NUNHEMS INDIA PRIVATE LIMITED, R.R.Dist V. DCIT, Hyderabad

ITA 822/HYD/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6622 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Retrospective amendment; Assessment record; Unabsorbed depreciation
• Section: 143(3); 80HHC; 234B; 115JB; 6; 263; 63; 12; 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.822/HYD/2010 ASSESSMENT YEAR: 2005-06 M/S NUNHEMS INDIA PRIVATE LIMITED, HYDERABAD. (PAN AABCN 1142L) VS THE DCIT, CIRCLE 16(1), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI R. VIJAYARAGHAVAN RESPONDENT BY : SHRI V. SRINIVAS ORDER PER CHANDRA POOJARI, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIR ECTED AGAINST THE ORDER PASSED U/S 263 OF THE IT ACT, 196 1 BY THE CITIV; HYDERABAD DATED 22.3.2010 AND PERTAINS TO T HE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN I TS APPEAL: 1. ERRED IN PASSING ORDER U/S 263 OF THE ACT WITHOUT ESTABLISHING THAT THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT WAS ERRONEOUS AS WELL AS PREJUDIC IAL TO THE INTEREST OF THE REVENUE. 2. ERRED IN DETERMINING THE TOTAL INCOME OF THE ASSESS EE AT RS.49,242,917 BY REVISION ORDER U/S 263 OF THE A CT AS AGAINST RS.15,901,021 BY ASSESSMENT ORDER U/S 143(3) OF THE ACT. ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 2 3. FAILED TO APPRECIATE THAT IN THE ABSENCE OF THE MET HOD OF COMPUTING THE AMOUNT OF LOWER OF BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION FOR SET OFF WHILE COMPUTING TAXABLE INCOME U/S 115JB OF THE ACT, IT I S OPEN TO MULTIPLE INTERPRETATIONS AND IN SUCH A SITU ATION IF THE ASSESSING OFFICER HAS ACCEPTED THE METHOD ADOPTED BY THE ASSESSEE, THE SAME CANNOT BE REGARDE D AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, SO AS TO INVOKE THE PROVISIONS OF SECT ION 263 OF THE ACT. ADJUSTMENT OF DEFERRED TAX LIABILITY: 4. FAILED TO APPRECIATE THAT THE RETROSPECTIVE AMENDM ENT IN LAW BROUGHT ABOUT BY FINANCE ACT, 2008, RELATING TO ADJUSTMENT OF DEFERRED TAXES IN COMPUTATION OF MINIMUM ALTERNATIVE TAX (MAT) U/S 115JB OF THE ACT, WOULD NOT MAKE THE ORDER OF ASSESSMENT AS ERRONEOUS AS WELL AS PREJUDICIAL TO REVENUE. 5. ERRED IN MAKING ADJUSTMENT RELATING TO DEFERRED TAX ES WHILE COMPUTING BROUGHT FORWARD BOOK LOSSES OF ASSESSMENT YEAR 2003-04 AND ASSESSMENT YEAR 2004- 05 WHICH IS BEYOND HIS JURISDICTION. 6. ERRED IN DIRECTING ADJUSTMENT OF PRIOR PERIOD EXPEN SES WHILE COMPUTING BROUGHT FORWARD BOOK LOSSES FOR ASSESSMENT YEAR 1999-2000 WITHOUT APPRECIATION THAT PRIOR PERIOD EXPENSES CANNOT BE REDUCED FROM THE BO OK PROFITS. 7. ERRED IN MAKING ADJUSTMENT RELATING TO PRIOR PERIOD EXPENSES WHILE COMPUTING BROUGHT FORWARD BOOK LOSSES OF ASSESSMENT YEAR 1999-2000 WHICH IS BEYOND HIS JURISDICTION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN DEVELOPING, PRODUCING, TRADING A ND MARKETING OF VEGETABLE SEEDS AND HAS FILED ITS RETU RN OF ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 3 INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 21.10.200 5 DECLARING TAXABLE INCOME AT RS.NIL AFTER SETTING OF F OF BROUGHT FORWARD BUSINESS LOSS AND SET OFF OF BROUGH T FORWARD DEPRECIATION LOSS UNDER NORMAL PROVISIONS A ND BOOK PROFITS OF RS.1,59,01,021/- UNDER THE PROVISIONS OF SECTION 115JB OF THE IT ACT. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 2.8.2006. THE ASSESSING OFFICER AFTER EXAMINING THE ASSESSMENT RECORDS FOR THE ASSESSMENT YEAR 2005-06 FOUND THAT THE RELEVANT ASSESSMENT ORDERS A RE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. A SHOW CAUSE WAS NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE. 4. IN RESPONSE TO THE NOTICE, SHRI KAMALESH SUSARL A, C.A THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE HAS FURNISHED ALL THE INFORMATION CALLED FOR AS DETAILE D BELOW: 5. THE CIT HAS EXERCISED ITS JURISDICTION U/S 263 FOR THE ASSESSMENT YEAR 2005-06 MAINLY ON ACCOUNT OF RETROSPECTIVE AMENDMENT TO SECTION 115JB BY FINANCE ACT, 2008 BY INTRODUCTION OF EXPLANATION (H) FOR ADDING BACK DEFERRED TAX EXPENSES. 6. THE LEARNED AR SUBMITTED THAT THE ASSESSMENT WA S COMPLETED U/S 143(3) IN DECEMBER 2007 AND INCOME WA S COMPUTED U/S 115JB. PROFIT AND LOSS ACCOUNT CLEARL Y SPECIFIES THE DEDUCTION OF DEFERRED TAX EXPENSES AT RS.2,49,47,424/- AND THE COMPUTATION OF SECTION 115 JB IS AFTER DEDUCTION OF THE DEFERRED TAX EXPENSES. ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 4 7. ACCORDING TO HIM, AT THE TIME THE ASSESSING OFF ICER COMPLETED THE ASSESSMENT U/S 143(3) IN DECEMBER, 20 07, THE DECISIONS WERE THAT DEFERRED TAX EXPENSES CANNO T BE ADDED BACK. THE LEARNED AUTHORIZED REPRESENTATIVE RELIED ON THE DECISION IN THE CASE OF BALRAMPUR CHINI MILL S LTD. (109 ITD 146) WHEREIN CONFIRMING BY THE CALCUTTA HI GH COURT IN THE CASE OF (316 ITR 374). THEREFORE, T HE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS HAS ADOPTED CORRECT INTERPRETATION OF SECTION 115JB AS ON THE DATE OF ASSESSMENT. THE RETROSPECTIVE AMENDMEN T OF SECTION 115JB BROUGHT ABOUT IN 2008 AFTER THE COMPL ETION OF ASSESSMENT UNDER SECTION 143(3) CANNOT MAKE THE ASSESSMENT ORDER ERRONEOUS. THE ASSESSING OFFICER COULD NOT HAVE ANTICIPATED THE AMENDMENT. THE SCOPE AND AMBIT OF SECTION 263 IS TO DETERMINE WHETHER THE ORDER PA SSED BY THE ASSESSING OFFICER IS IN ACCORDANCE WITH LAW, PR EVAILING AT THE TIME OF ASSESSMENT. WHILE IN THE NORMAL PROCEEDINGS, THE APPELLATE AUTHORITY CAN TAKE COGNI ZANCE OF SUBSEQUENT RETROSPECTIVE AMENDMENTS, BUT IN REVISIO NARY PROCEEDINGS ONLY THE LAW PREVAILING AT THE TIME ASS ESSMENT MUST BE SEEN. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES LTD. (243 ITR 83), EVEN IF THERE ARE TWO VIEWS POSSIBLE AND THE ASSESSING OFFICER HA S TAKEN ONE POSSIBLE VIEW IN THE ASSESSMENT, IT IS NOT ERRO NEOUS AND THE CIT WILL NOT HAVE JURISDICTION TO REVISE SUCH A N ORDER U/S 263 EVEN IF THE OTHER VIEW IS UPHELD BY THE APE X COURT SUBSEQUENTLY. THE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. (295 ITR 282) (SC) HAS HELD THAT RETROSPECTIVE AMENDMENT DOES NOT RENDER THE ASSESSM ENT ORDER ERRONEOUS. ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 5 8. HE SUBMITTED THAT EVEN THOUGH IT THAT CASE BEFO RE THE APEX COURT, THE AMENDMENT CAME INTO FORCE AFTER THE ORDER OF THE CIT, IF RETROSPECTIVE AMENDMENT WOULD MAKE T HE ASSESSMENT ORDER ERRONEOUS, THE SUPREME COURT COULD HAVE HELD THAT REVISION WAS VALID BY VIRTUE OF SUBSEQUEN T ASSESSMENT. THE FACT THAT THE SUPREME COURT QUASHE D THE ORDER OF CIT, IN THE TEETH OF THE RETROSPECTIVE AME NDMENT OF LAW, WOULD SHOW THAT AS FAR AS 263 IS CONCERNED THE CORRECTNESS OF ASSESSMENT ORDER HAS TO BE VIEWED AS PER THE INTERPRETATION OF LAW PREVAILING AT THE TIME OF ASS ESSMENT. IN THE CIRCUMSTANCES, HE PRAYED FOR SETTING ASIDE T HE ORDER OF THE CIT. 9. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT AS REGARDS TO DEF ERRED TAX EXPENSES, SEC.115JB HAS BEEN AMENDED BY THE FIN ANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1.4.2001, ACCORDING TO THE AMENDED PROVISIONS THE BOOK PROFIT FOR SECTI ON 115JB WOULD MEAN NET PROFIT AS SHOWN IN THE PROFIT AND LO SS ACCOUNT AND AS INCREASED BY THE AMOUNT OF DEFERRED TAX AND THE PROVISION THERE FOR VIDE CLAUSE H UNDER EXPLA NATION (1) U/S 115JB OF THE IT ACT. ACCORDING TO DR, ON THE D ATE OF ISSUANCE OF SHOW CAUSE NOTICE U/S 263 OF THE ACT, FOR THE INSTITUTION OF THE PRESENT PROCEEDING, THE POSITION OF LAW AS IT STANDS I.E., IN FEBRUARY, 2010 IT REQUIRES THE A DDING BACK OF DEFERRED TAX EXPENSES TO THE NET PROFIT SHOWN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. ACCORDING LY, HE SUBMITTED THAT THE JUDGEMENT RELIED BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. MAX INDIA L IMITED, (295 ITR 282) (SC) IS NOT APPLICABLE TO THE FACTS O F THE PRESENT CASE, BECAUSE IT WAS HELD IN THAT CASE THAT THE ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 6 POSITION OF LAW AS ON DATE OF ISSUE OF NOTICE U/S 2 63 IS TO BE CONSIDERED. IN THAT CASE THOUGH THE AMENDMENT WAS PERTAINING TO SECTION 80HHC WAS MADE RETROSPECTIVE EFFECT BUT IT WAS MADE AFTER THE ISSUE OF NOTICE U/S 263 B Y THE CIT. 10. FURTHER, THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE ASSESSING OFFICER HAS PASSED THE ORDER IN A MECHANICAL MANNER. THERE IS NO DISCUSSION WHATSOEVER IN THE ASSESSMENT ORDER. FOR THIS PURPO SE HE RELIED ON THE ORDER OF THIS TRIBUNAL DATED 15.2.200 8 IN ITA NO.270/H/2006 IN THE CASE OF THERMAL SYSTEMS (HYD.) P LTD. VS. ACIT AND ALSO THE ORDER OF THIS TRIBUNAL D ATED 9.4.2010 IN ITA NO.1/HYD/2009 IN THE CASE OF M/S S ARANG HITECH COLD STORAGE (P) LTD., NIZAMABAD VS. ACIT, NIZAMABAD. FURTHER HE RELIED ON THE ORDER OF THE T RIBUNAL (MUMBAI 3 RD MEMBER) IN THE CASE OF GTC INDUSTRIES LTD., VS. DCIT (104 ITD 86) (MUM) AND THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. R. M. COMPANY (148 ITR 353) (AP ). HE ALSO RELIED THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DALMIA CEMENT (BHARAT) LTD. (216 ITR 79 ) (SC). 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD ON THIS ISSUE. IN TH IS CASE THERE WAS NO DISPUTE REGARDING RETROSPECTIVE AMEND MENT MADE BY THE FINANCE ACT, 2008 INSERTED A CLAUSE H TO EXPLANATION (1) U/S 115JB(2) OF THE IT ACT. THE RETROSPECTIVE AMENDMENT HAS BEEN MADE EFFECTIVE FRO M 1.4.2001 TO CLAUSE (H) WHICH REQUIRES THE AMOUNT OF DEFERRED TAX AND THE PROVISION THERE FOR TO BE ADDE D BACK TO ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 7 THE BOOK PROFIT. THIS AMENDMENT WAS EXISTING AT T HE TIME OF ISSUE OF SHOW CAUSE NOTICE U/S 263 OF THE ACT BY THE CIT. WHEN THE AMENDMENT HAS BEEN MADE WITH RETROSPECTIVE EFFECT FROM 1.4.2001, IT IS DEEMED TO BE LAW STOOD AS ON 1.4.2001. THE ASSESSMENT YEAR INVOLVED HEREIN IS 2 005-06 AS SUCH THE AMENDMENT IS APPLICABLE TO THIS ASSESSM ENT YEAR ALSO. WE ARE OF THE VIEW THAT THE AMENDMENT T O BE CONSIDERED FOR THE YEAR UNDER CONSIDERATION. IN AN Y EVENT, HAVING REGARD TO THE SUBSEQUENT AMENDMENTS TO THE A CT, THERE WAS NO SCOPE FOR LIMITING THE PHRASE ORDER P ASSED BY THE ITO, IN SECTION 263 TO EXCLUDE ORDERS, PASSED BY THE ITO, ON THE BASIS OF LAW STOOD ON PASSING THE ORDER AS THE SUBSEQUENT AMENDMENTS TO THE ACT IS APPLICABLE TO T HE CASE. WHEN THERE IS A SUBSEQUENT AMENDMENT WITH RETROSPECTIVE EFFECT, IT IS TO BE CONSIDERED AND SH ALL BE GIVEN FULL EFFECT IN THE ASSESSMENT OF THE RELEVANT ASSES SMENT YEARS. IN THIS CASE, WHEN THE CIT TOOK UP THE CASE TO ISSUE SHOW CAUSE NOTICE U/S 263, INHERENTLY NO TWO VIEWS ARE POSSIBLE AND THE RETROSPECTIVE AMENDMENT ALREADY IN THE STATUTE BOOK AND ON THAT BASIS OF RETROSPECTIVE AME NDMENT, THE CIT ISSUED NOTICE U/S 263 AND BEING SO, THE JUDGEMENTS RELIED BY THE ASSESSEES COUNSEL IN THE CASE OF CIT VS. MAX INDIA LIMITED (295 ITR 282) IS NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE. FURTHER, THE RETROS PECTIVE AMENDMENTS SHALL BE DEEMED TO BE OPERATIVE AS ON 1.4.2001 SO AS TO APPLY IN RELATION TO ALL ASSESSME NTS SUBSEQUENT TO THE ASSESSMENT YEAR 2002-03. THIS AMENDMENT OF THE ACT IS ALSO APPLICABLE TO THIS ASS ESSMENT YEAR 2005-06. ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 8 12. FURTHER, WE PLACE RELIANCE ON THE JUDGEMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VINCAST ENGINEERING (280 ITR 385) (ALLAHABAD) WHEREIN IT WA S HELD AS FOLLOWS: THAT AFTER THE RETROSPECTIVE AMENDMENT OF SECTION 80J, THE PROVISIONS OF THE STATUTE EXCLUDE BORROWED CAPITAL FROM BEING TAKEN INTO CONSIDERATION FOR WOR KING OUT THE CAPITAL EMPLOYED UNDER SECTION 80J OF THE A CT. AS A RESULT OF THE RETROSPECTIVE AMENDMENT MADE IN THE SECTION THE POSITION UNDER LAW WOULD BE THAT DURING THE ASSESSMENT YEAR IN QUESTION BORROWED CAPITAL HAD TO NECESSARILY BE EXCLUDED AND HAD NOT TO BE TAKEN INT O CONSIDERATION WHILE WORKING OUT THE CAPITAL EMPLOYE D. THE ORDER WAS THEREFORE ERRONEOUS AND PREJUDICIAL T O THE INTERESTS OF THE REVENUE. THUS THE COMMISSIONE R WAS JUSTIFIED IN SETTING ASIDE THE ORDER OF THE ASS ESSING AUTHORITY IN EXERCISE BY JURISDICTION U/S 263. 13. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT THE CIT IS JUSTIFIED IN INVOKING THE PROVISION S OF SECTION 263 OF THE ACT WITH REGARD TO TREATMENT OF DEFERRED TAX EXPENSES UNDER EXPLANATION H TO SECTION 115JB. 14. NOW COMING TO THE SECOND ISSUE THE LEARNED AR SUBMITTED THAT THE CIT HAS REWORKED THE BOOK PROFI T COMPUTATION FOR THE EARLIER ASSESSMENT YEARS 1990-2 000, 2003-04 AND 2004-05 FOR WHICH YEARS ASSESSMENT HAS BECOME FINAL AND HE HAS WRONGLY INCREASED THE BOOK PROFITS/REDUCED THE BOOK LOSS. FOR THE ASSESSMENT YEAR 1999-2000, THE ASSESSEE HAD REDUCED PRIOR YEARS EX PENSES ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 9 IN COMPUTING THE BOOK PROFITS AND ARRIVED AT UNABSO RBED DEPRECIATION TO BE CARRIED FORWARD U/S 115JB AT RS.25,90,795/-. THE CIT HAS HELD THAT AS THE ASSES SEE HAD ADDED BACK PRIOR PERIOD EXPENSES OF RS.36,27,546/- WHILE COMPUTING INCOME FOR THE ASSESSMENT YEAR 1999-00 WH ICH HAS REACHED ITS FINALITY, THE ASSESSEE CANNOT NOW A RGUE THAT PRIOR PERIOD EXPENSES SHOULD BE EXCLUDED AND HENCE DETERMINED THE DEPRECIATION TO BE CARRIED U/S 115JB AS NIL. THE CIT HAS MISTAKEN THE COMPUTATION UNDER THE NORMAL PROVISIONS WITH THE COMPUTATION U/S 115JB. WHILE ASSESSEE HAS DEDUCTED PRIOR PERIOD EXPENSES IN REGU LAR COMPUTATION, THEY HAVE NOT DONE SO IN COMPUTING BOO K PROFIT U/S 115JB. THIS IS APPARENT FROM THE ORDER OF CIT HIMSELF. AS HELD BY THE DELHI HIGH COURT IN THE CA SE OF CIT VS. KHAITAN CHEMICALS AND FERTILIZERS LTD. (307 ITR 150) AND GULF OIL CORPORATION (111 ITD 124(HYD.) OF THE PAPER BOOK, PRIOR PERIOD EXPENSES AND EXTRAORDINARY ITEMS HAVE TO BE DEDUCTED WHILE COMPUTING BOOK PROFIT. THEREFORE THE UNABSORBED DEPRECIATION HAS TO BE CARRIED FORWARD A S DETERMINED BY THE ASSESSEE IS CORRECT. IN ANY EVEN T, THE BOOK PROFIT AS BROUGHT BY THE ASSESSEE IN THE RETUR N OF INCOME FOR THE ASSESSMENT YEAR 1999-2000 HAS BECOM E FINAL AND CANNOT BE REVISED U/S 263 OF THE ASSESSME NT YEAR 2005-06. SIMILARLY, THE ASSESSEE COMPUTED BOOK PROF IT U/S 115JB FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 I N THEIR RETURN OF INCOME AT RS.56,30,548/- AND RS.99,69,317/- RESPECTIVELY. THESE FIGURES OF THE BOOK PROFIT FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 HAS REACHED ITS FINALITY AS THIS COMPUTATION HAVE NOT D ISTURBED IN ANY PROCEEDINGS FOR THOSE YEARS. HOWEVER, THE C IT IN HIS EXERCISE OF REVISION OF ASSESSMENT ORDER FOR THE AS SESSMENT ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 10 YEAR 2005-06 HAS ADOPTED BOOK PROFIT FOR THE ASSESS MENT YEARS 2003-04 AND 2004-05 AT RS.11,428,352/- RESPEC TIVELY AND RS.15,282,465/- IN EFFECT FOR RE-COMPUTING THE BOOK PROFITS FOR THOSE YEARS. AS A RESULT OF THE UPWARD INCREASE OF THE BOOK PROFITS FOR 1999-2000, 2003-04 AND 2005-06 AS RECOMPUTED BY THE CIT, THE AMOUNT OF CARRIED FORWAR D UNABSORBED DEPRECIATION U/S 115JB AVAILABLE FOR SET TING OFF AGAINST THE BOOK PROFITS FOR THE ASSESSMENT YEAR 20 05-06 AS CLAIMED BY THE ASSESSEE. ACCORDING TO THE AR, THE CIT HAS NO POWER TO RE-COMPUTE THE BOOK PROFITS FOR THE ASS ESSMENT YEAR 1999-90, 2003-04 AND 2004-05 IN THE COURSE OF PASSING A REVISION ORDER FOR THE ASSESSMENT YEAR 20 05-06. IT IS ONLY BECAUSE OF THE RE-COMPUTATION OF THE BOO K PROFIT FOR THESE THREE YEARS, THE AMOUNT OF CARRIED FORWAR D UNABSORBED DEPRECIATION, WHICH IS AVAILABLE FOR SET OFF FOR THE ASSESSMENT YEAR 2005-06 WAS REDUCED. AS THE CI T HAS NO JURISDICTION TO REWORK THE BOOK PROFIT OF THE EA RLIER YEARS, CARRIED FORWARD LOSS AND UNABSORBED DEPRECIATION AV AILABLE FOR SET OFF FOR THE ASSESSMENT YEAR 2005-06 SHOULD BE AS PER THE RETURNS FILED BY THE ASSESSEE IN EARLIER YEARS. THEREFORE THE ADJUSTMENTS IN THE CARRIED FORWARD UNABSORBED DEPRECIATION MADE BY THE CIT REQUIRED TO BE DELETED AND THAT AS CLAIMED BY THE ASSESSEE SHOULD BE ACCEPTED BECAUSE OF THE RETROSPECTIVE AMENDMENT U/S 234B INTEREST CA NNOT BE LEVIED ON SUCH ADDITION. 15. HE RELIED ON THE FOLLOWING JUDGEMENTS: 1. REVATHI EQUIPMENTS LTD. (298 ITR 67) (MAD.) 2. CIT VS. DALMIA CEMENT (BHARAT) LTD. (SC) (79 ITR 39 ) 3. CIT VS. WESTERN INDIA OIL DISTRIBUTING CO. LTD. (SC ) 126 ITR 497 ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 11 4. ADDL. CIT VS. RAYMONDS LIMITED (209 TIOL) (ITAT, MUM.) 16. THE DR SUBMITTED THAT PRIOR PERIOD EXPENSES FOR THE ASSESSMENT YEAR 1999-2000 SHOULD BE TAKEN INTO AC COUNT AND IF IT IS DONE THERE WOULD BE NIL CARRIED FORW ARD LOSS. A SIMPLE LOOK AT THE RELEVANT RECORD I.E. FOR THE ASS ESSMENT YEAR 1999-2000 DEMOLISHES THE ASSESSEES CLAIM. VI DE ANNEXURE-1 WHICH IS A STATEMENT OF COMPUTATION OF T OTAL TAXABLE INCOME AS FILED BY THE ASSESSEE ALONG WITH THE RETURN FOR THE ASSESSMENT YEAR 1999-2000. ANNEXURE -2 IS THE STATEMENT SHOWING COMPUTATION OF INCOME U/S 115 JA OF THE ACT. IT CAN BE SEEN FROM ANNEXURE-1 THAT THE A SSESSEE HAD WORKED OUT INCOME UNDER THE HEAD FROM BUSINESS AND PROFESSION, AFTER ADMISSIBLE ADJUSTMENTS AT RS.29, 99,213/- AND FROM THIS THE ASSESSEE HAD CLAIMED DEDUCTION OF UNABSORBED LOSSES BROUGHT FORWARD FROM EARLIER YEAR S OF EQUAL AMOUNT. THE ASSESSEE SUO MOTU OF ITS OWN VO LITION HAS HAD ADDED BACK PRIOR PERIOD EXPENSES OF RS..36,27,546/-. THE INCOME THUS COMPUTED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000 HAD REAC HED ITS FINALITY AND THE DEPARTMENT HAD ACCEPTED THE SA ME U/S 143(1). IN VIEW OF THIS CLEAR EVIDENCE, IT CERTAIN LY DOES NOT LIE IN THE MOUTH OF THE ASSESSEE TO NOW COME FORWAR D WITH A PREPOSTEROUS CLAIM OF PRIOR PERIOD EXPENSES FOR ASS ESSMENT YEAR 1999-2000. THUS, THE ASSESSEES CLAIM ON THIS GROUND IS FOUND TO BE TOTALLY BEREFT OF MERIT AND SUBSTANC E. U/S 115JB THE LESSOR OF THE TWO FIGURES I.E. CARRIED FO RWARD BUSINESS LOSS OR CARRIED FORWARD DEPRECIATION LOSS IS ALLOWABLE FOR THE ASSESSMENT YEAR 1999-2000 AND THE ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 12 BUSINESS LOSS FIGURE WAS NIL HENCE, THE CARRIED FOR WARD FIGURE WILL BE NIL I.E., BEING THE LEAST OF THE TWO . 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR OPINION, THE METHOD ADOPTED BY THE CIT IS NOT CORRECT. WHILE COMPLETIN G THE ASSESSMENT OF THE AY 2005-06, THE CIT CANNOT DIST URB THE COMPUTATION OF INCOME OF EARLIER YEAR WHICH HAS ALR EADY REACHED ITS FINALITY AND NOT DISTURBED BY ANY PROCE SS OF LAW. THE CIT IN THE GUISE OF THE PROCEEDINGS U/S 263 WAN TS TO RE-COMPUTE THE BOOK PROFIT OF ASSESSMENT YEAR1999-2 000, THEREAFTER 2003-04, 2004-05 AND 2005-06. THIS IS N OT PERMITTED BY LAW. THIS ISSUE WAS COVERED BY THE J UDGMENT OF HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRE S LTD. VS. CIT (255 ITR 273) WHEREIN IT WAS HELD THAT THE REVENUE AUTHORITIES COULD NOT TINKER WITH THE PROFIT COMPUT ED UNDER THE COMPANIES ACT WHILE COMPUTING THE BOOK PROFIT U /S 115JA OF THE ACT AND ONLY THE ADJUSTMENTS AS PROVID ED IN THE EXPLANATION TO SECTION 115JA(2) COULD BE MADE. IT HAS BEEN POINTED OUT THAT THERE IS NO PROVISION FOR ADJ USTMENT OF PRIOR PERIOD EXPENSES WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS PER THE ACCOUNTING SYSTEM FOLLOWED. IN OUR OPINION, THE CIT IS NOT JUSTIFIED IN INVOKING PROVI SION OF 263 ON THE ISSUE RELATING TO ADJUSTMENT OF PRIOR PERIOD EXPENSES IN THIS ASSESSMENT YEAR. ACCORDINGLY, THIS GROUND OF THE APPEAL IS ALLOWED. 18. THE INTEREST U/S 234B BE CHARGED WHICH IS MANDATORY AND CONSEQUENTIAL IN NATURE. THE CASE LA W RELIED BY THE ASSESSEES COUNSEL IN THE CASE OF REV ATHI EQUIPMENTS LTD. CITED SUPRA CANNOT BE APPLIED TO TH E FACTS ITA NO.822/H/2010 NUNHEMS INDIA PRIVATE LTD. SECUNDERABAD 13 OF THE CASE WHICH IS FULLY DISTINGUISHABLE WHEREIN THE ASSESSEE HAS PROVED BONA FIDENESS BY DEPOSITING SEL F ASSESSMENT TAX OF RS.90 LAKHS WHICH IS MISSING IN T HE PRESENT CASE. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.6.2011 SD/- G.C. GUPTA SD/- CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH JUNE, 2011 COPY FORWARDED TO: 1. M/S NUNHEMS INDIA PRIVATE LIMITED, S-196, KANDLAKOYA, MEDCHAL TO MIYAPUR BY PASS ROAD, NEAR RAILWAY GATE, MEDCHAL, RANGAREDDY DISTRICT-501 403.(AP) 2. THE DCIT, CIRCLE 16(1), HYDERABAD 3. THE CIT(A) IV, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD. NP