Income Tax Appellate Tribunal - Ahmedabad
Overseas Synthetics Limited, Baroda vs Income Tax Officer Ward 1(4),, Surat on 11 November, 2016
I.T.A. No.2042/Ahd/2013
Assessment Year: 2008-09
Page 1 of 6
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH, "SMC", AHMEDABAD
[Coram: Pramod Kumar AM]
I.T.A. No.2042/Ahd/2013
Assessment Year: 2008-09
Overseas Synthetics Limited, ......................Appellant
Block No.355,
Manjusar Kumpad Road,
Village - Manjusar,
Taluka Savli,
District Vadodara - 391 775
[PAN: AAACO 2755 P]
Vs.
Income Tax Officer,
Ward 1(4), Surat. ...................Respondent
Appearances by:
Bhavin J. Marfatia for the appellant
Anthony Pariath for the respondent
Date of concluding the hearing: 11.11.2016
Date of pronouncing the order: 11.11.2016
DICTATED ORDER
1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 22.05.2013, passed by the learned CIT(A), in the matter of rectification of mistake under section 154 r.w.s. 143(3) of the Income Tax Act, 1961, for the assessment year 2008-09.
2. Grievance raised by the assessee appellant are as follows :-
"1. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in rejecting the condonation application filed by the Appellant.
2. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of AO in passing the order u/s 154 of the Act.
I.T.A. No.2042/Ahd/2013 Assessment Year: 2008-09 Page 2 of 6
3. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of AO in not allowing carry forward of unabsorbed depreciation amounting to Rs.2,38,88,963/-.
4. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in holding that the quantum of c/f Depreciation and losses can be decided only in the year in which the set-off is claimed.
5. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in applying the provisions of section 251(l)(c) despite the fact that proceedings u/s 154 are part of assessment proceedings only."
3. To adjudicate on this appal only a few material facts need to be taken note of. During the course of scrutiny assessment proceedings and while finalising the resultant assessment order under section 143(3) on 30th November 2010, the Assessing Officer inter alia noted that the assessee is allowed to carry forward the following depreciation/loss:
A.Y. Unabsorbed Unabsorbed Speculation
depreciation business loss loss (Rs.)
(Rs.) (Rs.)
1996-97 71,13,242/- ------ ------
1997-98 39,02,556/- ------ ------
1998-99 29,49,915/- ------ ------
2000-01 2,84,40,059/- ------ ------
2001-02 2,84,40,059/- ------ ------
2002-03 71,65,079/- 2,50,96,345/- ------
2003-04 25,49,144/- 1,39,21,112/- ------
2004-05 22,82,238/- 30,95,432/- ------
2007-08 19,17,657/- 19,17,657/- ------
2008-09 ------ ------ 1,87,564/-
I.T.A. No.2042/Ahd/2013
Assessment Year: 2008-09
Page 3 of 6
4. On 28.06.2012, however, the Assessing Officer passed reification order which inter alia holds that by mistake in the assessment order under section 143(3) dated 30.11.2010 "the assessee was allowed to carry forward the unabsorbed deprecation of A.Y. 1997-98 (Rs.39,02,556), 1998-99 (Rs.29,49,915) and 2000-01 (Rs.1,70,36,492)" Whereas the unabsorbed deprecation relevant to assessment years 1997-98, 1998-99 & 2000-2001 is allowable to be carried forward for future adjustment upto assessment year 2008-09. It was in this backdrop that the Assessing Officer concluded that "the irregular allowance of unabsorbed depreciation of Rs.2,38,88,963/- as discussed above is required to be disallowed as per sub- section 2(iii)(b) of section 32 as amended by the Finance (No.2) Act, 1996 w.e.f. 01.04.1997".
5. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A). The appeal, however, was rejected by the learned CIT(A) for more reasons than one. Learned CIT(A) was of the view that the delay of 56 days in filing of the appeal which was said to be attributed to the fact that the assessee's business was closed, does not deserve to be condoned. In his opinion, the explanation given by the assessee was of general in nature and does not amount to sufficient cause. He did not stop at that and proceeded to decide the matter on merits as well. Learned CIT(A) was of the view that the action of the Assessing Officer in allowing the carry forward of unabsorbed deprecation vide Assessment Order dated 30.11.2010, as also the action of the Assessing Officer in declining the said carry forward vide rectification order dated 28.06.2012, is wholly academic inasmuch as the call as to whether unabsorbed deprecation or loss is entitled to be set off can only be taken in the I.T.A. No.2042/Ahd/2013 Assessment Year: 2008-09 Page 4 of 6 year in which the set-off is claimed. It was in this background that he dismissed the grievance raised before him on merits. While doing so, he observed as follows:-
"7.6 Therefore, the mandate of the assessing officer, while passing the assessment order for Asstt Year 2008-09 did not include decision regarding the quantum of carried forward depreciation/losses from Assessment Years 1997-98 to 2007-08. This decision can only be taken in the orders for assessment years to which these losses/depreciation pertain to or the assessment years, in which, their set-off is claimed. Therefore, this appellate order of not admitting the appeal against order under section 154, on account of delay in filing of appeal, should not be taken as finding on the quantum of unabsorbed depreciation/business losses allowed to be carried forward or not allowed to be carried forward as far as assessment years other than assessment year 2008-09 are concerned.
7.7 It shall therefore, be open for the Assessing Officer to examine this claim in the year, in which the set off of such losses/unabsorbed depreciation is claimed."
6. The assessee is aggrieved and is in appeal before me.
7. Learned Counsel's submission is that closure of the business is a serious issue and the fact that the assessee virtually closed down his business at the relevant point of time, was certainly a good and sufficient cause for explaining the delay in filing the appeal. He submits that the learned CIT(A) was completely in error in not admitting the appeal. He also points out that the appeal being not admitted by the learned CIT(A) has been construed by the Assessing Officer as resulting in a legal position that the observation made by the Assessing Officer in the rectification order stands good in law. In these circumstances, the observations made by the learned CIT(A) to the effect that the independent call is to be taken by the Assessing Officer in the year of set-off ceases to have any legal basis. He thus urges me (a) to hold that the learned CIT(A) ought to have decided the matter on merits rather than summarily dismissing in limine (b) to hold that in all fairness independent call is to be taken by the Assessing Officer in the year in which set-off is claimed.
I.T.A. No.2042/Ahd/2013 Assessment Year: 2008-09 Page 5 of 6
8. Without prejudice to this stand, he points out that as held by the Hon'ble jurisdictional High Court in the case of General Motors India (P.). Ltd. vs. DCIT (2012) 25 txmann.com 364 (Guj), the assessee deserves to succeed on merits inasmuch as the unabsorbed depreciation has been held to be eligible for carry forward for unlimited period.
9. Learned Departmental Representative, on the other hand, relies upon the stand of the authorities below. His contention is that the order of the learned CIT(A), which is very elaborate and well reasoned, deserves to be sustained. He also points out that legal positions is unambiguous inasmuch as, as explained by the Assessing Officer in the rectification order, the unabsorbed depreciation cannot be carried forward indefinitely. He thus urged me to uphold the stand of the authorities below and decline to interfere in the matter.
10. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
11. I find myself in considered agreement with the stand of the leaned counsel that closure of business in the present case should indeed have been construed as sufficient cause for delay in filing the appeal and that the learned CIT(A) ought to have condoned the delay. I hold so. Having held so, however, I find, as rightly pointed by the learned CIT(A) that observations made by the Assessing Officer in the assessment order passed under section 143(3), as also observations made by the Assessing Officer in subsequent rectification order, are wholly academic inasmuch as the call on eligibility of set-off of unabsorbed depreciation or for that purpose unabsorbed losses carried forward from earlier years is to be taken by the Assessing Officer, seized of assessment in which the set-off is claimed. That is what Hon'ble Supreme Court has held though in the context of I.T.A. No.2042/Ahd/2013 Assessment Year: 2008-09 Page 6 of 6 losses carried forward, in the case of CIT vs. Manmohan Das, 59 ITR 699. The entire exercise carried out, so far as the impugned carry forward of unabsorbed depreciation pertaining to prior years, is concerned is wholly academic. In this view of the matter, I vacate the rectification order dated 28.06.2012 as academic and infructuous and make it clear that the call regarding eligibility of the said unabsorbed deprecation in question will be taken, on merits, and in accordance with law, in the year in which the set-of is claimed.
12. In the result, the appeal is allowed in the terms indicated above. Pronounced and dictated in the open Court today on 11th day of November, 2016.
Sd/-
Pramod Kumar
(Accountant Member)
Dated: the 11 th day of November, 2016.
PBN/*
Copies to: (1) The appellant (2) The respondent
(3) CIT (4) CIT(A)
(5) DR (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad