE TUNE OF 12.5% OF ALLEGED BOGUS PURCHASES WHILE THE AO MADE ADDITIONS TO THE TUNE OF 100% OF ALLEGED BOGUS PURCHASES. IT WAS SUBMITTED THAT REVENUE HAS NOT FILED A N Y AP PEAL AGAINST THE APPELLATE ORDER PASSED BY LD. C IT(A) FOR AY 2009 - 10 SO FAR AS THIS ISSUE IS CONCERNED , WHICH ATTAINED FINALITY . THE AP PELLATE ORDER OF LEARNED CIT(A) IS PLACED IN FILE. IT IS CLAIMED THAT WHILE GRANTING PART RELIEF FOR THE IMPUGNED ASSESS MENT YEAR 2010 - 11 , THE LEARNED CIT(A) RELIED UPON DECISION OF LEARNED CIT(A) FOR AY 2009 - 10 WHEREIN ADDITIONS TO THE INCOME OF THE ASSESSEE TO THE TUNE OF 12.5% OF THE ALLEGED BOGUS PURCHASES WERE UPHELD. IT IS CLAIMED THAT WHILE UPHOLDING ADDITIONS TO THE INCOME OF THE ASSESSEE TO THE TUNE OF 12.5% OF ALLEGED BOGUS PURCHASES FOR AY 2009 - 10, THE LEARNED CIT(A) HAS RELIED UPON THE RATIO OF DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P. SHETH PRONOU NCED ON 16.01.2013 IN TAX APPEAL NO. 5531 OF 2012. THE APPELLATE ORDER DATED 26.05.2016 PASSED BY LEARNED CIT(A) - 21, I.T.A. NO.4813/MUM/2017 13 MUMBAI FOR AY 2009 - 10 IN APPEAL NUMBER CIT(A) - 21/ITO - 13(3)(3)/IT - 11/2015 - 16 IS PLACED IN FILE. THE GROUNDS OF APPEAL MENTIONED IN TRIBUNAL ORDER IN ITA NO. 4961/MUM/2016 DATED 17.04.2018 IN ASSESSEES OWN CASE FOR AY 2009 - 10 IN REVENUE S APPEAL WHICH CLEARLY SHOWS THAT THE REVENUE DID NOT CHALLENGE UPHOLDING OF ADDITIONS TO THE INCOME OF THE ASSESSEE TO THE TUNE OF 12.5% OF ALLEGED BOGUS PU RCHASES BY LEARNED CIT(A) AS AGAINST ADDITIONS TO THE TUNE OF 100% OF ALLEGED BOGUS PURCHASES AS WERE MADE BY THE AO FOR AY 2009 - 10 . THE SAID ORDER OF THE TRIBUNAL IS PLACED IN FILE. 6 . WE HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECO RD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SPECTACLE LENSES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 05.10.2010 WHICH WAS PROCESSED U/S 143(1) OF THE 1961 ACT. THE ASSE SSMENT OF THE ASSESSEE WAS REOPENED BY THE AO U/S. 147 OF THE ACT VIDE ISSUANCE OF NOTICE DATED 24.03.2015 U/S 148 OF THE 1961 ACT. IT IS PERTINENT TO MENTION THAT REOPENING OF THE CONCLUDED ASSESSMENT WAS DONE BY REVENUE BY INVOCATION OF PROVISIONS OF SEC TION 147 OF THE 1961 ACT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR AND ORIGINALLY NO SCRUTINY ASSESSMENT WAS FRAMED BY THE REVENUE U/S 143(3) READ WITH SECTION 143(2) OF THE 1961 ACT. SO FAR AS REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 IS C ONCERNED, THE ASSESSEE HAS NOT RAISED ANY CHALLENGE TO REOPENING OF CONCLUDED ASSESSMENT U/S 147 WHICH HAS ATTAINED FINALITY. THE REASONS AS WERE RECORDED BY THE REVENUE STIPULATED THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM PERSONS INDULGING IN ISSUANCE OF BOGUS PURCHASE AND SALE BILLS WITHOUT ACTUAL DELIVERY OF GOODS. THE SALES TAX DEPARTMENT HAS STATED THAT PURCHASES TO THE TUNE OF RS. 14,61,825/ - MADE BY THE ASSESSEE ARE BOGUS PURCHASES. THIS LED TO REOPENING OF THE CONCLUDED ASSESSMENT BY AO U/S 147 OF THE 1961 ACT. THE REASONS FOR REOPENING WERE RECORDED BY THE AO WHICH WERE FURNISHED TO THE ASSESSEE BY THE AO VIDE LETTER DATED 18.08.2015, WHICH ARE REPRODUCED HEREUNDER: - I.T.A. NO.4813/MUM/2017 14 ' THE ASSESSEE HAS E - FILED THE RETURN OF INCOME ON 02.04.2015 DE CLARING INCOME O F RS. NIL/ - . A). THE DETAILS AND INFORMATION AVAILABLE ON RECORD SHOWS THE ASSESSEE ENTERED INTO PURCHASE TRANSACTIONS WITH THE FOLLOWING PERSONS DURING THE YEAR WHO ARE INVOLVED IN THE PROVIDING ACCOMMODATION ENTRIES: SR. NO NAME OF THE PARTY FROM WHOM ASSES S EE SHOWN PURCHASES AMOUNTS (RS.) 1. LAHREE IMPEX 14,60,369/ - 2. SIDDHIVINAYAK CORPORATION 1,456/ - TOTAL 14,61,825/ - B). THE NAME(S) OF THE ABOVE PERSON(S) WAS ALSO APPEARING IN THE LIST OF HAWALA DEALERS WHO PROVI DED THE BILLS WITHOUT DELIVERY O F ACTUAL GOODS, MADE AVAILABLE IN THE PUBLIC DOMAIN IN THE OFFICIAL WEBSITE OF THE MAHARASTHTRA SALES TAX DEPARTMENT. BEFORE THE SALES TAX AUTHORITIES THE PROPRIETOR/PARTNER/DIRECTOR OF THE SUPPLIER CONCERNS HAVE STATED ON OATH THAT THEY HAVE NOT PHYSICALLY PURCHASED OR SOLD ANY GOODS AND THEY HAVE MERELY ISSUED BOGUS BILLS OF PURCHASE/SALE. IN VIEW OF THE ABOVE FACTS, I HAVE A REASON TO BELIEVE THAT THE INCOME TO THE TUNE OF RS. 14,61,825/ - HAS ESCAPED ASSES SMENT'. THESE ALLEGED HAWALA OPERATORS HAVE FILED AFFIDAVITS AND/OR THEIR S TATEMENTS WERE RECORDED BEFORE MAHARASHTRA SALES TAX DEPARTMENT WHEREIN THEY AVERRED THAT THEY WERE INDULGING IN ISSUING BOGUS BILLS WITHOUT SUPPLYING ANY MATERIAL. THE SALES TAX D EPARTMENT HAD FURTHER STATED THAT THE PURCHASES MADE BY THE ASSESSEE FROM VARIOUS HAWALA DEALERS AMOUNTING TO RS. 14,61,825/ - WERE BOGUS PURCHASES. THE SEARCHES WERE CONDUCTED BY MAHARASHTRA SALES TAX A UTHORITIES ON THESE ALLEGED HAWALA DEALERS WHEREIN HU GE CASH WAS FOUND WHICH WERE WITHDRAWN BY THESE HAWALA DEALERS FROM THEIR BANKS AGAINST CHEQUES RECEIVED FROM THE PARTIES WHO HAD OBTAINED BOGUS BILLS FROM THESE HAWALA DEALERS TO BE RETURNED TO T HEM AGAINST CHEQUES RECEIVED FROM THESE PARTIES , AFTER DEDU CTING THEIR COMMISSION. THE ASSESSEE HAD I.T.A. NO.4813/MUM/2017 15 MADE ALLEGED PURCHASES FROM TWO ACCOMMODATION ENTRY PROVIDERS NAMELY LAHREEE IMPEX AND M/S SIDDHIVINAYAK CORPORATION, AGGREGATING TO RS. 14,61,825/ - . THE PAYMENTS TO LAHREE IMPEX WAS MADE THROUGH ACCOUNT PAYEE CHEQU ES WHILE PAYMENT TO M/S SIDDHIVINAYAK CORPORATION WAS MADE IN CASH THROUGH PETTY CASH BOOK. THE MATERIAL WERE CLAIMED TO BE PROCURED FOR MACHINERY MAINTENANCE FROM LAHREE IMPEX , WHILE ON THE OTHER HAND MATERIAL WAS ALLEGEDLY PROCURED FOR GENERAL REPAIRS AND MAINTENANCE FROM M/S SIDDHIVINAYAK CORPORATION . THE AO ASKED ASSESSEE TO PRODUCE THESE PARTIES FOR VERIFICATION WHICH COULD NOT BE PRODUCED BY THE ASSESSEE. THE NOTICES ISSUED BY THE AO U/S 133(6) OF THE 1961 ACT TO THESE PARTIES FOR VERIFYING PURCHASES RETURNED UNSERVED AND VERIFICATION COULD NOT BE DONE BY THE AO FROM THESE PARTIES. THE ASSESSEE DID PROVIDE COPIES OF BILLS RECEIVED FRO M THESE PARTIES BEFORE THE AO . THE ASSESSEE ALSO PRODUCED BANK STATEMENTS AND PETTY CASH BOOK F ROM WHERE THE PAYMENTS WERE MADE AS WELL COPIES OF LEDGER EXTRACTS OF THESE PARTIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE ALSO PRODUCED BY THE ASSESSEE BEFORE THE AO. THE ASSESSEE HAS CONSISTENTLY CLAIMED THAT THESE PURCHASES ARE GENUINE. THE ASSES SEE HOWEVER COULD NOT PRODUCE DELIVERY CHALLANS, TRANSPORT BILLS, OCTROI RECEIPTS ETC TO PROVE DELIVERY OF GOODS. IT WAS ALSO OBSERVED BY THE AUTHORITIES BELOW THAT IN ORDER TO COMPLETE BOOKS OF ACCOUNTS , ACCOMMODATION BILLS WERE PROCURED FROM THESE PAR TIES . IN THE OPINION OF THE AUTHORITIES BELOW , T HE CHEQUES WERE ISSUED BY THE ASSESSEE TO THESE PA RTIES WHEREIN CASH WAS RETURNED BACK BY THESE PARTIES TO THE ASSESSSEE AFTER DEDUCTING THEIR COMMISSION. AS PER AUTHORITIES BELOW , T HE CASH SO RECEIVED BACK BY THE ASSESSEE FROM THESE HAWALA DEALERS IS UTILISED FOR PROCURING MATERIAL FROM GREY MARKET IN CASH . THE AUTHORITIES BELOW ALSO OBSERVED THAT PAYMENTS HAVE BEEN MADE AFTER SUBSTANTIAL DELAYS WHICH ALSO SHOWS THAT BACK DATED BILLS WERE ARRANGED FROM THES E HAWALA DEALERS WITHOUT GETTING ANY DELIVERY OF MATERIAL AND THESE ARE ALL BOGUS PURCHASES . IT IS ALSO OBSERVED BY THE AUTHORITIES BELOW THAT THE PARTIES FROM WHOM THE ASSESSEE PROCURED MATERIAL FROM GREY I.T.A. NO.4813/MUM/2017 16 MARKET DOES NOT PAY ANY SALES TAX/INCOME - TAX ETC T O GOVERNMENT AND HENCE THE PRICES OF THE PRODUCT ARE LOW WHICH ADVANTAGE ASSESSEE OBTAINED BY PROCURING MATERIAL FROM GREY MARKET. THE AUTHORITIES BELOW ALSO HELD THAT IN SUCH CIRCUMSTANCES IN INCOME TAX PROCEEDINGS, THE LIABILITY TO TAX IS TO BE FASTENED ON THE ASSESSEE BASED ON PREPONDERANCE OF PROBABILITIES AS STRICT EVIDENCE MAY NOT BE AVAILA BLE. IT WAS CONCLUDED BY AUTHORITIES BELOW THAT THE ASSESSEE HAD FAILED TO DISCHARGE ONUS CAST ON IT TO PROVE THAT PURCHASES MADE BY IT WERE GENUINE. THE ASSESSEE COULD NOT PRODUCE THESE PARTIES BEFORE THE AUTHORITIES BELOW AND NOTICES ISSUED BY THE AO U/S 133(6) TO THESE PARTIES RETURNED UN - SERVED . THIS LED TO ESTIMATION OF PROFITS EMBEDDED IN THESE BOGUS PURCHASES , WHEREIN THE AO ESTIMATED PROFITS @ 25% OF ALLEGE D BOGUS PURCHASES TO BE BROUGHT TO TAX AS INCOME OVER AND ABOVE INCOME DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME FILED WITH REVENUE , WHILE LEARNED CIT(A) WAS OF THE VIEW THAT FAIR AND REASONABLE ESTIMATE OF PROFIT SHOULD BE 12.5% OF THE ALLEGED BOG US PURCHASES AS AN INCOME TO BE BROUGHT TO TAX OVER AND ABOVE INCOME DECLARED BY THE ASSESSEE. THE VIEW TAKEN BY THE AUTHORITIES BELOW TO ESTIMATE PROFITS EMBEDDED IN BOGUS PURCHASES AS AN INCOME TO BE BROUGHT TO TAX INSTEAD OF BRINGING TO TAX ENTIRE BOGUS PURCHASES IS A PLAUSIBLE VIEW BASED ON THE ENTIRE FACTUAL MATRIX OF THE CASE AND CANNOT BE CONSIDERED AS A PERVERSE VIEW . REFERENCE IS DRAWN TO DECISION OF HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS V. JCIT REPORTED IN (2007) 288 ITR 10(SC). THE CONTENTION OF LEARNED DR TO BRING TO TAX AS INCOME THE ENTIRE ALLEGED BOGUS PURCHASES BASED ON THE HONBLE APEX COURT DECISION IN THE CASE OF N K PROTEINS LIMITED(SUPRA) CANNOT BE ACCEDED TO. THERE ARE NO CLINCHING AND CONCLUSIVE EVIDENCES AVAILABLE ON R ECORD WHICH COULD JUSTIFY DISALLOWING 100% OF THE BOGUS PURCHASES. THE AO HAS NOT MADE ANY IN - DEPTH VERIFICATION AND ANALYSIS OF MACHINERY MAINTENANCE MATERIAL ACCOUNT NOR OF THE GENERAL REPAIRS ACCOUNT VIS - A - VIS PRECEDING YEARS EXPENSES TO FIND OUT ANY UNUSUAL OR ABNORMAL VARIATIONS. NO INDEPTH VERIFICATIONS OR ANALYSIS OF THESE EXPENSES WERE DONE BY THE AO VIS - A - I.T.A. NO.4813/MUM/2017 17 VIS MACHINERIES INSTALLED AND MATERIAL USED FOR REPAIRS AND MAINTENANCE. NO STATEMENTS OF THE ASSESSEE S EMPLOYEES WERE RECORDED CONFRON TING THE INCRIMINATING INFORMATION AS WELL TO UNEARTH TRUTH. THUS, IN NUT - SHELL NO COGENT , CLINCHING AND CONCLUSIVE EVIDENCES IS ON RECORD TO JUSTIFY ADDING ENTIRE ALLEGED BOGUS PURCHASES. THE REVENUE HAS ITSELF ACCEPTED HOLDING OF ADDITIONS TO THE TUNE O F INCOME OF 12.5% OF ALLEGED BOGUS PURCHASES AS HELD BY LEARNED CIT(A) FOR AY 2009 - 10 AND NO APPEAL WAS FILED BY REVENUE WITH TRIBUNAL ON THIS ISSUE FOR AY 2009 - 10. IT IS PERTINENT TO MENTION THAT THE AO MADE ADDITIONS TO THE INCOME OF THE ASSESSEE TO TH E TUNE OF 100% OF ALLEGED BOGUS PURCHASES FOR AY 2009 - 10 WHICH WAS REDUCED TO 12.5% BY LEARNED CIT(A). THE LEARNED DR IS ASKING US TO ENHANCE INCOME TO 100% OF ALLEGED BOGUS PURCHASES AS AGAINST ADDITIONS TO THE INCOME TO THE TUNE OF 25% MADE BY THE AO FO R THE IMPUGNED ASSESSMENT YEAR , FOR WHICH LEARNED DR IS OBLIGED TO SHOW PERVERSITY IN THE ASSESSMENT ORDER OF THE AO WITH CLINCHING, CONCLUSIVE AND COGENT INCRIMINATING MATERIAL ON RECORD WHICH IN OUR CONSIDERED VIEW THE LEARNED DR FAILED TO SHOW. THE AO TOOK A PLAUSIBLE VIEW WHICH IS NOT A PERVERSE VIEW. AT THIS STAGE BASED ON THE MATERIAL ON RECORD AND A PLAUSIBLE VIEW TAKEN BY AUTHORITIES BELOW, WE ARE NOT INCLINED TO RELEGATE ASSESSEE TO ANOTHER ROUND OF LITIGATION . THUS, BASED ON OUR ABOVE DISCUSSION S ,W E ARE IN AGREEMENT WITH THE AUTHORITIES BELOW THAT UNDER THESE CIRCUMSTANCES PROFITS EMBEDDED IN PURCHASES IS TO BE ESTIMATED WHICH HAS TO BE A FAIR AND REASONABLE ESTIMATE AS AN INCOME TO BE BROUGHT TO INCOME - TAX OVER AND ABOVE INCOME DECLARED BY THE ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE . EVEN FOR AY 2009 - 10, ADDITIONS WERE MADE BY THE AO DISALLOWING ALLEGED BOGUS PURCHASES TO THE TUNE OF 100% WHICH WAS THEN REDUCED TO 12.5% OF ALLEGED BOGUS PURCHASES BY LEARNED CIT(A). THE REVENUE DID NOT F ILE ANY APPEAL WITH TRIBUNAL ON THIS PART RELIEF GRANTED BY LEARNED CIT(A) FOR AY 2009 - 10. THE ASSESSEE HAS ALSO ACCEPTED ADDITIONS TO THE TUNE OF 12.5% OF THE ALLEGED BOGUS PURCHASES FOR BOTH AY 2009 - 10 AND FOR IMPUGNED ASSESSMENT YEAR I.E. AY 2010 - 11 WI TH A VIEW TO BUY PEACE AND TO END DISPUTE/LITIGATION WITH I.T.A. NO.4813/MUM/2017 18 DEPARTMENT. HONBLE SUPREME COURT IN THE CASE OF KANCHWALA GEMS V. JCIT REPORTED IN (2007) 288 ITR 10(SC) HAS HELD THAT IN BEST JUDGMENT ASSESSMENT AN HONEST AND FAIR ESTIMATE OF INCOME IS TO BE MAD E . WE AT THIS STAGE DO NOT WANT ASSESSEE TO BE RELEGATE D TO PAINS OF ANOTHER ROUND OF LITIGATION BASED ON MATERIAL ON RECORD. IN OUR CONSIDERED VIEW BASED ON FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ESTIMATION OF PROFIT BY LD. CIT(A) TO THE TUNE OF 12.5 % OF THE ALLEGED BOGUS PURCHASES AS INCOME OF THE ASSESSEE OVER & ABOVE WHAT WAS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME , IS CONSIDERED TO BE A REASONABLE AND FAIR ESTIMATE , WHICH WE CONFIRM /AFFIRM. IN THE RESULT , THE APPEAL OF THE REVENUE ON THIS GROUND STOOD DISMISSED. THE GROUND NO.(IV) FILED BY REVENUE IN ITS APPEAL WITH TRIBUNAL STAND DISMISSED. WE ORDER ACCORDINGLY. 7 . THE SECOND ISSUE IN THIS REVENUES APPEAL VIDE GROUNDS OF APPEAL NO. (I) TO (III) CONCERNS ITSELF WITH SET O FF OF UN - ABSORBED DEPRECIATION OF RS. 1,24,09,517/ - AGAINST THE INCOME OF THE CURRENT YEAR. THE DEPRECIATION WHICH WAS CLAIMED BY THE ASSESSEE TO BE SET OFF AGAINST INCOME OF THE CURRENT YEAR IS DEPRECIATION CARRY FORWARD FOR THE AY 1998 - 99, 1999 - 2000 AND 2000 - 01 . THE ASSESSEE HAS SUBMITTED IN COMPUTATION OF INCOME STATEMENT OF CARRIED FORWARD LOSSES TO BE SET OFF IN THIS YEAR, AS UNDER: - THE ASSESSEE HAS SOUGHT TO SET OFF THE LOSS OF RS. 1,24,09,517/ - IN THIS YEAR AND SET OFF IT AGAINST BUSINESS INCOME OF RS. 1,24,09,517/ - AND FILED NIL RETURN OF INCOME. THE AO OBSERVED THAT THESE SET OFF LOSS WAS ALREADY CLAIMED AS SET OFF IN AY 2006 - 0 7, 2007 - 08, 2008 - 09 AND 2009 - 10. THE AO ASKED THE ASSESSEE TO PROVIDE LIST OF UN - ABSORBED I.T.A. NO.4813/MUM/2017 19 DEPRECIATION BROUGHT FORWARD , SET OFF AND CARR Y FORWARD SINCE 1998 - 99 TILL AY 2010 - 11 . T HE ASSESSEE SUBMITTED THE DETAILS AS UNDER: - 7.2 . THE AO OBSERVED THAT THE REVENUE HAS ALREADY DISALLOWED SET OFF OF UN - ABSORBED DEPRECIATION IN THE EARLIER YEARS AS PER ORDERS OF THE AO ARE AS UNDER: - 7.3 THE AO OBSERVED THAT AS PER PROVISIONS OF S ECTION 32 OF THE ACT, UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD FOR INDEFINITE PERIOD AND CAN BE SET OFF AGAINST ANY HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD SALARIES. THE AO OBSERVED THAT BUT FOR AS SESSMENT YEARS 1997 - 98 TO 2001 - 0 2, UNABSORBED DEPRECIATION CANNOT BE CARRIED FORWARD FOR MORE THAN E IGHT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED AND SET OFF AGAINST ANY OTHER HEADS OF INCOME EXCEPT INCOME UNDER THE HEAD BUSINESS OR PROFESSION. THE AO OBSERVED THAT THE ASSESSEE COMPANY HAD CARRIED FORWARD UN ABSORBED DEPRECIATION OF AY 1998 - 99 OF RS. 28,08,998/ - , AY 1999 - 00 OF RS. 72,46,077/ - AND AY 2000 - 01 AMOUNTING TO RS. 23,54,442/ - WHICH CANNOT BE ADJUSTED AGAINST INCOME OF IMPUGNED ASSESSMENT YEAR AS MORE THAN EIGHT YEARS HAVE ALREADY ELAPSED, VIDE REA SSESSMENT ORDER DATED 17.03.2016 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT . 8. AGGRIEVED BY THE REASSESSMENT ORDER DATED 17.03.2016 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE 1961 ACT, THE I.T.A. NO.4813/MUM/2017 20 ASSESSEE FILED FIRST APPEAL WITH LEARNED CIT(A) AND THE LD. CIT(A) AFTER RELYING UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTOR S INDIA PRIVATE LTD. V. DCIT (2013) 354 ITR 244(GUJ.HC) WAS PLEASED TO GRANT RELIEF TO THE ASSESSEE , BY HOLDING AS UNDER : - 5.1. GROUNDS OF APPEAL NO.2 IS IN RESPECT OF UNABSORBED DEPRECIATION BROUGHT FORWARD OF RS. 1,24,09,517/ - PERTAINING TO A.YR S 1998 - 99, 1999 - 99 AND 2000 - 01 IN COMPUTATION OF TAXABLE INCOME. THIS ISSUE HAS BEEN DISCUSSED IN PARA 5 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER NOTED THAT THE APPELLANT HAD CLAIMED CARRIED FORWARD OF UNABSORBED DEPRECIATION OF AY 1998 - 99 , 1999 - 2000 AND AY 2000 - 2001 OF RS 210,04,962 AGAINST WHICH AN AMOUNT OF RS 124,09,517 WAS SET OFF IN THE CURRENT YEAR. THE ASSESSING FURTHER NOTED THAT SUCH CLAIM OF SET OFF HAD BEEN DISALLOWED IN EARLIER YEARS ALSO. HE NOTED THAT 'UNABSORBED DEPRECIATION' OF AY 1998 - 99, 1999 - 2000 AND 2001 - 01, THE SAME CANNOT BE ADJUSTED AGAINST THE INCOME FOR AY 2010 - 11 AS 8 YEARS HAVE ALREADY ELAPS ED. HE THEREFORE DISALLOWED THE CLAIM OF SET OFF OF UNABSORBED DEPRECIATION BROUGHT FORWARD FROM AY 1998 - 99, 1999 - 2000 AND 2000 - 01. 5.2. THE APPELLANT SUBMITTED THAT THE ISSUE OF SET OFF OF UNABSORBED DEPRECIATION FOR AY 1998 - 99, 1999 - 2000 AND 2000 - 01 HA S TO BE DEALT WITH IN ACCORDANCE WITH SECTION 32(2) OF THE ACT AS AMENDED BY THE FINANCE ACT 2001 WHICH ALLOWED THE CARRY FORWARD OF DEPREDATION INDEFINITELY AND NOT BY SECTION 32(2) AS IT STOOD DURING THE PERIOD AY 1997 - 98 TO AY 2001 - 02 WHICH RESTRICTED T HE CARRY FORWARD' FOR EIGHT YEARS. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. 354 ITR 244 AND OTHER DECISIONS WHICH FOLLOWED THIS DECISION. 5.3. I HAVE CONSIDERED THE FACTS OF THE A SSESSING OFFICER, THE SUBMISSIONS OF THE APPELLANT AND CASE LAWS CITED CAREFULLY. THE FIRST ISSUE IS WHETHER UNABSORBED DEPRECIATION FOR AY 2001 - 02 AND EARLIER YEARS CAN BE CARRIED FORWARD AND ADJUSTED AS PART OF CURRENT DEPRECIATION IN AY 2010 - 11. NO DOUB T THE SPECIAL BENCH OF THE ITAT IN THE CASE OF TIMES GUARANTEE LTD. (2010) 40 SOT 14 (MUM) HOLD THAT THE UNABSORBED DEPRECIATION FOR AY 2001 - 02 AND EARLIE R YEARS ARE GOVERNED BY THE EXTA NT LAW AND CANNOT BE CARRIED FORWARD BEYOND 8 YEARS, THE SAME WAS OVER RULED BY THE GUJARAT HIGH COURT. THE VIEW I.T.A. NO.4813/MUM/2017 21 THAT IT CAN LIE CARRIED FORWARD WITHOUT THIS RESTRICTION HAS NOW BEEN FOLLOWED IN SEVERAL DECISIONS, SOME OF WHICH ARE LISTED BELOW. GENERAL MOTORS INDIA PVT. LTD. VS. DC1T(354 ITR 244) ABACUS DISTRIBUTION (IND IA) (P) LTD. VS. DCIT 159 TTJ 156 (MUM) CONFIDENCE PETROLEUM INDIA LTD. VS. DCIT (ITA NO. 1937/MUM/2011) (MUM ITAT) HINDUSTA N UNILEVER LTD. VS. ACIT 22 ITR (TRIB.) 737 (MUM) ARCH FINE CHEMICALS V. SCIT (IT APPEAL NOS. 2414 & 2415/MUM/2012) (MUM IT AT) 5.4. IN THE CASE OF CONFIDENCE PETROLEUM, THE HON'BLE ITAT MUMBAI BENCH IN THEIR ORDER DATED 24 - 07 - 2013 HELD AS UNDER '2.2.BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT PROVISIONS OF SECTION 32(2) WE RE AMENDED BY FINANCE ACT 2001 W.E.F. 1ST APRIL 2002, THAT B Y THE SAID AMENDMENT POSITION AS EXISTED PRIOR TO 01.04.1997 WAS RESTORED, THAT UP TO AY 1996 - 97 UNABSORBED DEPRECIATION OF THE PREVIOUS YEAR WAS TREATED AS CURRENT YEARS DEPRECIATION THAT SAME WAS ALLOWED TO BE SET OFF AGAINST THE IN COME FROM ANY OTHER HEAD, THAT ONLY A LIMITED PERIOD THE CARRYING FORWARD WAS RESTRICTED TO EIGHT YEARS, THAT ASSESSEE WAS ENTITLED TO SET OFF UNABSORBED DEPRECIATION AS MENTIONED IN THE APPLICATION FILED U/S.154 OF THE ACT. HE RELIED UPON THE ORDERS OF TH E HON'BLE HIGH COURT OF MADRAS DELIVERED IN THE CASE OF CRAIGMORE PLANTATIONS INDIA LIMITED(253 ITR 447). HE ALSO RELIED UPON THE ORDER OF THE HON'BLE HIGH COURT OF GUJARAT DELIVERED IN .THE CASE OF GENERAL MOTORS INDIA PVT. LTD. DATED 3.08.2012. DEPARTMEN TAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND FAA. HE RELIED UPON THE ORDER OF SPECIAL BENCH OF ITAT IN THE CASE OF TIMES GUARANTY LTD. (ITA NO. 4917 &4918/MUM/2008 - AY 2003 - 04 & 20W - 05 (131 TTJ) (MUM) (S.B. 257). 2.3. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US. WE HAVE HE ARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IT APPEARS THAT WHILE DECIDING THE ISSUE OF UN - ABSORBED DEPRECIATION, AO AND THE FAA HAVE NOT CONSIDERED THE AMENDED PROVISIONS OF THE S EC 32(2) OF THE ACT IN RIGHT PERSPECTIVE. PERUSAL OF PROVISIONS OF SECTION 32 SHOW THAT PRIOR TO 01 - 04 - 1997, UN - ABSORBED DEPRECIATION OF THE PREVIOUS YEAR USED TO BE CLAIMED AS CURRENT DEPRECIATION AND WOULD BE ALLOWED TO BE SET - OFF AGAINST INCOME FROM ANY OTHER HEAD. BY AN I.T.A. NO.4813/MUM/2017 22 AMENDMENT TO THE PROVISIONS OF SECTION 32(2) OF THE ACT, W.E.F. 01 - 04 - 1997,TREATMENT OF UN - ABSORBED DEPRECIATION UNDERWENT A CHANGE - BECAUSE AS PER THE AMENDED PROVISION UN - ABSORBED DEPRECIATION WAS NO LONGER DEEMED TO BE PART OF CURRENT DEPRECATION AND THE PERIOD AVAILABLE FOR SET - OFF OF SUCH UNABSORBED DEPRECIATION FROM PROFITS OF SUBSEQUENT YEARS WAS RESTRICTED TO EIGHT YEARS. IT IS NOTEWORTHY THAT DU RING EARLIER PERIOD (UP TO 31.03.1997) NO SUCH TIME LIMIT WAS PRESCRIBED. VIDE FINANCE ACT, 2001 THE PROVISIONS OF SECTION 32(2) WERE ONCE AGAIN AMENDED AND A RESULT THE POSITION AS IT EXISTED PRIOR TO 01 - 04 - 1997 WAS RESTORED BACK. FROM THE AMENDMENTS TO FINANCE ACT, 2001 IT IS CLEAR THAT LEGISLATIVE INTENT WAS TO ALLOW UN - ABSORBED DEPRECIAT ION TO BE CARRIED FORWARD BEYOND PERIOD OF EIGHT YEAS. FOR THE AY UNDER CONSIDERATION, CORRECT LAW APPLICABLE WAS THE LAW THAT PREV AILED AS ON THE FIRST DAY OF APRIL OF THAT AY. IN OUR OPINION DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, AMENDED PROVISI ONS WERE APPLICABLE AND AO WAS SUPPOSED TO CALCULATE THE UN - ABSORBED DEPRECIATION AS REQUIRED BY THE ACT. IN OUR OPINION, THERE WAS NO BAR TO ALLOW THE UN - ABSORBED DEPRECIATION OF THE EARLIER YEARS IN THE AY 2007 - 08. WE FIND THAT SIMILAR ISSUE HAS BEEN DIS CUSSED AND DECIDED BY THE HON'BLE HIGH COURT OF GUJARAT ON 23.08.2012.,I N THE CAS E OF GENERAL MOTORS INDIA PVT. LT D. IN FOLLOWING MANNER : ' '30. THE LAST QUESTION WHICH ARISES FOR CONSIDERATION IS THAT WHETHER THE UNABSORBED DEPRECIATION PERTAINING TO AY. 1997 - 98 COULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AFTER A PERIOD OF EIGHT YEARS OR IT WOULD BE GOVERNED BY SECTION 32 AS AMENDED BY FINANCE JET 2001? THE REASON GIVEN BY THE ASSESSING OFFICER UNDER SECTION 147 IS THAT SE CTION 32(2) OF THE ACT WAS AMENDED BY FINANCE ACT NO.2 OF 1996 W.E.F. AY. 1997 - 98 AND THE UNABSORBED DEPRECIATION FOR THE A.Y. 1997 - 98 COULD BE CARRIED FORWARD UP TO THE MAXIMUM PERIOD OF 8 YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED. ACCORDING TO THE ASSESSING OFFICER, 8 YEARS EXPIRED IN THE A.Y. 2005 - 06 AND ONLY TILL THEN, THE ASSESSEE WAS ELIGIBLE TO - CLAIM UNABSORBED DEPRECIATION OF A.Y.1997 - 98 FOR BEING CARRIED FORWARD AND SET OFF AGAINST THE INCOME FOR THE AY 2005 - 06. BUT THE ASSESSEE WAS NOT ENTITLED FOR UNABSORBED DEPRECIATION OF R S.43,60,22,158/ - FOR A.Y. 1997 - 98, WHICH WAS NO T ELIGIBLE FOR BEING CARRIED FORWA RD AND SET OFF A GAINST THE INCOME FOR THE A.Y. 2 006 - 07. 31. PRIOR TO THE FINANCE ACT NO.2 OF 1996 THE UNABSORBED DEPRECIATION FOR ANY YEAR WAS ALLOWED TO BE CARRY FORWARD I.T.A. NO.4813/MUM/2017 23 INDEFINITELY AND BY E DEEMING FICTION BECAME ALLOWANCE OF THE IMMEDIATELY SUCCEEDING YEAR. THE FINANCE ACT NO.2 OF 1996 RESTRICTED THE CARRY FORWARD OF UNABSORBED DEPRECIATION AND SET - OFF TO A LIMIT OF 8 YEARS, FROM L THE A.Y.I997 - 98. CIRCULAR NO.762 DATED 18.2.1998 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN THE FORM, OF EXPLANATORY NOTES CATEGORICALLY PROVIDED, THAT THE UNABSORBED D EPRECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHICH FILL EFFECT CANNOT BE GIVEN IN THAT PREVIOUS YEAR SHALL BE CARRIED FORWARD AND AIDED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR AND BE DEEMED TO BE PART THEREOF. 32.SO, THE UNABSORBED DEPRECIATION ALLOWANCE OF A.Y. 1996 - 97 WOULD BE ADDED TO THE ALLOWANCE OF A.Y. 1997 - 98 AN D THE LIMITATION OF 8 YEA RS FOR THE CARRY - FORWARD AND SET - OFF OF SUCH UNABSORBED DEPRECIATION WOULD START FROM A.Y. 1997 - 98. 36.THE PURPOSE OF THIS AMENDMENT HAS BEEN CLARIFIED B Y CENTRAL BOARD OF DIRECT TAXES IN THE CIRCULAR NO. 14 OF 2001. THE RELEVANT PORTION OF THE SAID CIRCULAR READS AS UNDER: - ' MODIFICATION OF PROVISIONS RELATING TO DEPRECIATION. 30.1 UNDER THE EXIS TING PROVISIONS OF SECTION 32 OF THE INCOME - TAX ACT, CARR Y FORWARD AND SET OFF OF UNABSORBED DEPRECIATION IS ALLOTTED FOR 8 ASSESSMENT YEARS. 30.2 WITH A VIEW TO ENABLE THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY, SPECIALLY IN AN ERA WHERE OBSOLESCENCE TAKES PLACE SO OFTEN, THE ACT HAS DISPENSED WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE ACT HAS ALSO CLARIFIED THAT IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SEC TION 32 SHALL BE MANDATORY. 30.3 UNDER THE EXISTING PROVISIONS, NO DEDUCTION FOR DEPRECIATION IS ALLOWED ON ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA UNLESS IT IS USED (I) IN THE BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS, OR (II) OUTSIDE IN THE ASSESSE E'S BUSINESS OR PROFESSION IN ANOTHER COUNTRY. 30.4 THE ACT HAS ALLOWED DEPRECIATION ALLOWANCE ON ALL IMPORTED MOTORCARS ACQUIRED ON OR AFTER 1ST APRIL, 2001. I.T.A. NO.4813/MUM/2017 24 30.5 THESE AMENDMENTS WILL TAKE EFFECT FROM THE 1ST APRIL, 2002, AND WILL, ACCORDINGLY, APP LY IN RELATION TO THE ASSESSMENT YEAR 2002 - 03 AND SUBSEQUENT YEARS.' 37.THE CBDT CIRCULAR CLARIFIES THE INTENT OF THE AM ENDMENT THAT IT IS FOR ENABLING THE INDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE PLANT AND MACHINERY AND ACCORDINGLY THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR C ARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. THE AMENDMENT IS APPLICABLE FROM ASSESSMENT YEAR 200 2 - 03 AND SUBSEQUENT YEARS. THIS MEANS THAT ANY UNABSOR BED DEPRECIATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL, 2002{A.Y. 2002 - 03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND NOT BY THE PRO VISIONS OF SECTION 32(2) AS IT STOO D BEFORE THE SAID AMENDMENT. HAD THE INTENTION OF THE LEGISLATURE BEEN TO ALLOW THE UNABSORBED DEPRECIATION ALLOWANCE WORKED OUT IN A.Y. 1997 - 98 ONLY FOR EIGHT SUBSEQUENT ASSESSMENT YEARS EVEN AF TER THE AMENDMENT OF SECTI ON 32(2 ) BY FINANCE ACT, 2001 IT WOULD HAVE IN CORPO RATED A PROVISION TO THAT EFFECT. HOWEVER, IT DOES NOT CONTAIN ANY SUCH PROVISION. HENCE KEEPING IN VIEW THE PURPOSE OF AMENDMENT OF SECTION 32(2) OF THE ACT, A PURPOSIVE AND HARMONIOUS INTERPRETATION HAS TO B E TAKEN. WHILE CONSTRUING TAXING STATUTES, RULE OF STRICT INTERPRETATION HAS TO BE APPLIED, GIVING FAIR AND REASONA BL E CONSTRUCTION TO THE LANGUAGE O F THE SECTION WITHOUT LEANING TO THE SIDE O F ASSESSEE OR THE REVENUE. BUT I F THE LEGISLATURE FAILS TO EXPRESS CLEARLY AND THE ASSESSES BECOMES ENTITLED FOR A BENEFIT WITH IN THE AMBIT O F THE SECTION BY THE CLEAR WORDS USED IN THE SECTION, THE BENEFIT ACCRUING TO THE ASSESSEE CANNOT BE DENIED. HOWSOEVER , CIRCULAR NO. 14 OF 2001 HAD CLARIFIED THAT UNDER SECTI ON 32(2), IN COMPUTING THE PROFITS AND GAINS OF BUSINESS OR PROFESSION FOR ANY PREVIOUS YEAR, DEDUCTION OF DEPRECIATION UNDER SECTION 32 SHALL BE MANDATORY. THEREFORE, THE PROVISION OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 WOULD ALLOW THE UNA BSORBE D DEPRECIATION ALLOWANCE AVAILABLE IN THE A.Y. 1997 - 98, 1999 - 2000, 2000 - 01 AD 2001 - 02 TO BE CARRIED FORWARD THE SUCCEEDING YEARS, AND IF ANY UNABSORB ED DEPR ECIATION OR PART THEREOF COULD N OT BE SET OFF TILL THE A.Y. 2002 - 03 THEN IT WOULD BE CARRIED FORWARD TILL THE TIME IT IS SET OFF AGAINST THE PROFITS AND GAINS OF SUBSEQUENT YEARS . 38. THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATION IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT RELATES. IF SUCH DEPRECATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND I.T.A. NO.4813/MUM/2017 25 GAINS FROM ANY OTHER BUSINESS OR BUSINESS, IF ANY, CARRIED ON BY THE ASSESSEE. IF A BALANCE IS LE F T EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT OF INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNABSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS CU RRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPR ECIATION BECOMES THE DEPRECIATION ALLOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION THAT ANY UNABSOR BED DEPRECIATION AVAILABLE TO AN ASS ESSEE ON 1ST DAY OF APRIL 2002 (A .Y. 2002 - 03) WILL BE DEALT WITH IN ACCORDANT WITH THE PROVISIONS OF SECTION 32(1) AS AMENDED BY F INANCE 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 DISPENSED WITH, THE U NABSORBED DEPRECIATION FROM A.Y 1 997 - 98 UP TO THE A. Y.2001 - 02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002 - 03 AND BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2 ) AS AMENDED BY FINANCE ACT, 2001 AND WARE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS A ND GAINS OF SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER.' THEREFORE, REVERSING THE ORDER OF THE FAA, EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE - COMPANY.' 5.5. SAME VIEW WAS TAKEN BY THE HONBLE ITAT MUMBAI BENCH IN THEIR ORDER D ATED 9 - 10 - 2013 IN THE CASE OF ARCH FINE CHEMICALS PVT LTD. IN THESE DECISIONS, THE HONBLE ITAT FOLLOWED THE DECISION OF THE GUJARAT HIGH COURT DECISION IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. AND DID NOT FOLLOW THE ITAT SPL BENCH MUMBAI DECISION IN THE CASE TIMES GUARANTY LTD. ON THIS ISSUE. 5.6. SINCE THE DECISIONS OF ITAT MUMBAI ON THIS ISSUE IS IN FAVOUR OF THE APPELLANT, THE GROUNDS OF APPEAL IN THIS REGARD IS ALLOWED AND THE AO IS DIRECTED TO ALLOW THE ADJUSTMENT OF UNABSORBED DEPREDATION AND CARRY FORWARD OF UNABSORBED DEPRECIATION CLAIMED FOR AY 2000 - 01 AND EARLIER YEARS BY ASSESSEE AS CURRENT DEPRECIATION AND ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME IN THE CURRENT YEAR. HOWEVER, FROM THE DETAILS CALLED REGARDING THE AMOUNT ADJUSTED IN EARLIER ASSESSMENT YEARS IN THE RETURNS FILED AND ESPECIALLY AFTER THE CHANGE IN ASSESSED I.T.A. NO.4813/MUM/2017 26 INCOME AS PER ASSESSMENT ORDERS, IT IS SEEN THAT THERE ARE CERTAIN AMOUNTS THAT HAVE ALREADY BEEN ADJUSTED AND THUS THE QUANTUM MENTIONED IN THE RETURN OF INCOME I N AY 2010 - 11 HAS TO MODIFIED. THE ASSESSING OFFICER IS DIRECTED TO VERIFY AND EXPLICITLY TABULATE THE AMOUNT OF BOUGHT FORWARD UNABSORBED DEPRECIATION ASSESSMENT YEAR WISE AND THE ADJUSTMENT IN THE CURRENT YEAR. SUBJECT TO ABOVE, THE GROUND OF APPEAL NO 2 IS ALLOWED. 6. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 9 . AGGRIEVED BY THE RELIEF GRANTED BY LEARNED CIT(A) VIDE APPELLATE ORDER DATED 24.04.2017 , THE REVENUE HAS NOW FILED AN APPEAL WITH TRIBUNAL. THE LD. DR SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL BEFORE TRIBUNAL IS WITH RESPECT TO CARRY FORWARD AND SET OFF OF UN - ABSORBED DEPRECIATION OF EARLIER YEARS VIZ. AY 1997 - 98, 1998 - 99 AND 2000 - 01 AGAINST THE INCOME OF THE IMPUGNED ASSESSMENT YEAR . I T WAS SUBMITTED BY LEARNED DR THAT PRIOR TO ASSESSMENT YEAR 1997 - 98 UNABSORBED DEPRECIATION WAS ALLOWED TO BE CARRIED FORWARD FOR SET OFF FOR UNLIMITED PERIOD , WHILE HOWEVER WITH EFFECT FROM THE ASSESSMENT YEAR 1997 - 98 UN - ABSORBED DEPRECIATION IS ALLOWED TO BE CARRIED FORWARD FOR A P ERIOD OF EIGHT YEARS OWNING TO AMENDMENT MADE BY FINANCE ACT NO. 2 OF 1996 WHICH IS APPLICABLE FROM AY 1997 - 98 . IT WAS SUBMITTED BY LEARNED DR THAT SUBSEQUENTLY VIDE FINANCE ACT 2001 WITH EFFECT FROM ASSESSMENT YEAR 2002 - 03 , THE UN - ABSORBED DEPRECATION IS ALLOWED TO BE CARRY FORWARD FOR UNLIMITED PERIOD TO BE SET OFF AGAINST INCOME OF SUBSEQUENT YEARS AND ONLY FOR THE I NTERVENING PERIOD FOR ASSESSMENT YEAR 1997 - 98 TO ASSESSMENT YEAR 2001 - 02 , UN - ABSORBED DEPRECIATION WAS ALLOWED TO BE CARRY FORWARD FOR EIG HT YEARS FOR SET OFF . THE LD. DR SUBMITTED THAT THIS UNABSORBED DEPRECIATION OF RS. 1,24,09,517/ - PERTAIN ED TO ASSESSMENT 1998 - 99, 1999 - 20 00 TO 2000 - 01 AND CAN ONLY BE ALLOWED TO BE CARRY FORWARD FOR EIGHT YEARS ONLY. IT WAS SUBMITTED THAT ITAT MUMBAI SPEC IAL B ENCH IN THE CASE OF T IME S GUARANTEE LIMITED ( 2010) 40 SOT 14 (MUM) HAS HELD THAT THE UNABSORBED DEPRECIATION RELATABLE TO THIS PERIOD CAN ONLY BE ALLOWED TO BE CARRIED FORWARD FOR A PERIOD OF EIGHT YEARS. I T WAS , I.T.A. NO.4813/MUM/2017 27 HOWEVER, FAIRLY SUBMITTED BY LEARNED D R THAT HONBLE GUJARAT HIGH COURT IN THE GENERAL MOTOR S INDIA P. LTD. (SUPRA), HAS HELD THAT UNABSORBED DEPRECIATION FOR AY 1997 - 98 TO 2001 - 02 CAN BE ALLOWED TO BE CARRIED FORWARD FOR UNLIMITED PERIOD E VEN FOR THIS INTERVENING PERIOD . I T IS FAIRLY BROUGHT TO OUR NOTICE BY LEARNED DR THAT ITAT MUMBAI IN CONFIDENCE PETROLEUM INDIA P. LTD., V . DCIT IN ITA NO. 1937/MUM/2012 DID NOT FOLLOW THE DECISION OF SPECIAL B ENCH OF MUMBAI - TRIBU NAL IN THE CASE OF TIMES GUARANTEE LIMITED ( 2010) 40 SOT 14 (MUM) AND CHO SE TO FOLLOW THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CAS E OF GENERAL MOTOR S INDIA P LTD.(SUPRA) AND GRANTED RELIEF TO THE TAX - PAYER. 9.2 THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS AND CLAIMED THAT MUMBAI - TRIBUNAL IN ASSESSE S OWN CASE FOR AY 2009 - 10 H AS GRANTED RELIEF TO THE ASSES SEE BY ALLOWING SET OFF OF UNABSORBED DEPRECIATION FOR THE SAID PERIOD AY 1997 - 98 TO 2001 - 02 BEYOND PERIOD OF EIGHT YEARS BY RELYING ON JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL M OTORS INDIA PRIVATE LIMITED (SUPRA) , IN ITA NO. 4961/MUM/2016 , VIDE ORDER S DATED 17.04.2018 , BY HOLDING AS UNDER: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THAT THE ASSESSING OFFICER WHILE CO MPLETING THE ASSESSMENT DENIED THE SETOFF OF UNABSORBED DEPRECIATION RELEVANT TO ASSESSMENT YEARS 1997 - 98 AND 2000 - 2001 FOR THE REASON THAT SUCH UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD ONLY TO EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED AND SETOFF AGAINST ANY OTHER HEADS OF INCOME. THEREFORE, HE HELD THAT UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 1998 - 99 AND 1999 - 2000 CANNOT BE ADJUSTED AGAINST THE INCOME FOR ASSESSMENT YEAR 2009 - 10 AS EI GHT YEARS HAVE ALREADY LAPSED. ACCORDINGLY, THE UNABSORBED DEPRECIATION OF .55,54,310/ - BROUGHT FORWARD FROM ASSESSMENT YEAR 1999 - 2000 WAS DISALLOWED. 7. ON APPEAL LD.CIT(A) FOLLOWING THE DECISION OF THE MUMBAI BENCH IN THE CASE OF ARCH FINE CHEMICALS V. ACIT IN ITA.NO. 2414 AND 2415/MUM/2012, WHERE THE TRIBUNAL FOLLOWED THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT LTD., THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE TO ADJUST THE UNABSORBED DEPRECIATION AND C ARRIED FORWARD UNABSORBED DEPRECIATION FOR ASSESSMENT YEAR 2000 - 01 AND EARLIER YEARS AS CURRENT DEPRECIATION AND ALLOWED TO BE SET - OFF AGAINST BUSINESS INCOME IN I.T.A. NO.4813/MUM/2017 28 THE CURRENT ASSESSMENT YEAR. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT AND FIND THAT THE ISSUE HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE. THE QUESTION RAISED BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT IS AS UNDER: 7. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN DI RECTING TO ALLOW THE SET OFF OF BROUGHT FORWARD DEPRECIATION LOSSES OF AMALGAMATING COMPANY FOR THE ASSESSMENT YEARS 1996 - 97 AND 1997 - 98 I.E. FOR THE PERIOD PRIOR TO AMENDMENT IN SUB SECTION (2) OF SECTION 32 OF THE ACT W.E.F 01.04.2002?. THE HON'BLE J URISDICTIONAL HIGH COURT WITH REGARD TO THIS QUESTION HELD AS UNDER: 6. REGARDING QUESTION NO. 7 (A) THE IMPUGNED ORDER OF THE TRIBUNAL HAS ALLOWED THE RESPONDENT - ASSESSEE'S APPEAL ON THE ISSUE OF ALLOWING UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1996 - 97 AND 1997 - 98 WHICH WAS CARRIED FORWARD TO BE SET OFF IN THE SUBJECT ASSESSMENT YEAR. (B) THE GRIEVANCE OF THE APPELLANT IS THAT IN VIEW OF THE FETTER (OF EIGHT YEARS) IN CARRYING FORWARD DEPRECIATION FOR ASSESSMENT YEAR 1997 - 98 UPTO ASSESSMENT YEAR 2002 - 03, THE SET OFF OF THE SAME CANNOT BE ALLOWED IN THIS ASSESSMENT YEAR. (C) WE FI ND THAT THE IMPUGNED ORDER OF THE TRIBUNAL WHILE ALLOWING THE ASSESSEE - RESPONDENTS' CLAIM FOLLOWS THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA (P) LTD V. DY. CIT [2013] 354 ITR 244/[2012] 210 TAXMAN 20/25 TAXMANN.COM 364 WHEREIN ON IDEN TICAL FACTS IT WAS HELD THAT THE UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 1997 - 98 UPTO ASSESSMENT YEAR 2001 - 02 COULD BE ALLOWED TO BE SET OFF, IF IT WAS STILL UNABSORBED ON 1ST APRIL, 2001 THE ABOVE DECISION ALSO PLACED UPON THE CBDT CIRCULAR NO. 14 OF 2001 DATED 22ND NOVEMBER 2001 TO HOLD THAT ANY UNABSORBED DEPRECIATION WHICH IS AVAILABLE ON 1ST DAY OF APRIL, 2001 WOULD BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) OF THE ACT AS AMENDED BY THE FINANCE ACT OF 2001. MOREOVER, THE C IRCULAR NO. 14 OF 2001 ISSUED BY THE CBDT CLARIFIES THAT RESTRICTION OF EIGHT YEARS TO CARRY FORWARD AND SET OFF THE UNABSORBED DEPRECIATION HAS BEEN DISPENSED WITH CONSEQUENTLY, UNABSORBED DEPRECIATION FOR THE INTERVENING PERIODS BETWEEN ASSESSMENT 1997 - 9 8 UPTO 2001 - 02, IF AVAILABLE IN THE ASSESSMENT YEAR 2002 - 03 WOULD BE ALLOWABLE AS PART OF CARRIED FORWARD DEPRECIATION FROM ASSESSMENT YEAR 2002 - 03 ONWARDS NO DECISION CONTRARY TO THE DECISION OF THE GUJARAT HIGH COURT HAS BEEN SHOWN TO US. IT IS CLARIFIE D THAT ALTHOUGH THE DECISION OF THE GUJARAT HIGH COURT WAS RENDERED IN CONTEXT OF RE - OPENING NOTICE IT HAS ALSO EXAMINED THE ISSUE ON MERITS AND DREW SUPPORT FROM THE CBDT CIRCULAR WHICH IS BENEFICIAL TO THE I.T.A. NO.4813/MUM/2017 29 ASSESSEE TO CONCLUDE AS AFORESAID. NOTHING HAS B EEN SHOWN TO US TO INDICATE WHY THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS (INDIA) LTD. SHOULD NOT BE FOLLOWED IN THE PRESENT FACTS. (D) IN THE ABOVE VIEW QUESTION NO.7 AS RAISED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. 8. THEREFORE, AS COULD BE SEEN FROM THE ABOVE THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES AGAINST THE TRIBUNAL ORDER IN ALLOWING SET - OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1996 - 97 AND 1997 - 98 BEYOND EIGHT YEARS AGAINST THE INCOME OF THE ASSESSEE IN SUBSEQUENT YEARS. WHILE HOLDING SO THE HON'BLE JURISDICTIONAL HIGH COURT CONSIDERED THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD V. DY. CIT [354 ITR 244]. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. . 10 . WE HAVE CONSIDERED RIVAL CONTENTION S AND HAVE PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE L AWS . W E HAVE OBSERVED THAT THE ASSESSEE HAS CLAIMED SET OFF OF UN - ABSORBED DEPRECIATION FOR AY 1998 - 1999, 1999 - 2000, 2000 - 01 TO THE TUNE OF RS. 1,24,09,517/ - AGAINST THE INCOME OF THE IMPUGNED ASSESSMENT YE AR. THE REVENUE HAS DISALLOWED THE SAID CLAIM O F SET OFF OF UNABSORBED DEPRECIATION FOR AY 1998 - 99, 1999 - 00 AND 2000 - 01 ON THE GROUND THAT VIDE FINANCE ACT, 1996 W.E.F . AY 1997 - 98 , UN - ABSORBED DEPRECIATION COULD HAVE BEEN CARRIED FORWARD FOR THE PERIOD OF EIGHT YEARS . PRIOR TO THIS THE POSITION WAS TH AT UN - ABSORBED DEPRECIATION WAS ALLOWED TO BE CARRIED FO RWARD FOR UNLIMITED PERIOD. THIS POSITION ONCE AGAIN CHANGED VIDE FINANCE ACT , 2001 WHEREIN UNABSORBED DEPRECIATION WAS ALLOWED TO CARRY FORWARD AND SET OFF FOR UNLIMITED PERIOD WEF AY 2002 - 03. WE HAVE OBSERVED THAT MUMBAI - TRIBUNAL HAS ELABORATELY DISCUSSED THIS ISSUE IN ASSESSEES OWN CASE FOR AY 2009 - 10 IN ITA 4961/MUM/2016 , VIDE ORDERS DATED 17.04.2018 AND RELIEF WAS GRANTED TO THE ASSESSEE BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF GENERAL MOTORS INDIA PRIVATE LIMITED(SUPRA) , BY HOLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DENIED THE SE TOFF OF UNABSORBED DEPRECIATION RELEVANT TO ASSESSMENT YEARS 1997 - 98 AND 2000 - 2001 FOR THE REASON THAT SUCH I.T.A. NO.4813/MUM/2017 30 UNABSORBED DEPRECIATION CAN BE CARRIED FORWARD ONLY TO EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST CO MPUTED AND SETOFF AGAINST ANY OTHER HEADS OF INCOME. THEREFORE, HE HELD THAT UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEARS 1998 - 99 AND 1999 - 2000 CANNOT BE ADJUSTED AGAINST THE INCOME FOR ASSESSMENT YEAR 2009 - 10 AS EIGHT YEARS HAVE ALREADY LAPSED. ACCORD INGLY, THE UNABSORBED DEPRECIATION OF .55,54,310/ - BROUGHT FORWARD FROM ASSESSMENT YEAR 1999 - 2000 WAS DISALLOWED. 7. ON APPEAL LD.CIT(A) FOLLOWING THE DECISION OF THE MUMBAI BENCH IN THE CASE OF ARCH FINE CHEMICALS V. ACIT IN ITA.NO. 2414 AND 2415/MUM/ 2012, WHERE THE TRIBUNAL FOLLOWED THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT LTD., THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE TO ADJUST THE UNABSORBED DEPRECIATION AND CARRIED FORWARD UNABSORBED DEPRECIATIO N FOR ASSESSMENT YEAR 2000 - 01 AND EARLIER YEARS AS CURRENT DEPRECIATION AND ALLOWED TO BE SET - OFF AGAINST BUSINESS INCOME IN THE CURRENT ASSESSMENT YEAR. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND FIND THAT THE ISSU E HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE. THE QUESTION RAISED BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT IS AS UNDER: 7. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE TRIBUNAL WAS RIGHT IN DIRECTING TO ALLOW THE SET OFF OF BROUGHT FORWARD DEPRECIATION LOSSES OF AMALGAMATING COMPANY FOR THE ASSESSMENT YEARS 1996 - 97 AND 1997 - 98 I.E. FOR THE PERIOD PRIOR TO AMENDMENT IN SUB SECTION (2) OF SECTION 32 OF THE ACT W.E.F 01.04.2002?. THE HON'BLE JURISDICTIONAL HIGH COURT WITH RE GARD TO THIS QUESTION HELD AS UNDER: 6. REGARDING QUESTION NO. 7 (A) THE IMPUGNED ORDER OF THE TRIBUNAL HAS ALLOWED THE RESPONDENT - ASSESSEE'S APPEAL ON THE ISSUE OF ALLOWING UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEAR 1996 - 97 AND 1997 - 98 W HICH WAS CARRIED FORWARD TO BE SET OFF IN THE SUBJECT ASSESSMENT YEAR. (B) THE GRIEVANCE OF THE APPELLANT IS THAT IN VIEW OF THE FETTER (OF EIGHT YEARS) IN CARRYING FORWARD DEPRECIATION FOR ASSESSMENT YEAR 1997 - 98 UPTO ASSESSMENT YEAR 2002 - 03, THE SET O FF OF THE SAME CANNOT BE ALLOWED IN THIS ASSESSMENT YEAR. (C) WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL WHILE ALLOWING THE ASSESSEE - RESPONDENTS' CLAIM FOLLOWS THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS INDIA (P) LTD V. DY. CIT [201 3] 354 ITR 244/[2012] 210 TAXMAN 20/25 TAXMANN.COM 364 WHEREIN ON IDENTICAL FACTS IT WAS HELD THAT THE UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR 1997 - 98 UPTO ASSESSMENT YEAR 2001 - 02 COULD BE ALLOWED TO BE SET OFF, IF IT WAS STILL UNABSORBED ON 1ST AP RIL, 2001 THE ABOVE DECISION ALSO PLACED UPON THE CBDT CIRCULAR NO. 14 OF 2001 DATED 22ND I.T.A. NO.4813/MUM/2017 31 NOVEMBER 2001 TO HOLD THAT ANY UNABSORBED DEPRECIATION WHICH IS AVAILABLE ON 1ST DAY OF APRIL, 2001 WOULD BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 2(2) OF THE ACT AS AMENDED BY THE FINANCE ACT OF 2001. MOREOVER, THE CIRCULAR NO. 14 OF 2001 ISSUED BY THE CBDT CLARIFIES THAT RESTRICTION OF EIGHT YEARS TO CARRY FORWARD AND SET OFF THE UNABSORBED DEPRECIATION HAS BEEN DISPENSED WITH CONSEQUENTLY, UNABSOR BED DEPRECIATION FOR THE INTERVENING PERIODS BETWEEN ASSESSMENT 1997 - 98 UPTO 2001 - 02, IF AVAILABLE IN THE ASSESSMENT YEAR 2002 - 03 WOULD BE ALLOWABLE AS PART OF CARRIED FORWARD DEPRECIATION FROM ASSESSMENT YEAR 2002 - 03 ONWARDS NO DECISION CONTRARY TO THE D ECISION OF THE GUJARAT HIGH COURT HAS BEEN SHOWN TO US. IT IS CLARIFIED THAT ALTHOUGH THE DECISION OF THE GUJARAT HIGH COURT WAS RENDERED IN CONTEXT OF RE - OPENING NOTICE IT HAS ALSO EXAMINED THE ISSUE ON MERITS AND DREW SUPPORT FROM THE CBDT CIRCULAR WHICH IS BENEFICIAL TO THE ASSESSEE TO CONCLUDE AS AFORESAID. NOTHING HAS BEEN SHOWN TO US TO INDICATE WHY THE DECISION OF THE GUJARAT HIGH COURT IN GENERAL MOTORS (INDIA) LTD. SHOULD NOT BE FOLLOWED IN THE PRESENT FACTS. (D) IN THE ABOVE VIEW QUESTION NO.7 AS RAISED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. 8. THEREFORE, AS COULD BE SEEN FROM THE ABOVE THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES AGAINST THE TRIBUNAL ORDER IN ALLO WING SET - OFF OF UNABSORBED DEPRECIATION PERTAINING TO ASSESSMENT YEARS 1996 - 97 AND 1997 - 98 BEYOND EIGHT YEARS AGAINST THE INCOME OF THE ASSESSEE IN SUBSEQUENT YEARS. WHILE HOLDING SO THE HON'BLE JURISDICTIONAL HIGH COURT CONSIDERED THE DECISION OF THE HON' BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA (P) LTD V. DY. CIT [354 ITR 244]. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE ORDER OF THE LD.CIT(A) AND REJECT THE GROUNDS RAISED BY THE REVENUE. . RESPECTFULLY FOLLOWING THE DECIS ION OF MUMBAI - TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2009 - 10, WE HOLD THAT THE ASSESSEE IS ENTITLED FOR SET OFF OF UNABSORBED DEPRECIATION FOR AY 1998 - 99,1999 - 00 AND 2000 - 01 , AGGREGATING TO RS. 1,24,09,517/ - AGAINST THE INCOME OF THE IMPUGNED ASSESSMENT YEAR. WE HAVE ALSO NOTED THAT THE AO HAS OBSERVED THAT ASSESSEE HAS ALREADY SOUGHT SET OFF OF THIS UN - ABSORBED DEPRECATION AGAINST THE INCOME OF YEARS PRIOR TO THE IMPUGNED ASSESSMENT YEAR WHICH WAS NOT ALLOWED BY THE AO FOR THOSE YEARS. HOWEVER, SINCE THE CLAIM OF THE ASSESSEE IS NOW ALLOWED BY THE TRIBUNAL AS ABOVE, THE AO IS DIRECTED TO MAKE NECESSARY VERIFICATION WHILE ALLOWING SET OFF OF UN - ABSORBED DEPRECATION FOR AY 1998 - 99, 1999 - 00 AND 2000 - 01 AGAINST I.T.A. NO.4813/MUM/2017 32 INCOME OF THE IMPUGNED ASSESSMENT TO ENSURE THAT THE SAME WAS NOT ALLOWED FOR EARLIER YEARS TO AVOID DUPLICATIONS. THE LEARNED CIT(A) HAS ALSO GIVEN SIMILAR DIRECTIONS TO THE AO FOR VERIFICATIONS TO AVOID DUPLICATION OF THE SAME CLAIM. WE DONOT FIND ANY INFIRMITY IN TH E ORDER OF LEARNED CIT(A) GRANTING RELIEF TO THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. THE REVENUE FAILS ON THESE GROUNDS (I) TO (III) . WE ORDER ACCORDINGLY. 1 1 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED IN THE MANNER STATED ABOVE. ORD ER PRONOUNCED IN THE OPEN COURT ON 2 2 . 03 . 2019. 2 2 .0 3 .2019 S D / - S D / - (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2 2 .0 3 .2019 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI