Hari Orgachem Pvt.Ltd., Ahmedabad V. The Dy.CIT.,Circle-4, Ahmedabad

ITA 651/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2286 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY RAI
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 11/1/11 DRAFTED ON: 13/1/ 11 ITA NO.651/AHD/2008 ASSESSMENT YEAR : 2004-05 HARI ORGOCHEM PVT.LTD. 33, HARIBHAI MARKET REVDI BAZAR CROSS MARKET KALUPUR, AHMEDABAD VS. THE DCIT CIRCLE-4 AHMEDABAD PAN/GIR NO. : AAACH 7088 L ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI VIJAY RANJAN RESPONDENT BY: SHRI SANJAY RAI, SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -VIII AHMEDABAD DATED 18/12/2007 PASSED FOR ASSESSMENT YEAR 2004-05 . 2. GROUND NO.1 WAS IN RESPECT OF DISALLOWANCE U/S.1 4A OF THE I.T.ACT WHICH WAS NOT CONTESTED BEFORE US CONSIDERING THE S MALLNESS OF THE ADDITION, HENCE, DISMISSED BEING NOT PRESSED. 3. GROUND NO.2 WAS IN RESPECT OF A DISALLOWANCE OF RS.20,000/- WHICH HAS ALSO NOT BEEN CONTESTED CONSIDERING THE S MALLNESS OF THE ADDITION, HENCE, DISMISSED BEING NOT PRESSED. ITA NO.651/AHD/ 2008 HARI ORGOCHEM PVT.LTD. VS. DCIT ASST.YEAR - 2004-05 - 2 - 4. GROUND NO.3 IS REPRODUCED BELOW:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN NOT UPHOLDING THE ASSESSEES CLAIM THAT BU SINESS LOSS IN A SUM OF RS.44,84,604 WAS REQUIRED TO BE CARRIED FORW ARD AND IT WAS NOT REQUIRED TO BE SET OFF AGAINST THE PROFITS UNDE R THE HEAD CAPITAL GAINS. 5. THIS IS ONE OF THOSE CASES WHERE BECAUSE OF INCO RRECT APPROACH AND MISUNDERSTANDING OF LAW HAS CREATED UNNECESSARY LIT IGATION. FURTHER, IT IS ALSO WORTH TO COMMENT AT THE OUTSET ITSELF THAT THE CORRECT FACT ABOUT THE CLAIM WAS MESSED UP BY THE ASSESSEE DUE TO WHICH TH E AO WAS MISLEAD. WHEN THE ARGUMENTS WERE ADVANCED BY THE LEARNED AUT HORISED REPRESENTATIVE OF THE ASSESSEE MR. VIJAY RANJAN, HE HAS POINTED OUT ALL THOSE FACTS IN CLEAR TERMS BEFORE US. THE FACTS WH ICH WERE CLARIFIED BY THE LEARNED AUTHORISED REPRESENTATIVE AS ALSO OUR JUDGE MENT CAN BE SUMMARIZED AS FOLLOWS:- (I) THAT, THE ASSESSEE HAS FILED STATEMENT OF COMP UTATION OF INCOME AND ALONG WITH THAT ANNEXED A STATEMENT, WHR ERIN CLAUSE-6 IS WORTH REPRODUCTION. 6. OF COURSE, THERE IS A LOSS OF RS.4484604/- UND ER THE HEAD OF BUSINESS OR PROFESSION THE SAID LOSS IS DES IRED TO BE CARRIED FORWARD WITHOUT AVAILING ANY SET OFF AGAINS T THE INCOME UNDER THE HEAD CAPITAL GAINS. ASSESSEE IS A DVISED THAT THIS IS PERMISSIBLE UNDER SECTION 71(2) OF THE I.T. ACT. THE ASSESSEE HAS ACCORDINGLY OFFERED TO BE TAXED UN DER THE NORMAL PROVISIONS OF THE ACT ON INCOME EARNED UNDER THE HEAD CAPITAL GAINS AND CLAIMED THAT THE BUSINESS LO SS BE ITA NO.651/AHD/ 2008 HARI ORGOCHEM PVT.LTD. VS. DCIT ASST.YEAR - 2004-05 - 3 - CARRIED FORWARD TO BE ADJUSTED AGAINST BUSINESS INC OME IN NEXT AND SUBSEQUENT YEARS. AS PER THIS STATEMENT, IT APPEARED THAT THE ASSESSE E HAS REFERRED BUSINESS LOSS OF RS.44,84,604/-. THE ASSE SSEE HAS EXPRESSED NOT TO SET OFF THIS LOSS AGAINST THE INCO ME EARNED UNDER THE HEAD CAPITAL GAINS. (II) THAT, THE ASSESSING OFFICER WAS NOT CONVINCED AND HELD THAT THE LOSS WAS TO BE SET OFF AGAINST THE CAPITAL GAI NS. WITH THE RESULT, THE REQUEST OF CARRY FORWARD OF LOSS WA S NOT ACCEPTED. (III) THAT, BEFORE THE FIRST APPELLATE AUTHORITY, A GAIN THE ASSESSEE HAS MENTIONED THAT THE BUSINESS LOSS OF RS.44,84,60 4/- WAS TO BE CARRIED FORWARD AND NOT TO BE ADJUSTED AGAIN ST THE CAPITAL GAIN OF THE YEAR, HOWEVER, THE LEARNED CIT( APPEALS) HAS HELD THAT NO SUCH OPTION WAS AVAILABLE TO THE A SSESSEE SO THE ACTION OF THE ASSESSING OFFICER WAS AFFIRMED. (IV) THAT, THE AMOUNT IN QUESTION WAS NOT THE BUSINESS LOSS BUT ITS CORRECT NATURE WAS UNABSORBED DEPRECIATION . THIS MISTAKE WAS POINTED OUT AND PLEADED BY MR. RANJAN, LD.A.R. THAT THE UNABSORBED DEPRECIATION WAS MISTAK ENLY MENTIONED BY THE ASSESSEE AS BUSINESS LOSS WHICH RE SULTED THIS UNCALLED FOR LITIGATION. ITA NO.651/AHD/ 2008 HARI ORGOCHEM PVT.LTD. VS. DCIT ASST.YEAR - 2004-05 - 4 - 6. ONCE THE ADMITTED FACT IS THAT AS PER THE STATEM ENT OF INCOME FURNISHED BEFORE THE ASSESSING OFFICER THE IMPUGNED AMOUNT OF RS.44,84,604/- WAS NOT THE BUSINESS LOSS BUT ITS CO RRECT NATURE WAS UNABSORBED DEPRECIATION ALLOWANCE, AND THAT FACT WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER, THEREFORE, IT IS NECESSARY TO RESTORE THIS ISSUE BACK TO THE STAGE OF THE ASSESSING OFFIC ER FOR READJUDICATION AFRESH. IN THIS REGARD, WE MAY LIKE TO GIVE CERTAI N DIRECTIONS. THE ASSESSING OFFICER IS REQUIRED TO ASCERTAIN THE CORR ECT FACT THAT WHETHER THE IMPUGNED AMOUNT OF RS.44,84,604/- WAS UNABSORBED DE PRECIATION OR NOT. THIS FACT CAN BE EASILY VERIFIED FROM THE ASSESSMEN T RECORD OF THE REVENUE DEPT. FURTHER, THE UNABSORBED DEPRECIATION HAS TO BE COMPUTED AND TO BE ALLOWED TO BE CARRIED FORWARD AS PER THE PROVISIONS OF SECTION 32(2) OF THE I.T.ACT. THE ASSESSING OFFICER IS, TH EREFORE, REQUIRED TO EXAMINE THE CORRECT LEGAL POSITION AS PRESCRIBED UN DER LAW. THE ASSESSING OFFICER IS ALSO REQUIRED TO SEE APPLICATI ON OF SECTION 72(2) OF THE I.T.ACT ON THESE FACTS. BECAUSE THIS SECTION D EALS WITH THE METHOD OF CARRY FORWARD OF ANY ALLOWANCE U/S.32(2) OF THE I.T .ACT. THOUGH THE ASSESSEE HAS REFERRED TO SECTION 71(2) OF THE I.T.A CT BUT UNDER THE CHANGED CIRCUMSTANCES IF THE IMPUGNED AMOUNT WAS NO T AT ALL UNDER THE HEAD BUSINESS LOSS BUT UNDER THE HEAD UNABSORBED DEPRECIATION, THEN THE ASSESSING OFFICER IS TO ASCERTAIN THE APPLICABI LITY OF SECTION 72(2) OF THE I.T.ACT, INSTEAD OF, WHETHER AT ALL NECESSITATE D SEC. 71(2) OR NOT. SINCE THIS EXERCISE HAS YET TO BE TAKEN BY THE ASSE SSING OFFICER, THEREFORE, WE DEEM IT NECESSARY TO REFER THIS ISSUE BACK TO THE STAGE OF ASSESSING OFFICER FOR READJUDICATION AFRESH. WITH THE RESULT, THIS GROUND ITA NO.651/AHD/ 2008 HARI ORGOCHEM PVT.LTD. VS. DCIT ASST.YEAR - 2004-05 - 5 - RAISED BY THE ASSESSEE MAY BE TREATED AS ALLOWED BU T FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEES APPEAL I S PARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 21/ 01 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 21/ 01 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VIII, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..11.1.11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.1.11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S21/1/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/1/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER