2012 (12) TMI 733 - AT - Income Tax

Jurisdiction power u/s 263 by CIT(A) - set off of unabsorbed depreciation allowance brought forward from Assessment Year 1998-99 - Held that - Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. There is no enquiry by the AO whatsoever on the issue in dispute. He just accepted the claim of set off of earlier year unabsorbed depreciation in the assessment year under consideration. Being so, the CIT assumed jurisdiction u/s. 263. Thus it is to be opined that subject matter of the revision is pending before the Special Bench for adjudication and the AO passed the assessment order without an iota of discussion on the issue of whatsoever as such the CIT exercised his powers u/s. 263 to revise the order of AO which was in conformity with the order of the Special Bench and invoking the provisions of section 263 is justified. Set off of unabsorbed depreciation allowances carried forward from assessment year 1996-97 and 1998-99 against income relating to assessment year 2007-08 - This issue is covered against the assessee by the order of the Special Bench in the case of DCIT Versus Times Guaranty Ltd. 2010 (6) TMI 516 - ITAT, MUMBAI wherein held that unabsorbed depreciation relating to assessment years 1997-98 to 1999-2000 is to be dealt with in accordance with the provisions of section 32(2) as applicable to assessment year 1997-98 to 1999-2000 and, therefore, assessee cannot claim set off of unabsorbed depreciation relating to assessment year 1997-98 to 1999-2000 under any head of income other than income from business or profession in assessment years 2003-04 and 2004-05 - issue is decided against the assessee. when there are several decisions of non-jurisdictional High Courts expressing contrary views, the Tribunal is free to choose to adopt that view which appeals to it. For this purpose, we place reliance on the order of the Special Bench in the case of Kanel Oil & Export Industries Ltd. vs. JCIT, (2009 (8) TMI 806 - ITAT AHMEDABAD-C). Settlement of dues with Stressed Assts Stabilisation Fund IDBI - Held that - Perusuing the material on record & going through the impugned assessment order there is no discussion in the assessment order on the impugned issue. There is no enquiry on this issue. The order is erroneous and prejudicial to the interest of revenue as discussed in earlier paras of this order. Accordingly the order of the CIT(A) confirmed.

Issues Involved:

1. Erroneous and prejudicial assessment order regarding the set-off of unabsorbed depreciation from AY 1998-99 and AY 1996-97.
2. Erroneous assessment order concerning the compromised settlement of dues with Stressed Assets Stabilization Fund IDBI.
3. Non-compliance with CBDT circulars by the assessing officer.
4. Jurisdiction of CIT under Section 263 without issuing a show-cause notice.
5. Assessee's agreement to the setting aside of the assessment order.
6. Other grounds raised by the assessee without prejudice to one another.

Detailed Analysis:

1. Erroneous and Prejudicial Assessment Order Regarding Set-off of Unabsorbed Depreciation:

The CIT observed that the assessment order made by the assessing officer was erroneous and prejudicial to the interests of the revenue concerning the set-off of unabsorbed depreciation allowances from AY 1998-99 and AY 1996-97. The CIT noted that the law applicable to the relevant assessment year stipulated that such carry forward of unabsorbed depreciation is limited to 8 years. The assessee's reliance on Circular No. 14 of 2001, which permits the indefinite carry forward of unabsorbed depreciation, was rejected by the CIT, who instead relied on the Special Bench's decision in DCIT vs. Times Guarantee Ltd. The Tribunal upheld the CIT's view, noting that the assessment order lacked proper scrutiny and was therefore erroneous and prejudicial to the revenue.

2. Erroneous Assessment Order Concerning Compromised Settlement of Dues with Stressed Assets Stabilization Fund IDBI:

The CIT found that the assessing officer failed to make necessary inquiries regarding the compromised settlement of dues with Stressed Assets Stabilization Fund IDBI. The assessee contended that no income arose from the settlement under Section 41 of the Act. However, the CIT noted the absence of details regarding the interest waived and other particulars. The Tribunal agreed with the CIT, emphasizing that the assessment order was erroneous and prejudicial to the revenue due to the lack of inquiry and directed the assessing officer to re-examine the issue.

3. Non-compliance with CBDT Circulars by the Assessing Officer:

The assessee argued that the assessing officer's order was in compliance with CBDT Circular No. 14 of 2001, which permits the indefinite carry forward of unabsorbed depreciation. The Tribunal, however, upheld the CIT's reliance on the Special Bench's decision in DCIT vs. Times Guarantee Ltd., which mandated the application of Section 32(2) as it stood for AY 1997-98 to 1999-2000. The Tribunal noted that the assessing officer's failure to consider this decision rendered the assessment order erroneous and prejudicial to the revenue.

4. Jurisdiction of CIT under Section 263 Without Issuing a Show-cause Notice:

The assessee contended that the CIT erred in applying Section 263 on points for which no show-cause notice was issued. The Tribunal dismissed this argument, stating that the CIT's jurisdiction under Section 263 was valid as the assessment order was found to be erroneous and prejudicial to the revenue due to the lack of proper inquiry.

5. Assessee's Agreement to the Setting Aside of the Assessment Order:

The assessee argued that the CIT erred in observing that the appellant agreed to the setting aside of the assessment order. The Tribunal found this argument to be without merit, as the primary issue was the erroneous and prejudicial nature of the assessment order, which justified the CIT's action under Section 263.

6. Other Grounds Raised by the Assessee:

The Tribunal addressed the various other grounds raised by the assessee, including the binding nature of CBDT circulars and the adequacy of the assessing officer's inquiries. The Tribunal concluded that the assessment order was erroneous and prejudicial to the revenue due to the lack of proper inquiry and application of relevant legal provisions.

Conclusion:

The Tribunal upheld the CIT's order under Section 263, directing the assessing officer to re-examine the issues related to the set-off of unabsorbed depreciation and the compromised settlement of dues with Stressed Assets Stabilization Fund IDBI. The appeal of the assessee was dismissed, affirming the CIT's jurisdiction and the need for proper inquiry and application of law in the assessment process.

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