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TMI Blog2014 (6) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... f income for A.Y.2008-09 on 29.9.2008 declaring total income of Rs.Nil. The assessment was completed in scrutiny manner u/s. 143(3) of the I.T.Act, 1961 on 27.12.2010 determining total income at Rs.Nil. On verification of record, it is observed that the assessee was allowed to carry forward brought forward unabsorbed depreciation pertaining to different preceding A.Ys. (i.e. A.Y. 2001-01, A.Y. 2006-07 and A.Y. 2007-09). Out of these losses, unabsorbed depreciation losses of Rs.1,19,78,728/- pertaining to A.Y. 2001-01 was not eligible to be carried forward, as eight succeeding A.Y. Completed in A.Y.2008-09. As per sub-section 3 of section 72 of I Tax Act, 1961, no loss shall be carried forward and set off for more than eight assessment year for which the loss was first computed. As per sub section 2(iii)(b) of section 32 as amended by the Finance (No.2) Act, 1996 with effect from 1st April 1997, if the unabsorbed depreciation allowance cannot be wholly set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment year immediately succeeding the assessment year for which the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny assessment. Counsel for the petitioner pointed out that against the petitioner's claim of unabsorbed depreciation of Rs.2.29 crores (rounded off) for the assessment year 2000-01, the Assessing Officer in the order of assessment has allowed carry forward of only Rs.1.19 crores (rounded off). Admittedly, there were no queries by the Assessing Officer with respect to carry forward of unabsorbed depreciation beyond eight years and no corresponding representation from the petitioner on this aspect. The element of amount to be carried forward of unabsorbed depreciation for the year 2000-01 had no relevance to this aspect. In our opinion, therefore, this issue on the basis of which the impugned notice is founded was not scrutinized by the Assessing Officer in the original assessment. However, we find much force in the alternative contention of the petitioner, namely, that the issue itself has been decided by this Court in favour of the assessee. In similar circumstances in the case of General Motors India P. Ltd. (surpa), this Court held and observed as under: "30. The last question which arises for consideration is that whether the unabsorbed depreciation pertaining to A.Y. 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which effect has not been given (hereinafter referred to as unabsorbed depreciation allowance), as the case may be,- (i) shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (ii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i), the amount not so set off shall be set off from the income under any other head, if any, assessable for that assessment year; (iii) if the unabsorbed depreciation allowance cannot be wholly set off under clause (i) and Clause (ii), the amount of allowance not so set off shall be carried forward to the following assessment year and - (a) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year; (b) if the unabsorbed depreciation allowance cannot be wholly so set off, the amount of unabsorbed depreciation allowance not so set off shall be carried forward to the following assessment year not being more than eight assessment years immediately succeeding the assessment year for which the aforesaid allowance was first computed: Provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place plant and machinery, specially in an era where obsolescence takes place so often, the Act has dispensed with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The Act has also clarified that in computing the profits and gains of business or profession for any previous year, deduction of depreciation under section 32 shall be mandatory. 30.3 Under the existing provisions, no deduction for depreciation is allowed on any motor car manufactured outside India unless it is used (i) in the business of running it on hire for tourists, or (ii) outside in the assessee's business or profession in another country. 30.4 The Act has allowed depreciation allowance on all imported motor cars acquired on or after 1st April, 2001. 30.5 These amendments will take effect from the 1st April, 2002, and will, accordingly, apply in relation to the assessment year 2002-03 and subsequent years." 37. The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997- 98 upto the A.Y.2001- 02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some cases even days, before the assessment would be time-barred. This situation is quite unsatisfactory, both from the point of the assessee as well as the department. In the last minute rush, the Assessing Officer frames assessment in a most hurried manner. In the process, important and valid grounds raised by the assessee are often times lost sight of. Additions are thus made which could have been avoided forcing the assessee to prefer appeal which could have been avoided, further creating needless strain on the system. On the other hand, some times additions were made without full and proper scrutiny. The additions which should have otherwise stood the test of appellate scrutiny fail the test. We may refer to relevant dates from some of the cases which prompted us to make the above observations: Special Civil Application No. Date of notice under section 148 of the Act Date when the petitioner asked for reasons recorded Reasons supplied by the Assessing Officer Objection raised by the petitioner Objection disposed of by the Assessing Officer 3955/14 25/02/13 Not available Not available 07/02/14 06/03/14 3289/14 26/03/13 08/04/14 24/10/13 16/12/13 17/03/14 370 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing reopened has a right to know such reasons. We therefore thought that these two stages can be substantially eliminated by giving suitable directions. The further stage is of the assessee raising objections which often times is done after much delay and the last stage comes where the Assessing Officer deals with such objections. This is yet another problem area where unduly long time is consumed by the Assessing Officer. Under the circumstances, following directions are issued: (1) Once the Assessing Officer serves to an assessee a notice of reopening of assessment under section 148 of the Income Tax Act, 1961, and within the time permitted in such notice, the assessee files his return of income in response to such notice, the Assessing Officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons. (2) Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons. (3) If objections are received by the Assessing Officer from the assessee within the time permitted hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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