Deputy Commissioner of Income Tax, Ernakulam V. M/s Focuz Corporation Ltd., Cochin

ITA 92/COCH/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7644 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2010
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 16-02-2009
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPH
• Assessee Lawyers: P K SASIDHARAN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 115JB; 147; 148; 154; 11

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI T.R.SOOD, AM AND N.VIJAYAKUM ARAN, JM I.T.A NO. 92/COCH/2009 ASSESSMENT YEAR : 2003-04 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), ERNAKULAM VS. M/S. FOCUZ CORPORATION LTD., (FORMERLY BENZ AUTOMOBILES) EDAPPALLY, COCHIN-24 [PAN: AAACB 9529J] (REVENUE -APPELLANT) (ASSESSEE RESPONDENT) REVENUE BY DR. BABU JOSEPH, SR.DR ASSESSEE BY SHRI P.K.SASIDHARAN, CA O R D E R PER T.R.SOOD, AM: THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II, KOCHI ERRED IN QUASHING THE ORDER OF THE ASSESSING OFFICER U/S. 154 DATED 17.9.2007, HOLDING THAT WHAT CANNOT BE DONE U/S. 143(1) CANNOT BE DONE U/S. 154 OF THE ACT. 3 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IS WRONG IN VIEW OF THE RATIO OF DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. SITARAM TEXTILES, REPORTED IN (2009) 221 CTR 476. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME SHOWING NIL BOOK PROFIT. AFTER REDUCING F ROM THE BOOK PROFIT A SUM OF RS. 80,89,062/- ON ACCOUNT OF UNABSORBED DEPRECIATION O F THE EARLIER YEARS, IT RESULTED IN A NEGATIVE FIGURE OF THE BOOK PROFIT. THE SAME WAS A CCEPTED BY THE DEPARTMENT AND INTIMATION UNDER SECTION.143(1) WAS ISSUED. LATER ON, A NOTICE U/S. 154 WAS ISSUED AND THIS ITEM OF UNABSORBED DEPRECIATION WAS ADDED TO THE BO OK PROFIT IN TERMS OF CLAUSE 3(B) OF ITA.NO. 92/COCH./2009 2 EXPLANATION TO SUB SECTION (2) OF SECTION 115JB AND THUS ADDED A SUM OF RS. 80,89,062/- TO THE BOOK PROFIT. BEFORE THE LD. CIT(A), IT WAS MAI NLY SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 143(1), THE AO COULD NOT HAVE MADE ANY ADJU STMENTS IN THE RETURNED INCOME SINCE THE RETURNED INCOME HAS BEEN ACCEPTED WITHOUT MAKIN G ANY CHANGES. THEREFORE, THERE IS NO MISTAKE APPARENT FROM THE RECORDS IN THE INTIMATION U/S. 143(1) DATED 22.3.2004 AND THUS THERE IS NO SCOPE FOR RECTIFICATION, THE CIT(A) AGR EED WITH THE SUBMISSIONS AND DECIDED THE ISSUE VIDE PARAS 3 AND 4 OF HIS ORDER WHICH ARE AS UNDER:- 3. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIO N. SECTION 143(1) AS APPLICABLE FOR A.Y. 03-04 DOES NOT PROVIDE FOR ANY ADJUSTMENT IN THE TOTAL INCOME COMPUTED BY THE APPELLANT AS PER THE RETURN OF INC OME. THEREFORE, WHEN THE AO HAS ACCEPTED THE TOTAL INCOME COMPUTED BY THE APP ELLANT, HE HAS CORRECTLY APPLIED THE PROVISIONS OF SECTION 143(1) WHICH MEANS THAT THERE IS NO MISTAKE IN THE INTIMATION U/S. 143(1) WHICH WARRANTS RECTIFICATIO N U/S. 154. WHAT CANNOT BE DONE U/S. 143(1) CANNOT BE DONE U/S. 154. IN VI EW OF THIS, THE ORDER PASSED BY THE AO U/S. 154 DATED 17.9.2007 CANNOT BE SUSTAINE D. ACCORDINGLY ORDER U/S. 154 DATED 17.9.2007 IS QUASHED. 4. SINCE THIS IS A CASE OF WRONG COMPUT ATION OF BOOK PROFIT UNDER SECTION 115JB BY ALLOWING DEDUCTION OF BROUGHT FORWARD DEPRECIATION , WHEN BROUGHT FORWARD BUSINESS LOSS IS NIL, THE AO WAS FREE TO RECOMPUTE THE BOOK PROFIT BY TAKING THE CASE OF SCRUTINY BY ISSUE OF NOTICE U/S. 143(2). SINCE T HE TIME FOR SERVING THE NOTICE U/S. 143(2) HAS EXPIRED, I DIRECT THE AO TO RE-OPE N THE ASSESSMENT BY ISSUE OF NOTICE U/S. 148 AND RE-ASSESS THE INCOME U/S. 147 . 3. BEFORE US THE LD. DR STRONGLY SUPPORTED THE REC TIFICATION ORDER PASSED BY THE ASSESSING OFFICER AND SUBMITTED THAT THE UNABSORBED DEPRECIAT ION WAS CLEARLY REQUIRED TO BE ADDED IN TERMS OF CLAUSE 3(B) OF EXPLANATION 1 TO SECTION 11 5JA. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT THE RELEVANT POINT OF TIME, NO AD JUSTMENT COULD HAVE BEEN MADE U/S. 143(1), THERE WAS NO ERROR IN THE INTIMATION ISSUED U/S. 143(1). HE ALSO SUBMITTED THAT THERE WAS LOT OF CONFUSION GOING AROUND REGARDING ADJUSTM ENT OF BUSINESS LOSS AND UNABSORBED ITA.NO. 92/COCH./2009 3 DEPRECIATION AT THE RELEVANT POINT OF TIME AND ACCO RDINGLY, THE ISSUE WAS DEBATABLE AND THEREFORE, THE SAME COULD NOT HAVE BEEN RECTIFIED. HE ALSO SUBMITTED THAT THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. SI TARAM TEXTILES, 221 CTR 476 (KER.) RELIED UPON BY THE DEPARTMENT IN THE GROUNDS IS CLE ARLY DISTINGUISHABLE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. AT THE RELEVA NT POINT OF TIME, NO ADJUSTMENT WAS POSSIBLE U/S. 143(1) AND IF AN ASSESSEE HAS FILED THE RETURN, THEN THE REVENUE HAS TWO OPTIONS, EITHER TO ACCEPT THE SAME U/S. 143(1) OR T O TAKE THE CASE FOR SCRUTINY AND PASS THE ASSESSMENT ORDER U/S. 143(3), WHEREIN ANY ADDITION COULD HAVE BEEN MADE. BUT ONCE, THE RETURN HAS BEEN ACCEPTED UNDER SECTION 143(1) AND N O NOTICE U/S. 143(2) IS ISSUED, I.E., RETURN IS NOT TAKEN UP FOR SCRUTINY, THEN NO ERROR CAN BE SAID TO HAVE BEEN APPARENT IN SUCH AN INTIMATION. IF AN ADJUSTMENT CANNOT BE MADE U/S. 1 43(1), THEN OBVIOUSLY, NO RECTIFICATION CAN ALSO BE DONE U/S. 154 BECAUSE IT IS TRITE LAW THAT WHAT CANNOT BE DONE DIRECTLY CANNOT PURPORTEDLY BE SAID TO HAVE BEEN DONE INDIRECTLY. THEREFORE, IN OUR VIEW, THERE WAS NO MISTAKE APPARENT FROM THE INTIMATION ISSUED U/S. 14 3(1) AND THE SAME COULD NOT HAVE BEEN RECTIFIED. 5. COMING TO THE DECISION OF THE HONBLE KERALA HIGH COURT IN THE CASE OF SITARAM TEXTILES, SUPRA, WE FIND THAT THE SAME IS CLEARLY DISTINGUISHABLE BECAUSE THE SAME HAS BEEN RENDERED FOR THE ASSESSMENT YEARS 1989-90 AND 1990- 91, WHEN THE ADJUSTMENTS COULD HAVE BEEN DONE IN THE INTIMATIONS ISSUED U/S. 143(1) AND THEREFORE, THE SAME WERE AVAILABLE FOR RECTIFICATION ALSO AND THUS, THIS DECISION CLEARLY WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. 6. IN ANY CASE, WE FIND THAT THE LD. CIT(A) HAS VE RY CLEARLY ASKED THE AO TO REOPEN THE ASSESSMENT BECAUSE THE TIME FOR ISSUE OF NOTICE U/S . 143(2) HAD ALREADY BEEN EXPIRED AND THEREFORE, THE DEPARTMENT CAN STILL TAKE UP THIS IS SUE IN VIEW OF THE DIRECTION OF THE LD. CIT(A). THEREFORE, THERE WOULD BE NO LOSS CAUSED TO THE REVENUE. IN THESE CIRCUMSTANCES, WE FIND NOTHING WRONG WITH THE ORDER OF THE LD. CIT (A) AND CONFIRM THE SAME. ITA.NO. 92/COCH./2009 4 7. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. SD/- SD/- (N.VIJAYAKUMARAN) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED : 04 AUGUST 2010 GJ COPY TO: 1. M/S. FOCUZ CORPORATION LTD. (FORMERLY BENZ AUTO MOBILES), EDAPPALLY, COCHIN-24. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX OFFICER, C IRCLE-1(2), ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(A)-II, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5,D.R./I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REG ISTRAR) ITA.NO. 92/COCH./2009 5