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TMI Blog2008 (9) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 154 of the Act dated September 22, 1992 (exhibits D and E), and order under section 264 of the Act dated December 31, 1992 (exhibit I), are hereby quashed and set aside. - SPECIAL CIVIL APPLICATION NO. 1245 OF 1993 - - - Dated:- 22-9-2008 - D.A. MEHTA AND BANKIM N. MEHTA, JJ. For the Petitioner: S.N. Soparkar For the Respondent: Manish R. Bhatt, R.P. Bhatt and Bharat J. Shelat JUDGEMENT D. A. Mehta J.-Petitioner No. 1 herein, a limited company, has challenged the action of the respondent authorities, more particularly order dated December 31, 1992, made by respondent No. 1 under section 264 of the Income-tax Act, 1961 (" the Act" ), and intimations dated July 8, 1992, under section 143(1)(a) of the Act issued by respondent No. 2, and orders dated September 22, 1992, under section 154 of the Act made by respondent No. 2. The assessment years in question are 1990-91 and 1991-92. It is the case of the petitioner that respondent No. 2, by making disallowance of carried forward unabsorbed depreciation and unabsorbed investment allowance relatable to the assessment years 1988-89 and 1989-90 by way of prima facie adjustment under section 143(1)(a) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of information available in such return, accounts or documents, is prima facie admissible ; and disallowance of any loss carried forward, etc., which is similarly prima facie inadmissible. That, in the present case, the respondent authorities had committed error in law in placing reliance on the circular of the Central Board of Direct Taxes (CBDT) for the purposes of coming to the conclusion that carried forward unabsorbed depreciation and unabsorbed investment allowance had to be restricted to the extent the said amount was not considered while computing minimum alternate tax (MAT) under section 115J of the Act. That in any event the issue was highly debatable and could not have been considered to be prima facie inadmissible. In support of the submissions made the learned advocate for the petitioner has placed reliance on the following decisions : (i) Khatau Junkar Ltd. v. K. S. Pathania [1992] 196 ITR 55 (Bom) ; (ii) Coates of India Ltd. v. Deputy CIT (No. 1) [1995] 214 ITR 498 (Cal) ; (iii) Gujarat Poly-Avx Electronics Ltd. v. Deputy CIT (Assessment) [1996] 222 ITR 140 (Guj) ; (iv) Lallacherra Tea Co. P. Ltd. v. CIT [1999] 239 ITR 611 (Gauhati) ; (v) CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned orders so as to warrant interference. Referring to the unreported decision in the case of Kvaverner John Brown Engg. (India) (P) Ltd. [2008] 305 ITR 103 (SC) which had been relied upon by the petitioner it was pointed out that what was material for the purposes of working out additional tax under section 143(1A) of the Act was the date on which the returns of income were taken up for being considered under section 143(1)(a) of the Act. That, in the present case, on the date when the intimations for the two years under consideration were issued the Central Board of Direct Taxes Circular No. 495 was in operation and the said circular in effect stated what the apex court had stated subsequently and, therefore, respondent No. 2 was justified in making the adjustments of unabsorbed depreciation and unabsorbed investment allowance which had already been considered in earlier assessment years while working out the profit for the purposes of MAT under section 115J of the Act. On behalf of the respondent-authorities reliance was also placed on the apex court decision in the case of Asst. CIT v. J. K. Synthetics Ltd. [2001] 251 ITR 200 to submit that the earlier decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the assessee wants it to be interpreted to mean that wherever tax has been levied on total income as computed under section 115J(1) for the reasons that 30 per cent. of the book profit was higher than the total income computed under the normal provisions of the Income-tax Act then irrespective of the fact that set off for depreciation, investment allowance and business losses, if any, has actually been allowed in computing the total income under the provisions of the Income-tax Act, it should be deemed that no such set off has been allowed and the assessee will be entitled to carry forward such depreciation and investment allowance for set off in future .." Thereafter, respondent No. 1 authority goes on to refer to the Budget speech of the hon' ble Finance Minister while moving the Finance Bill, 1997, as well as the Explanatory Notes on the provisions of the said Finance Bill in support of the interpretation placed by the respondent authorities. In the circumstances, one will have to consider as to the scope of powers available to an assessing authority under the proviso to section 143(1)(a) of the Act. The said proviso reads as under : "Provided that in computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 143(1)(a)." In the case of CIT v. Malabar Building Products Ltd. [2001] 248 ITR 72, 77, the Kerala High Court has explained the phrase " prima facie inadmissible" in the following words (page 77) : "Prima facie inadmissible' means without much debate or on the face of the document itself it can be stated that a mistake has been committed by the assessee." Thus, it cannot be stated that the amount of unabsorbed depreciation and unabsorbed investment allowance to the extent considered for working out book profits for the purposes of section 115J of the Act for earlier assessment years, namely, the assessment years 1988-89 and 1989-90 can be treated to be prima facie inadmissible on the basis of the information available in the return, accounts, or documents accompanying the return for the two years under consideration. Record of any other assessment year cannot be considered. The court is not required to consider whether such an exercise of disallowance is permissible in regular assessment proceedings under section 143(3) of the Act. There is another angle to the issue in question. As contended by the learned advocate for the petitioner, in any view of the matter, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return under section 143(1)(a) of the Act in subsequent years cannot be considered to be free from doubt. In the case of T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 the apex court has stated that (page 53) : It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something hich can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As can be seen from the decisions cited on behalf of the petitioner and cited on behalf of the respondent authority as well as what is noted hereinbefore, on the date when the returns of income for the two years under consideration were filed and the returns taken up for processing under section 143(1)(a) of the Act there was no finality as to the true scope of the provisions of section 115J(2) of the Act so as to warrant disallowance of carried forward unabsorbed depreciation and unabsorbed investment allowance by reducing the figure on the basis of the only the Central Board of Direct Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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