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Income Tax Appellate Tribunal, ‘’ C’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned two appeal have been filed at the instance of the Assessee. Out of two appeals one is filed against the order of the Pr. Commissioner of Income Tax-1, Ahmedabad, arising in the matter of order passed u/s 263 of the Act and another appeal is filed against the order of the Learned Commissioner of Income
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Tax(Appeals)-1, Ahmedabad, arising in the matter of assessment order passed under s. 143(3) r.w.s 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-2012.
First we take up ITA No.707/AHD/2016 for A.Y. 2011-12.
The only issue raised by the assessee is that the learned PCIT under section 263 of the Act has held that the assessment framed under section 143(3) of the Act is erroneous insofar prejudicial to the interest of Revenue.
The facts in brief are that the assessee in the present case is a limited company and engaged in the business of manufacturing of very fine produce (denier) in POY, FDY, DTY and Texturised Yarn. The assessee filed the return of income for the year under consideration at Rs. nil after setting off the brought forward unabsorbed depreciation. The case of the assessee was subsequently selected under scrutiny and accordingly the assessment was framed under section 143(3) of the Act after making certain additions at Rs. 1,06,71,240.00 by the order dated 3 February 2014.
3.1 Subsequently, the learned PCIT found that the assessee has claimed business loss and unabsorbed depreciation pertaining to the assessment year 2006-07 and 2007-08 although the same (the assessee) came into existence with effect from the assessment year 2008-09. As per the PCIT the unabsorbed depreciation and brought forward losses of Rs. 1,72,40,959.00, 10,75,45,511.00 and 2,44,55,770.00 respectively pertain to the assessment years 2006-07 and 2007-08 i.e. pre-existence period the assessee. Therefore, the same was not to be allowed to be carried forward such unabsorbed depreciation and brought forward losses under normal as well as under the provisions of MAT under section 115 JB of the Act.
3.2 Accordingly the PCIT was of the view that there was under assessment of the income for the year under consideration under the provisions of MAT under
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section 115 JB of the Act as the AO allowed the deduction by way of adjustment of brought forward losses of Rs. 2,44,55,770.00 pertaining to the assessment year 2007-08.
3.3 Accordingly, the PCIT proposed to revise the assessment order by issuing a show cause notice dated 20 January 2016. In response to such show cause notice, the assessee submitted that it has been allowed to carry forward the impugned amount of brought forward losses pertaining to the assessment year 2007-08 to the subsequent years by virtue of the order of Hon’ble Gujarat High Court in the scheme of demerger vide order dated 27-08-2009 with effect from 1 April 2007.
3.4 However, the learned PCIT being dissatisfied with the contention of the assessee held that the assessment framed under section 143(3) of the Act vide order dated 8-2-2016 is erroneous insofar prejudicial to the interest of revenue by observing as under: I have considered the facts of the case and the submission made by the AR of the assessee. From the above discussion, it is evident that the asseesse company came into being only w.e.f. 01-04-2007 i.e A.Y. 2008-09, the assessee is not entitled to carry forward of business loss and unabsorbed depreciation either in normal provisions of the Act or under the provisions of section 115Jb of the Act. However, the AO has allowed the assessee’s claim of carry forward loss of Rs.2,44,55,770/- pertaining to A.Y. 2007-08 while computing the profit u/s.115JB of the Act which not allowable. The AO has overlooked the fact that the assessee company has come into being only w.e.f 01-04-2007 i.e 2008-09 and allowed the assessee’s claim of carry forward business loss of A.Y. 2007-08. Consequently, the assessment order is erroneous as well as prejudicial to the interest of Revenue. Accordingly, the said assessment is hereby cancelled and the AO is directed to make fresh assessment in accordance with law after giving proper opportunity to the assessee in respect of both the above issues.
Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 151 and contended that the assessee is entitled to carry forward the losses and unabsorbed depreciation pertaining to the period prior to the demerger under the provisions of section 72A of the Act as well as by virtue of the direction of the Hon’ble High Court of Gujarat. The learned AR in support of his contention filed a
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case compilation of Hon’ble High Courts and the tribunal’s which are placed on record. These orders are six in numbers.
On the contrary, the learned DR vehemently supported the order of the learned PCIT passed under section 263 of the Act.
We have heard the rival contentions of both the parties and perused the materials available on record. The assessee company came into existence as a result of demerger of the company namely Nova Petrochemicals Ltd by virtue of the order of Hon’ble Gujarat High Court dated 27-08-2009 w.e.f. 1-4-2007. In consequence to the demerger, the assessee carried forward the unabsorbed depreciation and the business loss pertaining to the financial year 2005-06 corresponding to assessment year 2006-07 amounting to ₹ 1,72,40,959.00 and Rs. Nil to the previous year 2007- 08 corresponding to assessment year 2008-09 and subsequent years.
7.1 The assessee, likewise also carried forward the unabsorbed depreciation and the business loss pertaining to the financial year 2006-07 corresponding to assessment year 2007-08 amounting to ₹ 10,75,45,511.00 and 2,44,55,770.00 respectively to the previous year 2007-08 corresponding to assessment year 2008- 09 and subsequent years.
7.2 It was contended by the assessee that such unabsorbed depreciation and the brought forward losses became the loss of the assessee by virtue of the Hon’ble High Court of Gujarat as well as under the provisions of section 72A of the Act.
7.3 Before, we touch upon the issue on hand, it is pertinent to note that the impugned losses and unabsorbed depreciation were allowed to be carried forward by the Revenue in the assessment framed under section 143(3) of the Act for the assessment year 2008-09 and 2009-10. In other words, such impugned losses in the year under consideration represents the brought forward amounts from the earlier years. This fact can be verified from the submission of the assessee before
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the ld. CIT-A in the proceedings of the assessment framed under section 143(3) r.w.s. 263 of the Act. This fact also remained undisputed by the Ld. DR appearing on behalf of the Revenue.
7.4 Thus the question arises whether the brought forward amount can be enquired in the year under consideration without disturbing the 1st year (the year of origin ) in which such amounts were incorporated in the books of accounts of the assessee. Certainly, the answer stands in negative.
7.5 At the time of hearing, a question was also raised to the learned DR about the fact whether the Revenue can disturb the impugned amount brought forward from the earlier years, but the learned DR cannot make any satisfactory reply. Thus in the absence of any provisions under the law for disturbing the brought forward balances in the year under consideration in the given facts and circumstances, we hold that the learned PCIT has held the assessment order under consideration as erroneous insofar prejudicial to the interest of revenue under the provisions of section 263 of the Act without having any valid jurisdiction. Accordingly, we hold that the order framed under section 263 of the Act is not sustainable and therefore we quash the same. Hence, the ground of appeal of the assessee is allowed.
7.6 In the result, the appeal of the assessee is allowed.
Coming to the ITA No. 2374/Ahd/2018 for A.Y. 2011-12. The assesse has raised the following grounds of appeal: 1. On the facts & in the circumstances of the case it is most respectfully submitted that the Ld.Commissioner of Income Tax (Appeals)-I has erred in law and on facts by confirming disallowance of set off of lower of book loss and unabsorbed depreciation Rs.2,44,55,770/- pertaining to AY 2007-08 earlier years u/s.115JB of IT Act made by Ld Assessing Officer as per direction given by Ld.Pr.Commissioner of Income Tax-1, disregarding order of Hon’ble High Court of Gujarat on scheme of demerger approved dated 27/08/2009. 2. That appellant craves to add to alter to substitute to amend any ground/grounds of appeal at any time or at the time of hearing of the appeal is occasion arises.
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At the outset we note that the appeal for the year under consideration is arising in consequence to the direction provided by the learned PCIT under section 263 of the Act which has been held by us as void ab initio in the paragraph number 7 of this order. For the detailed discussion, please refer the relevant paragraph. As the revisionary order passed under section 263 of the Act has been held as invalid, the consequential order has no leg to stand. Accordingly, we quash the order framed under section 143(3) read with section 263 of the Act dated 7 December 2016. Accordingly the appeal filed by the assessee does not require any separate adjudication and becomes infructuous.
9.1 In the result, the appeal of the assessee is dismissed as infructuous.
In the combined result, the appeals filed by the assessee bearing ITA No.707/Ahd/2016 for A.Y. 2011-12 is allowed and ITA bearing No.2374/Ahd/2018 for A.Y. 2011-12 is dismissed as infructuous.
Order pronounced in the Court on 28/06/2021 at Ahmedabad.
Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 28/06/2021 Manish