M/s Alps Granite (P) Ltd., Bangalore V. ITO, Bangalore

ITA 59/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0655 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-01-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Difference of opinion; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 32; 147; 148; 154

Judgement Text

PAGE 1 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NOS.58 & 59/BANG/2012 (ASSESSMENT YEARS 2005-06 & 2006-07) M/S ALPS GRANITE (P) LTD., NO.23/2, 7 TH FLOOR, COFFEE DAY SQUARE, VITTAL MALLYA ROAD, BANGALORE-1. PA NO.AABCA 7695 R VS THE INCOME TAX OFFICER, WARD-11(1), BANGALORE. (APPELLANT) (RESPONDENT) ITA NOS.254 & 255/BANG/2012 (ASST. YEARS 2005-06 & 2006-07) (BY REVENUE) DATE OF HEARING : 28.01.2013 DATE OF PRONOUNCEMENT : 28.01.2013 APPELLANT BY : SHRI C RAMESH, C.A. RESPONDENT BY : SHRI BIJOY KUMAR PANDA , ADDL. CIT ORD ER PER BENCH : THESE FOUR APPEALS INSTITUTED, AT THE INSTANCES O F THE ASSESSEE AS WELL AS THE REVENUE, ARE DIRECTED AGAINST THE CO NSOLIDATED ORDER OF THE CIT (A)-I, BANGALORE DATED 22.11.2011. THE RELEVAN T ASSESSMENT YEARS ARE 2005-06 AND 2006-07. PAGE 2 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 2 I.ITA NOS.58 & 59/B/12 AYS 2005-06 & 06-07 BY T HE ASSESSEE : A.Y. 2005-06: 2. OUT OF FIVE GROUNDS RAISED BY THE ASSESSEE IN IT S GROUNDS OF APPEAL, GROUND NOS.1 & 5 DO NOT SURVIVE FOR CONSIDERATION AS THEY ARE GENERAL IN NATURE. THE REMAINING THREE GROUNDS REL ATE TO A SOLITARY GROUND, NAMELY, THAT THE CIT (A) HAD ERRED IN HOLDING THAT THE RE-OPENIN G OF THE ASSESSMENT BY INVOKING THE PROVISIONS OF S.147 OF T HE ACT ARE PERMISSIBLE UNDER THE LAW. A.Y. 2006-07: 3. LIKEWISE, FOR THIS A.Y ALSO, THE ASSESSEE HAS R AISED FIVE GROUNDS, OUT OF WHICH, GROUND NOS. 1 & 5 BEING GENERAL, THEY NEED NO ADJUDICATION. IN THE REMAINING THREE GROUNDS, THE ASSESSEES GRIEVANCE IS THAT THE CIT (A) ERRED IN HOLDING THAT INVOKING OF PROVISIONS OF S. 154 OF THE ACT WAS VALID IN A SITUATION WHERE THERE WAS NO MISTAKE APPARENT FROM RECORDS. II.ITA NOS.254 & 255/12 AYS 2005-06 & 06-07 BY REVENUE : A.YS. 2005-06 & 2006-07: 4. THOUGH THE REVENUE HAS RAISED FIVE IDENTICAL GR OUNDS FOR BOTH THE AYS, THE SOLITARY ISSUE IS THAT THE CIT (A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO ALLOW SET-OFF OF BROUGHT FORWAR D UNABSORBED DEPRECATION OF AYS 1994-95 AND 1995-96 AS AGAINST T HE INCOME OF THE ASSESSEE FOR THE AYS 2005-06 AND 2006-07. PAGE 3 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 3 5. AS THE ISSUES RAISED BY BOTH THE PARTIES BEING I NTER-LINKED PERTAINING TO THE SAME ASSESSMENT YEARS, THEY WERE H EARD, CONSIDERED TOGETHER AND DISPOSED OFF, FOR THE SAKE OF CONVENIE NCE, BY THIS COMMON ORDER. 6. LET US NOW TAKE UP THE ISSUES RAISED BY THE REVE NUE FOR BOTH THE ASSESSMENT YEARS 2005-06 AND 06-07 TOGETHER FOR ADJUDICATION. I. ITA NOS.254 & 255/B/12 AYS 2005-06 & 06-07 B Y REVENUE : A.Y. 2005-06: THE FACTS OF THE ISSUES, IN BRIEF, ARE AS UNDER: 6.1. THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE OF GRANITE TILES AND SLABS, HAD FURNISHED ITS RETUR N OF INCOME FOR THE AY 2005-06, ADMITTING NIL INCOME WHICH WAS, ORIGINALLY, PROCESSED U/S 143(1) OF THE ACT AND, SUBSEQUENTLY, TAKEN UP FOR SCRUTINY. AF TER EXAMINING THE DETAILS FURNISHED, THE AO CONCLUDED THE ASSESSMENT, ACCEPTING THE INCOME RETURNED. HOWEVER, THE ASSESSMENT WAS SOUGHT TO BE RE-OPENED AND, ACCORDINGLY, A NOTICE U/S 148 OF THE ACT WAS SERVED ON THE ASSESSEE, REQUIRING IT TO FURNISH ITS RETURN OF INCOME. IN C OMPLIANCE, THE AO WAS REQUESTED TO TREAT ITS ORIGINAL RETURN FILED EARLIE R AS THE RETURN FILED IN RESPONSE TO THE SAID NOTICE. SUBSEQUENTLY, THE ASSE SSEE HAD OBJECTED TO THE RE-OPENING OF THE ASSESSMENT THROUGH A LETTER. AFT ER ELABORATELY DISCUSSING THE ISSUE COUPLED WITH EXTENSIVELY QUOTING THE AMEND MENT TO S. 32(2) OF THE ACT AND FOR THE REASONS RECORDED IN HIS IMPUGNED OR DER, THE AO HAD REJECTED THE ASSESSEES CLAIM FOR CARRY FORWARD OF U NABSORBED DEPRECIATION LOSS OF ASSESSMENT YEARS 1994-95 AND 95-96 AND CONC LUDED THE ASSESSMENT PAGE 4 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 4 U/S 143(3) R. W. S. 147 OF THE ACT BRINGING TO TAX THE ENTIRE CLAIM OF THE ASSESSEE OF RS.81,70,140/-. A.Y. 2006-07: 6.2. THE ASSESSEES RETURN OF INCOME FURNISHED DEC LARING A TOTAL INCOME OF RS.27.75 LAKHS WAS, INITIALLY, PROCESSED U /S 143(1) OF THE ACT AND, SUBSEQUENTLY, CONCLUDED THE ASSESSMENT U/S 143(3) OF THE ACT, ACCEPTING THE RETURNED INCOME, AFTER EXAMINING THE DETAILS FURNIS HED BY THE ASSESSEE. HOWEVER, THE AO HAD, IN A SUO MUTO ACTION, INITIATE D PROCEEDINGS U/S 154 OF THE ACT BY WAY OF ISSUANCE OF A SHOW-CAUSE NOTICE DAT ED 17.2.2011. THE ASSESSEE WAS DIRECTED TO EXPLAIN AS TO WHY THE UNABS ORBED DEPRECIATION FOR THE AYS 1995-96 AND 1996-97 ALLOWED TO BE SET OFF I N THE ASSESSMENT YEAR UNDER DISPUTE, IN THE ASSESSMENT ORDER 22.12.2008 S HOULD NOT BE WITHDRAWN BY TREATING THE SAME AS MISTAKE APPARENT FROM RECORD S. BRUSHING ASIDE THE ASSESSEES OBJECTION THAT RECTIFICATION SOUGHT TO B E EXECUTED IS A DEBATABLE ISSUE WHICH DOESNT FALL WITHIN THE SCOPE OF S. 154 OF THE ACT ETC., THE AO RECTIFIED THE SAME BY WITHDRAWING THE ASSESSEES CLA IM TO SET OFF OF THE UNABSORBED DEPRECATION FOR THE AYS 1995-96 AND 1996 -97. 7. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES PERT AINING TO BOTH THE AYS UNDER CONSIDERATION BEFORE THE CIT (A) FOR RELIEF. AFTER CAREFUL CONSIDERATION OF THE LENGTHY AND COMPREHENSIVE CONTE NTIONS PUT-FORTH ON BEHALF OF THE ASSESSEE AND ALSO ANALYZING VARIOUS AM ENDMENTS WITH REGARD TO THE PROVISIONS OF S. 32 (2) OF THE ACT COUPLED WIT H THE JUDICIAL PRONOUNCEMENTS ON THE ISSUE AS RECORDED IN HIS IMPU GNED ORDER, THE CIT (A) HAD DIRECTED THE AO TO ALLOW SET OFF OF CARRIED FOR WARD UNABSORBED PAGE 5 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 5 DEPRECIATION OF 1994-95 AND 1995-96 AGAINST THE INC OME OF THE AY 2005-06 AND THE BROUGHT FORWARD UNABSORBED DEPRECIATION OF 1995-96 AND 1996-97 AGAINST THE PROFITS OF AY 2006-07 7.1. AGGRIEVED, THE REVENUE HAS COME UP WITH THE P RESENT APPEALS. IT WAS SUBMITTED ON BEHALF OF THE REVENUE THAT THE CIT (A) WAS NOT JUSTIFIED IN DIRECTING THE AO TO ALLOW SET-OFF OF B ROUGHT FORWARD UNABSORBED DEPRECIATION OF THE AYS 1994-95 AND 1995 -96 AGAINST THE INCOME OF 2005-06 WITHOUT APPRECIATING THE FACT THA T THE HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE RELIED UPON BY THE CIT (A), DID NOT DECIDE THE ISSUE IN FAVOUR OF THAT ASSESSEE, INSTEA D, THE HONBLE COURT HAD REMITTED THE ISSUE BACK TO THE AO TO DECIDE AFRESH, KEEPING THE AMENDMENTS IN S. 32 OF THE ACT ETC., IT WAS, FURTH ER, URGED THAT THOUGH THE CIT (A) HAD AGREED WITH THE VIEW OF THE AO [REFER: PARA 13 OF CIT(A)S ORDER], BUT, ERRED IN ALLOWING RELIEF TO THE ASSESS EE BY NOT COMPREHENSIVELY GOING THROUGH THE RULING OF THE HONBLE COURT. 7.2. ON THE OTHER HAND, THE LEARNED AR CONTENDED T HAT UNDER THE LAW, THE AO COULD NOT HAVE INVOKED THE PROVISIONS O F S. 154 OF THE ACT SINCE THERE WAS NO MISTAKE APPARENT FROM RECORDS AND THAT THE MATTER INVOLVED WAS AN ISSUE OF INTERPRETATION OF THE STATUTE AND T HERE WERE DIVERGENT OPINIONS AVAILABLE ON A SIMILAR ISSUE. IN SUPPORT OF THE SAME, THE LEARNED AR HAD RELIED UPON A FEW CASE LAWS ON A SIMILAR ISSUE. 7.3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS, PERUSED THE RELEVANT MATERIALS ON RECORD. THE LEARNED A R HAD RELIED ON THE FINDINGS OF THE CIT (A) WHICH WERE PRIMARILY BASED ON THE RULING OF THE HONBLE PAGE 6 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 6 JURISDICTIONAL HIGH COURT IN THE CASE OF KARNATAKA CO-OPERATIVE MILK PRODUCERS FEDERATION LIMITED V. DCIT (ASST) IN WRI T PETITION NO.18389/2010 (T IT) DATED 10.2.2011. HOWEVER, THE REVENUE CONTENTED THAT THOUGH THE CIT (A) HEAVILY RELIED ON THE RULING OF THE HONBLE COURT IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, WHILE DOING SO, THE CIT (A) FAILED TO APPRECIATE THAT THE HONBLE COURT HAD, IN DEED, REMITTED BACK THE ISSUE TO THE AO TO DECIDE THE SAME AFRESH BY KEEPING THE AMENDMENTS IN SECTION 32 OF THE ACT. 7.4. ON A CAREFUL PERUSAL OF THE RULING OF THE HON BLE COURT, WE HAVE OBSERVED THAT AFTER DULY DEBATING THE ISSUE, THE HON BLE COURT HAD HELD THAT: (ON PAGE 8) THE ORDER PASSEDTHE AMENDMENT INTRODUCED LIMITING THE TIME FOR CARRYING FORWARD FOR A PERIOD OF EIGHT YEARS HAS TO BE RECKON ED NOT FROM 1993-94 BUT FROM 1996-97 AND THE SAME WAS CARRIED FORWARD AND BY THE YEAR 2006-07 SINCE AGAIN THERE IS AN AMENDMENT INTRODUCED DURING 2002 MAKING THIS PERIOD OF EIGHT YEARS AS UNLIMITED, FROM 2002 ONWARDS EVEN TILL 2006-07, IT IS PERMISSIBLE TO CAR RY FORWARD THE UNABSORBED DEPRECIATION IN VIEW OF THE CHANGE IN POSITION OF LAW. THIS ASPECT HAS NOT BEE N CONSIDERED BY THE REVISIONAL AUTHORITY AS SUCH, THE IMPUGNED ORDER PASSED AT ANNEXURE Q IS WITHOUT TAKI NG INTO CONSIDERATION THE PROVISIONS UNDER S.32 (2) OF THE ACT WHICH CAME TO BE INTRODUCED LIMITING EXTENDING THE PERIOD FROM EIGHT YEARS FOR AN UNLIMITED PERIOD. FU RTHER, CARRYING FORWARD OF UNABSORBED DEPRECIATION FOR EVER Y YEAR HAS TO BE CALCULATED INDIVIDUALLY BASED ON THE A UDIT REPORT AND TO ARRIVE AT THE EXACT AMOUNT TO BE CARR IED FORWARD. PAGE 7 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 7 IN THAT VIEW OF THE MATTER, THE IMPUGNED ORDER AT ANNEXURE Q AND ALSO THE ORDER OF THE ASSESSING AUTH ORITY AT ANNEXURE J IN NOT TAKING INTO CONSIDERATION THE LEGAL POSITION AS TO CARRYING FORWARD THE UNABSORBED DEPRECIATION REQUIRES INTERFERENCE AND RECONSIDERAT ION. ACCORDINGLY, ANNEXURE J & Q ARE QUASHED. MATTER IS REMITTED TO THE 1 ST RESPONDENT FOR RECONSIDERATION IN ACCORDANCE WITH LAW TAKING INTO CONSIDERATION THE PROVISIONS PROVIDED UNDER THE INCOME TAX ACT REGARD ING ALLOWING OF DEPRECIATION AND ALSO CARRYING FORWARD T HE CLAIM OF DEPRECIATION, TO ARRIVE AT A CONCLUSION ON SUCH CARRYING FORWARD OF THE DEPRECIATION AS TO WHAT WOUL D BE THE REMAINING AMOUNT TO BE DETERMINED FOR THE PURPO SE OF PAYMENT OF TAX. 7.5. IN CONSONANCE WITH THE RULING OF THE HONBLE COURT (SUPRA) WE ARE OF THE CONSIDERED VIEW THAT THE PRESENT ISSUE A LSO REQUIRES TO BE REMITTED BACK ON THE FILES OF THE AO WITH A SPECIFI C DIRECTION TO LOOK INTO THE ASPECT OF CARRIED FORWARD OF THE CLAIM OF UNABS ORBED DEPRECIATION AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE P ROVISIONS OF THE ACT AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSE SSEE OF BEING HEARD. WHILE DOING THE ABOVE EXERCISE, THE AO SHALL, HOWEV ER, KEEP IN VIEW THE OBSERVATION OF THE HONBLE COURT (SUPRA). IT IS OR DERED ACCORDINGLY. 7.6. IN ESSENCE, THE REVENUES APPEALS FOR THE AY S 2005-06 AND 2006-07 ARE TREATED AS ALLOWED FOR STATISTICAL PURP OSES. II.ITA NOS.58 & 59/B/12 AYS 05-06 & 06-07 BY TH E ASSESSEE : 8. THE SUM AND SUBSTANCE OF THE ASSESSEES SUBMISS ION WAS THAT THE RE-OPENING OF THE ASSESSMENT WAS ON CHANGE OF OPINION AND THAT THE AO BY INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT INTENDED TO SET RIGHT AN PAGE 8 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 8 ALLEGED ERROR IN INTERPRETATION OF LAW WHILE CONCLU DING THE ORIGINAL ASSESSMENT. IT WAS ARGUED THAT THERE WAS NO FRESH MATERIAL TO ARRIVE AT SUCH A CONCLUSION. IT WAS, FURTHER, SUBMITTED THAT SINCE THE AOS ACTION IN INVOKING THE PROVISIONS OF SECTION 147 WAS BAD IN L AW AND, CONSEQUENTLY, THE REASSESSMENT DOESNT SURVIVE. THE ASSESSEE HAD QUO TED VARIOUS CASE LAWS IN SUPPORT OF ITS SUBMISSION. THE ASSESSEE ALSO DISP UTED THE CASE LAWS ON WHICH THE REVENUE HAS PLACED STRONG RELIANCE TO SUP PORT THE AOS STAND ON THE GROUND THAT THOSE CASE LAWS WERE ON THE ISSUE O F FACTS. THE CASE OF THE PRESENT ISSUE, IT WAS SUBMITTED, WAS ON POSITION OF LAW WHICH WAS ALREADY IN EXISTENCE AND NO MATERIAL FACTS WERE REQUIRED TO IN TERPRET THE SAME. IT WAS SUBMITTED THAT BY ALLOWING THE UNABSORBED DEPRECIATI ON TO SET OFF, THE AO HAD COME TO A CONCLUSION IN THE ORIGINAL ASSESSMENT AND BY REOPENING THE ASSESSMENT; THE AO WAS TRYING A REMEDY FOR AN ALLEGED ERROR WHICH WAS THE RESULT OF A CHANGE OF OPINION ETC. IN CONCLUSION, IT WAS URGED THAT SINCE THE ASSESSING OFFICER OUGHT NOT TO HAVE INVOKED THE PRO VISIONS OF SECTION 147 OF THE ACT, THE REASSESSMENT PROCEEDINGS AND SUBSEQUEN T CONCLUSION OF THE SAME U/S 143 (3) R. W. S. 147 OF THE ACT REQUIRES T O BE CANCELLED. 8.1. ON THE OTHER HAND, THE LEARNED D R SUPPORTED THE STAND OF THE AO WHICH WAS SUBSEQUENTLY SUSTAINED BY THE CIT (A). IT WAS, THEREFORE, PRAYED THAT AS THE ASSESSEE HAD FAILED TO BRING ANY C REDIBLE EVIDENCE TO CONTRADICT THE FINDINGS OF THE CIT (A) ON THE ISSUE , THE GROUNDS RAISED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS UNDER CON SIDERATION REQUIRE TO BE REJECTED. PAGE 9 OF 10 ITA NOS.58 & 59/BANG/2 012 & 254 & 255/BANG/2012 9 8.2. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS, PERUSED THE REASONING OF THE AO IN RE-OPENING OF THE ASSESSMENT , FINDINGS OF THE CIT (A) AND THE CASE LAWS ON WHICH EITHER PARTY HAD PLA CED STRONG RELIANCE. 8.3. AT THIS JUNCTURE, WE WOULD LIKE TO POINT OUT THAT THE RE-OPENING OF THE ASSESSMENTS WERE OBJECTED TO BY THE ASSESSEE AND THE AO REJECTED THE ASSESSEES CONTENTIONS AND WENT AHEAD WITH THE RE-OPENING AND REFRAMING OF THE ASSESSMENT(S). HOWEVER, THE ASSE SSEE HAD NO OCCASION TO REBUT THE AOS STAND ON THE ISSUE. SINCE THE ISSUE S RAISED BY THE REVENUE IN ITS APPEALS (SUPRA) WITH REGARD TO THE CIT (A)S DI RECTION TO THE AO TO ALLOW SET OFF OF CARRIED FORWARD OF UNABSORBED DEPRECIATI ON AGAINST THE INCOMES OF AYS 2005-06 AND 2006-07 HAVE BEEN REMITTED BACK TO THE FILE OF THE AO FOR A FRESH LOOK (SUPRA), WE ARE OF THE CONSIDER ED VIEW THAT THE ISSUES RAISED BY THE ASSESSEE IN RESPECT OF RE-OPENING OF T HE ASSESSMENT BY THE AO AND ALSO OBJECTING TO THE INVOKING OF THE PROVIS IONS OF S. 154 OF THE ACT TO BE REMANDED BACK ON THE FILE OF THE AO WITH A D IRECTION TO ADDRESS TO THE GRIEVANCES OF THE ASSESSEE AND TO TAKE APPROPRI ATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AFTER AFFORDING AN O PPORTUNITY TO THE ASSESSEE TO PUT-FORTH ITS VIEWS ON THESE ISSUES. I T IS ORDERED ACCORDINGLY. 9. IN THE RESULT : (I) THE REVENUES APPEALS FOR THE A.YS 2005-06 AND 2006- 07 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES; & (II) THE ASSESSEES APPEALS FOR TH E AYS 2005-06 AND 2006- 07 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PAGE 10 OF 10 ITA NOS.58 & 59/BANG/ 2012 & 254 & 255/BANG/2012 10 THE ORDER IS PRONOUNCED ON THE 28 TH DAY OF JANUARY, 2013 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BAN GALORE.