SUNSHINE GRANITES PRIVATE LIMITED ,HYDERABAD vs. DEPUTY COMMISSIONER OF INCOME TAX ,CENTRAL CIRCLE-1(2), HYDERABAD

Director of the company filed an affidavit, explaining the reasons for the delay of 148 days in filing the appeal, and prayed that delay is unintentional and inadvertent due to the circumstances beyond their control. It is further stated that the company is at remote place in Karimnagar District. From 01/04/2020 on account of Covid-19, the business came to a standstill and the employees left and there were no staff at the registered office at Karimnagar. As there was no staff at the office, there was nobody to receive notice of the orders passed by the authorities. It was only when the demand was sought to be enforced and then, they contacted the counsel prepared the appeal papers and filed the same.

Delay of 148 days in preferring the appeal and the reason attributed for the delay in filing the appeal to the pandemic. As a matter of fact, though the learned DR does not concede to condone the delay, there is no denial of the fact that the Hon'ble Supreme Court in the Suo Motu proceedings in the case of M.A.No. 21/2022 in M.A.No. 665/2021 in SMW(C) No.3 of 2020 by order dated 10/01/2022 held that in cases, where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. The limitation period applicable to this appeal is covered by the above decision and, therefore, this appeal shall be treated as filed within the period of limitation. We, therefore, now shall proceed to hear the appeal on merits.

Only question involved in this appeal is whether the assessee is entitled to seek set off of the carried forward losses of the assessment year 2012-13 against the profit of the company for the assessment year 2013- 14, in view of the change in the shareholding pattern of the assessee? Initially while assessing the income of the assessee, learned Assessing Officer allowed the carry forward of losses of 2012-13 to be set off against the future losses, but the learned PCIT, in exercise of powers under section 263 of the Income Tax Act, 1961 (for short “the Act”) revised the same holding that the shareholding pattern of the assessee company changed substantially for the year under consideration and the shareholding to the extent of 51% was not the one and the same in the assessment year 2012- 13 and 2013-14, and therefore, in terms of section 79 of the Act, the carried forward losses cannot be allowed to be set off against the profits of the company in subsequent years.

Learned Assessing Officer, pursuant to the orders of the PCIT under section 263 of the Act, disallowed the brought forward losses of the assessment year 2012-13 and added the total income before setting off of such losses, to the income of the assessee and passed the order dated 31/10/2018 under section 143(3) read with section 263 of the Act.

Assessee preferred appeal before the learned CIT(A), but according to the learned CIT(A), failed to comply with various notices issued for hearing, and therefore, the learned CIT(A) proceeded ex parte and decided the issue against the assessee dismissing the appeal in limine.

Hence this appeal by the assessee contending that the learned CIT(A) should not have dismissed the appeal in limine, but could have

Learned AR placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Shri Subhulaxmi Mills Ltd. [2001] 119 Taxman 281 (SC) wherein the Hon’ble Apex Court upheld the judgment of Hon’ble Gujarat High Court in the case of CIT v. Shri Subhlaxmi Mills Ltd. [1983] 143 ITR 863 to the effect that when section 79 of the Act speaks of loss, it does not include unabsorbed depreciation or unabsorbed development rebate.

Per contra, it is the submission of the learned DR that the impugned order clearly shows that more than ten notices were issued to the assessee fixing the date of hearing between 03/03/2019 and 05/08/2021, but without assigning any reasons the assessee failed to comply with the same and to put forth their case on merits. learned DR, therefore, submits that without availing the opportunity granted by the learned CIT(A) and without allowing this forum to have the benefit of the view of the learned CIT(A) on this aspect for effective adjudication of the issue, it is not open for the assessee now to contend that the learned CIT(A) should not have proceeded ex parte or that he should have allowed the unabsorbed depreciation losses on the ground that section 79 of the Act has no application to the unabsorbed depreciation or unabsorbed development rebate.

We have gone through the record in the light of the submissions made on either side. It could be seen from the impugned order that the

The Hon’ble Apex Court is clear on this aspect and in the case of Shri Subhlaxmi Mills Ltd. (supra) expressly approved the view taken by the Hon’ble Gujarat High Court that when section 79 of the Act speaks of loss, it does not include unabsorbed depreciation or unabsorbed development rebate. Since it is neither a pure nor mixed question of fact, it does not admit of any further factual findings of the learned CIT(A), but involves only interpretation of the provision by the learned CIT(A). When the Hon’ble Supreme Court speaks on the non-applicability of section 79 of the Act to the unabsorbed depreciation loss, any opinion of learned CIT(A) on this aspect is immaterial, and suffice it to cause verification whether the carry forward losses of assessment year 2012-13 sought to be set off against the future losses by the assessee including the assessment year 2013-14, include any unabsorbed depreciation. If it is so, it is eligible for set off against the profits of the future years.

With this view of the matter, we direct the learned Assessing Officer to verify whether the carry forward losses of assessment year 2012-13 sought to be set off against the future losses by the assessee including the