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Judgment
Akil Kureshi, J.—Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 12.10.2012 raising following questions for our consideration:
(A) Whether the Appellate Tribunal is right in holding that since no new material has come on record there is no reason to believe that there was escapement of income? The provisions of section 147 expressly provide for reassessment without any requirement of fresh material on record?
(B) Whether the Appellate Tribunal is right in holding that unabsorbed depreciation of AY 1997-98 can be set-off beyond eight assessment years despite the fact that the same was governed by the erstwhile provisions of section 32(2) and the new provisions are applicable only from 01/04/2002?
From the questions, it can be seen that there are two clear parts of the appeal. First is with respect to validity of the reopened proceedings. Second question pertains to the Tribunal''s decision on the question of carry forward of unabsorbed depreciation u/s 32 of the Income Tax Act, 1961.
Assessment for assessment year 2006-2007 of the respondent assessee was originally framed after scrutiny. Such assessment was sought to be reopened beyond a period of four years from the end of relevant assessment year. In such proceedings, the Assessing Officer disallowed a sum of Rs. 68.36 lakhs (rounded off). The assessee carried the matter in appeal. He contested the issue both on validity of the reopening as well as on the quantum additions. CIT (Appeals) however, rejected the appeal upon which the assessee approached the Tribunal. Tribunal allowed the assessee''s appeal on both counts. Hence two separate questions at the hands of the Revenue.
In facts of the present case, we are inclined to examine only first question which in our opinion is sufficient. We may recall that notice for reopening was issued beyond a period of four years from the end of relevant assessment year. Original assessment was framed after scrutiny.
Assessing Officer had recorded following reasons for issuing notice for reopening:
The return of income declaring NIL income after adjusting brought forward unabsorbed depreciation of Rs. 95,17,604/- including unabsorbed depreciation of Rs. 68,36,912/- of AY 1997-98 filed by the assessee on 26.12.06. the assessment was finalized u/s. 143(3) on 22.8.06 determining same income and unabsorbed depreciation of Rs. 76,912/- of AY 1998-99 and Rs. 3,85,068/- of AY 2000-01 was allowed to carry forward.
As per the sub-section 2(iii)(b) of section 32 as amended by the Finance Act (No. 2) Act, 1996 with effect from 1st April 1997, if the unabsorbed depreciation allowance cannot be wholly set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed.
Scrutiny of records revealed that as per the provisions of sub-section 2(iii)(b) of section 32, unabsorbed depreciation could not be carried forward for more than eight assessment years immediately succeeding the assessment year for which allowance was first determined. As unabsorbed depreciation was of A.Y. 1997-98. Thus, in view of provisions of section 32 [2(iii) (b) ], it was eligible for set off till AY 2005-06. (1997-98 + eight years). Thus due to irregular set off of unabsorbed depreciation of AY 1997-98 in AY 2006-07 resulted in underassessment in Rs. 68,36,912/-.
Further, there was irregular carry forward unabsorbed depreciation of Rs. 76,912/- of AY 1998-99.
From such reasons, it straightaway emerges that even as per the Assessing Officer there was no failure on part of the assessee to disclose truly and fully all material facts. In that view of the matter, merely because the claim was not previously processed during the scrutiny assessment or that such claim was perhaps legally not sustainable, would not vest the jurisdiction in Assessing Officer to reopen the assessment. CIT (Appeals) erroneously upheld the validity of the reopening on the count that in the original assessment, such claim was not examined. Such issue would be relevant if the notice for reopening was issued within a period of four years from the end of relevant assessment year.
The Tribunal therefore, in our opinion, committed no error in declaring that the proceedings u/s 147 of the Act were invalid.
That being the position, the Revenue''s tax appeal must fail.
Counsel for the Revenue submitted that the Tribunal has committed a grave error in upholding the assessee''s claim for carry forward of unabsorbed depreciation beyond a period of eight years. When we have confirmed the Tribunal''s decision regarding invalidity of the proceedings, we make it clear we have not examined such a contention on merits. Tax Appeal is dismissed.