M/S.KINGS INFRA VENTURES LTD vs. THE COMMISSIONER OF INCOME TAX
What did the High Court hold?
The High Court found that the Income Tax Appellate Tribunal (ITAT) ought to have answered the grounds raised by the assessee regarding the first appellate authority's direction to reopen assessments for years 2010-11 and 2012-13 onwards, but failed to do so. The Revenue's counsel agreed that the Tribunal had not properly considered all relevant questions raised by the assessee. The Court agreed with the Revenue that the matter required reconsideration by the Tribunal concerning the direction given by the first appellate authority to reopen assessments for the years 2010-11 and 2012-13 onwards. The Court allowed the appeal, setting aside the ITAT's order and remitting the matter back for fresh consideration in accordance with law, after giving both parties an opportunity of hearing, within three months. The Court explicitly stated it did not go into the merits of the contentions raised by either party.
What were the facts?
The assessee, M/s. Kings Infra Ventures Ltd., filed its return for assessment year 2011-12 showing nil income after claiming a set-off of Rs. 1,52,76,459/- in carried forward losses, including depreciation losses from assessment years 1996-97 to 2009-10. The Assessing Officer disallowed the set-off. The Commissioner of Income Tax (Appeals) partly allowed the appeal, permitting the set-off of unabsorbed depreciation from assessment years 1996-97 and 1997-98 against taxable income for 2010-11, 2011-12, and subsequent years. The first appellate authority also directed the Assessing Officer to reopen assessments for impacted years and make necessary adjustments. The assessee appealed to the Income Tax Appellate Tribunal (ITAT) challenging the direction to reopen assessments for other years, arguing the ITAT's jurisdiction was limited to assessment year 2011-12. The ITAT did not address this specific ground, focusing only on assessment year 2011-12.
What were the issues?
1. Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in sustaining the order of the Appellate Commissioner, in toto? (Question of law and fact, concerning the scope of the Tribunal's jurisdiction). 2. Ought not the Appellate Tribunal to have held that the assets were 'kept ready for use' and therefore, there was no occasion for the 1st appellate authority to take a different stand? (Question of law and fact, concerning the allowability of depreciation). 3. Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the first appellate authority did not exceed the jurisdiction when it directed reopening of assessment for different years? (Question of law and fact, concerning the scope of the first appellate authority's powers). 4. Ought not the appellate Tribunal to have held that the 1st appellate authority must confine itself to the year in which the appeal is filed by the appellant, more particularly, when the appellate tribunal in Annexure-E order categorically stated that it will confine the consideration of the issues for the assessment year 2011-12 alone? (Question of law and fact, concerning the appellate authority's jurisdiction). 5. Whether on the facts and circumstances of the case, the appellate tribunal was correct in confirming the reopening of assessments for different assessment years, in the appeal filed by the assessee for the assessment year 2011-12, in the absence of any challenge from the Department, in respect of the years in which reassessment was directed to be made by the 1st appellate authority? Whether the finding of fact by the Appellate Tribunal erroneous and perverse? (Question of law and fact, concerning the scope of appellate powers and departmental appeals). Assessee's Contention: The ITAT erred in not interfering with the First Appellate Authority's direction to reopen assessments for years other than 2011-12, as this direction was made without jurisdiction in an appeal filed by the assessee concerning only assessment year 2011-12. The ITAT should have set aside this direction. Revenue's Contention: The ITAT properly considered the assessee's appeal. The assessee was given liberty to challenge the Assessing Officer's order when remedial measures are taken for other years, making it premature to argue interference is unwarranted. The assessee's remedy is not foreclosed.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
J U D G M E N T (Dated this the 17th day of November 2021) Basant Balaji J., The appellant challenges the order in I.T.A.No. 25/Coch/2017 dated 14.7.2017 of the Income Tax Appellate Tribunal, Cochin Bench, Kochi.
The appellant was engaged in the business of aqua farm culture and sale of its proceeds. Until 2007, the company functioned in the name of 'M/s.Victory Aqua Farm Limited' and later changed its name to 'M/s.Kings Infra Ventures Limited' and ventured into construction business. The appellant filed its return of income for the assessment years 2011-12, disclosing nil income. The appellant, while filing the return of income, made claim for Rs.1,52,76,459/-
ITA NO. 11 OF 2018 -3- (carried forward loss), which included depreciation loss of Rs.1,88,52,496/- (pertaining to the assessment years 1996-97 to 2009-10) and loss amounting to Rs.35,85,037/- (pertaining to the assessment years 1996-97 and 1997-98). The total loss of Rs.1,52,76,459/- was adjusted against the taxable income of Rs.35,85,037/- for the assessment year 2011-12, whereby the taxable income came to be nil. The assessment authority disallowed the set off of loss and assessed the same as tax for the assessment year 2011-12. Thereafter, the assessment was completed under Section 143(3) of the Income Tax Act.
The appellant filed appeal before the Commissioner of Income Tax Appeals.
The first appellate authority, after a detailed
discussion of the relevant provisions, as well as the ITA NO. 11 OF 2018 -4- adjustment of various Rules and Tribunals, allowed the Appeal in part.
As per the said order, the first appellate authority, allowed the amount of unabsorbed depreciation brought forward from the assessment years 1996-97 and 1997-98 were allowed to be set off against the taxable income for the assessment years 2010-11, 2011-12 and the following the years. The first appellate authority made a further direction to the Assessing Officer to take necessary steps to reopen the assessment proceedings for the assessment years impacted and if the assessment or re-assessment for the preceding assessment years 2010-11 serves to be disallowed any concurrent claim of the unabsorbed depreciation losses relating to assessment years 1997-98 as above, necessary
ITA NO. 11 OF 2018 -5- adjustment will need to be made to disallow any such equivalent value in the impugned assessment year 2011-12 and succeeding assessment years as applicable.
Aggrieved by the order of first appellate authority in respect of reopening of assessment years for the assessment years 2010-11 and succeeding years 2012-13 onwards, the appellant filed second appeal before in Income Tax Appellate Tribunal, Cochin Bench. The main ground raised by the appellant before the second appellate authority was that the grounds raised before the first appellate Authority was in respect of dis-allowance of unabsorbed depreciation for the assessment year 2011-12 and since the first appellate authority allowed the same, it exceeded its jurisdiction to further direct the Assessing officer to reopen the assessment proceedings
ITA NO. 11 OF 2018 -6- for the assessment year 2010-11 and 2012-13 onwards, more so when there was no appeal by the revenue. The Tribunal came to the definite conclusion that it is vested with the jurisdiction only to examine the issue concerning the year 2011-12 and since the first appellate authority has allowed set off, the Tribunal need not go into other directions made by the first appellate authority in respect of reopening of the assessment for the assessment years 2010-11 and 2012-13 onwards. The appellant herein challenges the order of the Income Tax Appellate Tribunal on various grounds. The appellant raises the following substantial questions of laws to be considered by this court: i. “Whether on the facts and circumstances of the case the Appellate Tribunal was justified in sustaining the order of the Appellate
ITA NO. 11 OF 2018 -7- Commissioner, in toto? ii. Ought not the Appellate Tribunal to have held that the assets were 'kept ready for use' and therefore, there was no occasion for the 1st appellate authority to take a different stand? iii.Whether on the facts and circumstances of the case the Appellate Tribunal was justified in holding that the first appellate authority did not exceed the jurisdiction when it directed reopening of assessment for different years? iv. Ought not the appellate Tribunal to have held that the 1st appellate authority must confine itself to the year in which the appeal is filed by the appellant, more particularly, when the appellate tribunal in Annexure-E order categorically stated that it will confine the consideration of the issues for the assessment year 2011-12 alone? v. Whether on the facts and circumstances of the case the appellate tribunal was correct in confirming the ITA NO. 11 OF 2018 -8- reopening of assessments for different assessment years, in the appeal filed by the assessee for the assessment year 2011-12, in the absence of any challenge from the Department, in respect of the years in which reassessment was directed to be made by the 1st appellate authority?Whether the finding of fact by the Appellate Tribunal erroneous and perverse?”
Heard the senior counsel Sri.Joseph Markose for the appellant and the senior counsel Shri P K R Menon for the respondent.
The senior counsel for the appellant argued that Income Tax Tribunal erred in interfering with the findings of the First Income Appellate Authority to the extent it directs the Assessing Officer to take necessary action for reopening
ITA NO. 11 OF 2018 -9- of the assessment for the years 2010-11 and 2012-13 onwards, as it was done by the 1st appellate authority without jurisdiction in an appeal filed by the assessee challenging the disallowing of unabsorbed depreciation. for the year 2011-12. He further submitted that even though his appeal was partly allowed by the first appellate authority granting relief for the assessment years 2011-12, the further direction made by the First appellate authority to the Assessing Officer, is unwarranted.
The senior counsel argued that since the appeal before the Tribunal was in respect of second part of the order of the first appellate Authority directing the Assessing Officer to reopen the assessment, the Tribunal ought to have interfered and allowed the appeal setting aside the direction made by the ITA NO. 11 OF 2018 -10- first appellant authority to the Assessing Officer.
On the other hand, the senior counsel, Shri P K R Menon submitted that the Tribunal has properly considered
the appeal filed by the assessee and the assessee was given liberty to challenge the order of the Assessing Officer when remedial measures are taken by the Assessing Officer for the respective years 2010-11 and the assessment years 2012-13 onwards and its premature for him to argue that interference is unwarranted at this stage. The remedy of the assessee is not foreclosed by the order of the Tribunal and hence, it does not warrant any interference with the order of the Tribunal.
We have anxiously considered the rival submissions made at the Bar. On going through Annexure - D, it is evident that the appellant challenges the order of the first appellant
ITA NO. 11 OF 2018 -11- authority on the ground that the first appellate authority exceeded its jurisdiction which was limited to the assessment year 2011-12 and by giving direction or re-opening the assessment for the years 2010-11 and 2012-13 onwards, was without jurisdiction. On going through the order of the Tribunal, we have noted that the grounds raised by the appellant mentioned above was taken note of, but the said contention was not answered by the Tribunal for the reason that the issue before the Tribunal was only in respect of the assessment years 2011-12. The Tribunal did not go into the grounds raised by the appellant in respect of the direction given by the 1st appellate authority to the Assessing Officer to re-open the assessment for the years 2010-11 and 2012-13 onwards. According to us, the Tribunal ought to have ITA NO. 11 OF 2018 -12- answered the said question, but failed to do so. The learned senior counsel Shri P K R Menon appearing for the Revenue also agrees that the Tribunal has not properly considered all of the relevant questions raised by assessee. He, however, suggests persuasively that this court ought not examine all the aspects afresh. We are in total agreement with him, after reading the order of the Tribunal and we are of the view that the matter requires re-consideration by the Tribunal in respect of the issue regarding the direction given by the 1st appellant authority to the Assessing officer to re-open the assessment for the years 2010-11 and 2012-13 onwards. The questions are answered accordingly. In the result, this Income Tax Appeal is allowed, setting aside the order of the Tribunal dated 14.7.2017 and remitting
ITA NO. 11 OF 2018 -13- back for fresh consideration, in accordance with law, after giving both the parties opportunity of hearing, at any rate, within a period of three months from the date of receipt of a certified copy of this judgment. Needless to state, that we are not gone into the merits of the contentions raised by either of the parties. The Tribunal is free to look into the issue afresh and pass fresh final orders as directed above. S.V.BHATTI,
JUDGE BASANT BALAJI,
JUDGE dl/
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