Case Law Details
ADM Agro Industries Latur & Vizag Pvt. Ltd Vs DCIT (ITAT Delhi)
The grievance of the assessee is that impugned order passed by the A.O is illegal and barred by time. Section 154(7) of the Act prescribes the limitations for the passing order u/s 154 of the Act. For the sake of clarity, same is reproduced here as under:-
“(7) Save as otherwise provided in section 155 or subsection (4) of section 186, no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed.”
A plain reading of the Section makes it clear no order can be made after the expiry of four years from the end of the Financial Year in which orders sought to be amended was passed. In this case, the Assessing Officer sought to amend the order dated 25/3/2013. Hence, the limitation would start from 1/4/2013 and would expire on 31st March, 2017. However, impugned order is dated 16/3/2016. Therefore, the grounds of the assessee are devoid of any merit. Hence, dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal filed by the assessee for the assessment year 2007- 08 is directed against the order of Ld. CIT(A)-1, New Delhi dated 26.04.2016. The assessee has raised following grounds of appeal:-
1. “That the rectification order dated 16.03.2016 passed by the Assessing Officer (“AO”) u/s 154/143(3)/250 of the Income Tax Act, 1961 (“the Ace) and the disallowance made therein is illegal, bad in law, without jurisdiction and barred by time limitation.
2. That on the facts and circumstances of the case, the rectification order passed by the AO u/s 154 of the Act dated 16.03.2016 is barred by limitation as the assessment order cannot be rectified by a notice u/s 154 dated 07.03.2016, which is admittedly beyond the period of four years as stipulated in section 154. Hence the order u/s 154 is barred by limitation, and hence the same is invalid and liable to be set aside.
3. That the time limitation u/s 154 has to be seen from the date of the original assessment order u/s 143(3) and not from the appeal effect order, as the issue was not subject matter of appeal before the Commissioner of Income Tax (Appeals) ‘CIT(Appeals)” .
4. That on the facts and circumstances of the case, the CIT(Appeals) has erred on facts and in law in upholding AO’ s order invoking section 154 of the Act to make disallowance u/s 32(2) when the said issue is highly debatable and therefore, the order passed u/s 154 is illegal, bad in law and liable to be set aside.
5. That the CIT(Appeals) has failed to appreciate that there was no mistake apparent from record which could have been rectified u/s 154 by the AO hence the order passed u/s 154 is beyond the scope of the said scheme, hence the same is liable to be set aside.
6. That, on the facts and circumstances of the case, the CIT(Appeals) has erred on facts and in law in upholding the action of AO disallowing set off of unabsorbed depreciation amounting to Rs. 3,83,54,673/- claimed for A.Y. 1995-96, 1996-97 and 1998-99 against the profits for A.Y. 2007-08 by ignoring the amendment made in section 32(2).
7. That, on the facts and circumstances of the case, the AO as well as CIT(Appeals) have failed to appreciate that the unabsorbed depreciation available as on 1 April 2001 would be governed by the provisions of section 32(2) of the Act as amended by the Finance Act, 2001 and has therefore erred in upholding the disallowance of claim of set off of unabsorbed depreciation amounting to Rs. 3,83,54,673/-.
8. That, without prejudice, the disallowance of carry forward of depreciation has also been wrongly worked out.
9. That the Appellant craves leave to alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either before or during the hearing.”
2. Facts of the present case are that the assessee filed its return of income on 31.10.2007 declaring NIL income after adjusting unabsorbed depreciation to the extent of Rs.3,83,54,673/-. During the course of assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (“the Act”), disallowance amounting to Rs.25,76,13,085/- was made on account of cash purchases made from farmers. The Assessing Officer (“AO”) vide order dated 05.02.2015 passed the appeal effect order u/s 250 r.w.s. 143(3) of the Act. Subsequently, a notice u/s 154/155 of the Act dated 07.03.2016 was issued by the AO for rectification of certain mistake apparent from record in the assessment order passed for the subject Assessment Year. As per the said notice, the claim of set off of unabsorbed depreciation amounting to Rs.3,83,54,673/- for Assessment Years 1995-96, 1996-97 and 1998-99 against the profits of Assessment Year 2007-08 was stated to be a mistake apparent from record. Since in view of the AO, the unabsorbed depreciation as on 31.03.1997 and the period starting from 199798 to 2001-02 was allowed to be carried forward for eight Assessment Years only. Hence, the AO proceeded to pass an order u/s 154 of the Act, dated 16.03.2016 for Assessment Year 2007-08 wherein the set off of unabsorbed depreciation pertaining to Assessment Years 1995-96, 1996-97 and 1998-99 was denied.
3. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal.
4. Aggrieved against this, the assessee preferred appeal before the Tribunal.
5. Ground No. 1 to 5 are against legality of the action for rectifying the mistake.
6. Ld. Counsel for the assessee submitted that the impugned order passed u/s 154 of the Act is clearly barred by limitation. It is submitted that even otherwise also issue of allowability of set off of depreciation is a debatable issue, hence, is beyond the scope of provision of Section 154 of the Act.
7. Ld. Counsel for the assessee submitted that Ld. CIT(A) was not justified in confirming the action of the Assessing Officer .
8. Per contra, Ld. Departmental Representative opposed these submissions and supported the orders of the authorities below. He submitted that the order is within the time prescribed under the Act.
9. We have heard rival submission and perused the material available on record and supported the orders of the authorities below.
10. The grievance of the assessee is that impugned order passed by the A.O is illegal and barred by time. Section 154(7) of the Act prescribes the limitations for the passing order u/s 154 of the Act. For the sake of clarity, same is reproduced here as under:-
“(7) Save as otherwise provided in section 155 or subsection (4) of section 186, no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed.”
11. A plain reading of the Section makes it clear no order can be made after the expiry of four years from the end of the Financial Year in which orders sought to be amended was passed. In this case, the Assessing Officer sought to amend the order dated 25/3/2013. Hence, the limitation would start from 1/4/2013 and would expire on 31st March, 2017. However, impugned order is dated 16/3/2016. Therefore, the grounds of the assessee are devoid of any merit. Hence, dismissed.
12. Ground No. 6 & 7 are on merit of the disallowance of depreciation by the Ld.CIT(A)
13. Ld. Counsel for the assessee submitted that the Ld.CIT(A) declined the claim of the assessee by relying upon the judgment of the Special Bench of this Tribunal. However, the Hon’ble High Court of Madras has decided the issue in the case of CIT Vs Tamil Nadu Small Industries Cooperation vide order dated 20/7/2021 in T. C. A No. 236/2017 in favour of the assessee by following its earlier order in the case of Arway Heart Hospital Ltd. Vs. Assistant Commissioner of Income Tax 127 Taxman.com805 & 2020 122 Taxman.com 212 (Madras) Commissioner of Income Tax Vs. Sanmar Chemical Industries Ltd.
14. Ld. Departmental Representative opposedthe submissions and supported the order of the authorities below.
15. We have heard the rival submissions and perused the material available on record and gone through the orders of the authorities below. We find that the Ld.CIT(A) has relied upon the judgment of the Special Bench of this Tribunal in the case of DCIT VS. Times Guaranty Ltd. However, the Hon’ble Madras High Court has ruled in favour of the assessee in the case of CIT Vs. Tamil Nadu Small Industries Corporation Ltd. in T.C.A No. 236/2017. Therefore, respectfully, following the judgment of the Hon’ble Madras High Court in the case of CIT Vs. Tamil Nadu Small Industries Corporation Ltd. WE hereby direct the Assessing Officer to delete the disallowance and allow setting off of unabsorbed depreciation as claimed by the assessee.
16. Ground No. 8 is in respect of error in computation of disallowance of carry forward of depreciation. Since, we have allowed Ground No. 7. This ground has become infructuous, hence, dismissed.
Ground No. 9 is general in nature, needs no separate adjudication.
17. In the result, the appeal of the assessee is partly allowed.
Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 31st December, 2021.
