The DCIT, Anand Circle, Anand V. M/s. Sun On Peak Hotel Pvt. Ltd., Anand

ITA 519/AHD/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5524 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 02-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Business income; Depreciation; Source of fund; Difference of opinion; Assessment record; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings; Set aside; Capital Gains
• Section: 143(3); 50C; 201; 147; 148; 12; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER 1. I.T.A. NO.301/AHD/2017 2. I.T.A. NO.519/AHD/2017 (ASSESSMENT YEAR : 2009-10) 1. SUN ON PEAK HOTEL PVT.LTD. 401, MILE STONE OPP. CITY BUS STAND VALLABH VIYANAGAR ROAD ANAND 388 120 2. DCIT, ANAND CIRCLE,ANAND VS. 1. THE DCIT ANAND CIRCLE ANAND 2. SUN ON PEAK HOTEL PVT.LTD., ANAND [PAN NO. AACCS 7265C] ( APPELLANT S ) .. ( RESPONDENT S ) ASSESSEE BY : SHRI SUNIL TALATI, AR REVENUE BY : SHRI KISHAN VYAS, CIT-DR DATE OF HEARING 10/08/2018 DATE OF PRONOUNCEMENT 05/11/2018 O R D E R PER MS. MADHUMITA ROY - JM: THE ABOVE CROSS-APPEALS FILED BEFORE US BY THE A SSESSEE AND THE REVENUE RESPECTIVELY ARE AGAINST THE ORDER DATED 13.10.201 6 PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS)-4, VADODARA [LD.CIT(A) IN SHOR T] FOR ASSESSMENT YEAR (AY) 2009-10 ARISING OUT OF THE ORDER DATED 31.03.2015 PASSED BY THE DCIT, ANAND CIRCLE, ANAND. 2. SINCE BOTH THE APPEALS RELATE TO THE SAME AS SESSEE, THESE ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY A COMMON ORDER. ITA NO.301/AHD/2017 FOR AY 2009-10. - 2 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 3. THE ASSESSEE HAS CHALLENGED THE VERY REOPENING O F THE ASSESSMENT PROCEEDINGS BY THE LD. AO IN THE ABSENCE OF ANY FRESH MATERIAL AND ONLY ON CHANGE OF OPINION. FURTHER THAT, ON MERIT THE ASSESSEE HAS ASSAILED AGAINST T HE DISALLOWANCE OF SET OFF OF CARRIED FORWARD BUSINESS LOSS OF RS.3,49,87,936/- AGAINST T HE SHORT TERM CAPITAL GAIN (STCG) INCURRED OF RS.3,40,07,018 U/S.50C OF THE ACT. 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HOTEL AND HAVING OTHER SOURCES OF INCOME. ON 28.12.2011 THE ASSESSMENT ORDER WAS PAS SED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR AY 2009 -10 DETERMINING TOTAL INCOME AT RS.NIL AFTER ALLOWING BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION. THEREAFTER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 201 1-12, IT WAS HELD THAT THE ASSESSEE WAS NOT CARRYING ON BUSINESS ACTIVITIES AND THEREFO RE WAS NOT ELIGIBLE FOR SET OFF OF OLD BROUGHT FORWARD LOSSES. ACCORDING TO THE ASSESSING OFFICER IN TERMS OF THE PROVISIONS OF SECTION 72 OF THE ACT, BROUGHT FORWARD UNABSORBED B USINESS LOSS AND DEPRECIATION LOSS OF EARLIER YEAR COULD BE SET OFF ONLY AGAINST THE BUSI NESS INCOME OF THE ASSESSEE AND NOT AGAINST SHORT TERM CAPITAL GAIN AS ASSESSED IN AY 2 009-10. WHEREAS IN THE CASE OF THE ASSESSEE, WHILE PASSING THE ASSESSMENT ORDER SUCH S ET OFF OF BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION AMOUNTING TO RS.3,40,07,018/- WAS ALLOWED AGAINST INCOME FROM STCG WHICH IS IN CONTRAVENTION OF THE PROVISION OF SECTION 72 OF THE ACT AND THUS WAS REQUIRED TO BE DISALLOWED. 5. THE SAID ASSESSMENT PROCEEDING WAS REOPENED AND NOTICE U/S.148 WAS ISSUED ON 13.03.2014 AFTER ACCORDING THE REASON ON THE SAME D AY, SENT THROUGH RPAD WHICH WAS DULY SERVED UPON THE ASSESSEE. THE ASSESSEE REQU ESTED TO PROVIDE THE REASON FOR REOPENING OF THE RE-ASSESSMENT PROCEEDING. TH E ASSESSEE THEREAFTER IN RESPONSE TO THE - 3 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 NOTICE U/S.148 FILED RETURN OF INCOME ON 23.07.2014 . SUBSEQUENTLY, THE HEARING WAS FIXED ON 10.10.2014 WHICH WAS MADE KNOWN TO THE ASSESSEE BY AND UNDER A NOTICE DATED 29.09.2014. DUE TO NON ATTENDANCE OF THE ASSESSEE ON THE DATE OF HEARING ON 10.10.2014, LETTER WAS ISSUED U/S.142(1) DATED 18.03.2015 INFOR MING THE ASSESSEE OF THE INTENTION OF THE AO TO DISALLOW THE CLAIM OF SET OFF OF BROUGHT FORWARD LOSSES AGAINST THE STCG SINCE THE ASSESSEE HAS NOT CARRIED OUT BUSINESS ACTIVITIE S DURING THE YEAR UNDER CONSIDERATION FIXING THE NEXT DATE OF HEARING ON 23.03.15. THE R EASONS RECORDED FOR RE-OPENING OF THE ASSESSMENT WAS ALSO SERVED UPON THE ASSESSEE ALON G WITH THE NOTICE U/S.142(1) OF THE ACT DATED 23.03.2015 ISSUED BY THE AO, THE CONTENT WHEREOF IS NARRATED HEREINBELOW : 1. IN THIS CASE, THE ASSESSMENT FOR A.Y.2009-10 WA S FINALIZED U/S.143(3) OF THE IT ACT ON 28/12/2011 ASSESSING THE TOTAL INCOME AT RS.NIL ALL OWING SETOFF OF UNABSORBED DEPRECIATION AND BUSINESS LOSSES EARLIER YEAR. IN THIS CASE THE INCO ME FROM SHORT TERM CAPITAL GAIN WAS WORKED OUT AT RS.3,40,07,018/- AND SETOFF OF BROUGHT FORWARD U NABSORBED BUSINESS LOSS AND DEPRECIATION LOSS OF EARLIER YEAR AND MADE. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2011-12 IT WAS HELD THAT THE ASSESSEE IS NOT CARRYING ON THE BUSINESS ACTIVITIES AND THEREFORE IS NOT ELIGIBLE FOR SETOFF OF OLD BROUGHT FORWARD LOSSES. 3. ACCORDINGLY TO THE PROVISION OF SECTION 7OF THE IT ACT, BROUGHT FORWARD UNABSORBED BUSINESS LOSS AND DEPRECIATION LOSS OF EARLIER YEAR COULD BE SETOFF ONLY AGAINST THE BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY, INCOME OF THE ASSESSEE FROM SHORT TERM CAPITAL GAIN COULD NOT BE SETOFF AGAINST BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION. THEREFORE, CLAIM OF SETOFF OF SAID LOSS FROM STCG TO THE EXTENT OF RS.3,40,07, 018/- WAS IN CONTRAVENTION OF THE PROVISION OF SECTION 72 OF THE IT ACT. ACCORDINGLY, BY VIRTUE OF SAID SETOFF OF LOSS, THE INCOME TO EXTENT OF RS.3,40,07,018/- HAS ESCAPED ASSESSMENT. 4. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BEL IEVE THAT THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS.3,40,07,018/- HAS ESCAPED THE ASSE SSMENT WITHIN THE MEANING OF SEC.147 OF THE INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-1 0 AND IT IS A FIR CASE FOR ISSUANCE OF NOTICE U/S.148 OF THE ACT. I, THEREFORE, ISSUE NOTICE U/S. 148 OF THE ACT FOR A.Y. 2009-10 TO THE ASSESSEE. 5.1. THE AO ULTIMATELY REJECTED THE CLAIM OF THE AS SESSEE OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION WITH THE OBSERVATION AS FOLLOWS:- - 4 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 THE AFORESAID SUBMISSION IS CONSIDERED CAREFULLY. IN ACCORDING TO THE PROVISION OF SECTION 72 OF THE IT ACT BROUGHT FORWARD UNABSORBED BUSINESS AND DEPRECIATION LOSS OF EARLIER YEAR COULD BE SETOFF ONLY AGAINST THE BUSI NESS INCOME. FURTHER, THE BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION COULD ONLY B E SETOFF AGAINST BUSINESS INCOME AND SECTION 72 IS NOT PERMIT TO SETOFF EARLIER YEARS BR OUGHT FORWARD BUSINESS LOSS AND DEPRECIATION AGAINST SHORT TERM CAPITAL GAIN. IN V IEW OF THE ABOVE, THE CLAIM OF THE ASSESSEE IS NOT BEING ENTERTAINED AND THE SETOFF OF BROUGHT FORWARD BUSINESS LAW AND DEPRECIATION IS BEING REJECTED. PENALTY PROCEEDING S U/S.274 R.W.S.271(1)(C) OF THE IT ACT ARE BEING INITIATED SEPARATELY FOR FURNISHING INACC URATE PARTICULARS OF THE INCOME. 6. RESULTANTLY, AN ADDITION OF RS.3,40,07,018/- WAS MADE ON ACCOUNT OF STCG WHICH WAS ALLOWED AT THE TIME OF ORIGINAL SCRUTINY ASSESS MENT. 7. THE ASSESSEE FILED THE APPEAL BEFORE THE LD.CIT( A) ASSAILING THE REOPENING OF ASSESSMENT AND ALSO ON MERIT AGAINST SUCH DISALLOWA NCE AS MENTIONED ABOVE. HOWEVER, THE LD. CIT(A) REJECTED THE GROUND OF RE OPENING OF THE ASSESSMENT PROCEEDINGS MADE BY THE AO. HENCE, THE INSTANT APP EAL. 8. THE LD.REPRESENTATIVE OF THE ASSESSEE SUBMITT4ED BEFORE US THAT THERE IS CHANGE OF OPINION AND THE REOPENING IS THUS BAD IN LAW. HE F URTHER ADDED THAT THE LD.CIT(A) WRONGLY DISALLOWED THE SET OFF OF CARRIED FORWARD B USINESS LOSS AGAINST THE STCG U/S.50C OF THE ACT BY VIRTUE OF WHICH THE STCG IS ONLY DEEM ING FICTION. THUS, SET OFF OF BROUGHT FORWARD UNABSORBED BUSINESS LOSS AGAINST SUCH BUSIN ESS INCOME IS TO BE ALLOWED. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE REL IES UPON THE ORDERS PASSED BY THE AUTHORITIES BELOW. 8.1. WE HAVE HEARD THE RESPECTIVE PARTIES AND PER USED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT WHILE REJECTING THE GROUND OF REOPENING, THE LD. CIT(A) MADE FOLLOWING OBSERVATION: - 5 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE A.O HAS OBSERVE D IN THE INSTANT CASE THE APPELLANT COMPANY HAS SOLD LAND AND BUILDING AND DECLARED SHORT TERM CAPITAL GAINS OF RS.2.50 CRORES WHEREAS AS PER DEED OF CONVEYANCE THE SALE TRANSACTION WAS DET ERMINED AT RS.3.40 CRORES AS DETERMINED BY STAMP AUTHORITIES FOR THE STAMP VALUATION. ACCORDIN GLY, FOR THE PURPOSE OF WORKING OF CAPITAL GAIN AS PER THE PROVISION OF SECTION 50C OF THE AC T IS BEING THE VALUE SOLD AND DETERMINED BY THE SAID CONCERNED AUTHORITY. THE SAID VALUE WAS ADMITT ED BY THE APPELLANT AND THE DIFFERENCE OF SHORT TERM CAPITAL GAIN OF RS.65,07,018/- WAS WORKE D OUT BY THE APPELLANT SOLD HOTEL NAMELY COMFORT INN SUNSET AT AHMEDABAD IN F.Y. 2006-07. AF TER THE SALE THE APPELLANT LEFT WITH NO ANY BLOCK OF ASSET OF THE EXIST IN THE YEAR UNDER CONSI DERATION. THE A.O HAS REASON TO BELIEVE THAT THE CHARGEABLE TO TAX TO THE EXTENT OF RS.3,40,07,0 18/- HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF SEC.147 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-10. . 8.2. THE LD. CIT(A) HAS ALSO OBSERVED IN THE ORD ER IMPUGNED THAT THE AO HAS RECORDED REASONS TO BELIEVE THAT THE INCOME CHARGEA BLE TO TAX TO THE EXTENT OF RS.3,40,07,018/- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. IN SUPPORT OF THE CONTENTION MADE BY THE LD. CIT(A) IN THE ORDER IMPUGNED THE REASON FOR REOPENING AS MADE BY THE AO WAS ALSO REITERATED . FINALLY, THE LD. CIT(A) OPINED THAT ONCE IT IS FOUND THAT THE AO HAS REASONS TO BE LIEVE THAT THERE WAS INCOME ESCAPING ASSESSMENT THE ASSESSEE CANNOT CHALLENGE THE REOPEN ING ASSESSMENT SINCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2011-12 IT WAS HELD THAT THE ASSESSEE WAS NOT CARRYING ON BUSINESS ACTIVITIES AND WAS NOT ELIGIBL E FOR SET OFF OF OLD BROUGHT FORWARD LOSSES. HE FURTHER OBSERVED AS FOLLOWS: 3.3.2 THE A.O HAS RECORDED REASON TO BELIEVE THAT T HE INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS.3,40,07,018/- HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME- TAX ACT, 1961. THE REASONS RECORDED BY THE ASSESSIN G OFFICER ARE AS UNDER: ' REASONS FOR ISSUE OF NOTICE U/S 148 OF THE I.T. A CT, 1961. 1. IN THIS CASE, THE ASSESSMENT FOR A.Y. 2009-10 WAS F INALIZED U/S 143(3) OF THE I T ACT ON 28.12.2011 ASSESSING THE TOTAL INCOME AT RS.NIL ALL OWING SETOFF OF UNABSORBED DEPRECIATION AND BUSINESS LOSSES OF EARLIER YEAR. I N THIS CASE THE INCOME FROM SHORT TERM CAPITAL GAIN WAS WORKED OUT AT RS.3,40,07,018/- AND SETOFF OF BROUGHT FORWARD UNABSORBED BUSINESS LOSS AND DEPRECIATION LOSS OF E ARLIER YEAR WAS MADE. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y . 2011-12 IT WAS HELD THAT THE ASSESSEE IS NOT CARRYING ON THE BUSINESS ACTIVITIES AND THEREFORE IS NOT ELIGIBLE FOR SETOFF OF OLD BROUGHT FORWARD LOSSES. - 6 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 3. ACCORDING TO THE PROVISIONS OF SECTION 72 OF THE I T ACT, BROUGHT FORWARD UNABSORBED BUSINESS LOSS AND DEPRECIATION LOSS OF EARLIER YEAR COULD BE SETOFF ONLY AGAINST THE BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY, INCOM E OF THE ASSESSEE FROM SHORT TERM CAPITAL GAIN COULD NOT BE SETOFF AGAINST THE BROUGH T FORWARD BUSINESS LOSS AND DEPRECIATION. THEREFORE, CLAIM SETOFF OF LOSS AGAIN ST INCOME FROM SHORT TERM CAPITAL GAIN WAS REQUIRED TO BE DISALLOWED. THUS, SETOFF OF SAID LOSS FROM STCG TO THE EXTENT OF RS.3,40,07,018/- WAS IN CONTRAVENTION OF THE PROVIS ION OF SECTION 72 OF THE IT ACT. ACCORDINGLY, BY VIRTUE OF SAID SETOFF OF LOSS, THE INCOME TO EXTENT OF RS.3,40,07,018/- HAS ESCAPED ASSESSMENT. 4. IN VIEW OF THE ABOVE FACTS, I HAVE REASON TO BELIE VE THAT THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF RS.3,40,07,018/- HAS ESCAPED THE ASSE SSMENT WITHIN THE MEANING OF SEC.147 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSM ENT YEAR 2009-10 AND IT IS A FIT CASE FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT. I, THERE FORE, ISSUE NOTICE U/S 148 OF THE ACT FOR A.Y. 2009-10 TO THE ASSESSEE.' 3.3.3. ELABORATING ON THE REACH OF THE TERM 'REASON TO BELIEVE' APPEARING IN SECTION 34(1A) OF THE OLD ACT, IT WAS HELD IN SHEO NATH SINGH VS AAC [1971] 82 ITR 147 (SC), THAT 'THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BAS ED UPON REASONABLE GROUNDS AND THAT THE ITO MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BU T NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. IT IS NOW WELL-SETTLED THAT THE TERM 'ESCAPED ASSESSMENT' INCLUDES BOTH NON-ASSESSMENT A ND UNDER-ASSESSMENT [TAX OFFICER-CUM-REGIONAL TRANSPOR T OFFICER VS DURG TRANSPORT CO. (P.) LTD. [1972] 85 ITR 156 (SC) AND CIT V. SUN ENGINEER ING WORKS (P.) LTD. [1992] 198 ITR 297 (SC)]. REFERRING TO THE SCOPE OF OPERATION OF CLAUSES (A) AND (B) OF SECTION 147, THE SUPREME COURT HELD IN NIRANJAN & CO. (P.) LTD. V. C1T [1986] 159 ITR 153 (SC) THAT REOPENING UNDER SECTION 147 CAN ONLY BE MADE AFTER COMPLETING THE A SSESSMENT IF THE INCOME-TAX OFFICER HAS A REASON TO BELIEVE UNDER CLAUSE (A) THAT BY REASON O F OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN OR TO DISCLOSE FULLY OR T RULY ALL RELEVANT FACTS, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR. REOPENING IS ALSO POSSIBLE UNDER CLAUSE (B) NOTWITHSTANDING THAT THERE WAS NO OMISSION OR FAILU RE ON THE PART OF THE ASSESSEE, IF THE INCOME- TAX OFFICER HAS IN CONSEQUENCE OF INFORMATION IN HI S POSSESSION, REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AFTER TRACING THE LAW ON THE POINT RIGHT FROM THE EARLIEST DECISION OF THE CONSTITUTION BENCH IN CALCUTTA DISCOUNT CO. LTD. VS ITO [1961] 41 ITR 191(SC) AND WHILE AGREEING WITH THE DECISION IN CASE OF PHOOL CHAND BAJRANG LAL [1993] 203 ITR 456 (SC) THE SUPREME COURT HELD IN SRI KRISHNA (P.) LTD. V. ITO [1996] 221 ITR 538 (SC ) THAT THE EXISTENCE OF THE REASONS TO BELIEVE IS SUP POSED TO BE A CHECK AND A LIMITATION, UPON THE POWER TO REOPEN THE ASSESSMENT AND THAT SECTIONS 148(2) AND 151 IMPOSE FURTHER CHECKS BY RESPECTIVELY PRESCRIBING (I) THE REQUIREMENT TO REC ORD REASONS AND (II) THE REQUIREMENT FOR THE COMMISSIONER TO SATISFY HIMSELF THAT IT WAS A FIT C ASE FOR THE ISSUE OF A NOTICE. THEREFORE, THE POWER CONFERRED UPON THE ITO WAS HELD BY THE APEX C OURT TO HAVE BEEN HEDGED WITH SEVERAL SAFEGUARDS CONCEIVED IN THE INTEREST OF ELIMINATING ROOM FOR ABUSE OF THIS POWER BY THE ASSESSING OFFICERS. - 7 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 3.3.4. IN RAYMOND WOOLLEN MILLS LTD. VS ITO [1999] 236 ITR 34 (SC), THE ASSESSMENT WAS REOPENED ON THE GROUND THAT THE ASSESSEE WAS CHARGI NG TO ITS PROFIT AND LOSS ACCOUNT, FISCAL DUTIES PAID DURING THE YEAR AS WELL AS LABOUR CHARG ES, POWER, FUEL, WAGES, CHEMICALS, ETC., AND THAT, HOWEVER, WHILE VALUING ITS CLOSING STOCK, THE ELEMENTS OF FISCAL DUTY AND THE OTHER DIRECT MANUFACTURING COSTS WERE NOT INCLUDED. THE REASON F OR REOPENING WAS THAT SUCH NON-INCLUSION RESULTED IN UNDERVALUATION OF INVENTORIES AND UNDER STATEMENT OF PROFITS. WHEN A CHALLENGE WAS MADE, THE SUPREME COURT REJECTED IT ON THE GROUND T HAT THE COURT COULD ONLY SEE WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE ASSESSMENT COULD BE REOPENED AND THAT THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL CANN OT BE CONSIDERED. THE COURT MADE IT CLEAR THAT IT WOULD BE OPEN TO THE ASSESSEE TO PROVE THE ASSUM PTION OF THE ASSESSING OFFICER TO BE ERRONEOUS AND THAT THERE WERE NO NEW FACTS WHILE PARTICIPATIN G IN THE PROCEEDINGS. 3.3.5. INDICATING THE PROCEDURE TO BE FOLLOWED IN C ASE WHERE A NOTICE UNDER SECTION 148 IS ISSUED, THE SUPREME COURT HELD IN GKN DRIVESHAFTS ( INDIA) LTD. V. ITO [2003] 259 ITR 19 (SC) THAT WHEN A NOTICE UNDER SECTION 148 IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICE IS TO FILE A RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING OF NOTICE. THE ASSESSING OFFICER IS THEN OBLIGED TO FURNISH REASONS AFTER RECEIPT OF WH ICH, THE NOTICE CAN FILE OBJECTIONS. THEREAFTER, THE ASSESSING OFFICER IS BOUND TO PASS A SPEAKING O RDER DISPOSING OF THE OBJECTIONS. THESE CONDITIONS HAVE DULY BEEN COMPLIED BY THE ASSESSING OFFICER BEFORE ISSUE OF REASSESSMENT NOTICE. AFTER RECEIPT OF THE 'REASON TO BELIEVE' FROM THE A SSESSING OFFICER, THE ASSESSEE HAD FILED ITS OBJECTION VIDE LETTER DATED 18.03.2015 WHICH THE AS SESSING OFFICER DISPOSED BY PASSING SPEAKING ORDER ON 26.03.2015 AND THE SAID ORDER WAS DULY COM MUNICATED TO THE ASSESSEE. THUS, IN THE PRESENT CASE THE A.O. HAS RIGHTLY REOP ENED THE ASSESSMENT THAT CLAIM OF SETOFF OF LOSS AGAINST INCOME FROM SHORT TERM CAPIT AL GAIN REQUIRED TO BE DISALLOWED. UNDER SECTION 147 OF THE ACT, THE ASSESSING OFFICER HAS T HE POWER TO ASSESS OR RE-ASSESS THE INCOME. SUCH A POWER HAS TO BE EXERCISED BY THE ASSESSING O FFICER ALONE. THE PRE-REQUISITE OF 'HAS REASON TO BELIEVE' MUST BE IN EXISTENCE FOR EXERCISING THE POWER UNDER SECTION 147, THE POWER CAN BE EXERCISED OVER ANY INCOME WHICH IS CHARGEABLE TO TA X THAT HAS ESCAPED ASSESSMENT. WHILE DOING SO, THE ASSESSING OFFICER IS REQUIRED TO FOLLOW THE PROVISIONS CONTAINED IN SECTIONS 148 TO 153, WHICH ARE MORE PROCEDURAL IN NATURE. UNDER SECTION 147, THE POWER IS AVAILABLE TO THE ASSESSING OFFICER TO ASSESS ANY OTHER INCOME CHARGEABLE TO TA X, WHICH HAS ESCAPED ASSESSMENT COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS AS WELL. SUCH A POWER CAN BE EXERCISED NOTWITHSTANDING THE FACT THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDER SECTION 148(2) OF THE ACT. 3.3.6. PROVISO TO SECTION 147 DEALS WITH LIMITATION FOR EXERCISE OF THE POWER UNDER CERTAIN CIRCUMSTANCES. WHILE IT PLACES FETTERS ON THE POWER OF THE ASSESSING OFFICER AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN RESPECT OF SCRUTINY ASSESSMENT ONLY, IT DOES GIVE CERTAIN LATITUDE WHEN ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS N ECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. THE THIRD PROVISO ALSO GIVES A FURTHER POWER TO THE ASSESSING OFFICER TO ASSESS OR REASSESS - 8 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTER S WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. IF ONE LOOKS AT EXPLANATION 2, IT DEALS WITH THE CASES WHI CH ARE DEEMED TO BE INVOLVING INCOME CHARGEABLE TO TAX ESCAPING ASSESSMENT. ACCORDINGLY, IF AN INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE; OR SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT ; OR EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMP UTED OR WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTI TY) LOCATED OUTSIDE INDIA, HAVING DEEMED TO BE THE CASES OF ESCAPED ASSESSMENT, IT WOULD COME UNDE R THE PURVIEW OF SECTION 147. THUS, THE ABOVE SAID PROVISION WOULD MAKE IT CLEAR THAT THE P OWER OF THE ASSESSING OFFICER IS RATHER WIDE. IN THE PRESENT CASE, IT IS SQUARELY COVERED BY THE CASE OF RAYMOND WOOLLEN MILLS LTD. (SUPRA), WHEREIN THE HON'BLE SUPREME COURT MADE AN OBSERVATI ON THAT THE COURT COULD ONLY SEE THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE ASSESSMENT COULD BE REOPENED AND THAT THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL CANN OT BE CONSIDERED. 3.3.7. ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS B OJARAJ TEXTILE MILLS LTD. IN I.T.A. NO.L503/MDS/2007 (A.Y.: 2001-02) VIDE THEIR ORDER D ATED 08.04.2011 HAVE UPHELD THE OPENING OF ASSESSMENT ON IDENTICAL FACTS. '8.3 SINCE THE ASSESSING OFFICER DURING THE ORIGINA L ASSESSMENT PROCEEDINGS HAS NOT APPROPRIATELY CONSIDERED THE ISSUE AND ACCEPTED THE CLAIM OF THE ASSESSEE ABOUT SET OFF OF CARRY FORWARD OF LOSS INCLUDING UNABSORBED DEPRECIA TION AGAINST SHORT TERM CAPITAL GAINS DETERMINED IN RELATION TO DEPRECIABLE ASSETS UNDER SECTION 50 OF THE INCOME TAX ACT, REASONS ARE RECORDED AND NOTICE U/S 148 HAS BEEN IS SUED/SERVED WITHIN FOUR YEARS, THEREFORE, IN VIEW OF THE FACTS, CIRCUMSTANCES AND RATIO OF THE DECISION AS REPRODUCED ABOVE AND DISCUSSION MADE, WE HOLD THAT INITIATION OF REASSESSMENT PROCEEDINGS IN THIS CASE BY THE ASSESSING OFFICER WERE JUSTIFIED. OUR V IEW IS FURTHER FORTIFIED BY THE HON'BLE BOMBAY HIGH COURT'S DECISION IN THE CASE OF LPCA LA BORATORIES LTD. V. GAJANAND MEENA, DCIT AND OTHERS 251ITR 420. THEREFORE, THE O RDER OF THE ID. CIT(A) IN THIS REGARD IS SET ASIDE AND INITIATION OF REASSESSMENT BY THE ASSESSING OFFICER IS HELD TO BE JUSTIFIED AND PROPER.' IN ANY EVENT, ONCE IT IS FOUND THAT THE ASSESSING O FFICER HAD REASON TO BELIEVE THAT THERE WAS INCOME ESCAPING ASSESSMENT, IT IS NOT OPEN TO T HE ASSESSEE TO CHALLENGE THE REOPENING OF ASSESSMENT SINCE, DURING THE COURSE OF ASSESSMENT P ROCEEDINGS FOR A.Y. 2011-12, IT WAS HELD THAT THE ASSESSEE IS NOT CARRYING ON THE BUSINESS ACTIVI TIES AND, THEREFORE, IS NOT ELIGIBLE FOR SETOFF OF OLD BROUGHT FORWARD LOSSES. IT IS ALSO SEEN FROM TH E ABOVE DISCUSSION THAT THE ASSESSING OFFICER HAS FOLLOWED PROPER PROCEDURE LAID DOWN BEFORE REOP ENING OF THE ASSESSMENT. HE HAD 'REASON TO BELIEVE' THAT INCOME HAS ESCAPED ASSESSMENT. SUCH ' REASON TO BELIEVE' WAS RECORDED IN WRITING AND COPY OF THE SAME WAS SUPPLIED TO THE ASSESSEE. THUS, THE REASONING PUT FORTH BY THE APPELLANT TO SUBSTANTIATE GROUND OF APPEAL ARE NOT JUSTIFIABL E AND THE ACTION OF A.O. IN REOPENING OF THE ASSESSMENT IS UPHELD. CONSEQUENTLY, THE FIRST GROUN D OF APPEAL IS DISMISSED. - 9 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 9. IT APPEARS THAT THE LD. LD. ASSESSING OFFICER R EOPENED THE ASSESSMENT ON THE PREMISE THAT HE HAS REASON TO BELIEVE THAT THE INCO ME HAS ESCAPED ASSESSMENT. RECORDING OF SUCH REASON TO BELIEVE WAS ALSO MADE KNOWN TO THE ASSESSEE BY SUPPLYING A COPY OF THE SAME WITHIN FOUR YEARS. IN THAT VIEW OF THE MA TTER, THE LD.CIT(A) RIGHTLY POINTED OUT THE LD. ASSESSING OFFICER HAS EXERCISED THE POWER U NDER THE PROVISIONS OF SECTION 147 OF THE ACT AS DISCUSSED ABOVE. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) NEITHER ANY REASON TO INTERFERE WITH THE SAME. THUS, THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 10. SO FAR AS THE GROUND OF DISALLOWANCE OF SET OFF OF CARRIED FORWARD LOSSES OF RS.3,49,87,936/- AGAINST THE STCG INCURRED OF RS.3, 40,07,018/- U/S.50C OF THE ACT IS CONCERNED, WE FIND THAT THE SAME WAS REJECTED BY TH E LD. AO BUT IN APPEAL WE DO NOT FIND ANY OBSERVATION REGARDING THE ISSUE OF SET OFF OF C ARRIED FORWARD BUSINESS LOSSES AGAINST THE STCG MADE BY LD. CIT(A) IN THE ORDER IMPUGNED. WE THEREFORE IN ORDER TO PREVENT THE MISCARRIAGE OF JUSTICE, FIND IT FIT TO REMIT TH IS PARTICULAR ISSUE TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION OF THE SAME AFRESH IN ACCOR DANCE WITH LAW. WE ORDER ACCORDINGLY. THUS, THIS GROUND OF ASSESSEES APPEA L IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.301/ AHD/2017 FOR AY 2009-10 IS ALLOWED FOR STATISTICAL PURPOSES. REVENUES APPEAL ITA NO.519/AHD/2017 FOR AY 2009-10 12. IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE DECISION OF THE LD. CIT(A) IN ALLOWING THE SET OFF OF CARRIED FORWARD UNABSORBED DEPRECIATION AGAINST THE INCOME COMPUTED UNDER THE HEAD STCG OF THE YEAR UNDER CO NSIDERATION PARTICULARLY WHEN THE AO HAS DISALLOWED THE SAME IN TERMS OF PROVISIONS O F SECTION 72 OF THE ACT. - 10 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 13. THE LD.DEPARTMENTAL REPRESENTATIVE DURING THE COURSE OF HEARING OF THE MATTER SUBMITTED BEFORE US THAT THE LD. CIT(A) PASSED THE ORDER WITHOUT APPRECIATING THE PROVISIONS OF SECTION 32(2) R.W.S.32(1) OF THE ACT WHEN THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN IN SECTION 32(1) OF THE ACT AS ALLEGED BY THE REVENUE. ON THE CONTRARY, THE LD. REPRESENTATIVE OF THE ASSESSEE RE LIES UPON THE ORDER PASSED BY THE DCIT(A). 14. WE HAVE HEARD THE RESPECTIVE PARTIES AND PERUSE D THE RECORDS. WE FIND THAT THE LD. CIT(A) IN HIS ORDER CONSIDERED THE SUBMISSIONS MADE BY THE LD. AR AND THE AO AS WELL. WHILE ALLOWING THE CLAIM OF SET OFF OF BRO UGHT FORWARD UNABSORBED DEPRECIATION, THE LD. CIT(A) HAS MADE THE FOLLOWING OBSERVATIONS: 3.3.8. NOW COMING TO THE ISSUE OF SETOFF OF BROU GHT FORWARD LOSSES AGAINST INCOME FROM SHORT TERM CAPITAL GAIN, I HAVE CONSIDERED THE SUBMISSION S OF THE LEARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFICER. THE ASSESSI NG OFFICER HAS REOPENED THE ASSESSMENT ON THE GROUND THAT CLAIM OF SETOFF OF BROUGHT FORWARD LOSSES AGAINST INCOME FROM SHORT TERM CAPITAL GAIN REQUIRED TO BE DISALLOWED AS THE SAME WAS IN C ONTRAVENTION OF THE PROVISION OF SECTION 72 OF THE L.T. ACT. ON THIS ISSUE, THE APPELLANT HAS RELI ED ON THE FOLLOWING DECISIONS HOLDING THAT CARRIED FORWARD UNABSORBED DEPRECATION WHICH BECOME CURRENT YEAR'S DEPRECATION HAS TO BE ALLOWED TO BE SET OFF U/S 71 UNDER ANY OTHER HEAD O F INCOME. A. CIT VS. JAIPURIA CHINA CLAY MINES (P) LTD - 59 ITR 0555 ( COPY ENCLOSED ON PAGE 84 TO 85 )( SC) B. E.K. LINGAMURTHY & ANR. VS. SETTLEMENT COMMISSI ON & ANR. (2009) 77 CCH 0086 ( SC) (COPY ENCLOSED ON PAGE 86 ) C. SURESH INDUSTRIES (P.) LTD VS. ACIT - ITA NO. 5374/MUM/2011 ( ITAT MUMBAI) ( COPY ENCLOSED ON PAGE 87 TO 88 ) D. DIGITAL ELECTRONICS LTD VS. ADDL. CIT-ITA NO. 1 658/MUM/2009 (ITAT MUMBAI) (COPY ENCLOSED ON PAGE 89 TO 91) E. M/S. RAJ SHREE HEADLINES PVT LTD VS. ITO-ITA N O. 1627/MUM/2012 ( ITAT MUMBAI) ( COPY ENCLOSED ON PAGE 92 TO 93 ) THE ABOVE CASE LAWS RELIED UPON BY THE APPELLANT WE RE DISTINGUISHED BY THE ASSESSING OFFICER WHO WAS OF THE VIEW THAT SET OFF OF UNABSORBED BUSI NESS LOSS AGAINST PROFIT ON SALE OF ASSETS CANNOT BE ALLOWED IN VIEW OF THE FACT THAT PROFIT O N SALE OF ASSETS WAS SHORT TERM CAPITAL GAIN - 11 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 WITHIN THE MEANING OF SECTION 50 OF THE INCOME TAX ACT, 1961 AND AS PER THE PROVISIONS OF SEC. 72 OF THE ACT, LOSS UNDER THE HEAD 'PROFIT AND GAIN S OF BUSINESS OR PROFESSION' CAN BE SET OFF ONLY AGAINST PROFITS OF ANY BUSINESS IN THE SUBSEQUENT Y EAR. HOWEVER, I AM INCLINED TO ACCEPT THE CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE THA T THE ISSUE IS COVERED IN HIS FAVOUR BY THE CASE LAWS CITED ABOVE. THE AUTHORIZED REPRESENTATIV E HAS CONTENDED THAT INCOME UNDER THE DEEMING FICTION OF SECTION 50 HAS TO BE CONSIDERED AND TREATED AS BUSINESS INCOME AND EVEN ON THIS GROUND, THE CARRIED FORWARD OF UNABSORBED DEPR ECIATION HAS TO BE ALLOWED. HE HAS SUBMITTED THAT CURRENT YEAR'S SHORT TERM CAPITAL GA IN CAN BE SET OFF AGAINST CARRIED FORWARD UNABSORBED DEPRECATION WHICH BECOMES THE CURRENT YE AR'S DEPRECATION AS CLEARLY PROVIDED IN SECTION 32(2) WHICH PROVIDES SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME INCLUDING SHORT TERM CAPITAL GAIN. IN OTHER WORDS IF THE ASSESSEE H AS INCOME OF SHORT TERM CAPITAL GAIN IN AY 2009-10 OF RS. 3,40,07,018/- THEN THE SAME HAS TO B E SET OFF AGAINST UNABSORBED DEPRECIATION CLAIMED AND ALLOWED IN EARLIER YEARS ORDERS. 3.3.9. HON'BLE SUPREME COURT IN THE CASE OF CIT VS VIRMANI INDUSTRIES (P.) LTD. [1995] 83 TAXMAN 343 (SC) HAS CONSIDERED AND FOLLOWED TWO APE X COURT DECISIONS IN CIT VS JAIPURIA CHINA CLAY MINES (P.) LTD. [1966] 59 ITR 555 (SC) A ND RAJAPALAYAM MILLS LTD. VS CIT [1978] 115 ITR 777 (SC) AND HELD AS UNDER :- '16. THE NEXT QUESTION IS WHETHER FOR AVAILING THE BENEFIT OF SECTION 32(2), IS IT NECESSARY THAT THE BUSINESS CARRIED ON IN THE FOLLOWING PREVIOUS YEAR SHOULD BE THE SAME BUSINESS AS WAS CARRIED ON IN THE PRECEDING PREVIOUS YEAR AS HAS BEEN HELD BY THE MADRAS HIGH COURT IN EAST ASIATIC CO. (P.) LTD.'S CASE (SUPRA). WE ARE OF THE OPINION THAT IN THE ABSENCE OF ANY WORDS TO THAT EFFECT, NO SUCH REQUIREMENT OUGHT TO BE READ INTO THE SAID SUB-SECTION. A LOOK AT SECTION 72 SHOWS THAT WHERE THE PARLIAMENT INTENDED TO PROVIDE SUCH A LIM ITATION, IT DID SO EXPRESSLY. SECTION 72 DEALS WITH CARRY-FORWARD AND SET OFF OF BUSINESS LOSS. TH E PROVISO TO CLAUSE (I) OF SUB-SECTION (1) OF SECTION 72 EXPRESSLY PROVIDES THAT SUCH A COURSE IS PERMISSIBLE ONLY WHERE 'THE BUSINESS OR PROFESSION FOR WHICH THE LOSS WAS ORIGINALLY COMPUT ED CONTINUED TO BE CARRIED ON BY HIM IN THE PREVIOUS YEAR RELEVANT FOR THAT ASSESSMENT YEAR'. I N THE ABSENCE OF ANY WORDS TO THAT EFFECT, IT MUST BE HELD THAT FOR AVAILING THE BENEFIT OF SECTI ON 32(2), IT IS NOT NECESSARY THAT THE BUSINESS CARRIED ON IN THE FOLLOWING YEAR IS THE SAME BUSINE SS AS WAS CARRIED ON IN THE PREVIOUS YEAR. 17. THE OTHER QUESTION IS WHETHER THE ASSETS WHICH EARN ED THE DEPRECIATION IN THE PRECEDING YEAR SHOULD EXIST AND SHOULD CONTINUE TO BE USED FO R THE PURPOSE OF BUSINESS IN THE FOLLOWING YEAR. IN THE ABSENCE OF ANY WORDS IN THE SAID SUB-S ECTION TO THAT EFFECT, WE CANNOT READ THIS REQUIREMENT ALSO INTO THE SAID SUB-SECTION. THIS IS EVIDENT FROM THE WORDS 'OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE FOR THE PREVIOUS YEAR' OCCURRING IN THE SUBSECTION. - 12 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 18. YET ANOTHER QUESTION WHICH HAS TO BE ANSWERED BEFORE WE CAN ANSWER THE QUESTION CONCERNED IN THIS APPEAL IS WHETHER IT IS NECESSARY THAT IN THE FOLLOWING YEAR, THE ASSESSEE MUST CARRY ON BUSINESS, I.E., SOME OR OTHER BUSINESS, TO AVAIL OF THE BENEFIT OF THE SAID SUB-SECTION? TWO VIEWS ARE POSSIBLE IN THIS BEHALF, VIZ, (I) SIN CE THE SUB-SECTION SPEAK OF UNABSORBED DEPRECIATION BEING CARRIED FORWARD TO THE NEXT YEAR AND 'ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AN D DEEMED TO BE PART OF THAT ALLOWANCE', THE SUB-SECTION NECESSARILY CONTEMPLATES EXISTENCE OF A BUSINESS IN THE FOLLOWING YEAR AND (2) INASMUCH AS THE SUB-SECTION NOT ONLY SPEAKS OF ADDI NG THE UNABSORBED DEPRECIATION TO THE DEPRECIATION ALLOWANCE ALLOWED IN THE FOLLOWING YEA R BUT ALSO SAYS THAT IN THE ABSENCE OF SUCH ALLOWANCE, THE CARRIED FORWARD DEPRECIATION ALLOWAN CE SHALL BE THE ALLOWANCE FOR THAT YEAR, IT MEANS THAT IN THE FOLLOWING YEAR, THE ASSESSEE NEED NOT CARRY ON ANY BUSINESS OR PROFESSION FOR AVAILING THE BENEFIT OF SUB-SECTION (2) OF SECTION 32. WE ARE INCLINED TO ADOPT THE SECOND OF THE ABOVE TWO VIEWS HAVING REGARD TO THE DECISIONS OF T HIS COURT IN JAIPURIA CHINA CLAY MINES (P.) LTD.'S CASE (SUPRA) AND RAJAPALAYAM MILLS LTD.'S CA SE (SUPRA). WE HAVE EXTRACTED THE RELEVANT OBSERVATIONS FROM BOTH THE JUDGMENTS HEREINABOVE, W HICH SAY THAT THE UNABSORBED DEPRECIATION ALLOWANCE HAS NOT ONLY TO BE SET OFF AGAINST OTHER HEADS OF INCOME IN THE RELEVANT PREVIOUS YEAR BUT WHERE IT IS CARRIED FORWARD, IT 'STANDS ON EXAC TLY THE SAME FOOTING AS THE CURRENT DEPRECIATION'. 3.3.10. THE WORDINGS OF EXISTING SECTION 32(2) AR E SIMILAR TO THE WORDINGS OF SEC. 32(2) EXISTING PRIOR TO AY 1997-98. THEREFORE, I HAVE NO HESITATIO N IN HOLDING THAT THE DECISION OF THE APEX COURT DELIVERED IN THE CASE OF VIRMANI INDUSTRIES (SUPRA) IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. CONSIDERING THE SAME, CURRENT YEA R'S DEPRECIATION IS TO BE ALLOWED AS SET OFF FROM THE SHORT TERM CAPITAL GAINS AND BROUGHT FORWA RD DEPRECIATION IS TO BE TREATED AS CURRENT YEAR'S DEPRECIATION AS PER THE LEGAL FICTION OF SEC TION 32(2), THE SAME IS ALSO TO BE ''ALLOWED TO BE SET OFF FROM THE SHORT TERM CAPITAL GAINS. ACCORDIN GLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SET OFF OF CARRY FORWARD UNABSORBED DEPRE CIATION AGAINST THE INCOME COMPUTED UNDER THE HEAD 'SHORT TERM CAPITAL GAIN' OF THE YEAR UNDE R CONSIDERATION. THE APPELLANT HAS MENTIONED IN GROUND NO.3 THAT RS.91,18,363/- IS THE UNABSORBE D DEPRECIATION, HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FIGURES OF UNABSO RBED DEPRECIATION FROM THE ASSESSMENT RECORDS AND ALLOW RELIEF TO THE APPELLANT IN ACCORDANCE WIT H THE LAW. SUBJECT TO SUCH VERIFICATION AND DETERMINATION OF CARRY FORWARD UNABSORBED DEPRECIAT ION, THIS GROUND IS TREATED AS ALLOWED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED, 15. WE FIND NO INFIRMITY IN THE ORDER PASSED BY TH E LD.CIT(A) IN FAVOUR OF THE ASSESSEE AS MENTIONED ABOVE PARTICULARLY TAKING INT O CONSIDERATION OF THE JUDGMENTS CITED BY HIM WHEREBY THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED. - 13 - ITA NO.301/AHD/2017 (ASSESSEE)& ITA NO.519/AHD/2018(REVENUE) SUN ON PEAK HOTEL PVT.LTD. VS. DCIT ASST.YEAR 2009-10 15.1. WE, THEREFORE, FIND NO REASON TO INTERFERE W ITH THE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. THUS, THIS GROUND OF APPEAL PREFERRED BY THE REVENUE IS DISMISSED. 16. IN THE COMBINED RESULT, ASSESSEES APPEAL IS AL LOWED FOR STATISTICAL PURPOSES AND REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 05/11/2018 SD/- SD/- (AMARJIT SINGH) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 05/ 11/2018 .., . ../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-4, VADODARA 5. !'# , $ , / DR, ITAT, AHMEDABAD 6. #() *+ / GUARD FILE. / BY ORDER, ! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 10.8.18DICTATION-PAD 16- PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 11.8.18/5.11.2018 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. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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