2008 (9) TMI 589 - HC - Income Tax

Set off and carry forward - Rectification of mistakes - There was no mistake apparent from the orders under section 143(1)(a)/143(3) warranting rectification of these orders and withdrawal of set-off of losses and depreciation pertaining to the earlier years allowed to the appellant through these orders - The very fact that the presumption of the appellant s business being closed was a debatable point, there was no mistake apparent from the records warranting rectification - he running of hotel was handed over by the court to the court receiver who was none but one of the directors of the company - The provisions of section 154 can be invoked only if there is a mistake either of a fact or law from the records - In this case, the first appellate authority/Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal have recorded concurrent findings of fact in respect of the issue as to whether the Assessing Officer was justified in invoking section 154 of the Act regarding rectification - Hence the appeals are dismissed

Summary

Issues Involved:
1. Appeal under section 260A of the Income-tax Act, 1961 regarding benefit of carry forward losses and depreciation.
2. Justification of Income-tax Appellate Tribunal's decision on carry forward losses and depreciation.
3. Rectification of mistake apparent on the record by the Assessing Officer.
4. Commissioner of Income-tax (Appeals) decision on allowing carry forward losses and depreciation.
5. Income-tax Appellate Tribunal's confirmation of Commissioner's decision.
6. Substantial questions of law regarding cessation of business and entitlement to carry forward losses.

Analysis:

1. The appeal under section 260A raised substantial questions of law regarding the benefit of carry forward losses and depreciation. The primary issue was whether the Income-tax Appellate Tribunal was justified in allowing these benefits despite the hotel business being managed by a court receiver. The assessment order pertained to the year 1990-91, and related Tax Appeals for 1991-92 and 1992-93 were decided collectively due to identical issues.

2. The factual background revealed that the respondent company was engaged in the hotel business and initially declared nil income for 1990-91 but later claimed high carry forward of losses. The Assessing Officer allowed unabsorbed brought forward depreciation and business losses to be carried forward. However, for the assessment year 1987-88, the claim for carry forward was disallowed as the business was managed by a court receiver, leading to a series of rectification orders.

3. The Commissioner of Income-tax (Appeals) allowed the appeals filed by the assessee, stating that there was no mistake apparent on the record justifying the rectification orders. The Commissioner emphasized that the Assessing Officer erred in withdrawing the claims of depreciation and losses relating to earlier years as there was no cessation of business by the appellant.

4. The Income-tax Appellate Tribunal upheld the Commissioner's decision, emphasizing that the issue of granting benefits of set-off brought forward losses and depreciation was debatable and not a mistake apparent on the record. The Tribunal affirmed the Commissioner's findings on the merits of the case, stating that the appellant was entitled to carry forward and set-off losses and depreciation relating to earlier years.

5. The High Court affirmed the decisions of the Commissioner and the Tribunal, concluding that no substantial question of law was involved. The Court held that the Assessing Officer had erred in invoking section 154 of the Income-tax Act for rectification and that the findings of both authorities were not perverse. The appeals were dismissed based on these conclusions.

6. The Court's analysis highlighted the importance of the limited scope of section 154 for rectification of mistakes, citing relevant Supreme Court decisions. The conclusion emphasized that there was no cessation of business by the assessee, and the appellant was entitled to carry forward and set-off losses and depreciation relating to earlier years based on the facts presented in the case.