SMT M. R. PRABHAVATHY vs. THE ASSISTANT COMMISSIONER

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF AUGUST 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.8 OF 2019 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX

5TH FLOOR, BMTC BUILDING

80 FEET ROAD, KORMANGALA

BENGALURU-560095. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX

CIRCLE-1(2)(1), 2ND FLOOR

BMTC BUILDING, 80 FEET ROAD

KORMANGALA, BENGALURU-560095.

... APPELLANTS (BY SRI. SANMATHI E.I. ADV., FOR SRI. ARAVIND K.V. ADV.,) AND: M/S. KIDS KEMP NO.18, RAMANNSHREE ARCADE M.G. ROAD, BENGALURU-560001 PAN: AABFK 6993K.

... RESPONDENT (BY SRI. A. SHANKAR, SR. COUNSEL A/W SRI. BHAIRAV KUTTAIAH, ADV.,) - - -

2 THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 25.05.2018 PASSED IN M.P.NO.8/BANG/2018 (IN ITA NO.1034/BANG/2016), FOR THE ASSESSMENT YEAR 2008- 09, PRAYING TO:

I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE IN M.P.NO.8/BANG/2018 (IN ITA NO.1034/BANG/2016) DATED 25.05.2018 FOR ASSESSMENT YEAR 2008-09 ANNEXURE-C CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2)(1), BENGALURU. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the revenue against the order dated 25.05.2018 passed by the Income Tax Appellate Tribunal. The subject matter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court on the following substantial question of law: "Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in law in setting aside the disallowance of

3 set off of unabsorbed depreciation by following the judgment of Gujarat High Court in the case of GENERAL MOTORS PRIVATE LIMITED., even though the amendments madder to Section 32(2) of the Act which removed the gap of 8 years in allowing set off of unabsorbed depreciation is prospective and effective only from 1-4-2002?" 2. Facts leading to filing of this appeal briefly stated are that the assessee is a partnership firm and is engaged in the business of sale of readymade garments. The assessee had claimed set off of unabsorbed depreciation in relation to Assessment Years 1997-98, 1998-99 and 1999-2000 in the return of income. The aforesaid claim was accepted in the regular assessment under Section 143(3) for the Assessment Years 2008-09 and 2009-2010. The assessee was directed to carry forward the depreciation in the proceeding under Section 143(1) of the Act for the Assessment Year 2010-11 also. 3. Thereafter, a notice under Section 154 of the Act was served on the assessee by which it was proposed to disallow the unabsorbed depreciation. The assessee submitted its response to the aforesaid notices and the

4 Assessing Officer, by an order dated 25.02.2014 passed under Section 154 of the Act, rectified the assessment and disallowed the unabsorbed assessment of depreciation of the Assessment Years 1997-98 to 2001-02. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 29.02.2016 allowed the appeal on merits but did not adjudicate the issue with regard to jurisdiction raised by the assessee as the same had been rendered academic. Being aggrieved, the revenue filed an appeal whereas the assessee filed a cross-objection before the Income Tax Appellate Tribunal. The Tribunal, by a common order dated 06.07.2017, dismissed the appeal preferred by the revenue as well as the cross-objection preferred by the assessee and upheld the order passed by the Commissioner of Income Tax (Appeals) allowing the unabsorbed depreciation. It is pertinent to note that against the aforesaid order, the revenue has not filed any appeal. 4. The revenue, being aggrieved by the order of the Tribunal dated 06.07.2017, filed a miscellaneous petition which was dismissed by the Tribunal by an order dated

5 25.05.2018. In the aforesaid factual background, this appeal has been filed. 5. Learned counsel for the revenue submitted that the Tribunal grossly erred in dismissing the appeal preferred by the revenue by placing reliance on the decision of Gujarat High Court in 'M/s. GENERAL MOTORS INDIA PVT. LTD. Vs. DEPUTY COMMISSIONER OF INCOME-TAX' 354 ITR 244 (GUJ). It is further submitted that the amendment made to Section 32(2) of the Act which removed the cap of 8 years in allowing the set off of unabsorbed depreciation, is prospective in nature and applies w.e.f. 01.04.2002 only. It is further submitted that the Tribunal ought to have appreciated that the amendment made to Section 32(2) of the Act is prospective in nature. In this connection, our attention has been invited to memorandum explaining the provisions of Finance Act, 2001. Learned counsel for the revenue, while inviting the attention of this Court to the decision of the Supreme Court in 'COMMISSIONER OF CUSTOMS (IMPORT) MUMBAI Vs. M/s. DILIP KUMAR AND CO. & ORS.' (2018) 68 GST 239, has submitted that

6 the provisions pertaining to deduction / exemption has to be strictly considered and in case there is any ambiguity in the provision, the benefit of the same has to be explained to the revenue. 6. On the other hand, learned Senior counsel for the assessee submitted that for invocation of Section 154 of the Act, twin conditions have to be satisfied. Firstly, that there has to be a mistake. Secondly, such mistake has to be apparent on the record. It is further submitted that the Tribunal has recorded a categorical finding in the fact situation of the case, that the revenue has failed to make out any error apparent on the face of record. It is further submitted that the issue involved in the appeal was debatable and the Tribunal, after assigning reasons vide order dated 06.07.2017, had upheld the order of the Commissioner of Income Tax (Appeals) allowing unabsorbed depreciation. It is pointed out that the aforesaid order was not challenged by the revenue. It is further submitted that infact the substantial question of law involved in this appeal does not arise for consideration.

7 7. We have considered the submissions made on both sides and have perused the record. Admittedly, the revenue has not challenged the order dated 06.07.2017 passed by the Income Tax Appellate Tribunal by which the appeal preferred by the revenue was dismissed and the order passed by the Commissioner of Income Tax (Appeals) allowing the claim of the assessee for unabsorbed depreciation was upheld. In order to invoke Section 154 of the Act, twin conditions are required to be satisfied namely that there has to be a mistake and such a mistake has to be apparent on record. It is settled in law that the detection of such a mistake does not require a search or thorough application of mind and there cannot be a mistake in respect of an issue which admits of two plausible opinion. In the instant case, the Tribunal has dealt with the contention of the revenue in paragraph 6 and has held that for the reasons assigned therein, in the decision of Calcutta High Court in the case of 'PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. Vs. CIT' 380 ITR 165 does not apply to the case of the assessee and has recorded a finding that the

8 miscellaneous petition filed by the revenue is liable to be dismissed as the revenue has failed to show any error apparent on the face of the record in the order dated 06.07.2017 passed by the Tribunal. The order dated 06.07.2017 is based on the decision of the High Court of Gujarat in M/s. GENERAL MOTORS INDIA, supra. The aforesaid order does not suffer from any mistake apparent on the face of the record warranting invocation of power under Section 144 of the Act. The Tribunal has therefore, rightly dismissed the application filed by the revenue. The substantial question of law framed by this Court in fact does not arise for consideration in this appeal. In the result, the appeal fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE RV