2017 (3) TMI 270 - HC - Income Tax

MAT computation - disallowing the deduction of accumulated unabsorbed depreciation of earlier years while computing the book profit u/s 115JB - Held that - As for A.Y 2009-2010, the Assessing Officer allowed deduction of alleged accumulated unabsorbed depreciation of earlier years and computed the book profit for the purpose of Section 115JB of the Act accordingly. It is required to be noted that assessment for A.Y 2009-2010 was a scrutiny assessment under Section 143 (3) of the Act. A similar treatment was given by the Assessing Officer for Assessment Year 2011-2012. It is not in dispute that the aforesaid assessments for Assessment Years 2009-2010 and 2011-2012 have attained finality. Despite the above, in the subsequent Assessment Year 2012-2013, the Assessing Officer has taken a contrary view which has been confirmed by the learned CIT A by observing that each assessment year is a distinct year and therefore, the principle of res judicata shall not be applicable. It is required to be noted that the question in the earlier years was also with respect to the similar/same deduction of alleged accumulated unabsorbed depreciation of earlier years, which came to be allowed by AO while computing the book profit for the purpose of Section 115JB of the I.T Act. It was not the case on behalf of the Assessing Officer and even before this Court, it is not the case of the Revenue, that there are change in circumstances with respect to the year under consideration and with respect to A.Y 2009-2010 and/or A.Y 2011-2012. Thus in absence of any change in the circumstances, it was not open for the Assessing Officer to take a different view in the subsequent assessment years. SEE M/s. Dalmia 2015 (9) TMI 1247 - SUPREME COURT wherein dismissed/disposed of the appeal preferred by the Revenue on the ground that consistency does demand that there being no change in the circumstances, the income for the year under consideration will have to be treated business income, as per the previous years. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of accumulated unabsorbed depreciation deduction under Section 115JB of the Income-tax Act for different assessment years.
2. Applicability of the principle of res judicata in income tax proceedings.
3. Consistency in allowing deductions across assessment years.

Issue 1: Disallowance of accumulated unabsorbed depreciation deduction under Section 115JB:
The case involved two Tax Appeals concerning the disallowance of accumulated unabsorbed depreciation deduction under Section 115JB of the Income-tax Act for different assessment years. The Assessing Officer disallowed the deduction in both cases, leading to appeals by the assessee. The Tribunal allowed the appeals, citing consistency in allowing similar deductions in earlier assessment years where the assessments had attained finality. The Tribunal observed that the Assessing Officer had previously allowed the deduction for the purpose of computing book profit under Section 115JB. The Court upheld the Tribunal's decision, stating that in the absence of any change in circumstances, the Assessing Officer could not take a different view in subsequent assessment years.

Issue 2: Applicability of the principle of res judicata:
The Revenue argued that each assessment year is distinct, and the principle of res judicata does not apply in taxation matters. They contended that if the Assessing Officer finds that a previous view was incorrect, they can take a different view in subsequent years. However, the assessee relied on a Supreme Court decision emphasizing consistency in assessments. The Court noted that the Assessing Officer had allowed the deduction in previous years, and there were no changes in circumstances. Therefore, the principle of res judicata applied, and the Assessing Officer could not take a contrary view in subsequent assessment years without valid reasons.

Issue 3: Consistency in allowing deductions across assessment years:
The Tribunal set aside the orders disallowing deductions in both cases, emphasizing consistency in granting similar benefits in earlier years. The Court agreed with the Tribunal's decision, stating that the Assessing Officer had allowed the deduction in previous assessments, and there were no changes in circumstances to warrant a different view. Consequently, the Court dismissed both Tax Appeals, as no substantial question of law arose, and upheld the principle of consistency in income tax assessments.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the Court's reasoning in resolving the disputes related to the disallowance of accumulated unabsorbed depreciation deductions and the applicability of the principle of res judicata in income tax proceedings.