2013 (1) TMI 1007 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Set-off of unabsorbed depreciation.
3. Transfer of undertaking and valuation.
4. Computation of depreciation.
5. 100% depreciation on Boiler.
6. Option under Rule 5(1A).
7. Deduction of profits under Section 115J.
8. Computation of loss on sale of shares.

Summary of the Judgment:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessee challenged the jurisdiction of the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act, 1961, arguing that the scrutiny assessment was completed u/s 143(3) read with section 147 after examining the books of accounts and other documents. The CIT held that the assessment order was erroneous and prejudicial to the interest of the revenue. The tribunal upheld the CIT's jurisdiction, noting that the Assessing Officer (AO) had not applied his mind to the issues at hand, resulting in a 'no opinion' scenario rather than 'one of the possible opinions'.

2. Set-off of Unabsorbed Depreciation:
The CIT held that unabsorbed depreciation could only be set off against the profits and gains of business or profession. The tribunal noted that the AO had failed to examine the set-off of unabsorbed depreciation against capital gains. The CIT(A) later allowed the set-off of unabsorbed depreciation against capital gains, supported by the Hon'ble Jurisdictional High Court's decision in CIT vs. Pioneer Asia Packing (P) Ltd., which held that unabsorbed depreciation from prior to 1996-97 could be set off against capital gains.

3. Transfer of Undertaking and Valuation:
The CIT questioned the arm's length nature of the transfer of the undertaking to its subsidiary. The tribunal observed that the valuation was approved by the Madras High Court and supported by a valuation from Tata Economic Consultancy Services. The CIT's order was upheld, directing the AO to reassess the valuation.

4. Computation of Depreciation:
The CIT held that the AO had not computed the depreciation correctly in respect of assets transferred to its subsidiary. The tribunal noted that the AO had failed to verify the depreciation claim and directed a fresh assessment. The CIT(A) later confirmed the AO's findings, restricting the assessee's claim of depreciation by apportioning it according to the number of days the assets were used.

5. 100% Depreciation on Boiler:
The CIT held that the AO had wrongly allowed the claim for 100% depreciation on a boiler. The tribunal observed that the AO had not verified the claim and directed a fresh assessment.

6. Option under Rule 5(1A):
The CIT held that the option under Rule 5(1A) had not been obtained. The tribunal noted that the AO had failed to verify this and directed a fresh assessment.

7. Deduction of Profits under Section 115J:
The CIT held that the AO had wrongly allowed the claim for deduction of profits of the cogeneration power division in computing the Minimum Alternate Tax (MAT) under Section 115JA. The tribunal upheld the CIT's direction for a fresh assessment.

8. Computation of Loss on Sale of Shares:
The CIT held that the loss on the sale of shares of Kothari Sugars and Chemicals Ltd was not computed correctly. The tribunal observed that the AO had not verified the computation and directed a fresh assessment.

Conclusion:
The tribunal dismissed all three appeals (I.T.A. Nos. 635/Mds/2010, 791/Mds/2012, and 816/Mds/2012), upholding the CIT's directions for fresh assessments and confirming the CIT(A)'s findings on various issues. The CIT was found to have rightly directed the AO to proceed afresh in accordance with the law.