Income Tax Appellate Tribunal - Hyderabad
M/S. Dharti Dredging & Infrastructure ... vs Assessee on 11 October, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
I.T.A. No. 145/Hyd/2012
(Assessment year : 2007-08)
M/s. Dharti Dredging & Vs. Addl. Commissioner of
Infrastructure Ltd., Income-tax, Range-1
Hyderabad Hyderabad
PAN: AABCD6612M
Appellant Respondent
Appellant by: Sri S.C. Tiwari
Respondent by: Sri Narahari Biswal
Date of hearing: 11.10.2012
Date of pronouncement: 16.11.2012
ORDER
PER CHANDRA POOJARI, AM:
This appeal by the assessee is directed against the order of the CIT-I, Hyderabad dated 26.12.2011 for A.Y. 2007-08.
2. The assessee raised the following grounds of appeal:
1. That on the facts and in the circumstances of the appellant's case and in law, learned Commissioner of Income-tax has erred in observing that the assessment order made by the learned assessing officer is erroneous and prejudicial to the interests of revenue in relation to set off of unabsorbed depreciation allowance brought forward from Assessment Year 1998-99 and therefore required revision u/s. 263 of the Act.
2. That on the facts and in the circumstances of the appellant's case and in law, learned Commissioner of Income-tax has erred in observing that the assessment order made by the learned assessing officer is erroneous and prejudicial to the interests of revenue in relation to set off of unabsorbed depreciation allowance brought forward from Assessment Year 1996-97 and therefore required revision u/s. 263 of the Act.2 I.T.A. No. 145/Hyd/2012
M/s. Dharti Dredging & Infrastructure Ltd.
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3. That on the facts and in the circumstances of the appellant's case and in law, learned Commissioner of Income-tax has erred in observing that the assessment order made by the learned assessing officer is erroneous and prejudicial to the interests of revenue in relation to the compromised settlement of dues with Stressed Assets Stabilization Fund IDBI.
4. That on the facts and in the circumstances of the appellant's case and in law, learned Commissioner of Income-tax has erred in not following the principle that CBDT circular favourable to the assessee is binding on the learned assessing officer.
5. That on the facts and in the circumstances of the appellant's case and in law, learned Commissioner of Income-tax has erred in not appreciating that even if ITAT takes, more so subsequently, a different view; the view taken by the learned assessing officer does not cease to be a possible view and cannot be called erroneous for the purposes of section 263.
6. That on the facts and in the circumstances of the appellant's case and in law, learned CIT has erred in applying provisions of section 263 on the point(s) for which no show-cause notice was issued to the appellant.
7. That on the facts and in the circumstances of the appellant's case and in law, learned CIT has erred in observing that the appellant agreed to setting aside of the assessment order as made by the learned Assessing Officer.
8. That each of the grounds of appeal above are independent and without prejudice to one another.
9. That the impugned order of learned CIT being contrary to facts and circumstances of the appellant's case, law applicable and material on record may be set aside or such order may be passed thereupon as Hon'ble Tribunal may deem fit.
10. That the appellant craves leave to reserve to itself to add on, cancel, alter or modify any of the grounds of appeal above before or at the time of hearing of this appeal and to produce such documents, evidence or material in support of this appeal as considered 3 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== necessary by the appellant.
3. Brief facts of the issue are that in this case the assessment was completed u/s. 143(3) of Income-tax Act, 1961 vide order dated 29.12.2009. On going through the records it was observed by the CIT that unabsorbed depreciation relating to A.Y. 1998-99 was wrongly set off in the A.Y. 2007-08 and according to the CIT it is to be withdrawn. It was also observed that unabsorbed depreciation relating to A.Y. 1996-97 was also wrongly set off in the A.Y. 2007-08 also and it has to be withdrawn. According to the CIT as the law applicable to the relevant assessment year stipulated that such carry forward of unabsorbed depreciation is to be limited to 8 years only. The assessee was wrong in setting off of the unabsorbed depreciation relating to A.Y. 1996-97 and 1998- 99 in the current year under consideration i.e., 2007-08. The assessee objected to the proposal of the CIT placing reliance on the Circular No. 14 of 2001 which permits carry forward of unabsorbed depreciation indefinitely. At the same time, the assessee relied on the judgement of Supreme Court in the case of Uco Bank vs. CIT (237 ITR 889) (SC) for the proposition that the circular is binding in nature. The CIT relied on the order of the Special Bench in the case of DCIT vs. Times Guarantee Ltd. (2010) 4 ITR 210 (Trib) (SB) wherein held that unabsorbed depreciation relating to A.Ys. 1997-98 to 1999-2000 is to be dealt with in accordance with the provisions of section 32(2) of the Act as applicable for A.Ys. 1997-98 to 1999-2000 and, therefore, assessee cannot claim set off of unabsorbed depreciation relating to A.Ys. 1997-98 to 1999-2000 against income under any head other than 'profits and gains of business or profession' in A.Y. 2003-04. Further, the CIT has also dealt with the issue relating to compromise settlement of dues with Stressed Assets Stabilisation Fund IDBI. It was the contention of the assessee that no income arose out of the settlement even under the provisions of section 41 4 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== of the Act. However, the details of interest waived as against what was earlier allowed as deduction and such other information giving the particulars of the gross sum of Rs. 10.70 crores are not available. Being so, the CIT remitted the issue back to the file of the Assessing Officer for fresh consideration. Against this issue and with regard to assumption of jurisdiction u/s. 263 of the Act, the assessee is in appeal before us.
4. The learned AR submitted that the impugned order passed by the learned Commissioner of Income Tax is against the basic tenets of provisions of Section 263 of Income Tax Act, 1961 on the following aspects of law governing the facts of the case. The assessment order passed cannot be termed as "erroneous" inasmuch as the Assessing Officer has passed the order after application of his mind on the very same issue, after considering all the information, explanation filed. The Commissioner of Income Tax cannot substitute his own views on the issue in exercise of the jurisdiction under Section 263 of Income Tax Act, 1961. For this purpose, he relied on the following case-law:
1. Malabar Industries Co. Ltd. vs. CIT (109 Taxman 66) (SC)
2. CIT v. Gabriel India Ltd. (203 ITR 108) (Bom)
5. Further AR submitted that the impugned order under Section 263 of Income Tax Act, 1961 is not maintainable for the reason that the show cause notice was issued for alleged failure of further enquiry into the matter, even in the body of the impugned order it goes to show that the assessment order was proposed to be revised for further enquiry into the matter. It was submitted that if the learned Commissioner was of the opinion that no enquiry was made by the Assessing Officer, even then he should not have directed the Assessing Officer to disallow the claim of the assessee itself. Thus, the impugned order had travelled beyond the scope and ambit of show cause notice and therefore, the order under section 263 of IT Act, 1961 is null and void and is liable to 5 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== be quashed. Even assuming that the enquiries made by the Assessing Officer are inadequate, the jurisdiction under Sec. 263 of Income Tax Act, 1961 cannot be assumed as it was only in the cases of lack of enquiries that the jurisdiction under Sec. 263 of Income Tax Act, 1961 can be assumed.
6. The AR submitted that in Gabriel India Ltd., 203 ITR 108 (Born), law on this aspect was discussed in the following manner (page 113) :
"From reading of sub-section (1) of section 263, it is clear that the power of suo moto revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income- tax Officer is 'erroneous in so far as it is prejudicial to the interests of the Revenue'. It is not an arbitrary or unchartered power; it can be exercised only on fulfilment of the requirements laid down by sub-sect ion (1). The consideration of the Commissioner, as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it ca n be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-
accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in ether spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977) 106 ITR 1 (SC) at page 10) ...."
From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax officer acting in accordance with law makes a certain assessment, the 6 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== same cannot be branded as 'erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re- examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed.
We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee, Such decision of the Income- tax Officer cannot be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard."
7. The learned AR submitted that in the instant case, the learned Assessing Officer called for explanation on the very same 7 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== issue on various occasions from the Assessee and the Assessee had furnished its explanation which clearly shows that the Assessing Officer has undertaken the exercise of examining the issues in dispute and on being satisfied with the explanation furnished by the Assessee, the AO accepted the same.
8. The AR submitted that thus, even the learned Commissioner of Income Tax conceded the fact that Assessing Officer made enquiries. The only grievance of the learned Commissioner of Income Tax was that the Assessing Officer should have made further enquiries rather than accepting the claim. Therefore, it cannot be said that it is a case of "lack of enquiry."
9. The AR further submitted that the impugned order is also liable to be set aside for the simple reason that the learned Commissioner of Income Tax had not furnished the material in the show cause notice based on which he jumped over to the conclusion impetuously, without proper application of mind, that the assessment order is erroneous and prejudicial to the interests of revenue. It was only in the impugned order, a mention was made to the subsequent order of the Special Bench, based on which he had come to such conclusion. It is well settled principle of law that the principle of res judicata does not apply to the Income Tax proceedings.
10. No new material has been brought on record to suggest that the assessment order was erroneous and prejudicial to the interests of revenue. Therefore, the jurisdiction under Section 263 of Income Tax Act, 1961 cannot be assumed.
11. The AR submitted that that the learned Assessing Officer after duly considering the explanation and information filed in response to the questionnaire on the issue, on being satisfied with such explanation chose not to make any further enquiry. Endless 8 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== enquiry is not possible and it is for the learned Assessing Officer to decide when to end the enquiry. The learned CIT cannot transgress the jurisdiction under Section 263 of I.T. Act, 1961 by mentioning that no proper enquiry was made.
12. The learned AR also submitted that there is a contradiction between the show-cause notice and the order of the CIT and the CIT has not given any finding and also given wrong direction to the Assessing Officer to redo the entire assessment by setting aside the assessment order. Being so, it was submitted that the order on this issue cannot be sustained.
13. The AR submitted that the Assessing Officer relied on Circular No. 14 of 2001 which permits carry forward of unabsorbed depreciation indefinitely. As per the judgement of Supreme Court in the case of Uco Bank Ltd. (supra) the circular of the CBDT is binding on the Department. Being so, the Assessing Officer has not committed any error while passing the assessment order dated 29.12.2009. Further, he submitted that as per the Income-tax Act, the law stands amended on the first day of April of any financial year must apply to the assessment of that year. Any amendment in the Act which comes into force after the first day of April of the financial year would not apply to the assessment for the year, even if the assessment is actually made after the amendment comes into force. For this purpose he relied on the judgement of Supreme Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala (60 ITR 262) (SC) and on the judgement of Bombay High Court in the case of CIT vs. Orkay Silk Mills Pvt. Ltd. (230 ITR 108). Further, he also submitted that the order of the Tribunal Special Bench Mumbai in the case of DCIT vs. Times Guarantee Ltd. (supra) was delivered on 30.6.2010 wherein it was held that unabsorbed depreciation relating to A.Ys. 1997-98 to 1999-2000 is to be dealt with in accordance with the 9 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== provisions of section 32(2) of the Act as applicable for A.Ys. 1997- 98 to 1999-2000 and, therefore, the assessee cannot claim set off of unabsorbed depreciation relating to A.Ys. 1997-98 to 1999- 2000 against the income under any head other than 'profit and gains of business or profession' for the A.Ys. 2003-04 and 2004-
05. As the assessment order was passed on 29.12.2009, this Special Bench order dated 30.6.2010 was not available to the Assessing Officer.
14. Further, he drew our attention to the provisions of section 32(2) as they stood as on 1.4.2007 which reads as under:
"(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-
section (1) in any previous year, owing to there being no profit or gains chargeable for that previous year or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub- section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous year. "
15. He submitted that from the above it is clear that there is no time limit u/s 32(2) for set off of any unabsorbed depreciation brought forward from earlier years. It may be pointed out that this is the interpretation given by CBDT in circular No. 14 of 2001 dated 12.12.10 reported in 252 ITR (Statute) 65.
16. As regards the objection of Audit, based on ITAT Special Bench decision in the case of DCIT vs. M/s. Times Guaranty limited reported in 131 TTJ (Mum.) (SB) 257, it is submitted by the AR that no cognizance of that decision can be taken by any assessing officer in view of CBDT circular no. 14 (Supra) It is a 10 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== settled legal position that CBDT circular cannot be dissented by the assessing officer, more so if the circular is beneficial to taxpayer. For this, there is a clear authority in the Hon'ble Supreme Court judgment in the case of UCO Bank vs. CIT 237 ITR 889 (SC). It, therefore, follows that even after ITAT (SB) decision in the case of M/s. Times Guarantee (Supra) an assessing officer is liable to take the same action as has been taken by the assessing officer in the case under consideration.
17. He submitted that in the instant case the assessment order has been made on 29.12.09 whereas the Special Bench of the Tribunal has pronounced their decision in the case of M/s. Times Guarantee (Supra.) on 30.06.10. The very fact that the larger bench of tribunal was constituted shows that there were two possible views, which have been sorted out by the Special Bench in the case of M/s Times Guarantee (Supra). It is well established that in a case where two views are possible and the assessing officer takes in the assessment order the view which is favourable to the assessee, no fault can be found with the assessing officer and the order passed by him cannot be said to be erroneous. Authority for the same can be found in the judgment of Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. 203 ITR 108 (Bom) and Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT 109 Taxman 66 (SC).
18. Further, it was pointed out that during assessment year 2001-02, when the amended provision of sec. 32(2) became effective, the unabsorbed depreciation of the assessee for assessment year 1998-99 was live and capable of being carried forward.
19. Further he relied on the judgement of Gujarat High Court in Special Civil Application No. 1773 of 2012 in the case of General 11 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== Motors India Pvt. Ltd. vs. DCIT dated 23.8.2012 wherein held as under:
"37. The AR drew our attention to the law of Income-tax by Sampath Iyengar with regard to scope and effect of the amendment as explained by the Board in Circular No. 14 of 2001 The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A. Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No. 14 of 2001 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A.Y. 2002-03 then it would be carried 12 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd. =============================== forward till the time it is set off against the profits and gains of subsequent years.
38. It can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1 si day of April 2002 (A. Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y. 1997-98 up to the A.Y. 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever."
20. The AR further relied on the order of the Tribunal Third Member in the case of Singhvi & Doshi Enterprises vs. ITO 131 ITD 161 (TM) wherein held that decision of non-jurisdictional High Court is binding so long as there is no decision of jurisdictional High Court, the Tribunal is bound by the judgement of any other High Court which is available directly on the subject.
13 I.T.A. No. 145/Hyd/2012M/s. Dharti Dredging & Infrastructure Ltd.
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21. According to AR, in view of the Third Member decision of Chennai Bench cited supra Gujarat High Court decision is to be followed instead of Special Bench decision.
22. The AR drew our attention to the law of Income-tax by Sampath Iyengar with regard to scope and effect of the amendment as explained by the Board in Circular No. 14 of 2001.
23. The AR submitted that, therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A. Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y. 1997-98 up to the A.Y. 2001-02 got carried forward to the 14 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever.
24. The learned DR submitted that there is no enquiry on the part of the Assessing Officer while completing assessment. He simply accepted the claim of the assessee with regard to set off of unabsorbed depreciation while completing assessment. Being so, nothing prohibits the CIT in assuming jurisdiction u/s. 263 of the Act. Even on merit, there is no case to assessee as the issue was already decided by the Special Bench (Mumbai) (cited supra) in favour of the Department.
25. We have heard both the parties and perused the material on record. We have carefully considered the rival submissions in the light of material placed before us and also gone through all the judgements cited by the parties before us. First we take up the legal issue with reference to the jurisdiction of invoking the provisions of section 263 of the Act by the learned CIT. The scheme of the IT Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to erroneous order of the assessing officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the revenue. As held in the case of Malabar Industries Co. Ltd., Vs. CIT ( 243 ITR 83 (SC), the Commissioner can exercise revision jurisdictional u/s 263 if he is satisfied that the order of the assessing officer sought to be revised is (i)erroneous; and also (ii) prejudicial to the interests of the revenue. The word 'erroneous' has not been defined in the Income Tax Act. It has been however defined at page 562 in Black's Law Dictionary (seventh Edition) thus;
15 I.T.A. No. 145/Hyd/2012M/s. Dharti Dredging & Infrastructure Ltd.
=============================== 'erroneous, adj. Involving error, deviating from the law'.
The word 'error' has been defined at the same page in the same dictionary thus:
'error No. 1 : A psychological state that does not conform to Objective reality; a brief that what is false is true or that what is true is false'.
At page 649/650 in P. Ramanatha Aiyer's Law Lexicon Reprint 2002, the word 'error' has been defined to mean-
'Error: A mistaken judgement or deviation from the truth in matters of fact, and from the law in matters of judgement 'error' is a fault in judgement, or in the process or proceeding to judgement or in the execution upon the same, in a Court of Record; which in the Civil Law is called a Nullityie" (termes de la ley).
Something incorrectly done through ignorance or inadvertence S.99 CPC and S.215 Cr.PC.
'Error, Fault, Error respects the act; fault respect the agent, an error may lay in the judgement, or in the conduct, but a fault lies in the will or intention."
26. At page 650 of the aforesaid Law Lexicon, the scope of Error, Mistake, Blunder, and Hallucination has been explained thus:
"An error is any deviation from the standard or course of right, truth, justice or accuracy, which is not intentional. A mistake is an error committed under a misapprehension of misconception of the nature of a case. An error may be from the absence of knowledge, a mistake is from insufficient or false observation. Blunder is a practical error of a peculiarly gross or awkward kind, committed through glaring ignorance, heedlessness, or awkwardness. An error may be overlooked or atoned for, a mistake may be rectified, but the shame or ridicule which is occasioned by a blunder, who can counteract. Strictly speaking, Hallucination is an illusion of the perception, a phantasm of the imagination. The one comes of 16 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd. =============================== disordered vision, the other of discarded imagination. It is extended in medical science to matters of sensation, whether there is no corresponding cause to produce it. In its ordinary use it denotes an unaccountable error in judgement or fact, especially in one remarkable otherwise for accurate information and right decision. It is exceptional error or mistake in those otherwise not likely to be deceived."
27. In order to ascertain whether an order sought to be revised under Section 263 is erroneous, it should be seen whether it suffers from any of the aforesaid forms of error. In our view, an order sought to be revised under Section 263 would be erroneous and fall in the aforesaid category of "errors" if it is, inter alia, based on an incorrect assumption of facts or an incorrect application of law or non-application of mind to something which was obvious and required application of mind or based on no or insufficient materials so as to affect the merits of the case and thereby cause prejudice to the interest of the revenue.
28. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but 17 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be noted that the present assessment was made under Section 143(3) of the Income-tax Act. In other words, the Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. Bulk of the returns filed by the assessees across the country is accepted by the Department under Section 143(1) without any scrutiny. Only a few cases are picked up for scrutiny. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made and the genuineness of the claim ought to have 18 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. In taking the aforesaid view, we are supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT (67 ITR 84) (SC), Smt. Tara Devi Aggarwal v. CIT (88 ITR 323) (SC), and Malabar Industrial Co. Ltd.'s case ( 243 ITR 83) (SC).
29. In Malabar Industrial Co. Ltd. case the Hon'ble Court has held as under:
"There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall the orders passed without applying the principles of natural justice or without application of mind.
In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under Section 264 or through appeals and other means of judicial review, the prejudice caused to the State Exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under Section 263. Arbitrariness in decision-making causing prejudice to either party cannot therefore be allowed to stand and stare at the legal system. It is difficult to countenance 19 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd. =============================== such arbitrariness in the actions of the Assessing Officer. It is the duty of the Assessing Officer to adequately protect the interest of both the parties, namely, the assessee as well as the State. If he fails to discharge his duties fairly, his arbitrary actions culminating in erroneous orders can always be corrected either at the instance of the assessee, if the assessee is prejudiced or at the instance of the Commissioner, if the revenue is prejudiced. While making an assessment, the ITO has a varied role to play. He is the investigator, prosecutor as well as adjudicator. As an adjudicator he is an arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows:
"Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances or arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the 20 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd. =============================== order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge."
30. Similar view was earlier taken by the Hon'ble Supreme Court in Siemens Engg. & Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the ITO acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under Sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgments on which reliance was placed by the learned Counsel for the assessee also points to the same direction. They have held that orders, which are subversive of the administration of revenue, must be regarded as erroneous and prejudicial to the interests of the revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been done in the case before us, the administration of revenue is bound to suffer. If without discussing the nature of the transaction and materials on record, the Assessing Officer had made certain addition to the income of the assessee, the same would have been considered erroneous by any appellate authority as being violative of the principles of natural justice which require that the authority must indicate the reasons for an adverse order. We find no reason why the same view should not be taken when an order is against the interests of the revenue. As a matter of fact such orders are prejudicial to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case.
31. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial 21 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== to the interests of the Revenue under Section 263 in the following cases:
(i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it.
(ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. In the same category fall orders passed without applying the principles of natural justice or without application of mind.
(iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case.
32. We shall now turn to the facts of the case to see whether the case before us is covered by the aforesaid principles. Perusal of the assessment order passed by the Assessing Officer does not show any application of mind on his part. He simply accepted the claim of the assessee. This is a case where the Assessing Officer mechanically accepted what the assessee wanted him to accept without any application of mind or enquiry. The evidence available on record is not enough to hold that the return of the assessee was objectively examined or considered by the Assessing Officer. It is because of such non-consideration of the issues on the part of the Assessing Officer that the return filed by the assessee stood automatically accepted without any proper scrutiny. The assessment order placed before us is clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee. The Assessing Officer has completely omitted to examine the issues in question from consideration and made the assessment in an arbitrary manner. His order is a completely non- speaking order. In our view, it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 22 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to pass a fresh order considering the issues raised by the CIT. In our view, the assessee should have no grievance in the action of learned Commissioner in exercising the jurisdiction u/s. 263 of the IT Act.
33. It was however contended by the learned Counsel that the Assessing Officer had taken a possible view in accepting the return of the assessee with reference to expenditure and hence, the Commissioner was not justified in assuming the revisional jurisdiction under Section 263. We have given our thoughtful consideration to the aforesaid submissions. As already stated earlier, an order becomes erroneous because inquiries, which ought to have been made on the facts of the case, were not made and not because there is anything wrong with the order if all the facts stated or the claims made in the return are assumed to be correct. Thus, it is mere failure on the part of the Assessing Officer to make the necessary inquiries or to examine the claim made by the assessee in accordance with law, which renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing more is required to be established in such a case. One would not know as to what would have happened if the Assessing Officer had made the requisite inquiries or examined the claim of the assessee in accordance with law. He could have accepted the assessee's claim. Equally, he could have also rejected the assessee's claim depending upon the results of his enquiry or examination into the claim of the assessee. Thus, the formation of any view by the Assessing Officer would necessarily depend upon the results of his inquiry and conscious, and not passive, examination into the claim of the assessee. If the Assessing Officer passes an order mechanically without making the requisite inquiries or examining the claim of the assessee in accordance with law, such an order will clearly be erroneous in law as it would 23 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== not be based on objective consideration of the relevant materials. It is therefore, the mere failure on the part of the Assessing Officer in not making the inquiries or not examining the claim of the assessee in accordance with law that per se renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing else is required to be established in such a case to show that the order sought to be revised is erroneous and prejudicial to the interests of the revenue.
34. We are unable to accept the submission of the learned Counsel for two other reasons also. First reason is that the view so taken by the Assessing Officer without making the requisite inquiries or examining the claim of the assessee will per se be an erroneous view and hence will be amenable to revisional jurisdiction under Section 263. Second reason is that it is not taking of any view that will take the matter under the scope of Section 263. The view taken by the Assessing Officer should not be a mere view in vacuum but a judicial view. It is well established that the Assessing Officer being a quasi-judicial authority cannot take a view, either against or in favour of the assessee / revenue, without making proper inquiries and without proper examination of the claim made by the assessee in the light of the applicable law. As already stated earlier, we are not able to appreciate on what material was placed before the Assessing Officer at the assessment stage to take such a view. The assessee has also not been able to lead enough evidence to show to us that any inquiry was made by the Assessing Officer in this regard. Therefore mere allegation that the Assessing Officer has taken a view in the matter will not put the matter beyond the purview of Section 263 unless the view so taken by the Assessing Officer is a judicial view consciously based upon proper inquiries and appreciation of all the relevant factual and legal aspects of the case. The judicial view taken by the Assessing Officer may perhaps place the matter 24 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== outside the purview of Section 263 unless it is shown that the view so taken by the Assessing Officer contains some apparent error of reasoning or of law or of fact on the face of it.
35. The learned Counsel has strongly relied upon the following observations made in the case of Malabar Industrial Co. Ltd. (supra) and submitted that the learned Commissioner was not justified in substituting his view for that of the Assessing Officer:
"... Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law."
36. We have carefully gone through the aforesaid observations.
"Adopting" one of the courses permissible in law necessarily requires the Assessing Officer to consciously analyse and evaluate the facts in the light of relevant law and bring them on record. It is only then that he can be said to have "adopted" or chosen one of the courses permissible in law. The Assessing Officer cannot be presumed or attributed to have "adopted" or chosen a course permissible in law when his order does not speak in that behalf. Similarly, "taking" one view where two or more views are possible also necessarily imports the requirement of analysing the facts in the light of applicable law. Therefore, proper examination of facts in the light of relevant law is a necessary concomitant in order to say that the Assessing Officer has adopted a permissible course of law or taken a view where two or more views are possible. It is only after such proper examination and evaluation has been done by the Assessing Officer that he can come to a conclusion as to what 25 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd. =============================== are the permissible courses available in law or what are the possible views on the issue before him. In case he comes to the conclusion that more than one view is possible then he has necessarily to choose a view, which is most appropriate on the facts of the case. In order to apply the aforesaid observations to a given case, it must therefore first be shown that the Assessing Officer has "adopted" a permissible course of law or, where two views are possible, the Assessing Officer has "taken" one such possible view in the order sought to be revised under Section 263. This requires the Assessing Officer to take a conscious decision; else he would neither be able to "adopt" a course permissible in law nor "take" a view where two or more views are possible. In other words, it is the Assessing Officer who has to adopt a permissible course of law or take a view where two or more views are possible. It is difficult to comprehend as to how the Assessing Officer can be attributed to have "adopted" a permissible course of law or "taken" a view where two or more views are possible when the order passed by him does not speak in that behalf. We cannot assume, in order to provide legitimacy to the assessment order, that the Assessing Officer has adopted a permissible course of law or taken a possible view where his order does not say so. The submissions made by the learned Counsel, if accepted, would require us to form, substitute and read our view in the order of the Assessing Officer when the Assessing Officer himself has not taken a view. It could have been a different position if the Assessing Officer had "adopted" or "taken" a view after analysing the facts and deciding the matter in the light of the applicable law. However, in the case before us, the Assessing Officer has not at all examined as to whether only one view was possible or two or more views were possible and hence, the question of his adopting or choosing one view in preference to the other does not arise. The aforesaid 26 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd. =============================== observations of the Hon'ble Supreme Court do not, in our view, help the assessee; and rather they are against the assessee.
37. In the case of Padmasundara Rao v. State of Tamil Nadu (255 ITR 147), the Hon'ble Supreme Court has held that "... There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morrin in Harrington v. British Railways Board [1972] 2 WLR 537 (HL).
Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases...." Therefore, the observations of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd's case (supra) on which reliance has been placed by the learned Counsel cannot be read in isolation. The judgment deserves to be read in its entirety to cull out the law laid down by the Hon'ble Supreme Court. If so read, it is quite evident that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue. If the order sought to be revised under Section 263 suffers from any of the aforesaid vices, it cannot be said that the Assessing Officer has "adopted", in such an order, a course permissible in law or "taken" a view where two or more views are possible."
38. It was next contended by the learned Authorised Representative that the Assessing Officer had considered all the relevant aspects of the case carefully while passing the order. According to him, the mere fact that the assessment order passed by the Assessing Officer was short would neither mean failure on his part in not examining the matter carefully nor would render his order erroneous so long as the view taken by him was a possible view. In our view, the aforesaid submission of the assessee must fail for the reasons already explained in the foregoing paras of this order as the order, which is sought to be 27 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== revised under Section 263 reflects no proper application of mind by the Assessing Officer and thus be amenable to revision under Section 263. In this case before us, the assessment order passed by the Assessing Officer lacks judicial strength to stand. It is not a case where the order is short but is not supported by judicial strength. It is in this view of the matter that we feel that the learned Commissioner has correctly exercised his revisional jurisdiction under Section 263.
39. In our opinion, the Assessing Officer has been entrusted the role of an investigator, prosecutor as well as adjudicator under the scheme of the Income-tax Act. If he commits an error while discharging the aforesaid roles and consequently passes an erroneous order causing prejudice either to the assessee or to the State Exchequer or to both, the order so passed by him is liable to be corrected. As mentioned earlier, the assessee can have the prejudice caused to him corrected by filing an appeal; as also by filing a revision application under Section 264. But the State Exchequer has no right of appeal against the orders of the Assessing Officer. Section 263 has therefore been enacted to empower the Commissioner to correct an erroneous order-passed by the Assessing Officer which he considers to be prejudicial to the interest of the revenue. The Commissioner has also been empowered to invoke his revisional jurisdiction under Section 264 at the instance of the assessee also. The line of difference between Sections 263 and 264 is that while the former can be invoked to remove the prejudice caused to the State the later can be invoked to remove the prejudice caused to the assessee. The provisions of Section 263 would lose significance if they were to be interpreted in a manner that prevented the Commissioner from revising the erroneous order passed by the Assessing Officer, which was prejudicial to the interest of the revenue. In fact, such a course would be counter productive as it would have the effect of 28 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== promoting arbitrariness in the decisions of the Assessing Officers and thus destroy the very fabric of sound tax discipline. If erroneous orders, which are prejudicial to the interest of the revenue, are allowed to stand, the consequences would be disastrous in that the honest tax payers would be required to pay more than others to compensate for the loss caused by such erroneous orders. For this reason also, we are of the view that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue within the meaning of Section 263.
40. Adverting to the facts of the present case, there is no enquiry by the Assessing Officer whatsoever on the issue in dispute. He just accepted the claim of set off of earlier year unabsorbed depreciation in the assessment year under consideration. Being so, the CIT assumed jurisdiction u/s. 263 of the Act. The argument of the assessee's counsel is that there are decisions in favour of the assessee. Therefore, the view adopted by the Assessing Officer is one of the possible views. The general law on the question of revisional jurisdiction is that an order passed by the Assessing Officer cannot be held to be erroneous, if the Assessing Officer has followed one of the possible views on the subject. But this principle by and large applies to questions of fact. When it comes to question of law, the law laid down by the competent authority has to be invariably followed. It is a settled law that when a court declares the law on a subject, the declaration goes back to the date of enactment of that particular law as to state that the law from the date of its enactment itself was in the manner decided by the court subsequently. Therefore, the pronounced order of the Special Bench dates back to the date 29 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== of enactment and, therefore, the superimposition made by the judicial pronouncement the assessment order has become erroneous. It is not only erroneous, but also prejudicial to the interest of revenue inasmuch as the error has contributed in granting excessive relief to the assessee. The arguments of the CIT DR that the question of allowability of claim was sub-judice before the Tribunal Special Bench (Mumbai) at the time of passing the revision order is accepted and the argument of the assessee's counsel that it is a debatable issue is rejected as there was no discussion of whatsoever by the Assessing Officer in the impugned assessment order. In our humble opinion subject matter of the revision is pending before the Special Bench for adjudication and the Assessing Officer passed the assessment order without an iota of discussion on the issue of whatsoever as such the CIT exercised his powers u/s. 263 of the Act to revise the order of the Assessing Officer which was in conformity with the order of the Special Bench and invoking the provisions of section 263 is justified.
41. Coming to the merit of the issue raised by the assessee relating to set off of unabsorbed depreciation allowances carried forward from assessment year 1996-97 and 1998-99 against income relating to assessment year 2007-08, this issue is covered against the assessee by the order of the Special Bench cited supra wherein held that unabsorbed depreciation relating to assessment years 1997-98 to 1999-2000 is to be dealt with in accordance with the provisions of section 32(2) of the IT Act as applicable to assessment year 1997-98 to 1999-2000 and, therefore, assessee cannot claim set off of unabsorbed depreciation relating to assessment year 1997-98 to 1999-2000 under any head of income other than "income from business or profession" in assessment years 2003-04 and 2004-05. In view of the above decision, we are inclined to hold that the assessee case is squarely covered by the 30 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== above decision and as such assessee cannot claim set off of unabsorbed carried forward depreciation relating to assessment years 1996-97 and 1998-99 against the income relating to assessment year 2007-08. On merit also, this issue is decided against the assessee.
42. The learned AR relied on the judgement of Gujarat High Court in Special Civil Application No. 1773 of 2012 dated 23.8.2012 in the case of General Motors India Pvt. Ltd. (cited supra) for the proposition of set off of unabsorbed depreciation allowance disputed before us against the profit and gains of subsequent year without any limit of period whatsoever. In our opinion this judgement cannot be considered as binding precedent as this is not a jurisdictional High Court judgement. Further, on the same subject Hon'ble Madras High Court in the case of CIT vs. Pioneer Asia Packing Pvt. Ltd., (310 ITR 198) has held that unabsorbed depreciation brought forward as on 1st April 1997 could be set off against the business income or income under any other head for A.Y. 1997098 and 7 subsequent years on the basis of clarification issued by the Finance Minister. Again the Hon'ble Madras High Court in the case of S & S Power Switchgear Ltd. (318 ITR 187) (Mad) reiterated the same view by laying down that the unabsorbed depreciation brought forward as on 1st April, 1997 could be set off against business income or income under any other head for A.Y. 1997-98 and 7 subsequent assessment years by relying on the clarification of Finance Minister as well as CBDT circular No. 762 dated 18.2.1997 (145 ITR St. 5). Being so, un adjusted depreciation brought forward up to 1st April, 1997 became eligible for set off not only against the business income but also against income under the other heads in 8 assessment years only on the strength of the clarification given by the Finance Minister. Being so, in our opinion, judgement of High Court, though not of the jurisdictional High Court, prevails over an order 31 I.T.A. No. 145/Hyd/2012 M/s. Dharti Dredging & Infrastructure Ltd.
=============================== of the Special Bench. However, when there are several decisions of non-jurisdictional High Courts expressing contrary views, the Tribunal is free to choose to adopt that view which appeals to it. For this purpose, we place reliance on the order of the Special Bench in the case of Kanel Oil & Export Industries Ltd. vs. JCIT, (121 ITD 596) (SB) (Ahd).
43. Regarding the issue relating to settlement of dues with Stressed Assts Stabilisation Fund IDBI, the AR submitted the issue is to be decided in favour of the assessee in view of the judgement of Supreme Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons Ltd., 222 ITR 344 (SC). He submitted that as seen from the records that the assessee entered into one time compromise settlement of dues with Stressed Assets Stabilization Fund (IDBI) for an aggregate sum of Rs. 17,67,00,000 in full and final settlement of dues. It is submitted that the entire amount of Rs. 17,67,00,000/- does not contain any amount for which the allowance/deduction has been made in earlier assessment for any assessment year, including the assessment year under consideration. He submitted that the provisions of Sec. 41(1) are not applicable. The AR also relied on Morley (Inspector of Taxes) vs. Tettersall (7 ITR 316) (CA) wherein held that the quality and the nature of a receipt for income-tax purposes is fitted once and for all when it is received, and subsequent operations cannot turn a receipt which is not a trading receipt into one.
44. The DR relied on the order of the CIT on this issue and submitted that there was no enquiry by the Assessing Officer as the details of interest waived as against what was earlier allowed as deduction and such other information giving particulars of the component of this settlement dues is not brought on record by the Assessing Officer.
32 I.T.A. No. 145/Hyd/2012M/s. Dharti Dredging & Infrastructure Ltd.
===============================
45. We have heard both the parties and perused the material on record. We have gone through the impugned assessment order. In this case also there is no discussion in the assessment order on the impugned issue. There is no enquiry on this issue. The order is erroneous and prejudicial to the interest of revenue as discussed in earlier paras of this order. Accordingly, we confirm the order of the CIT. This issue was also not examined by the Assessing Officer and it requires examination by the Assessing Officer. Being so, the CIT is justified in directing the Assessing Officer to conduct necessary enquiry.
46. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 16th November, 2012.
Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 16th November, 2012
Copy forwarded to:
1. M/s. Dharti Dredging & Infrastructure Ltd., 1st Floor, Point of View, B.S. Maktha, Begumpet, Hyderabad-500 016
2. The Addl. Commissioner of Income-tax, Range-1, Hyderabad.
3. The CIT-I, Hyderabad
4. The ACIT, Circle-1(2), Hyderabad.
5. The DR - A Bench, ITAT, Hyderabad.
tprao