2023 (4) TMI 1107 - AT - Income Tax

Reopening the assessment for years other than the current assessment year - Jurisdiction of the ld. CIT(A) in directing the AO for the years impacted by the claim for depreciation - Claim of unabsorbed depreciation - how could assessment for preceding years, since finalised, be revisited? - if the appellate authority, in directing the AO to consider reopening the assessment for years other than the current assessment year, i.e., the years impacted by the assessee s claim of unabsorbed depreciation, being AY 2010-11, and AY 2012-13 onwards, had exceeded his jurisdiction? HELD THAT - A carry forward of a claim, subject to the conditions therefor being satisfied, could only be where the same stands assessed and determined for an earlier year in the first place - That is, there is no claim for the earlier year/s which, on account of it not being able to be given effect to on account of inadequacy of profits, could be carried forward to a subsequent year. This in fact is the AO s case in substance (refer para 2). Rather, as we observe, even if the claim for depreciation on the assets of the erstwhile business were to hold, as where there has been a resumption of the aqua farm culture business of which there is though no whisper, the same would only be on the basis of the closing WDV for AY 1998-99, i.e., as on 31.3.1998. That is, there is no question of any claim for depreciation for the earlier years, so as to claim its carry forward to a later year. We state this as a matter of abundant caution, even as there is no case for resumption of the said business, nor indeed of the assets thereof having been deployed and put to use for the property development business. CIT(A) did not issue any direction for disallowance for the other years, which, where given effect to, is liable to be assailed for those years, but only directed for, in view of absence of any factual or legal basis, taking remedial course of reassessment for disallowing the set off of claim of UAD for AY 1998-99 onwards in the assessments for the years for which the claim had been made by the assessee. How, pray, could that be faulted with? The assessee s challenge is wholly without merit. His findings, which we endorse, as was by the Tribunal in the first round, again remain unassailed. The claim of the assets being kept in a ready-to-use state for the intervening years is no more than a bogey, without any factual basis, and sufficiently impugned by the ld. CIT(A), whose findings remain uncontroverted before the Tribunal, both in the first and second round. The same in fact conforms to the undisputed facts of the case. The answer to the question arising, as delineated in one word, is No . CIT(A) is clearly within his rights to require the AO to take remedial action for the other years. We have already noted an absence of any challenge before us on the merits of the decision by the ld. CIT(A), even as we have, as a matter of abundant caution, expressed our opinion thereon. Decided against assessee.

Summary

Issues Involved:
1. Jurisdiction of CIT(A) in directing the AO to reopen assessments for years other than the year under appeal.
2. Validity of the claim for unabsorbed depreciation (UAD) for AYs 1998-99 to 2009-10.
3. Merits of the factual findings by the CIT(A) regarding the state of readiness of assets for depreciation claims.

Summary:

Jurisdiction of CIT(A):
The primary issue was whether the CIT(A) exceeded his jurisdiction by directing the AO to consider reopening assessments for years other than the current assessment year (AY 2011-12). The Tribunal observed that there was no material on record to suggest that the assessee had returned the income for the intervening years, thereby justifying the CIT(A)'s direction. The Tribunal held that the CIT(A) did not exceed his jurisdiction as the direction was based on factual findings and was necessary for the disposal of the appeal for AY 2011-12. The Tribunal endorsed the CIT(A)'s findings and clarified that the direction to the AO did not prejudice the assessee, as the AO could independently initiate reassessment proceedings based on those findings.

Validity of the Claim for UAD:
The assessee claimed unabsorbed depreciation for AYs 1996-97 to 2009-10 amounting to Rs. 188.52 lakhs. The AO disallowed the claim for UAD for AYs 1998-99 to 2009-10, stating that there was no business in existence during those years. The CIT(A) upheld this disallowance, allowing only the UAD for AYs 1996-97 and 1997-98. The Tribunal confirmed that the CIT(A)'s findings were based on a detailed examination and were uncontroverted by the assessee. The Tribunal also noted that the claim of depreciation for the earlier years was unfounded as there was no evidence of the assets being kept in a state of readiness for use.

Merits of the Factual Findings:
The Tribunal endorsed the CIT(A)'s factual findings that the assets were not kept in a state of readiness for use during AYs 1998-99 to 2009-10. The Tribunal noted that the assessee had discontinued its business and there was no expenditure on the maintenance and upkeep of the assets, making the claim for depreciation untenable. The Tribunal emphasized that the CIT(A)'s findings were based on an exhaustive study of the matter and remained uncontroverted by the assessee.

Conclusion:
The Tribunal concluded that the CIT(A) was within his rights to direct the AO to take remedial action for the other years impacted by the assessee's claim for UAD. The appeal by the assessee was dismissed, and the Tribunal upheld the CIT(A)'s findings and directions. The order was pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, on 24th April 2023.